For over a century, Kodak was the name of photography. Founded in 1880, Kodak built a monopoly on cameras and films. By 1976, Kodak accounted for 90% of film and 85% of camera sales in America. Until the 1990s, it was consistently ranked among the world's top five most valuable brands.
Kodak set a low price for their cameras and profited mainly from the recurring revenue from films and chemicals. While they profited from camera sales, the margins were slim compared to the high-margin films. To capitalize on this business model, Kodak pioneered an innovative razors-and-blades strategy: they set a low price for Kodak cameras to maximize unit sales. This allowed them to profit from the recurring purchases of Kodak film by camera owners for over 100 years. By giving away the razor (the camera) for next to nothing, Kodak could reap consistent rewards from sales of the blades (film, chemicals). This model proved highly successful and went on to inspire similar strategies, including razors and blades, inkjet printers and cartridges, as well as Nespresso's bundled machine and pod approach.
Kodak was also a pioneer in R&D. They invented the first digital camera in the world all the way back in 1975. Kodak had end-to-end expertise in digital imaging, from sensor design to memory chips to image compression algorithms. Their research prowess allowed them to develop groundbreaking digital camera prototypes decades ahead of competitors. Given their vast technical expertise and proven track record of bringing cutting-edge innovations to market, Kodak was uniquely positioned to capitalize on the transition into the digital era.
However, despite this major technological breakthrough, Kodak was ultimately disrupted. While it may be tempting to blame their downfall solely on the rapid pace of digital adoption, Kodak's rival Fujifilm adapted and survived the market transitions. Why did these two firms have such different outcomes?
Fujifilm was founded in Japan in 1934. Although initially lagging behind Kodak in film technology, Fujifilm steadily improved its capabilities. In 1976, Fujifilm achieved a major milestone by developing Fujicolor F-II 400 film just two months before Kodak could release a comparable product. For the first time, Fujifilm demonstrated leadership in film technology.
Kodak and Fujifilm both recognized that digital cameras jeopardized their highly profitable film and chemical businesses, which accounted for over 80% of profits. However, the two companies took different approaches to this existential threat. Kodak rested on their laurels, Fujifilm urgently pursued every opportunity to transition their business.
Despite the existential threat posed by digital cameras, Kodak declined to sponsor the 1984 Olympics, after nearly a century of sponsorship. Kodak rationalized that its brand name was already ubiquitous, so advertising at the Olympics was unnecessary. However, this move failed to account for the possibility of another competitor taking over the Olympics sponsorship.
Fujifilm recognized the Olympics as a valuable opportunity to market itself globally. This strategy paid off - Fujifilm expanded its international market share from almost zero to 4% by 1985. Over the next decade, Fujifilm continued gaining market share in film. By 1997, Fujifilm had 33% market share compared to Kodak's 44%. But their film business would soon become irrelevant, as digital cameras began their rapid growth around 2000.
In the 1990s, both Kodak and Fujifilm recognized they could not compete with electronic brands like Sony, Canon, and Nikon in the digital camera market. At the same time, neither company wanted to immediately cannibalize their profitable film businesses. Facing this disruption, both companies took different approaches.
In 1993, Kodak hired former Motorola CEO George Fisher to lead the company through digital transformation. Fisher brought valuable experience leading tech innovation. Fisher saw digital cameras as an opportunity to coexist with film, rather than an urgent threat. This perspective seemed reasonable in the early 1990s, as few anticipated the blistering pace at which digital photography would transform the market. However, Fisher replaced many executives, hindering his ability to rally the leadership team. With unstable management, he struggled to transform resistant Kodak culture. He eventually departed the company in 2000.
On the other hand, Fujifilm took decisive action to reposition itself. Recognizing digital photography as an existential threat, Fujifilm took decisive action under new CEO Shigetaka Komori. Promoted from within in 2003, Komori had risen through the ranks and carried strong internal support. Upon taking charge, he immediately moved to minimize losses by aggressively restructuring and reducing investment in Fujifilm's declining film business. Simultaneously, Komori invested resources into deeply analyzing Fujifilm's accumulated patents, both successful and failed products, and emerging trends they could capitalize on. By scrutinizing this institutional knowledge, Komori aimed to identify promising new directions where Fujifilm could apply their expertise. This two-pronged approach allowed Fujifilm to shift focus and resources away from their shrinking core film business into new growth areas for the future.
It took Komori over a year to carefully develop a focused corporate strategy. Once set, his highly disciplined leadership team swiftly executed by capitalizing on Fujifilm's expertise to expand into new lines. For example, Fujitac, their electronics materials subsidiary, had previously evaluated both LCD and PDP, deciding to focus on LCDs. This R&D-driven strategy was now leveraged to launch Fujifilm's successful cosmetics line Astalift, pharmaceutical line Toyama Chemical, and document solutions with Xerox. Komori's patient, deliberate strategic planning combined with his team's disciplined execution enabled Fujifilm to rapidly build on existing capabilities in launching new growth areas.
Their strategic differences also highlight broader contrasts between American and Japanese corporate culture at the time. Many U.S. firms prioritized rapid investment and maximizing growth, whereas Japanese companies took a more prudent, cautious approach focused on building up substantial cash reserves. This disciplined financial stewardship put Fujifilm in a stronger position to endure the coming disruption. When the digital photography revolution hit, Fujifilm's fiscal conservatism provided crucial flexibility to restructure and reinvent itself.
Despite holding many patents and inventing the digital camera, Kodak missed opportunities to defend its dominant position and use its portfolio of intellectual property. It underestimated the threat of digital cameras and failed to foresee Fujifilm as a meaningful competitor.
In contrast, Fujifilm had a cohesive strategy that paid off. Over decades, Fujifilm consistently took action to improve its positioning. It invested in technical capabilities, built strong cash reserves, and leveraged opportunities like the 1984 Olympics to increase market share.
When new technology disrupts, the key is how companies respond to decline. Kodak was once as dominant as Apple is today. But while it took over a century to build Kodak into a titan of industry, its fall was fast - as if Apple were to disappear in ten years. Meanwhile, Fujifilm shows the deep strategic change required to stay relevant amidst disruption.
But could Kodak have avoided its fate if it had made bolder strategic choices? Or were internal conflicts impossible to overcome? In the end, speed and focus determine which companies build the future and which become footnotes in business history.