TightWind is written by Kyle Baxter. Stay Hungry. Stay Foolish.

Dustin Curtis:

As they were hyper-focused on improving and slowly evolving their products, they lost sight of their market as it went through a massive revolution. It doesn’t matter how good you are at evolutionary iteration; no amount of evolution will make up for a revolution.

I don’t think it’s that simple in this case. While Kodak moved slower than other companies on digital cameras, they didn’t move that slow—they introduced their line of point-and-shoot digital cameras in 2001, and became the top-selling brand of digital cameras in the U.S. in 2005.

The problem was that as the camera business shifted from film to digital cameras, it lost what made it a profitable business—film. Companies could sell their cameras at attractive prices and then make a lot of money on higher-margin film. But there is no film for digital cameras, and digital cameras became a commodities business, which meant very low profit margins. Consumer digital cameras simply aren’t a very good business.

But wait! Kodak could have out-innovated their competition, made dramatically better digital cameras, and then charge higher margins. That only works, though, if the other option isn’t already good enough—which digital cameras very quickly became. For most people, the difference between eight and five megapixels or a much better lens were negligible, because all they wanted was an affordable camera that took decent photos.

Kodak’s real problem was not that they didn’t move quickly enough or innovate enough in digital cameras. Their problem was that they were in the digital cameras business, which had little future.

(Via Marcelo Somers.)