Ask HN: Insider history of the demise of Kodak?

I'm also interested in the more specialist products - holography, xray, and movie film.

Big ships are slow to turn. One systemic cause based on my experience in old-big companies is that if profit margins on some products are high, mid and some high level managers maximize that product (e.g. roll-to-roll manufactured films in Kodak). With such optimization, you end up at "local-maxima". This continues until you have an "iceberg right ahead" moment when profits start to spiral downward. Depending on the pace of growth of the technology/sales of your competitor(s), this descent is rapid and irreversible.

The story of staggering institutional inertia and failure is amazingly similar to Xerox's, and similar to hundreds of other US corporate manufacturing giants declining into bankruptcy over the last 40 years, by failing to be concerned with, or collectively act on (board, executive, staff) the future year risks of on a several-decade time scale. This list of inertially failing organizations, among others, includes General Motors, IBM, HP, AT&T, and others.

[Can any public company plan on a multi-decade time scale? This is an anthropological, sociological, cultural and business question of interest in the academic literature.]

Others, along with Harvard Business School professor Clayton M. Christensen, have written extensively on the general cultural difficulty of spending money now for an uncertain future while making money presently on a multi-decade investment.

Xerox was originally under the thumb of Kodak, in Rochester, New York, as the maker of photographic paper, chemicals and related equipment, known as the "The Haloid Photographic Company" (halides -- bromine and related chemical elements, along with silver, being the key photographic chemicals of photography) and founded in 1906.

The owner-leadership of the Haloid company in the 1930s and 1940s knew the company was doomed in the long-run with their then-present capability. Later on, it turns out that neither the Xerox of 1995, nor the Kodak of 1995 understood the necessity of having a keen paranoia of their technology's changing future and future unreliable income.

Xerox's, Kodak's, and other corporate stories are both studied in graduate-level business and engineering programs looking at the risks of failing to plan for change, the end of patent monopoly and market domination, and the cultural and financial necessity for understanding, committing to, and planning on the demise of the present technology currently sustaining an organization.

The Haloid company was not crushed by Kodak, in part, because of antitrust laws, but it was always in danger of failing in a competitive market dominated by Kodak, and from the 1930s onward had committed money to find and own a technology that was sustainable and patentable to survive: the Haloid company invented the term "xerography" (dry image transfer).

After the growing success of xerography in the late 1950s, and 1960s, after near-death experiences bringing the technology to market, the culture of developing and ultimately surviving on the new market of new-but different technology was lost in the profits of xerography in the minds of the then-present executive leadership, addicted to the amazing profits of xerographic patents: thus the results of new research and technology failed to be supported to make it to market.

Yet the Xerox company's creations, developments and discoveries are the present backbone of the present era of computing: ethernet, laser printers, personal computers, graphical user interfaces, Smalltalk (see also Object Oriented Programming and Virtual Machines, and the like). Look up the history of Xerox's "Palo Also Research Center (PARC). The Smallalk VM was the foundation of Self, and the later Java VM, with the addition of a couple decades of further work.

See "Fumbling the Future: How Xerox Invented, Then Ignored, the First Personal Computer" by Douglas K. Smith and Robert C. Alexander for that story, published in 1988, nearly three decades ago. The cultural failures and non-response parallels are remarkable.

Doubtless there are dozens of similar reports on the Kodak cultural inertia and failure to understand change, in academic articles, and books. Google is your friend.

Kodak leadership thought that they could not profit from digital cameras, and early and expensive technology could only be used by large institutions (NASA). As costs dropped, Kodak thought that their market was commodity consumables, so they licensed the technology they created. The consumables chemistry and photographic ...

There are quite a few articles online that go into some detail about it. Just search for "Kodak Clay Christensen", or something similar. Here's one: http://www.economist.com/node/21542796

    Another reason why Kodak was slow to change was that its
    executives “suffered from a mentality of perfect products,
    rather than the high-tech mindset of make it, launch it,
    fix it...”
    
    Bad luck played a role, too. Kodak thought that the thousands
    of chemicals its researchers had created for use in film
    might instead be turned into drugs. But its pharmaceutical
    operations fizzled, and were sold in the 1990s.

On a related note, I just purchased a 10 pack of Kodak Portra 400 4x5" sheet film last night. I normally shoot Kodak's Tri-X and 5222 cine film, or Fuji's Acros 100, but thought it'd be fun to get into large format color photography on occasion.

Digital cameras in the 70s and 80s were impractical, low quality devices that were mostly useless without a computer, which is not something that the majority of people had in their homes.

Kodak did follow up with digital though. They had a digital SLR by 1994 (before Canon or Nikon) and digital cameras for $299 by 1996.

The advantage that companies like Nikon and Canon had are their lenses, and the huge investments photographers made in their lenses is what locked them in to a particular brand.

This is why a lot of traditional camera companies (Konica, Minolta, Fuji, Polaroid) were unable to keep up.

What I've always been curious about was whether Apple's engineers reached out to Kodak when designing the iphone's camera?

It would seem logical that Kodak could have potentially been a possible supplier.

I lived in Rochester, NY and got a 20 hr/week job interning at Kodak in the slide film research department during HS in 1999-2000.

I remember on one occasion my boss, a mid-level executive (head of new slide film research? something like that) asked me what I thought about digital cameras, I think both because I was young and seen as "the computer guy". I didn't own one but I'd read about them a decent amount. I told him I understood they were expensive/low-quality at the moment but the advantage of ditching film and using ever-improving digital tech still seemed huge. I don't remember his exact words, but he couldn't really see the appeal or promise.

The 7-story building I worked in is just a mound of grass last I looked. I have thought from time to time just about the institutional inertia that fights against seeing what's going on and adapting. There were just tens of thousands of people with very highly specialized skills around film and chemicals and processing and dark rooms and paper and so many things most of which simply aren't relevant to a digital photography world.

Now, granted, other film/pre-digital camera companies did a far better job making the jump. I'd argue maybe in part again that Kodak seeing itself as emotionally wed to film while other companies saw themselves moreso as camera/photo companies. That Fuji has been able to survive is more surprising to me than Canon/Nikon/Olympus/etc.

My high school physics teacher worked at Kodak's research labs on CCDs, including some that were for use in "specialized applications," which I assume to mean spy satellites†. He said that he had quit when Kodak decided to stop shooting themselves in the foot and shot themselves in the head instead. That would have been the early 90s, I think. I don't have any specific mismanagement stories, but I'll send you his email address (the most recent that I could find.) I always wished that he would talk about it in more detail and now that it is some years later, maybe he will.

† He told us one fun story. One of his research papers had been cleared by the censors for publication and accepted by a scientific journal. However, just before the journal went to print, the censors changed their minds. It was too late to fix the layout, so the edition was released with a sheaf of blank pages in the middle. He said that it was the proudest anyone had ever been of some blank paper.

Edit: Apparently, there is no way to private message an HN user. If you have a Reddit account or similar, I can pm you there.

Here's a memoir from Brad Paxton, a family friend. Might be worth checking out (disclaimer: I'm related to the editor) since he was a VP who had a lot to do with high-tech projects during this time:

https://www.amazon.com/Pictures-Pop-Bottles-Pills-Electronic...

Thought experiment..even if you could time travel, how would you have saved Kodak?

I (and I've noticed this in others my age) still have a lingering thought that photography is expensive, and to conserve 'film'. Back in the day, even with slides, the finished cost per slide was about a buck each. It's just hard to dispel the habitual thought "is this shot worth taking?"

I'm still getting used to the ability to snap a pic and casually text it to a friend instead of trying to describe it.

I just downloaded a phone app that turns it into a scanner, complete with OCR. It's not as good as my flatbed, but it's incredibly convenient.

I feel like I'm living in the future.

I worked for Creo when it was acquired by Kodak in 2005 for $1B and then later for Kodak for quite a few years. At the time Kodak still had cash but film was obviously in decline. This acquisition was part of a $3B acquisition spree.

Kodak's mangement proceeded to run Creo into the ground through a series of layoffs, remote micromanagement, shuffling things around etc. At the time of the acquisition Creo was profitable (though definitely with some challenges) and had a few growth initiatives that looked promising (all cancelled). Very capable management, good people, and well run. There were a lot of opportunities to create some long term value in different areas but the only Kodak strategy was to keep cost cutting and milk all the businesses to their death.

What was amazing to me is that the CEO kept his job even after Kodak's market cap went below $1B. I forget what that market cap was at the time of the acquisition but probably in the $10-$20B range. Gotta be one of the top ten value destroying CEOs of all times.

For many many years it didn't matter what management did, film kept printing money for the company. Only when things changed you could tell that management was actually incompetent. Before that you didn't need to be competent to keep making money. Kind of like Warren Buffet says, only when the tide goes out you find who is swimming without their bathing suits...

I just saw something on Bloomberg the other day about Kodak finally getting some anti-counterfeiting technology that AFAIK is the same one developed in Creo over 10 years ago (Traceless) released.

EDIT: Another personal anecdote is that the first "real" digital camera I ever used, I'm guessing around 1996, was a Kodak. It was pretty decent. I think the price tag was quite high. At that point in time Kodak had a good reputation in digital cameras. The problem is digital cameras would never replace film as a business even if Kodak went 100% into digital. They needed to diversify.

My dad devised the "Bayer filter" used in digital cameras, in the 1970's in the Kodak Park Research Labs. It is hard to convey now exactly how remote and speculative the idea of a digital camera was then. The HP-35 calculator was the cutting edge, very expensive consumer electronics of the day; the idea of an iPhone was science fiction. Simply put, my dad was playing.

This was the decade that the Hunt brothers were cornering the silver market. Kodak's practical interest in digital methods was to use less silver while keeping customers happy. The idea was for Kodak to insert a digital step before printing enlargements, to reduce the inevitable grain that came with using less silver. Black and white digital prints were scattered about our home, often involving the challenging textural details of bathing beauties on rugs.

I have no inside information what so ever, but I am still today using a digital camera with a Kodak sensor almost daily (a M9). I am still baffled, how a company of this size and revenue can fall apart like this - probably only paralleled by the demise of Nokia. Till the early 2000s, Kodak was not only a leader in film but also in digital photography. Their CCD sensors are still made today, their sensor division now owned by OnSemi.

All the first Nikon and Canon DSLRs had Kodak technology in them. Not sure how things happened in detail, but eventually Nikon and Canon had their own digital technology, mostly based on CMOS sensors. Kodak had one more CMOS camera of their own - the 14n based on a Nikon body. But while being the highest resolution body at that time, it got mixed reviews. Still at that time Kodak probably would have had enough cash to buy Nikon.

Yet they withdrew from professional digital cameras, the last life sign was providing sensors for the Leica M9 and S. And with no other leg to stand on, the company mostly vanished with the collapse of the film market.

Ironically, the price you pay per roll of film is on an all-time high, so in theory, the business of making film should be more profitable than it was, but the scale just is not there any more.

Recent design grad from RIT. I learned from / worked with many former Kodak employees from the late 90's into early 00's. The majority of them worked on the consumer product side of the business.

It is my understanding that Kodak's efforts were too little too late. The organization was driven by the business people and was hemorrhaging money and only staying afloat through licensing and selling off their patent portfolio and the medical imaging devision. They watched their consumer product profits from film evaporate and failed to transition into the digital age.

These designers and engineers that I have learned from and worked with are certainly brilliant individuals. It seems that the organizational culture did not provide them with the creative freedom needed to envision and develop products competitive with those coming from smaller, nimbler companies.

Steven Sasson, the man who invented the camera gave a talk to my program (CE at Rochester Institute of Tech) about the process and downfall of his invention at Kodak. It all started as some backroom research project with no funding to see if they could do something with the new technology of CDC cells. The camera ended up at .01 Megapixels and stored on a tape (with about 20+ second write time). What most people did not realize is he also made a device for displaying the image onto a TV (what good is a digital image if there is no way to display it). IIRC the first "public" demo of this technology was during the Tiananmen Square Massacre to smuggle/transmit the video out of the county. If you watch one of the original broadcasts the only sign of it was a little Kodak logo at the bottom of the screen. Now there is something you need to know about film.... it was probably one of the most profitable products ever. Also Kodak was not really a pure technology company, it was more of a consumer tech/chemical company. While they did have a lot of engineers (many of my professors all worked there), some were more focused on the manufacturing process rather than an end product. A lot of their internal structure was focused on making and processing chemical film. When he showed this product to the upper level (however never the CEO) the demo went something like: walk into room with the camera, take picture of attendees, show picture on TV. While this was totally unheard of the time, mostly they all just laughed at the quality of the image and brushed it off. They also saw no appeal in viewing pictures on a TV screen vs an actual picture. A patent was filed and that was mostly the end of it. A lot of people laugh at Kodak for that mistake, but it really it’s just another example of the inventors dilemma. At that time though it made perfect sense for Kodak to make that decision because they were just making so much money. One could say the technology was ahead of its time. Well then digital really started to take rise. They ended up turning a lot of their focus into making personal photo printers. In 2004 Kodak then realized that almost every company that made a digital camera infringed on their patents and started to sue them all. They ended up winning a lot of money but they could never get their foot back into the market. TLDR: Camera was ahead of its time and threatened to undo the whole company whose main focus was producing and processing chemical film.

Steven Sasson, the man who invented the camera gave a talk to my program (CE at Rochester Institute of Tech) about the process and downfall of his invention at Kodak. It all started as some backroom research project with no funding to see if they could do something with the new technology of CDC cells. The camera ended up at .01 Megapixels and stored on a tape (with about 20+ second write time). What most people did not realize is he also made a device for displaying the image onto a TV (what good is a digital image if there is no way to display it). IIRC the first "public" demo of this technology was during the Tiananmen Square Massacre to smuggle/transmit the video out of the county. If you watch one of the original broadcasts the only sign of it was a little Kodak logo at the bottom of the screen. Now there is something you need to know about film.... it was probably one of the most profitable products ever. Also Kodak was not really a pure technology company, it was more of a consumer tech/chemical company. While they did have a lot of engineers (many of my professors all worked there), some were more focused on the manufacturing process rather than an end product. A lot of their internal structure was focused on making and processing chemical film. When he showed this product to the upper level (however never the CEO) the demo went something like: walk into room with the camera, take picture of attendees, show picture on TV. While this was totally unheard of the time, mostly they all just laughed at the quality of the image and brushed it off. They also saw no appeal in viewing pictures on a TV screen vs an actual picture. A patent was filed and that was mostly the end of it. A lot of people laugh at Kodak for that mistake, but it really it’s just another example of the inventors dilemma. At that time though it made perfect sense for Kodak to make that decision because they were just making so much money. One could say the technology was ahead of its time. Well then digital really started to take rise. They ended up turning a lot of their focus into making personal photo printers. In 2004 Kodak then realized that almost every company that made a digital camera infringed on their patents and started to sue them all. They ended up winning a lot of money but they could never get their foot back into the market. TLDR: Camera was ahead of its time and threatened to undo the whole company whose main focus was producing and processing chemical film.

Rochester NY resident since 1982, Kodak's peak employment year. Wrote embedded software for Xerox for a couple years around 2000. My belief is that companies like Kodak, Xerox, HP, IBM, etc. have business structures that cannot survive in a low margin business. These companies drove and thrived with technological change for decades. The leadership could not accept the change of their key lines of business into low margin commodities.

This is something I'd posted previously on HN:

I worked at Kodak as a summer intern in '85. Was the era of the disk camera. Was also my first programming job. Lotus 1-2-3.

Most people today can't comprehend the scale of American manufacturing as it still was at that time. The Elmgrove plant where I worked (one of a dozen facilities in the Rochester area) has over 14 thousand employees. Our start and end times were staggered in 7 minute increments to manage traffic flow.

That none of that would exist 20 years later was inconceivable at the time. The word "disruption" wasn't in business vocabulary. Nor was the phrase "made in China". Some senior technical managers saw the "digital" writing on the wall. But what could they do? What could anyone do? There was no way to turn that aircraft carrier on a dime.

At the end of my summer internship, I attended a presentation that our small team gave to more senior managers at the top of Kodak Tower in the conference room adjacent to President Chandler's office. One of the managers took me to the window and pointed out to me different plants and facilities of the vast Kodak empire spread out across the Rochester region. I assumed like many that Kodak had a bright future ahead because they had a world-renowned brand and excellent scientists and engineers. What many at the time didn't yet recognize was that there was no business model in digital cameras that would employ 100 thousand engineers, managers, factory workers, technicians, and staff. There were certainly no senior managers willing or able to sacrifice the golden goose of film to pursue something entirely different.

I worked for Kodak from 2002-2009 in their Windsor, CO plant, in the Thermal Media Manufacturing division and also wrote the occasional post for the corporate blog (thermal media == Dye sublimation printer media used in Kodak Picture Kiosks mainly). AMA.

It was the same thing every year - digital is cannibalizing film faster than we thought, we need to close down X or lay off N people. A year or two of that sure but over and over again and it became clear the executives were just not getting it. Looking back I wonder if they just decided to slowly ride the ship down, extracting nice salaries along the way. I still can't understand how someone - activist shareholders, a board member with half a brain, an executive willing to speak out - didn't make a bigger stink and try to get fresh leadership.

I remember one year at an all division meeting they showed the latest corporate "motivational" video - "Winds of Change" (http://m.youtube.com/watch?v=JYW49bsiP4k). We thought finally, they get it and are admitting we've been stagnating and now we're gonna turn it all around. Everyone was super pumped up for weeks.

Then we realized the only thing that had changed was our ad agency who had produced the video.

From the warren buffet autobiography ...

“What about Kodak? asked Bill Ruane. He looked back at Gates to see what he would say. “Kodak is toast,” said Gates.8 Nobody else in the Buffett Group knew that digital technology would make film cameras toast. In 1991, even Kodak didn’t know that it was toast.9 “Bill probably thinks all the television networks are going to get killed,” said Larry Tisch, whose company, Loews Corp., owned a stake in the CBS network. “No, it’s not that simple,” said Gates. “The way networks create and expose shows is different than camera film, and nothing is going to come in and fundamentally change that.”

“You’ll see some falloff as people move toward variety, but the networks own the content and they “can repurpose it. The networks face an interesting challenge as we move the transport of TV onto the Internet. But it’s not like photography, where you get rid of film so knowing how to make film becomes absolutely irrelevant."

Check out this book on the iBooks Store: https://itun.es/us/hj_bz.l

Excerpt From: Schroeder, Alice. “The Snowball.” Bantam Books, 2009. iBooks.

This isn't exactly insider, but offhand experience. I worked at a pharmacy from 2005-2013 that had Kodak film processing and digital printing machines. Early on, there was a still a great deal of actual film. Digital cameras still were expensive or not rivaling the quality of film. Many machines didn't offer negative-to-cd, but offered a floppy disk. This slow updating of their equipment was a theme in the company. As film sales slowed, Kodak grew worse. Outsourced tech support for the machines, who were graded on whether or not they had to send a technician out to the store. That was switched to another system, where a tech called back. Most times this was recorded as done, but wasn't. This sort of thing was very common, and didn't improve as they sold off and outsourced bits of the company. They did finally start updating machines, and having fewer locations that processed film quickly and phased out send-away processing - truly focusing on digital products. By then, their advantage had slipped. While they relied on quality film before, their prints seemed no better quality than competitors.

Part of the problem was obviously that they didn't take digital seriously soon enough. This in combination with what seemed like a poorly run company meant software always lagged behind sometimes by years. For example, it took some time before folks could put video from their camera onto a dvd, and the cd's themselves could only hold 120 pictures while SD cards were keeping thousands. It was a software issue. In addition, some of the retail outfits they contracted through seemed overpriced.

I think the official story was filled with lament over not taking digital technology seriously early on. While I read some stuff about them, it has been some years and I don't know how much was reserved for the workplace environment.

There are few insider details from a NYTimes profile on Steven Sasson[1] who invented the digital camera while at Kodak.

[1] http://lens.blogs.nytimes.com/2015/08/12/kodaks-first-digita...

Ten years ago, "the mobile web" might have been a reference to WAP. Nine years ago, when the iPhone arrived, mobile web was Edge: where you could get it and when you could afford it.

Companies like RIM and Nokia had smartphones. The people running them were smart. Their engineering was good. It had to be because wireless access to the internet wasn't ubiquitous. Suddenly the companies faced the first mover disadvantage.

It's difficult to imagine how revolutionary the technology of Kodachrome was. It utterly disrupted consumer photography and photojournalism and professional photography. The fact that Kodak was experimenting with digital photography in the 1970's shows how out front they were and they were right to treat it as a technology that wouldn't be viable for more than two decades...and one that nobody has figured out how to monitize except via the sale of hardware.

There's probably no plausible alternate universe where Kodak managed to produce sustainable profit from processing and storing digital images or selling media or anything related to their core business. Digital photography moved image production out of retail channels. I could text an image to ten of my relatives without a trip to Walgreens for one hour processing, and $0.08 3x5 prints in an hour available in the mid 1990's was a pretty amazing innovation versus the four or five days and significantly higher prices that were typical in the 70's and 80's.

Kodak wasn't a company standing still. It just didn't have a good way to make money from digital imagery: HP had them beat in the printer ink as liquid gold market and the camera manufacturers weren't going anywhere: optics are still bounded by the physics of optics.

Circling back, I think it wasn't so much people sitting around and thinking "we're Kodak" as it was the fact that Kodak wasn't Nokia and hence didn't have a history of selling off it's mainline business and moving into a new industry. Not that as a publicly traded company in the US that would have ever really been a viable option. Quarter by quarter, Kodak was obligated to maximize stockholder value for the short rather than long term.

Companies become obsolescent. Consider Sun.

Spent a 3 weeks integrating the kodak robotic microfilm system with VMS based Vax in a joint bid with Kodak and Digital in this time frame. This system was supposed to save kodak. The Kodak VP of Government Systems from Washington flew in to "supervise" and royally screwed everything up. Guy was the biggest nut bag in the world.