PROFILE OF A STRUGGLING COMPANY: KODAK ✓ Solved

PROFILE OF A STRUGGLING COMPANY: KODAK

In 1880, photography hobbyist and school dropout George Eastman became the first to manufacture dry plates commercially in the United States successfully. Eastman had the goal to "make photography as convenient as the pencil," and in 1888, made a simple camera available to the public with the slogan "you push the button, we do the rest." Formed in Rochester, NY, in 1892, Eastman Kodak would make itself into a global powerhouse for the next 100 years.

At the height of its reign, Kodak employed over 120,000 workers and had over $10 billion in sales. The term "Kodak moment" became a household name, synonymous with capturing moments with photographs. Today, Kodak has relinquished dominance mainly due to management miscalculations of the popularity of digital photography and online photo sharing.

Current Management Planning

To understand the goals and thought process behind current management planning at Kodak, one must analyze and understand the past failures that led to the company's situation. Kodak's founder, George Eastman, understood change and embraced advancements in technology. Eastman made the bold decision to move from dry-plate photography to silver-halide film, and then to invest in color instead of black and white film. Kodak used the "razor and blades" marketing strategy, where an inexpensive item, such as a camera, is offered at low cost or even free to sell the disposable commodity (film) and became the world leader in advancement and production of film.

This dominance led to arrogance and blinded management to the onset of Fujifilm, which challenged Kodak's share of the film market by undercutting the price of a 400-speed film. Kodak's response was one of "why would any consumer want a lower-priced product when they can have one made here in America." By setting film production and processing as its core product, Kodak viewed itself primarily as a chemical company. It directed efforts and funding to acquire Sterling Drug in 1988 for $5.1 billion, even though digital photography was looming on the horizon (Mui, 2012).

Ironically, it was a Kodak engineer, Steve Sasson, who invented the digital camera in 1975. After learning the breakthrough was centered around filmless photography, management's response was "that's cute – but don't tell anyone about it" (White, 2012). Eventually, Kodak accepted and embraced technology, but instead of pure digital photography, it created and marketed the Advantix, which still utilized film printing. Such shortsightedness and inability to adapt to change kept Kodak mired in the past. Kodak wrote off $500 million in development for Advantix and sold Sterling Drug in 1994 for half of the acquired price.

By the time Kodak realized its mistake, an entire decade was lost, and the company was too far behind the curve to recover. The advent of digital cameras, followed by smartphones, rendered film printing obsolete. In January 2012, Kodak filed for bankruptcy, was forced to close 13 factories, lay off 50,000 workers, and spend $3.4 billion to restructure and settle pension claims (Jinks, 2013).

Employees' Perception and Culture

During Kodak's founding at the end of the 19th century, it was common for businesses to treat their employees well by fostering a "family" atmosphere. Employees felt a sense of camaraderie and loyalty to the company, believing in its stability and job security. At its height, Kodak employed over 62,000 people at its Rochester headquarters alone, contributing to a culture that permeated the local community. Kodak's founder, George Eastman, built hospitals, funded dental clinics, and donated over $2 billion to philanthropic causes, reinforcing a paternalistic corporate ethos (Kodak, 2019).

However, Kodak's culture became insular, promoting from within and stifling new ideas. The belief that "the company could do no wrong" contributed to a dangerous complacency. In 1989, Kodak faced a pivotal moment with the retirement of its CEO, Colby Chandler. The board appointed Kay Whitmore, a long-time internal candidate who favored the traditional film business. Whitmore's resistance to digital photography proved detrimental (Mui, 2012).

In the mid-1990s, Kodak did create a separate division for digital photography under Willy Shih, which began to open up communication and innovation. However, the desire to merge digital, professional, and consumer divisions by 2003 signified a refusal to evolve—a culture clash silenced the potential for innovation from more progressive employees (Shih, 2016).

Communication Issues

The top-down communication structure at Kodak restricted innovation and created stagnation. By emphasizing seniority over merit, Kodak stifled creativity and relegated innovative ideas to the periphery. The lack of employee feedback and bottom-up communication contributed to significant disconnects between management and the workforce.

Management's priorities, centered on maintaining the status quo, ignored market shifts towards digital technology. The company's internal communication suffered from hierarchical limitations, resulting in diminished responsiveness to market changes. By valuing stability and short-term profits over adaptability, Kodak executives alienated employees who could have contributed to the company's survival in the digital transition (HRD, 2015).

Conclusion

In choosing to honor its founder George Eastman by keeping Kodak solely as a film and chemical company, executives neglected to embrace the innovative spirit that made him successful. Eastman transitioned from dry plate photography to silver halide film, fueling Kodak's growth. However, when confronted with the digital age, the company's leadership failed to discard outdated beliefs and adapt its culture. Despite having innovative employees and products positioned for success, Kodak's entrenched culture became a barrier to transformation and ultimately led to its decline.

References

  • Anthony, S. D. (2016). Kodak's downfall wasn't about technology. Harvard Business Review.

  • Fowler, B. (2013). Kodak CEO talks company's future. Phys.Org.

  • HRD. (2015). HR lessons from Kodak's turnaround.

  • Jinks, B. (2013). Kodak moments just a memory as company exits bankruptcy. The Seattle Times.

  • Kodak. (2019). Putting People and Communities First: Kodak's Ongoing Legacy.

  • Kodak. (2020). Laying the Foundation.

  • Mui, C. (2012). How Kodak Failed. Forbes.

  • Shih, W. (2016). The Real Lessons From Kodak's Decline. MIT Sloan Management Review.

  • White, T. (2012). Culture at Kodak and Beyond. Heart of a Leader.