Abstract

Kodak’s Surprisingly Long Journey Towards Strategic Renewal: A Half Century of Exploring Digital Transformation in the Face of Uncertainty and Inertia

Kodak’s failure to transition from film to digital technology has become a canonical example of a dominant incumbent failing in the face of an industry transition. In this paper, we undertake a systematic study of Kodak’s decision-making from its earliest efforts in digital technology in the 1960s and 1970s through its bankruptcy in 2012. We draw on a comprehensive combination of primary and secondary sources that include the company’s internal documents such as organizational charts, speeches by the company executives, employee newspaper, and technical reports on individual technologies as well as letters to the shareholders, annual reports, and SEC filings. Our analysis of Kodak’s decision-making over the half-century leading up to its bankruptcy finds limited evidence of inertia and extensive evidence of strategic renewal efforts which included sustained substantial R&D investment, commercialization of multiple digital products, as well as acquisitions of firms with promising imaging technologies. From 1980s onwards, Kodak had standalone business units to develop and commercialize digital technology, incubated start-ups, and attempted to diversify by leveraging its competencies in adjacent fields. In understanding why these efforts fell short of staving off Kodak’s demise, we consider the role of uncertainty around technology adoption in industry transitions. Specifically, this uncertainty gave rise to ambiguous feedback from Kodak’s digital efforts which yielded negative economic outcomes in contrast to the growing and profitable film franchise. The protracted popularity of film made it difficult for Kodak managers to commit to a single course of action with respect to digital technology—a challenge further exacerbated by the rapid replacement of digital cameras by smartphones. Our findings point to the need to consider technology substitution dynamics in understanding incumbent performance in industry transitions.