OL 215: Final Project Two Milestone : Struggling Company

Running Head: PROFILE OF A STRUGGLING COMPANY: KODAK

PROFILE OF A STRUGGLING COMPANY: KODAK 8

Final Project Two– Milestone Two: Profile of a Struggling Company: Kodak

Chosen Company: Kodak

Jane Doe

Dr. Bekim Belica

OL-215 Principles of Management

Southern New Hampshire University

April 11, 2021

Introduction

 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 and 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.

Profile: 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, in which 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 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. The camera itself was roughly the size of a toaster and took 20 seconds to produce an image to a small television screen and printed into an actual photograph. 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. However, instead of pure digital photography, it created and marketed the Advantix, which still utilized film printing, and 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 it's mistake, an entire decade was lost, and the company was too far behind the curve and unable to recover. Digital cameras then gave way to cell phones and posting and sharing photographs online, 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). Today, Kodak is a much smaller company employing 3,500 workers at its Rochester, NY plant instead of the previous 60,000, and has focused on packaging, printing, and graphic communications. Kodak's inkjet systems have lowered publishers' costs for large production runs such as novels as well as smaller runs of textbooks generating $2.7 billion in revenue. However, it still faces stiff competition from entrenched giants such as Hewlett-Packard and Xerox (Fowler, 2013).

Profile: 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. Likewise, employees felt a sense of camaraderie and loyalty to the company being confident in its stability and believing that it would be a job that would last their entire working life. One would receive a gold watch after 30 years and a pension that ensures comfort and financial security throughout their old age. At the height of its industry dominance, Kodak employed over 62,000 people at its Rochester, NY headquarters alone. Kodak culture permeated the whole town, and the world as George Eastman would build hospitals, dental clinics, sponsor a United Way chapter, and donate over $2 billion to philanthropic and charitable causes (Kodak, 2019). It was the belief that the company could do no wrong, and the goose would continue to lay golden eggs well into the future. Kodak's culture filled open positions by promotion from within the company itself, which denied new viewpoints or ideas from outside a self-created bubble. It ultimately caused it to rot from the inside out (White, 2012). In 1989, Kodak found itself at a crossroads with the retirement of its CEO, Colby Chandler. The board narrowed the field to two replacements and chose Kay Whitmore, a thirty-year employee who had moved up the internal ladder and was a steadfast believer that the company's lifeblood was in the traditional film business. Immediately after taking up the mantle of leadership, Whitmore declared he would ensure that the company will keep to its core business and represented the belief that digital photography was an evil enemy that threatened the sacred cow of film and chemicals. Whitmore would hold the position for three years before being fired by the board in 1993. As a side note, Phil Samper, the unchosen executive, had a deep appreciation for advancements in technology and viewed digital photography as an industry disruptor to be exploited. Samper would resign from Kodak, and go on to be the president of Sun Microsystems, and later the CEO of Cray Research (Mui, 2012). In the mid-1990s, Kodak set up a separate division to research the validity of digital photography and any opportunities that could exist. Spearheaded by Willy Shih, it fostered a new culture of open communication and was uninhibited by legacy managers or their constrained thinking. It proved to be successful and built a leading market share in digital cameras. Executives realized they had opened a Pandora's box, and the digital future meant shrinking film demands and with it the necessity of thousands of employees, factories, and infrastructure. Survival instinct soon kicked in, and executives who had been with the company for decades believed they were entitled to positions in the new division. The internal strife led to the merger of digital, professional, and consumer film divisions in 2003, and signified the death knell for transitioning to a new culture (Shih, 2016).

Profile: Communication

This patriarchal society that Kodak fostered by internal promotions buried talented executives deep within a hierarchy. Presiding over a franchise rather than building a business-led to complacency and suppression of new ideas as managers disregarded innovators, mothballed cutting-edge technology, and the vicious cycle led to the company's downfall. Kodak cemented itself in the "top-down" approach in which executives decided a course of action and conveyed it to managers who, in turn, oversaw ground-level employees who carried out the orders of those above. By basing a manager or executives' value upon the length of service within the company, Kodak denied itself the ability to embrace a "bottom-up" approach by not enabling its employees to research and create new products organically. Communication flowed from the top down, but not from the bottom up. By valuing stability, harmony, and short term profits over embracing change and capitalizing upon market disruption, Kodak's executives turned a deaf ear to those who could see where the future lay and ultimately doomed itself (HRD, 2015).

Conclusion

In choosing to honor its founder, George Eastman, by making Kodak solely a film and chemical company, executives neglected to embrace the characteristics that made him great. Eastman proved to be both an innovator and entrepreneur who was not afraid to explore new technology and expand markets. By transitioning from dry plate photographs to silver-anide film, he built Kodak into a global power that furthered photography and motion pictures. As a humanitarian, Eastman sought to use his wealth to better humanity and advance the arts and created a paternalistic/family culture within Kodak, which was typical of companies during the period. The executives who took up his legacy continued to make strides in both film and chemicals but neglected to change the culture of Kodak itself. When faced with entering the digital age, the company had all the correct personnel and products in place to facilitate the change but was held back by a culture that could not exist in a digital age. By failing to evaluate core beliefs, discard those that are no longer relevant, and revitalize those that are, Kodak was unable to step away from the authoritarian culture and create a new one that would further it's potential.

Works Cited Anthony, S. D. (2016, July 15). Kodak's downfall Wasn't About technology. Retrieved from Harvard Business Review: https://hbr.org/2016/07/kodaks-downfall-wasnt-about-technology Fowler, B. (2013, September 3). Kodak CEO talks company's future. Retrieved from Phys.Org: https://phys.org/news/2013-09-kodak-ceo-company-future.html HRD. (2015, February 26). Retrieved from HR lessons from Kodak's turnaround: https://www.hcamag.com/au/news/general/hr-lessons-from-kodaks-turnaround/142068 Jinks, B. (2013, September 3). Kodak moments just a memory as company exits bankruptcy. Retrieved from The Seattle Times: https://www.seattletimes.com/business/kodak-moments-just-a-memory-as-company-exits-bankruptcy/ Kodak. (2019, June 19). Retrieved from Putting People and Communities First: Kodak's Ongoing Legacy: https://www.kodak.com/US/en/corp/blog/blog_post/?contentid=4295013807 Kodak. (2020). Retrieved from Laying the Foundation: https://www.kodak.com/US/en/corp/aboutus/heritage/georgeeastman/default.htm Mui, C. (2012, January 18). How Kodak Failed. Retrieved from Forbes: https://www.forbes.com/sites/chunkamui/2012/01/18/how-kodak-failed/#33d6e7fa6f27 Shih, W. (2016, May 20). MIT Sloan Management Review. Retrieved from The Real Lessons From Kodak's Decline: https://sloanreview.mit.edu/article/the-real-lessons-from-kodaks-decline/ White, T. (2012, March 17). Culture and Kodak and Beyond. Retrieved from Heart of a Leader: https://heartofaleader.wordpress.com/2012/03/17/culture-and-kodak-and-beyond/