《《Mistakes_Made_on_Kodak_s_Road_to_Innovation---》.pdf

Mistakes Made on Kodaks Road to Innovation By Steve Hamm and William C. Symonds Business Week Online 09/23/07 4:00 AM PT Theres no better example than Kodak of the importance of coming up with new ways of doing business -- and the difficulties of succeeding. At its peak, Kodak was an icon of American technology innovation. Now its fighting to recover from a tech revolution that is strangling its core business. Kodak was late to recognize the problem, slow to react, and then went down the wrong innovation path. When Eastman Kodak (NYSE: EK) vowed in 2000 to become a leader in digital cameras, the idea seemed ludicrous. The old-line Rochester, N.Y., company had film and print all through its DNA. Yet by 2005, Kodak ranked No. 1 in the U.S. in digital camera sales . Its digital sales surged 40 percent, to US$5.7 billion, even as its film-based businesses fell 18 percent. The key: product innovation, something Kodak knew how to do oh-so-well. The company designed one award-winning breakthrough after another to make digital photography nearly as simple as pointing and clicking. So why does Kodak Chief Executive Antonio M. Perez now dump on digital cameras, calling them a crappy business? Simple: While blazing growth of camera sales has helped blunt the effects of Kodaks fast-fading film revenues, it hasnt replaced the rich profits of the film business. Even the best mass-market cameras yield slim profit margins. So, although Kodaks digital camera business was a roaring sales success, it turned out to be a crushing profit disappointment. Perez, who arrived at Kodak in 2003 and became chief executive last year, had championed a dramatic change only to find it wasnt the right model for turning the company around. Now hes crafting yet another strategy for Kodak, its third in less than a decade. Building on the mistakes made and lessons learned in recent years, Perez is attempting innovation of another sort -- reinventing t