IS524 Amaravadi
School of Computer Sciences
Don’t become the next KODAK
Therese Poletti's Tech Tales
Commentary: Dismissing innovation, it missed key opportunities
SAN FRANCISCO (MarketWatch) — EastmanKodakCo., the photography company founded during America’s Gilded Age by inventor and entrepreneur George Eastman, has filed for Chapter 11.Now investors and pundits are trying to figure out at what point the iconic company did itself in, and what — if anything — can be salvaged.
One simple answer is thatKodakgot fat and complacent relying too heavily on its highly profitable cash cow, the film business. That made it fearful and skeptical of what are now called disruptive new technologies, such as thedigital camera, which one of its own engineers invented in 1975. “They decided themselves at some point, ‘I no longer need to be in the innovation game,’ ” said Hal Gregersen, a professor of leadership at Insead, the global business school in France. WhenKodakengineer Steve Sasson pitched an electronic camera to upper management, and they didn’t know what to do with it, Gregersen said, “they sealed the fate of the company.”
Years later, Sasson, who described his invention as a toaster-size prototype that took photos with a resolution of 0.01 megapixels, told the New York Times that Kodak’s management responded, “That’s cute but don’t tell anyone about it.”
The first cracks in Kodak’s world dominance of photography began to light when Fujifilm arrived in the U.S. in the late 1970s, and Kodak’s executives steadfastly refused to believe the Japanese giant would become a real competitor, even though it was selling film at lower prices. “Corporate failures are incremental,” said Gregersen. “Kodak had a complete corner on the market untilFujicame along. He said that when companies rely on the same business models for decades, “senior managers lose the capacity to discover the next business model. “That happens because they stop engaging in the behavior to do something different.”
Gregersen, a co-author of “The Innovator’s DNA” with Clayton Christensen, said he sees this happen frequently at large companies too dependent upon one product and afraid to kill off their own very profitable children, as Apple Inc.(US:AAPL)co-founder Steve Jobs was famous for a willingness to do. This business conundrum was famously explored and analyzed in Christensen’s best-selling “The Innovator’s Dilemma.”
“The fact that they couldn’t see what that [digital camera] might become reflects to me years, if not decades, of senior management behavior that disabled or incapacitated their ability to see,” he added. “That comes from leading a fairly insular life, not stepping out of the office.”
CurrentKodakChief Executive Antonio Perez made a full-on push to embrace digital photography when he was named CEO in 2005. But some analysts believe he also muddied the Rochester, N.Y., company’s focus by making an expensive gamble on consumer ink-jet and commercial printing.
In printing,Kodakstill lags far behind the dominantHewlett-PackardCo.(US:HPQ)), Perez’s former employer, with a market share in the single digits in the U.S. It doesn’t even show up in IDC’s third-quarter peripherals market research, except under the blanket category of “other Printers are a commodity,” Gregersen said. “If I wereKodak— where there is this rich, enormous history and brand — the question to ask is, ‘Do the senior people have an authentic, real connection to the people today taking pictures?’ ”
As an example, Gregersen pointed to Apple co-founder Jobs. As private as the late Jobs was, he lived in relative modesty compared with most CEOs, in a walkable — if pricey — neighborhood of Palo Alto, Calif. Jobs was also known to answer emails from customers and was occasionally spotted out in Silicon Valley, where some have recalled talking to him in line in stores. “He was out looking atCuisinartmachines, but he also had that broader experience,” Gregersen said. “We laugh at the fact that he lived in India on an ashram and didn’t like the noise of a fan. But he used life experience that was not normal to create incredible products and services.”
Working with his other company, Pixar Animation Studios, now part of Disney(US:DIS), also gave Jobs a much broader view and experience of another industry, entertainment. Over the weekend, a conference of innovators called the Intersection was held at Pixar’s campus in Emeryville, Calif., where one of the themes was how innovation can come from learning about other industries and making connections among previously unrelated things.
Kodak, which invented the Brownie camera that popularized the field of photography for the masses, ironically missed one of the biggest shifts in consumer behavior: amateur photography with camera phones, and then “smartphones.” An example of howKodakhas lagged in recent years was seen at the Consumer Electronics Show last week. The company introduced a new feature on itsEasyshare digital cameraswith built-in WiFi. Consumers can now upload higher-res photos directly to social networks like Facebook — a feature that’s been available in smartphones for over a year.
In recent weeks, battling to stave off bankruptcy, the company had been looking to add cash to its operations, had sued rivals for intellectual property violations, and had tried to sell off some of its vast patent portfolio. “There is little doubt that they have technology and IP of tremendous value,” said Anthony Sabino, a professor at St. John’s University’s business school, who applauded the company’s efforts to stay out of bankruptcy. Gregersen, though, would argue that Kodak’s business model and path to innovation were long since bankrupt.
Questions:
- What concepts does the article touch upon that have been discussed in the course? Name them.
- Why did Kodak fail according to the article?
- How can we explain this using concepts and theories in the course?
- What were the mistakes made by Perez according to the article?
- How can we describe these in organizational terms?
- What should Kodak have done differently to avoid bankruptcy?