Assignment Principles of Management Term 1 EPGDM- Missing the bus- Kodak
Missing the bus- Kodak
There are few corporate blunders as staggering as Kodak’s missed opportunities in digital photography, a technology that it invented. This strategic failure was the direct cause of Kodak’s decades-long decline as digital photography destroyed its film-based business model that set Kodak on the path to bankruptcy.
Steve Sasson, the Kodak engineer who invented the first digital camera in 1975, characterized the initial corporate response to his invention this way:
“But it was filmless photography, so top executives’’ reaction was, ‘that’s cute—but don’t tell anyone about it.”
Kodak inability to see digital photography as a disruptive technology, even as its researchers extended the boundaries of the technology, would continue for decades.
To understand how Kodak could stay in denial for so long, let us go back to a story that Vince Barabba, a former Kodak executive, recounts from 1981, when he was Kodak’s head of market intelligence. Around the time when Sony introduced the first electronic camera, one of Kodak’s largest retailer, photo finishers, asked him whether they should be concerned about digital photography. With the support of Kodak’s CEO, Barabba conducted a very extensive research effort that looked at the core technologies and likely adoption curves around silver halide film versus digital photography.
The results of the study produced both “bad” and “good” news. The “bad” news was that digital photography had the potential capability to replace Kodak’s established film based business. The “good” news was that it would take some time for that to occur and that Kodak had roughly ten years to prepare for the transition.
The study’s projections were based on numerous factors, including: the cost of digital photography equipment; the quality of images and prints; and the interoperability of various components, such as cameras, displays, and printers. All pointed to the conclusion that adoption of digital photography would be minimal and non-threatening for a time. History proved the study’s conclusions to be remarkably accurate, both in the short and long term.
The problem is that, during its 10-year window of opportunity, Kodak did little to prepare for the later disruption. In fact, Kodak made exactly the mistake that George Eastman, its founder, avoided twice before, when he gave up a profitable dry-plate business to move to film and when he invested in colour film even though it was demonstrably inferior to black and white film (which Kodak dominated).
Barabba left Kodak in 1985 but remained close to it. Thus he got a close look at the fact that rather than prepare for the time when digital photography would replace film, as Eastman had with prior disruptive technologies, Kodak chose to use digital to improve the quality of film.
This strategy continued even though, in 1986, Kodak’s research labs developed the first mega-pixel camera, one of the milestones that Barabba’s study had forecasted as a tipping point in terms of the viability of standalone digital photography.
The choice to use digital as a prop for the film business culminated in the 1996 introduction of the Advantix Preview film and camera system, which Kodak spent more than $500M to develop and launch. One of the key features of the Advantix system was that it allowed users to preview their shots and indicate how many prints they wanted. The Advantix Preview could do that because it was a digital camera. Yet it still used film and emphasized print because Kodak was in the photo film, chemical and paper business. Advantix flopped. Why buy a digital camera and still pay for film and prints? Kodak wrote off almost the entire cost of development.
Kodak also suffered several other significant, self-inflicted wounds in those pivotal years:
In 1988, Kodak bought Sterling Drug for $5.1B, deciding that it was really a chemical business, with a part of that business being a photography company. Kodak soon learned that chemically treated photo paper isn’t really all that similar to hormonal agents and cardiovascular drugs, and it sold Sterling in pieces, for about half of the original purchase price.
In 1989, the Kodak board of directors had a chance to take make a course change when Colby Chandler, the CEO, retired. The choices came down to Phil Samper and Kay R. Whitmore. Whitmore represented the traditional film business, where he had moved up the rank for three decades. Samper had a deep appreciation for digital technology. The board chose Whitmore. As the New York Times reported at the time,
“Mr. Whitmore said he would make sure Kodak stayed closer to its core businesses in film and photographic chemicals.”
Samper resigned and would demonstrate his grasp of the digital world in later roles as president of Sun Microsystems and then CEO of Cray Research. Whitmore lasted a little more than three years, before the board fired him in 1993.
For more than another decade, a series of new Kodak CEOs would bemoan his predecessor’s failure to transform the organization to digital, declare his own intention to do so, and proceed to fail at the transition, as well. George Fisher, who was lured from his position as CEO of Motorola to succeed Whitmore in 1993, captured the core issue when he told the New York Times that Kodak
“regarded digital photography as the enemy, an evil juggernaut that would kill the chemical-based film and paper business that fuelled Kodak’s sales and profits for decades.”
Fisher oversaw the flop of Advantix and was gone by 1999. The story did not change for another decade. Kodak now has a market value of $140m and teeters on bankruptcy. Its prospects seem reduced to suing Apple and others for infringing on patents that it was never able to turn into winning products.
Kodak’s strategists and planners not only presided over the creation of technological breakthroughs but was also presented with an accurate market assessment about the risks and opportunities of such capabilities. Yet Kodak failed in making the right strategic choices.
Answer all the questions.
- According to you what could have been the reason for Kodak to move slowly in response to the changing External Environment. (10 marks)
- Giving justifications, propose and explain a Management Principle that you think can be used by organizations operating in fast changing business environment. (10 marks)
- “Planning for a very long term as well as for a very short term can be equally problematic.” Give opinion in favour or against the statement referring to the Kodak’s case. (10 marks)
Assignment Principles of Management –Term 1 (EPGDM) - Mission the bus-Kodak assignment help
This particular project is based on the case study about Kodak Company and how it failed to make the right strategic choices. After reading case study, you have to write answers to three of the questions which are listed in the question paper. Prepare most accurate answers to the questions which are mentioned in the question file.
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