The Destruction of Kodak

After reading Schumpeter’s “The Process of Creative Destruction,” in particular a quote toward the end of the selection stating, “In the case of retail trade the competition that matters arises not from additional shops of the same type, but from the department store, the chain store, the mail-order house and the supermarket which are bound to destroy those pyramids sooner or later,” my mind immediately went to Kodak. Though a perhaps overused example in business courses across the country, the story of Kodak seems to perfectly display the efficacy of Schumpeter’s warning regarding creative destruction.

This article¬†explains how Kodak, the company that essentially created the picture-taking industry, eventually was forced to file for bankruptcy in 2012. Kodak’s downfall came with the invention of digital photography and online forms of sharing photos. As the article notes, “Companies often see the disruptive forces affecting their industry. They frequently divert sufficient resources to participate in emerging markets. Their failure is usually an inability to truly embrace the new business models the disruptive change opens up. Kodak created a digital camera, invested in the technology, and even understood that photos would be shared online. Where they failed was in realizing that online photo sharing was¬†the new business, not just a way to expand the printing business.” This language seems to mirror Schumpeter’s idea of creative destruction exactly. The retailer must not be focused on new ways to market an old idea, but must be focused on new ideas entirely.