Christian Sandström holds a PhD from Chalmers University of Technology, Sweden. He writes and speaks about disruptive innovation and technological change.

It is well known that Kodak was hurt badly with the shift from film to digital imaging.

But it is often forgotten that the problems started before the technological shift.

The problem was spelled Fujifilm.

Fuji had been on the rise for several decades, but hadn’t really been a big threat in the United States.

Up until the mid 1990s, Kodak still had around 80 percent of the US market, despite being more

expensive than Fuji.

Towards the second half of the 1990s, this changed through a coincidence.

In 1997, Costco, a big US retailer, dropped Fuji in favour of Kodak…

Fuji suddenly had millions of film rolls that they needed to get rid of. The company therefore dumped

its prices to 50 percent of what Kodak cost…

The rolls were quickly sold and the new price turned out to be so successful that Fuji kept it…

… Causing its market share to increase with 60 percent very quickly…

The price war had started, and Fuji was now on the attack…

For more than a century, Kodak had taken their home market for granted and suddenly

this was not the case.

… The company had relied upon traditional and kind of cheesy marketing for over the years…

The history of American families had basically been recorded with Kodak film…

… And Kodak had always been kind of

sentimental in its marketing…

… It had worked for a century…

… Around the entire world…

No wonder Kodak got confused when Fuji ran ads saying “pictures should be

nostalgic, your film shouldn’t”.

Fuji’s slogan was also very forward-looking: ”You can see the future from here”

Many Americans now bought the cheaper green roll…

… Instead of the good old yellow box.

When they noticed that the result wasn’t worse, many stayed with Fuji.

Fuji was also highly innovative in its way of using seasonal campaigns, quick-hit programs and

various tricks in order to sell more film.

Kodak responded by getting rid of its cheesy image.

And eventually by lowering

prices.

And by getting rid of about 19 000 employees in 1997 – probably the largest layoff in American

corporate history.

The price cuts

eventually stopped the rapid decline in

market share.

Now Fuji had nothing to gain from the war, and both companies now let prices

drift up again gradually.

While prices returned for Kodak, market shares did not.

Through something that resembled a coincidence, Fuji had succeeded in buying market shares from Kodak.

The deal with Costco

had looked like a winner, but things

turned out differently for Kodak…

The price war with Fuji should be regarded as an important explanation to why Kodak suffered so

badly later on in the shift to digital imaging.

The company had been financially wounded before the digital revolution and this augmented the

difficulties related to the shift…

… Fuji, on the other hand, had gained momentum and obtained resources that were vital when

developing a competitive digital camera business.

Image attributions

Sources

cnn.com Seattle Times

Find out more:

www.christiansandstrom.org