A clue to Eastman Kodak Co.'s ongoing embrace of the digital world was revealed at last fall's Japan Electronics Show, where attendees saw the unveiling of the world's first commercially viable model of a full-color, active-matrix, organic light-emitting diode (OLED) display. The OLED introduction also provides evidence that the Kodak that was founded on R&D (George Eastman innovated dry plates and roll film that simplified photography) is still more about imaging research than any one product. The evidence also suggests that the company is much more than the "800-lb gorilla" in its traditional consumer film markets. Daniel A. Carp, president, who succeeded George M. C. Fisher (now chairman) as CEO in January, asserts that "R&D is at the core of what is going on in our company -- probably more so today than at any time in our history." He says Kodak's R&D challenge is due to the unique nature of the image business. "Unlike some other businesses [that] have a natural limit to their field of use, images have no natural upper limit. The image business is limited only by the creativity of the products and services that we can offer consumers." By "we," Carp is referring to the partnering strategy Kodak has adopted in order to bring innovative products and services to the marketplace. For example, the display at the Japan Electronics Show was a result of an alliance with licensee Sanyo Electric Co. Ltd. What they exhibited was a unique 2.4-in. (measured diagonally) display that features a 190,000-pixel panel. Kodak claims the device features the most vivid colors and highest-quality image yet produced on an OLED display. What's also unique about the technology is that the demonstration model, thin as a dime, weighs less than half its LCD counterpart and requires much less power. In May Kodak was recognized by the Society for Information Display for its technological innovation in the conception, design, and development of the imaging system. Also in May the Kodak/Sanyo team demonstrated a 5.5-in. (measured diagonally) OLED, the largest display of its kind to date. "The technology is the hottest thing to come along in the 20 years I've looked at electronic displays," says analyst David E. Mentley, senior vice president, Stanford Resources Inc., San Jose. Clearly, Kodak is going after the multitude of electronic products that need more legible displays to interface with users. That includes competing with the LCD screens typically found on digital video cameras and personal digital assistants. The effort also could pave the way for a revolution in display devices, including thinner and lighter computer screens and low-power, wall-mountable television monitors. Monochrome OLED displays based on Kodak's technology already are built into many car audio units produced by Pioneer Corp. "Vivid, full-color active matrix is the next step for OLEDs to reach their full potential as the display technology of the 21st century," says James C. Stoffel, Kodak's chief technical officer and director, worldwide research. Kodak is not the only company investigating OLED technology. In Mentley's new study on the technology he counts over 85 companies worldwide working in the field. But Kodak's strong position comes from research efforts conducted over more than a decade. Company researchers made a number of major breakthroughs that led to more than 40 patents on the basic OLED device structure, key classes of materials, doping techniques to dramatically improve efficiency and control color, as well as methods for depositing small organic molecules on substrates. Kodak OLED technology grew initially from research into organic electronic devices used in electrophotography. In addition to the alliance with Sanyo, Kodak has entered into licensing agreements with FED Corp., Pioneer, and TDK Corp. The company also is providing its licensees with patented OLED materials. In January Motorola Inc. and Pioneer announced a joint development program to roll out the display technology in cellular phones within a year. What's interesting, says Mentley, is that the technology is so new that it is emerging without the aid of consumer fanfare. Will that deter market development? No, says the Stanford Resources analyst, because the price/performance benefits are so significant. For 2000 Mentley estimates worldwide shipments at approximately $18 million with growth to $714 million in 2005. That growth will come out of the flat-panel market of $17 billion for 2000 that is expected to reach $35 billion for 2005. Analysts are viewing Kodak's exploitation of the flat-panel opportunity as one measure of Carp's recognition of digital imaging as more of an opportunity than a threat. The new flat-panel technology comes at a critical time for the giant filmmaker, notes Harvard Business School management guru Clayton M. Christensen. Product life-cycle challenges are especially daunting to well-managed companies such as Kodak, he says. Ironically, these problems occur despite a company's embrace of innovation in production, marketing, and investment. Caused by disruptive technologies -- digital imaging in Kodak's case -- the threat doesn't respond to the usual managerial principles that encourage consistent performance improvements in products and services, explains Christensen. In fact, good business practices can send a company into precipitous decline. What is disruptive technology? Christensen coined the term in his business bestseller, The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail (1997, Harvard Business School Press, recently released in paperback by HarperBusiness). Christensen's thesis focuses on the critical distinction between sustaining technologies that enhance current trends in an industry and the disruptive forces unleashed by innovations that herald the wave of the future. Since companies depend on customers and investors for resources, well-run organizations find it difficult to allocate resources for products that fly in the face of current mainstream demands, observes Christensen. For example, Kodak is the major force in analog film and related products, notes analyst Gary Schneider of Bear, Stearns & Co. Inc., New York. Schneider estimates Kodak film market dominance at 70% in the U.S. and notes that it has a very big piece of the business in Europe. He also observes that the company continues to successfully expand its traditional film business in emerging countries such as China. Companies hoping to survive disruptive technologies need to confront some organizational issues, says Christensen. "Several things need to happen. One is the organizational flexibility to address the disruption from outside the mainstream of the existing business. If you look at the history of the major disruptions elsewhere in our economy, the leading firms always viewed the disruption as a threat. But in reality they were on the brink of a huge growth opportunity that they just simply didn't see." Christensen cites the confrontation of mainframe computer companies by minicomputers as an example. "When the disruptive technology of the minicomputer came along mainframe makers felt threatened, not realizing that they were confronted by an even bigger market opportunity." Other examples range from the threat of the minicomputer to the PC and the challenge the tabletop copier posed to Xerox Corp., Kodak's Rochester, N.Y., neighbor. "When the little tabletop copiers emerged in the early 1980s, this was a disruptive technology to Xerox. Canon Inc. and Ricoh Co. Ltd. seized the opportunity and put photocopying within the reach of consumers, who increased the volume of copying a thousandfold. A current example is the online trading disruption threatening conventional brokerage houses. "In every case, leading companies frame it [the disruptive technology] as a threat when in reality they are on the brink of a big growth opportunity. When they view the disruptive intruder as a threat to the existing business, they don't pursue [potential] growth with new customers." Christensen places Kodak at this juncture with digital photography. He emphasizes that "although people might view digital photography as a threat to Kodak, the growth potential dwarfs the size of Kodak's traditional market. It's a huge opportunity -- not a threat. That's why it needs to be created or incubated in a completely different organizational unit than their mainstream business. If incubated in the mainstream business, they'll implement digital photography to strengthen the current business model and possibly jeopardize the new market applications. If pursued outside the mainstream in a very different business model, digital photography could play out in a very exciting way," says Christensen. By "outside the mainstream," he is referring to a completely different organizational unit as well as different people. Christensen's thinking meshes with the vision of Stoffel, who became chief technical officer at the end of June following the retirement of Carl F. Kohrt, the 29-year veteran who served as executive vice president, assistant chief operating officer, and chief technical officer. "Personally I'm going to continue to push hard to grow new business models that leverage Kodak's assets in broad ways. I'm not necessarily going to rely on the current businesses or sales channels . . . to grow Kodak because there are far too many neat [imaging] ideas that fall outside our existing businesses and channels," Stoffel says. "OLEDs are a good example. Another is the Kodak/Hewlett-Packard Co. joint venture in inkjet photofinishing. It represents a commitment by both companies to grow the inkjet photofinishing business." As a board member of the joint venture Stoffel is enthusiastic about the prospects of using the digital inkjet technology to extending photofinishing capabilities to smaller retail establishments. "With inkjet technology substituting for chemical processing, the photofinishing approach gains space savings at a considerably lower entry cost." He says the venture will launch products in approximately 12 months. Stoffel also sits on the board of a joint venture called NexPress Solutions LLC. The mission is to develop very-high-speed, very-high-quality color document printing for print-on-demand applications from mainframes or network servers. Kodak's partner is Heidelberger Druckmaschinen AG, Heidelberg, Germany. In May, at the DRUPA show in Dusseldorf, Germany, NexPress exhibited its first product, the 2100 digital production color press. Stoffel says it is literally a color printing press with no need for plates; the digital data is entered and the pages come flying out the back. Kodak is not ignoring opportunities in digital cameras. It claims to be the No. 2 brand in the U.S. and among the top three in the world. Stoffel anticipates a continuing release of new models, for both the professional and consumer user. In the faster-growing consumer market expect new models using CMOS (complementary metal-oxide semiconductor) imagers, adds Stoffel. CEOs have a multilevel responsibility for dealing with disruptive technologies, says Kodak's Carp. "Maintaining the right level of R&D investment -- with R&D leadership that is connected to the business -- is just the beginning. It's also critical to exercise the role of devil's advocate for ideas that come out that don't make it through the system naturally. Let's say you're a [researcher] working on an idea like OLEDs that you're trying to sell through the system, but the system won't run with it. To take advantage of the opportunity it is incumbent on the CEO to find a new way to take the idea to the marketplace." Kodak's embrace of the digital world can be measured in a number of ways. One metric is that approximately $2.3 billion of its total revenues of $14 billion comes from digital technology. But perhaps the most meaningful measure is the company's creativity with concepts like the OLED that embody the company's trademark: "Take Pictures. Further."