kodak and the digital destruction of value chains
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kodak and the digital destruction of value chainsTRANSCRIPT
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Kodak and the Digital D t ti f V l Ch iDestruction of Value Chains
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Few technologies have been as disruptive as digital technology. It has turn industry after g gy y
industry upside down.
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One reason for this is of course that it as destroyed the competence base of y p
established companies.
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Mechanical calculators used to be based upon cogwheels and with the shift to electronics, the
value of all this competence was lost.
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When the interior of a product instead lookedlike this, many mechanical companies lost, y p
their competitive advantage.
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The same thing happened with cameras.
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Another reason for the turmoil is that digital technology has destroyed established value chains.
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Large and complex value chains have been removed since the technology is much simpler and cheaper.
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Let me give a few examples
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Once upon a time there used to be radio stores in societyradio stores in society
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Calculator stores
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Plenty of camera stores
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Music stores.
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In these cases, digital technology has removeddownstream activities in the value chain
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and therefore lost much of theircompetitive advantage.
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Kodak used to be vertically integrated
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and had many sites like this one around the world (photos from Stockholm).
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Needless to say, this implied high entry barriers and a better relationship to customers.
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It took many decades before Fujifilm becamea threat to Kodak
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But when the digital revolution came intomotion, these sites became useless.
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Cameras were instead sold in consumerelectronics stores and film declined rapidly.
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Severalcamera
t hstores havealso goneg
out of b ibusiness.
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The continuous consumption of film generated continuous revenues andgenerated continuous revenues and
visits to the local camera store.
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And they repaired your camera.
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Consumerelectronics isnt
repaired, becausenew, better
products enter the market all the time.
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Thousands of camera storesThousands of camera stores around the world have died.
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The same thithing
happened to ppRadio stores.
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The special radio stores made money on reparation, and therefore, transistor radios did
not fit into this value chain.
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They were instead sold via discount stores.
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How many radio stores do weh i th ld t d ?have in the world today?
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With the shift from mechanical calculators, the sales channel shifted to bookstores.the sales channel shifted to bookstores.
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No more reparation, and moreover, the pricewas in the end so low that no money could be
made on repairing these products.
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Have you ever repaired an electronic calculator?
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The music industry is experiencing preciselythe same kind of value chain destruction.
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Bookstores have also losttheir competitive advantage
ith th i f th i t twith the rise of the internet.
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How many special TV stores doHow many special TV stores dowe have nowadays?
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And how often do you repairAnd how often do you repairthese products?
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When it is broke, youll have a good reason to buy a new, better and cheaper one instead.
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Digital technology has created valuechains which are much shorter and simpler.p
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It has created value
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by removing activities
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and made products so cheap that it makes no sense to repair them anymore.
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All these digital products have are nowadaysmainly sold via huge consumer electronics
stores or over the internet.
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This is of course much cheaper and it makes sense economically
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But theres been quite some creativedestruction associated to this revolution.
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Christian Sandstrm is a PhD student at ChalmersPhD student at Chalmers University of Technology in Gothenburg, Sweden.in Gothenburg, Sweden.
He writes and speaks about disruptive innovation and
technological change.
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Christian Sandstrm is a PhD student at ChalmersPhD student at Chalmers University of Technology in Gothenburg, Sweden.in Gothenburg, Sweden.
He writes and speaks about disruptive
B t h t h d t K d k?
innovation and technological change.
But what happened to Kodak?
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Christian Sandstrm is a PhD student at ChalmersPhD student at Chalmers University of Technology in Gothenburg, Sweden.in Gothenburg, Sweden.
He writes and speaks about disruptive
B t h t h d t K d k?
innovation and technological change.
But what happened to Kodak?
Find out more:www.christiansandstrom.org
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