They had the tech but didn't see the danger in it, they belived that the lower quality digital camera would fail and investing in them would mean exploring a new market and they choose the safe corporate move, buisness as usual.

Turns out that low quality but way more pratical and cheaper on the long run really sells

“One of Job's business rules was to never be afraid of cannibalizing yourself. " If you don't cannibalize yourself, someone else will," he said. So even though an Iphone might cannibalize sales of an IPod, or an IPad might cannibalize sales of a laptop, that did not deter him.”

Kodak did sell digital cameras but they were so scared of protecting their film business I don't think they went all in on digital and let the other camera companies take over.