Thinking of Kodak, we can remember razor blades and Apples.
Soon after it began in 1880, Kodak told us, “You press the button and we do the rest.” Making home photography simple, they just had to sell us a camera; then, as with the razor and blades, we would buy lots of the film that fueled their profits. Meanwhile, in Rochester, NY, from the factory to the lab, pictures were Kodak’s focus. In 1975 Kodak even invented digital photography. However, Kodak employees responded with, “Why would anyone ever want to view his or her pictures on a TV?”
And that takes us to Apple(s) and rumors that Kodak will soon declare bankruptcy.
Our bottom line: The innovation that drives economic growth rarely comes from large firms like Kodak. Yes, R & D from Kodak, Xerox and others like them produced groundbreaking patents. But they did not have the culture to reinvent themselves.
Here is more detail about “What Went Wrong at Kodak.”
The Economic Lesson
Kodak’s plight returns us to Joseph Schumpeter (1883-1950) and entrepreneurial innovation propelling capitalism. But also, by upsetting the status quo, the result is creative destruction and conflict between the new and the old.
An Economic Question: What other products might recently have experienced creative destruction?