Disruptive Technology Innovation: A Case Study

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The history of the human race is the history of technology innovation. Technology innovations have spurred developments around us since the beginning of civilization. Some innovations are termed disruptive, for their ability to disrupt an industry and change fundamental aspects of business and society. In this article, we look at the photography industry, the disruption caused by digital cameras, and the case study of Kodak.

In the nineteenth century, cameras were big and bulky, set up on huge tripods, used wet film that required immediate processing, and were accessible to the privileged few. In the late 1880s, a young man by the name of George Eastman disrupted the industry by founding a new company, Kodak which introduced two revolutionary breakthroughs: Dry Film and Handheld cameras. The dry film meant that processing could be delayed, and the handheld cameras were for the masses. Their line You press the button, we do the rest made history.

Over the next one hundred and twenty years, Kodak dominated the industry. Constant innovation and adaptability to change resulted in the company literally capturing the 20th century. Some of the facts and milestones are astounding. For example, the Apollo 11 mission and the first men on the moon were captured on Kodak film.

Kodak influenced Hollywood like no other company: Kodak film was used for 80 Oscar- winning Best Pictures. The medical world was transformed when X-Ray images were first captured on Kodak photographic paper. Among other industries, Kodak was a pioneer in document imaging, and in the printing and publishing industry. By 1975, Kodaks market share in the US was around 85% – 90% for both photographic film and cameras.

It was time for the next disruptive technology innovation the digital camera.

The first digital camera invented in 1975 had a resolution of 10,000 pixels and captured black-and-white images. Initially considered fringe technology, over the next thirty-five years, digital camera technology disrupted and then wiped out the film based photography industry. This period saw the decline in the sales of film rolls, film prints and analog cameras, with a simultaneous increase in the sales of digital cameras and digital prints. The decline was gradual initially, and dramatic in later years. Kodak tried, but appeared unable to adapt to the disruptions fast enough.

Could the decline of Kodak have been complacency, considering their market dominance in 1975? Perhaps however my opinion is influenced by the thought provoking book The Innovators Dilemma: When New Technologies cause Great Companies to fail by Clayton Christensen. Disruptive technologies can and do cause large companies to fail. Essentially this is because the returns on investment (ROI) follow an exponential growth: initially, they are extremely small which makes it difficult for large companies to justify significant investments in them, at the expense of the traditional bread winners. However beyond a certain point, the returns on disruptive technologies suddenly begin to overtake those from traditional ones. By then however, it is too late.

In Kodaks case, literature available [see References] appears to indicate that digital technology was never really accepted nor adopted for nearly two decades after the invention of the digital camera. The price that was paid was heavy indeed a bankruptcy filing in January 2012, a sad end to over a century of industry dominance.

Finally, the punch line and the biggest irony of all: The Company where the digital camera was invented in 1975, and which dismissed the innovation as being insignificant to the traditional film based photography industry, was also Kodak.


Found this interesting? Here are some references for further reading:

http://blogs.wsj.com/source/2012/02/26/the-demise-of-kodak-five-reasons/ http://www.kodak.com/ek/US/en/Our_Company/History_of_Kodak/Imaging-_the_basics.htm http://www.forbes.com/sites/chunkamui/2012/01/18/how-kodak-failed/ http://www.forbes.com/sites/johnkotter/2012/05/02/barriers-to-change-the-real-reason-behind-the- kodak-downfall/

The Innovators Dilemma: When New Technologies Cause Great Firms to fail by Clayton Christensen

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