Hello, in this video, I’ll describe how the digital camera disrupted one of the world’s
largest corporations.
You may have heard of the Kodak company which is known for its cameras and film
products - at one point in the 1990s, it was the 5th highest valued company in the
United States.
[Image description: title reads Kodak camera: Founded 1888, image is of early
prototype camera resembling brown metal box with a large circle hole in the front]
Kodak was founded by George Eastman in 1880 to make photographic plates. By 1888,
Eastman had invented and started to sell the first snapshot camera. Over the next 100
years, the company innovated many inexpensive popular cameras as well as high
quality professional equipment. It also created Kodachrome film, slide film, the carousel
projector, super 8 movie film, and many other products.
[Image description: title reads Kodak film, image is of a box of Kodak film next to a roll
of film]
Then in 1975, the Kodak engineer Steven Sasson showed his colleagues a working
prototype of the first digital camera. Weighing slightly more than 3 and half kilograms, it
was powered by 16 AA batteries. It converted images into data that was stored on a
tape cassette. Along with two colleagues, Sasson also developed a playback device to
show the photographs on a television screen. But Kodak’s management was
unenthusiastic. At just 100 x 100 pixels, the images were really low quality. And Kodak’s
leadership was confused. “Why would anyone want to look at their pictures on a
television? How will you make a photo album with digital images?”
[Image description: title reads Digital camera prototype, image is of large digital camera
made of metal sitting on a table]
Sasson and a small team kept working on digital photography. Image quality improved
significantly – a Kodak digital camera was used on Space Shuttle missions starting in
1991.
George Eastman found out early on that the company profited more from selling film
and chemicals than from cameras. When Sasson invented the digital camera, Kodak
had 90% of the US film market and sold its products worldwide. At its peak in the 1990s,
Kodak had revenues of $16 billion - largely from the film business - and employed over
145,000 people.
But in the 1990s and early 2000s, electronics companies like Sony and Casio began
marketing digital cameras. Then cell phone makers – first in Japan and then in Europe
and the United States – started to include low resolution cameras in phones like the
Sharp J-Phone. Younger generations stopped buying cameras. Kodak’s film sales
started to drop, slowly at first and then rapidly.
[Image description: title reads Sharp J-phone, image is of two cell phones on a table]
Harvard Business School professor Clayton Christensen developed the concept of
disruptive innovation to argue that new technologies can pose a major challenge to
incumbent firms. Profitable companies like Kodak innovate for their existing customers.
A new technology like the digital camera is (1) initially lower quality, (2) has a different
customer base, and (3) requires new business models to be profitable. So, the
incumbent firm ignores it. But as the new technology improves, it attracts a mass
market.
Kodak tried to pivot to sell digital cameras but lost money doing so. The company also
tried to interest people in its image storage and sharing platforms, but did not attract
enough customers to make it work. Every effort to transition away from the film and
chemical business failed, and Kodak declared bankruptcy in 2012.
Kodak still exists but now is a small company making film for professional
photographers and the movie industry. Digital cameras, meanwhile, are embedded in
thousands of electronic devices. This image is a photograph taken from space in 2022
using an iPhone, not a Kodak camera.
[Image description: title reads Earth from Space, image is of an astronaut taking a selfie
picture with a reflection of the earth in his helmet]
The pattern of disruptive innovation creates a significant dilemma for even innovative
firms - can they create new products and services that attract new customers without
undercutting their profit margins? Or if a whole area will be disrupted, can industry
leaders pivot? If you work at a large company, the lesson is to look out for new
technologies that attract younger customers. If you are the upstart innovator, keep
working on both the technology and the business model to bring about change.
Thank you for watching.