Digital technology has destroyed entire value chains. This has happened in the music industrys, for radios, calculators etc.

1. Kodak and the Digital
Destruction of V l Ch i
D t ti f Value Chains

2. Few technologies have been as disruptive as
digital technology. It has turn industry after
g gy y
industry upside down.

3. One reason for this is of course that it as
destroyed the competence base of
y p
established companies.

4. Mechanical calculators used to be based upon
cogwheels and with the shift to electronics, the
value of all this competence was lost.

5. When the interior of a product instead looked
like this, many mechanical companies lost
, y p
their competitive advantage.

6. The same thing happened with cameras.

7. Another reason for the turmoil is that digital
technology has destroyed established value chains.

8. Large and complex value chains have been removed
since the technology is much simpler and cheaper.

9. Let me give a few examples…

10. Once upon a time there used to be
radio stores in society
society…

12. Calculator stores…

15. … Plenty of camera stores…

17. … Music stores.

18. In these cases, digital technology has removed
downstream activities in the value chain…

19. … and therefore lost much of their
competitive advantage.

20. Kodak used to be vertically integrated…

21. … and had many sites like this one around the
world (photos from Stockholm).

22. Needless to say, this implied high entry barriers and
a better relationship to customers.

23. It took many decades before Fujifilm became
a threat to Kodak…

24. But when the digital revolution came into
motion, these sites became useless.

25. Cameras were instead sold in consumer
electronics stores and film declined rapidly.

26. Several
camera
stores h
t have
also gone
g
out of
business.
b i

29. The continuous consumption of film
generated continuous revenues and
visits to the local camera store.

30. And they repaired your camera.

31. Consumer
electronics isn’t
repaired, because
new, better
products enter the
market all the time.

32. Thousands of camera stores
around the world have died.

33. The same
thing
thi
happened to
pp
Radio stores.

35. The special radio stores made money on
reparation, and therefore, transistor radios did
not fit into this value chain.

36. They were instead sold via discount stores.

37. How many radio stores do we
have i the world today?
h in th ld t d ?

38. With the shift from mechanical calculators,
the sales channel shifted to bookstores.

39. No more reparation, and moreover, the price
was in the end so low that no money could be
made on repairing these products.

40. Have you ever repaired an electronic calculator?

41. The music industry is experiencing precisely
the same kind of value chain destruction.

42. Bookstores have also lost
their competitive advantage
with the rise of the i t
ith th i f th internet.
t

43. How many special TV stores do
we have nowadays?

44. And how often do you repair
these products?

45. When it is broke, you’ll have a good reason to buy a
new, better and cheaper one instead.

46. Digital technology has created value
chains which are much shorter and simpler.
p

47. It has created value…

48. … by removing activities…

49. … and made products so cheap that it makes no
sense to repair them anymore.

50. All these digital products have are nowadays
mainly sold via huge consumer electronics
stores or over the internet.

51. This is of course much cheaper and it makes
sense economically…

52. But there’s been quite some creative
destruction associated to this revolution.

53. Christian Sandström is a
PhD student at Chalmers
University of Technology
in Gothenburg, Sweden.
He writes and speaks
about disruptive
innovation and
technological change.

54. Christian Sandström is a
PhD student at Chalmers
University of Technology
in Gothenburg, Sweden.
He writes and speaks
about disruptive
innovation and
technological change.
But h t happened to Kodak?
B t what h d t K d k?

55. Christian Sandström is a
PhD student at Chalmers
University of Technology
in Gothenburg, Sweden.
He writes and speaks
about disruptive
innovation and
technological change.
But h t happened to Kodak?
B t what h d t K d k?
Find out more:
www.christiansandstrom.org