Disruptive technology:How Kodak misd the digital
photography revolution
Henry C.Lucas Jr.*,Jie Mein Goh
Decisions,Operations and Information Technologies,Robert H.Smith School of Business,University of Maryland,College Park,MD 20740,United States a r t i c l e i n f o Article history:Available online 25February 2009Keywords:Innovation Information and communications technologies Disruptive technology Core rigidities Ca study Qualitative rearch
a b s t r a c t
The purpo of this paper is to analyze how a firm responds to a challenge from a transfor-
mational technology that pos a threat to its historical business model.We extend
Christenn’s theory of disruptive technologies to undertake this analysis.The paper makes
真诚待人
two contributions:the first is to extend theory and the cond is to learn from the example
of Kodak’s respon to digital photography.Our extensions to existing theory include con-
siderations of organizational change,and the culture of the organization.Information tech-
nology has the potential to transform industries through the creation of new digital
products and rvices.Kodak’s middle managers,culture and rigid,bureaucratic structure
hindered a fast respon to new technology which dramatically changed the process of
capturing and sharing images.Film is a physical,chemical product,and despite a succes-
sion of new CEOs,Kodak’s middle managers were unable to make a transition to think
digitally.Kodak has experienced a nearly 80%decline in its workforce,loss of market share,
a tumbling stock price,and significant internal turmoil as a result of its failure to take
advantage of this new technology.
Ó2009Elvier B.V.All rights rerved.1.Introduction
The purpo of this paper is to explore how firms respond to challenges from rare transformational technology that threatens a traditional,successful business model.We propo an extension of Christenn’s theory of disruptive technolo-gies and illustrate the extensions with a longitudinal ca study of Kodak.Kodak is unique in that it developed and patented many of the components of digital photography,yet this new form of photography has had a rious,negative impact on the firm.The two main contributions of the paper are the extension to Christenn’s theory and the lessons from Kodak’s unsuc-cessful respon to a major technological discontinuity.
The digital camera combined with information and communications technologies (ICT),specifically the capabilities of the computer to store and display photographs,and the Internet to transmit them,transformed the major customer process asso-ciated with photography .The consumer could take many photos at virtually no cost,and delete unwanted ones by pushing a button.Rather than waiting to develop a photo and then nding it by mail to another person,the customer uploads the pic-ture to a PC and nds it as an email attachment to multiple recipients.If the customer wants a hard copy,she can print a picture locally on an inexpensive color printer on a PC,nd it to an Internet photo rvice,or go to a store that had a devel-oping kiosk.
0963-8687/$-e front matter Ó2009Elvier B.V.All rights rerved.doi:10.1016/j.jsis.2009.01.002
*Corresponding author.Tel.:+13013141968.
E-mail address:hlucas@rhsmith.umd.edu (H.C.Lucas Jr.),jgoh@rhsmith.umd.edu (J.M.Goh).
Journal of Strategic Information Systems 18(2009)46–55
Contents lists available at ScienceDirect
Journal of Strategic Information Systems
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j ou r na l h om e pa ge :w w w.e l v ie r.c om /lo c ate /jsi s
感动女生的情话H.C.Lucas,J.M.Goh/Journal of Strategic Information Systems18(2009)46–5547
1.1.Past rearch:Christenn’s theory of disruptive technologies
Christenn’s theory of disruptive technologies is one of the most popular for explaining the plight of the incumbentfirm facing a significant new technology.He propos a theory of respon to disruptive technologies in two books about inno-vation(Christenn,1997;Christenn and Raynor,2003).He argues that investing in disruptive technologies is not a ra-tionalfinancial decision for nior managers to make becau,for the most part,disruptive technologies are initially of interest to the least profitable customers in a market(Christenn,1997).The highest-performing companies have systems for eliminating ideas that customers do not ask for,making it difficult for them to invest resources in disruptive technologies. By the time lead customers request innovative products,it is too late to compete in the new market.The root cau of the failure to adapt to disruptive technologies is that the company practiced good management.The decision-making and re-source-allocation process that make established companies successful cau them to reject disruptive technologies.
Christenn and Overdorf(2000)prent a framework for dealing with disruptive change that focus on resources,pro-cess and values.Resources include people,equipment,technologies,cash,product designs and relationships.Process are the procedures and operational patterns of thefirm,and values are the standards employees u to t priorities for making decisions.Managers design process so that employees perform tasks in a consistent way every time;they are not meant to change.The most important process when coping with a disruptive technology are tho in the background such as how the company does market rearch and translate it intofinancial projections,and how the company negotiates plans and budgets.Employees exhibit their values every day as they decide which orders are more important,what customers have priority and whether an idea for a new product is attractive.The exerci of the values constitutes the culture of the orga-nization.Culture defines what the organization does,but it also defines what it cannot do,and in this respect can be a dis-ability when confronting a new innovation.
1.2.Extending Christenn’s theory
When afirm is confronted with a discontinuous,highly disruptive technology,nior management has to bring about sig-nificant changes in the organization at all levels.Ourfirst extension to Christenn i
s to emphasize the change process re-quired to adopt a disruptive technology.Senior management has to convince others of the need to move in a new direction. Specifically we are interested in how middle managers change themlves and also bring about change in the organization (e Rouleau,2005;Balogun,2006).
Christenn argues that thefirm is not ready to adapt a disruptive technology becau it does not e a demand from its customers for the new innovation.He maintains that high-performing companies have systems in place that tend to kill ideas that customers are not asking for.We propo to extend this part of his theory to encompass the culture of the orga-nization,by which we mean the beliefs of employees,the way thefirm organizes itlf and the nature of the interactions among employees(Schein,1983).
1.3.Afirst extension:the struggle for change
In confronting a technological disruption,afirm faces a struggle between employees who ek to u dynamic capabilities to bring about change,and employees for whom core capabilities have become core rigidities.Management propensities for change drive the process(e Fig.1).We describe this ongoing struggle using concepts from dynamic capabilities,core rigid-ities and management propensities.
48H.C.Lucas,J.M.Goh/Journal of Strategic Information Systems18(2009)46–55
1.3.1.Dynamic capabilities
The theory of dynamic capabilities is an extension of the resource-bad view of thefirm(Barney,1991;Peteraf,1993; Mata et al.,1995;Einhardt and Martin,2000;Barney and Arikan,2001).Dynamic capabilities is defined as‘‘thefirm’s abil-ity to integrate,build external competences to address rapidly changing environments”(Teece et al.,1997).They‘‘consist of specific strategic and organizational process like product development,alliancing and strategic decision-making that cre-ate value forfirms within dynamic markets by manipulating resources into new value-
creating strategies”(Einhardt and Martin,2000;Helfat et al.,2007;Teece,2007).
The theory suggests that afirm has three class of asts to u in eking new forms of competitive advantage when confronted with a novel situation including:
党务公开栏内容
Process:asmblies offirm-specific asts that span individuals and groups.The process have three roles including coordination,learning and reconfiguration.
Positions:specific asts including plant and equipment,knowledge and reputational asts,that determine competitive advantage at a given point in time.
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Paths:the quence of events that have led to afirm’s current ‘‘...afirm’s previous investments and its rep-ertoire of routines constrain its future behavior”(Teece et al.,1997).
1.3.
2.Core rigidities嫉妒造句
Dynamic capabilities may not,however,always enable afirm to reconfigure its business in respon to an external threat. Leonard-Barton(1992)introduces the idea that the core activities of thefirm can be
后天八卦方位图come so rigid that it cannot respond to new innovations.Her four dimensions of a core capability include:(a)employee knowledge and skills;(b)technical systems which embed knowledge and support innovation;(c)managerial systems which guide knowledge creation and control and (d)values and norms associated with various types of knowledge.
Leonard-Barton suggests that core capabilities that are appropriate in one situation may turn out to be inappropriate in another,for example,the challenges for an incumbentfirm from a new entrant.The core capabilities,rather than being dynamic and helpful in coping with change,become core rigidities that inhibit a respon.There are a number of paths to rigidity.Becau corporate resources are limited,firms often emphasize one discipline,which makes the company less attractive to people from non-dominant disciplines.It is easy for technical systems to become outdated,especially when they involve expensive plant and equipment or complex software.Management systems also become rigid over time as peo-ple respond to incentive and reward systems;there is little interest in performing tasks that appear to be undervalued by nior management.It is easy for the organization to fall into the competency trap;employees convince themlves that their current process and technology are superior to a new,disruptive technology,and they fail to respond appropriately.
Rigidities in the core capabilities inhibit individual and organizational learning when confronted with a rare,techno-logical disruption.Employees may be comfortable with their existing knowledge and skills and resist learning the new tech-nology.There may be little incentive to build new technical and managerial systems,or to learn new knowledge to create the systems.
1.3.3.Management propensities
Management propensities determine the outcome of the battle between dynamic capabilities and core rigidities in responding to a transformational technology.This implication is an extension to rearch demonstrating the importance of managers in determiningfirm performance outcomes(Holcomb et al.,2008;Castanias and Helfat,2001;Bantel and Jack-son,1989;Hambrick and Mason,1984).Managers have to develop a strategy that emphasizes the respon to a disruptive technology,and they must communicate this strategy throughout thefirm(O’Reilly,1989).Senior managers have to learn a new technology and develop cognitions that change is necessary;they must lead the change effort(Sherif and Menon,2004). Managers must also help subordinates develop cognitions that respond to a new direction for thefirm.They must teach oth-ers in the organization about their vision for thefirm and e that employees learn this new business model and all that it entails.We refer to the managerial activities as propensities or managers’inclinations
to act in a certain way.
During the cour of responding to the disruptive technological change,complications result and cau different manage-ment levels to have different managerial cognitions(Gavetti,2005a).If it is desirable to change the overall direction of afirm, nior managers are likely to be faced with one group of long-term employees who exhibit core rigidities,and newer employees who are trying to innovate and take advantage of thefirm’s dynamic capabilities.
It is interesting to note that the discussion above has a parallel in the IS strategy literature.For example,Galliers(2004, 2006)has propod a framework for information systems strategizing which focus on exploitation,exploration and change management.Afirm confronted with a technological discontinuity needs to explore,utilize its dynamic capabilities and learn a new,agile respon to a threat.It needs to create knowledge,which is a key component of Gallier’s IS strategy frame-work as well.
1.4.A cond extension:organization culture
Organizational culture shapes organizational cognition and has a very important role in its respon to technology-en-abled transformations.We have adopted Schein’s(1983)definition of culture for the
purpos of this paper.Culture is‘‘a
H.C.Lucas,J.M.Goh/Journal of Strategic Information Systems18(2009)46–5549 pattern of basic assumptions that a given group has invented,discovered,or developed in learning to cope with its problems of external adaptation and internal integration–a pattern of assumptions that has worked well enough to be considered valid,and therefore,to be taught to new members as the correct way you perceive,think,and feel in relation to the prob-lems”(Schein,1983,p.14).Founders teach organizational members through their actions and through this process,culture is developed,learned and embedded(Schein,1985).
Culture operates at both the macro and micro levels within an organization.As defined by Schein,culture is a multilevel concept that is fragmented across domains such as different types of management.Literature(Burke,2002)often focus on the role of nior management in creating afirm’s culture;we e a need to consider the role of middle management which has been less emphasized in prior rearch(Balogun and Johnson,2004;Danneels,2004).Middle managers are typically the largest managerial group and they play a key role in implementingfirm strategy.Given their position in the organizational hierarchy,middle managements’propensities may be different from tho of nior management.
Previous literature on organizational change acknowledges the role of culture in facilitating,managing,or impeding ,Burke,2002;Tripsas and Gavetti,2000).A bureaucracy is associated with slow respon and employees who value curity over risk-taking.Bureaucratic structure leads to organizational inertia(Merton,1957).Thus,an organization culture that promotes hierarchy and maintaining the status quo will be resistant to disruptive technologies.
2.The ca of Kodak
2.1.Data collection
The rearch reported here comes from primary and condary sources.We obtained annual reports from Kodak and arched the literature to build an historical time line of the key events in digital photography and Kodak’s respon to this new technology.We looked at past Kodak web sites on www.archive to get a n of changes in marketing and strategy. As a part of a larger project on IT-enabled transformations,members of a rearch team visited Kodak and interviewed two employees the company was willing to make available to us.Also as a part of the larger study we asked Carly Fiorina,ex-CEO of HP,to expand on her early analysis and comments on Kodak’s history with digital photography.We consulted a teaching ca study,books and a videotaped interview with one of the Kodak CEOs during this time period.
2.2.The ri and fall of Kodak
George Eastman founded the Eastman Kodak Company in1880and developed thefirst snapshot camera in1888.It be-came clear early on that consumables provided the revenue;cameras did not need to be expensive becau their owners ud large amounts offilm.Kodak invested heavily infilm and when color photography was introduced,it was one of the few companies that had the knowledge and process to succeed.The company achieved$1billion in sales in1962.By1976, Kodak captured the majority of the USfilm and camera market(90%and85%,respectively).Kodak’s photofinishing process quickly became the industry standard for quality.As a result,most of the power of the corporation centered on its massive film-making plant,and historically CEOs came from manufacturing jobs at the factory(Gavetti et al.,2004).
Kodak’s sales hit$10billion in1981,but then competitive pressures,especially from Fuji,hindered future increas (Gavetti et al.,2004).In1986,Kodak invented thefist megapixel nsor capturing1.4million pixels to produce a high-quality 5Â7print.Kodak had introduced more than50products that were tied to the capture or conversion of digital images.In 1990Kodak began to ll its Photo CD system in which a consumer took a roll offilm to a photofinisher who placed images on a CDROM rather than paper.The consumer needed a Photo CD player to e the images on a T
V screen.However,costs were too high and the product never achieved the success Kodak had forecasted.
Kodak went through a total of ven restructurings during the period between1983and1993.In1993Kay Whitmore,a Kodak insider,stepped down as chairman to be replaced by George Fisher,the CEO who had turned around Motorola.The board saw Fisher as a‘‘digital man”.One of Fisher’sfirst strategic moves was to refocus Kodak on photography;he sold the companies in its health gment,collecting$7.9billion he ud to repay debt(Gavetti et al.,2004).He also went after Fuji and the Japane government for restraining the sales of Kodak products.Fisher did not give up onfilm;he believed that China was an emerging market with great potential for photography and invested heavily there in a joint venture with the Chine government.
By1996,Kodak had cut$50million from the cost offilm and paper production and had reduced cycle times;what ud to take months could be done in less than a day(Swasy,1997).By1997,digital camera sales were increasing by75%a year whilefilm camera sales incread by only3%.By this time there were many new entrants in digital photography,mostly Japane electronicsfirms.In2000,the value of digital cameras sold pasd the value offilm cameras.That year Fisher left as CEO and was replaced by Daniel Carp.In2001sales of analog cameras dropped for the
first time.
In2002,Kodak bought Ofoto,an online picture rvice,signaling a greater commitment to digital photography.Kodak’s 2003annual report’s chairman’s letter stated that Kodak‘‘implemented a digitally oriented strategy to support revenue and sustainable earnings”.In the same year,Kodak clod itsfilm camera factory in the US.The2004chairman’s letter reported on progress:‘‘In thefirst full year of its digital transformation strategy,Kodak came out of the gate at a full gallop-and we continue to build momentum”.In2005,Carp stepped down early as chairman and was replaced by Antonio Perez.
Since 1993,Kodak has reduced its labor force by clo to 80%through retirements and layoffs,over 100,000employees,a strong indication of the difficulties the company has encountered (e Fig.2).Kodak net sales reached $20billion in 1992,and dropped to below $15billion in the ensuing 5years,though some of the decline was due to divestitures.This change is particularly dramatic when compared with Fuji’s net sales,which have been growing since 2001.Fuji and other brands began to compete heavily with Kodak,offering high quality film at 20%below Kodak’s price.By 1993Fuji had a 21%market share of worldwide film sales (Gavetti et al.,2004).In addition to pressure from competitors,investors have been highly critical of the company and its management.Share prices in
Fig.3ro during Fisher’s first 4years of leadership (1993–1997),and then began a precipitous decline during Carp’s chairmanship starting in 2000.
2.3.The movement to digital photography
The transformation from conventional photography to digital photography took about two decades.Information and communications technologies play as important a role in digital photography as the camera,itlf.The computer is a vehicle for editing,saving,storing and ultimately sharing photographs with others.The Internet is the vehicle for the distribution of multiple copies of an image to different recipients.
Steven Sasson,The inventor of the digital camera at Kodak,remarks on the history of digital rearch at the company.Well,you’d be surprid at some of the breakthroughs and innovations that Kodak was doing.We were sort of in an odd position where we were certainly supporting Silver Hallide photography for all our customers,but we were also
doing
Fig.2.Kodak’s net sales and number of
employees.
Fig.3.Kodak’s monthly share price.
50H.C.Lucas,J.M.Goh /Journal of Strategic Information Systems 18(2009)46–55
advanced rearch into digital imaging.You know,Kodak made the first megapixel imager in the mid-1980s.We were doing image compression rearch and even making products using,what we call,DCT compression back in the mid 1980s.And we made some of the first cameras.You might be surprid that a Kodak digital camera went aboard the 1991space shuttle mission.
Paul Porter,Kodak’s Director of Design and Usability,commented:
We were way ahead of the curve in digital even though we were pretty much a film and chemical company.We did a lot of rearch in digital becau we knew at some point in time the world would change.We invented the digital camera.So,being the first ones there we continuously worked in the labs so to make sure when that change was made we were pre-pared for it.So we have the experti in the rearch labs to generate the innovations that make our experience either,more gratifying,more intuitive or better connected than what other people do.
As prices fell and performance of digital cameras improved in the 1998time frame,there was a dramatic increa in the sales of digital products (e Fig.4).The movement toward digital photography has a huge adver impact in firms that had historically been in the photography busine
ss such as Kodak,Fuji and Konica Minolta.When photography moved from film to digital,it invited a whole new group of competitors into the marketplace.Companies like HP,Lexmark,Epson and Canon suddenly became photofinishers with their color printers,some of which were designed to work easily with digital cameras to produce prints.A number of online rvices like Ofoto sprung up.Fig.5shows a timeline of the key events in Kodak’s his-tory related to digital
photography.
Fig.4.Sales of digital camera.
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H.C.Lucas,J.M.Goh /Journal of Strategic Information Systems 18(2009)46–5551
