Kodak: An Analysis of Failure

 Kodak: An Analysis of Failure

AMBA 600, 9042

June 10, 2016

Abstract

Kodak did not make the transition from film to digital like its competitors Canon, Fuji, and Sony.  That failure led to large drops in market share, which ultimately led to bankruptcy.  The purpose of this paper is to analyze the failures and successes of Kodak across four major characteristics of business.  Those characteristics are leadership, teamwork, management, and technology.  Kodak’s leadership failures are analyzed through a lens of executive complacency.  A sense of security may have impacted its business decisions, marketing strategies, and ability to innovate.  Furthermore, we discuss how Kodak’s teamwork almost saved the company from demise, but that its management did not allow for the innovative thinking to take place, going so far as to silence the innovators.  That void of innovation was filled with poor management decisions and an unsustainable business framework.  From a technology standpoint, we discuss some of Kodak’s past innovations as a reference point to future success.  This paper makes two contributions: the first is to serve as a warning to future executives, leaders, and managers on the follies of Kodak’s business practices over the last three decades.  The second is a recommendation on how Kodak can and likely will recovery from its bankruptcy and failure.

Kodak: An Analysis of Failure

Introduction

For nearly 100 years Kodak was the leader in camera innovation driving them to a 90 percent market share in photographic film and an 85percent market share in camera sales in the US by 1976 (Sparkes, 2012).  Executives explored revolutionary ideas such as film stored on rolls and the snapshot camera called “The Brownie” (Sparkes, 2012).  Nevertheless, Kodak executives cease to be visionary, relying on its past successes and the perceived comfort that they had driven the film world to its peak. The problem was film had reached its pinnacle.  It is abundantly clear that Kodak failed due to its inability to move into the digital photography world fast enough to establish the foothold they had during the film era. Why did Kodak make such poor strategic decisions with regard to digital?  The research will outline the reasons for their successes and failures, as well as describe their path for the a successful future.  

Kodak Leadership

Kodak’s failures were centered on the common theme of leadership complacency (Kotter, 2012).  Whether it was in marketing, innovation, or even business operations Kodak executives became complacent.   When Steve Sasson, an engineer at Kodak, showed executives his digital camera, the first in the world, their response was lukewarm at best.  In an interview with the New York times Mr. Sasson said “My prototype was big as a toaster, but the technical people loved it,….but it was filmless photography, so management‘s reaction was, ‘that‘s cute — but don‘t tell anyone about it’” (Deutsch, 2008).  

Although it was not known at the time how popular the digital medium would become, Kodak executives reacted to a revolutionary technology with contempt.  It was as if executives knew digital photography had the potential to change the industry because they told Mr. Sasson to not say anything.  Apparently Kodak’s leaders assumed the technology would never be discovered by anyone else.  That was leadership complacency at its worst and the Kodak executives would soon realize it.

Kodak was once a master in marketing.  Everyone remembers the phrase “Kodak moment.”  Kodak even marketed their film being used by astronauts on the moon (Kilmacher, 2014).  However, in a 2007 marketing video the tone turned darker and more aggressive.  Rather than seeming revolutionary, leaders at Kodak seemed irritated and outdated saying “It’s not playing grab ass anymore” with digital.  Ironically, Kodak even attacked Apple and the marketing video flopped badly (Kodak, 2007).

This tone carried into their business model where Kodak executives decided that rather than returning to its innovative roots it would double down on film and chemicals by buying up pharmaceutical companies like Sterling Drug. This venture inevitably failed because Kodak did not know how to develop and market drugs, nor did it know how to convert Sterling Drug into a chemical company.  Kodak eventually sold Sterling Drug in pieces at a loss. (Cohan 2011) At this point they began conceding the battle to other camera companies and pursued a policy of litigation for patent infringements.  The largest being a suit against Apple and RIM, which Kodak lost thus wasting even more money and further tarnishing the brand.  (Bloomberg, 2012)

According to Scott (2012), there exists eight dimensions of leadership that an executive should follow to successfully weather technological change across the business functions.  Those are being supportive, charismatic, intelligence, responsibility, having a vision, integrity, risk taking, and challenging traditions.  Kodak leadership exhibited none of those during their fall from the top.

Kodak Teamwork

Initially, Kodak maintained success by relying on its team mentality.  However, the failures in leadership, and in particular failures in those eight dimensions, lead to strife within the teams at Kodak.  That was not the case early on.   More and more organizations are realizing that teamwork can be beneficial to the growth of the organization depending how it is managed.  In the Harvard Business Review it was reported that, over the years, organizations have tried different approaches to teamwork (Harvard Management Update, 2008).  Teamwork in many environments have the same basic principles. These principles are setting defined goals, communicating effectively to share ideas, deciding on the best process to use to accomplish the goal, committing to the team effort and believing that team members will live up to their commitment.

The Management Development Review Case Study  discussed how in previous years in an effort to devise new ways for the company to be successful, Kodak implemented the teamwork concept (Emerald Insight, 1997).  In this case study, Kodak made the decision to change from a normal organization to one organization that was more customer-focused in order to improve the overall success of the organization.  This change was as a result of their findings that, while teamwork was not the only key to a business’ success, it was condidered more profitable to organization because teams had the tendency to outperform individuals.

Teamwork at Kodak proved to be successful when it was managed appropriately.  They were able to garner knowledge and different perspectives from the team members, with diverse backgrounds and expertise.  Additionally, it was the teamwork approach that saved the Kodak hundreds of thousands of dollars by incorporating three different units and streamlining the company’s annual report.  Kodak also claimed to have used teams for market growth and Research and Development.  Teamwork was vital to the transformation of Kodak and once it was realized that teams are much more effective the organization expanded the idea of cross-functional teamwork to the entire organization (Emerald Group Publishing, 1996).  However, the successful outcome of teamwork was not evident after a while when, according to they became complacent when it came to keeping up with current technology (Kotter 2012).  Kodak’s demise started when there was a turn in the digital technology industry.  The organization that had the cornerstone in the industry seems to have lost their momentum.  They were very overly confident that they had already mastered the digital industry that they did not prepare for potential challenges that may come with new competitors in the industry. (SOURCE?)  Kodak was the organization that forged ahead and made the digital industry what it was, at the time and when other organizations like Fuji, introduced new technology that is when Kodak’s downward spiraling begun.  This was Kodak’s opportunity to make strategic decisions on how to optimize their products to combat potential challenges in the industry; however, they did not respond as they should even though management was advised by others in the organization.  Regardless of the advice that was provided, teamwork was ‘not at play’ in the decision to not move forward with any optimization that could have improved their products. (SOURCE?)  

The concept of teamwork, though underutilized, can be very effective if used appropriately. The key to a successful team is cohesiveness and the willingness to communicate, brainstorm and be able to listen and consider recommendation from others. There are many issues that contributed to Kodak’s eventual demise. However, it is the opinion of many that Kodak’s complacency and the lack of effective research and development in a timely manner did not prepare them for what was to come in the new era of digital technology and consumer demands. They were faced with challenges and did not remain vigilant and staying ahead of demands of the consumer and which takes effort, innovation and teamwork. Incorporating teams in the workforce is an important asset and Kodak did not take advantage of the resources available to them until it was too late.