From Silver Halide to Digital Imaging Technology at Eastman Kodak The Challenges Ahead

In February 2007, Antonio Perez, the chief executive officer (CEO) of the Eastman Kodak Co., was reflecting on Kodak’s current situation since he took over almost two years ago. After eight quarters of losses, his revamped digital strategy seemed to be finally starting to pay off. His efforts to cut costs while investing heavily to develop new digital products resulted in a slender profit of $16 million on sales of $3.8 billion and were expected to rise further in 2007. Following several billion dollars of losses and tens of thousands of job cuts, the news gave Kodak shares a boost. But could Kodak maintain its momentum in the face of its digital rivals that were all introducing new and improved products? Had Kodak finally achieved a distinctive competence in digital imaging? Was its new digital business model—based on strategies to counter the threats posed to Kodak’s traditional silver halide-based technology by the convergence of imaging and digital information technology—really working? Did the company have the digital products in place to rebuild its profitability and fulfill its “You press the button, we do the rest” promise? Or, after ten years of declining sales and profits, was the company just on the verge of another downward slope in the face of intense global competition on all product fronts? Kodak’s History Eastman Kodak Co. was incorporated in New Jersey on October 24, 1901, as successor to the Eastman Dry Plate Co., the business originally established by George Eastman in September 1880. The Dry Plate Co. had been formed to develop a dry photographic plate that was more portable and easier to use than other plates in the rapidly developing photography field. To mass-produce the dry plates uniformly, Eastman patented a plate-coating machine and began to manufacture the plates commercially. Eastman’s continuing interest in the infant photographic industry led to his development in 1884 of silver halide paper-based photographic roll film. Eastman capped this invention with his introduction of the first portable camera in 1888. This camera used his own patented film, which was developed using his own proprietary method. Thus Eastman had gained control of all the stages of the photographic process. His breakthroughs made possible the development of photography as a mass leisure activity. The popularity of the “recorded images” business was immediate, and sales boomed. Eastman’s inventions revolutionized the photographic industry, and his company was uniquely placed to lead the world in the development of photographic technology. From the beginning, Kodak focused on four primary objectives to guide the growth of its business: (1) mass production to lower production costs, (2) maintaining the lead in technological developments, (3) extensive product advertising, and (4) the development of a multinational business to exploit the world market. Although common now, those goals were revolutionary at the time. In due course, Kodak’s yellow boxes could be found in every country in the world.