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KODAK:&Rise&and&Fall&of&a&Legend&
Organizational+Transformation+in+the+Case+of++
Eastman+Kodak+Corporation!
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Richard!Hess!
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Global!Organization!&!Leadership!
Professor!Dong;Jae!Kim!
Yonsei!University!
Graduate!School!of!International!Studies!
Seoul,!June!9th!2014!
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Directories!
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Global!Organization!&!Leadership!
Content&
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LIST!OF!GRAPHS!AND!FIGURES!
II!
1.! INTRODUCTION!
1!
2.! METHODOLOGY!
2!
3.! HOW!EVERYTHING!BEGAN:!THE!FOUNDING!AND!THE!WAY!TO!THE!TOP!
3!
3.1.! GEORGE!EASTMAN!AND!THE!INITIATION!OF!THE!AMATEUR!PHOTOGRAPHY!MARKET!
3!
3.2.! DIVERSIFICATION!AND!THE!RISE!OF!THE!KODAK!BRAND!
4!
3.3.! ORGANIZATIONAL!PROPERTIES!DURING!THE!RISE!
5!
3.4.! INTERIM!CONCLUSION!
7!
4.! HOW!THE!GIANT!FELL:!COMPETITION!AND!DISRUPTIVE!TECHNOLOGIES!
8!
4.1.! STAGE!1:!HUBRIS!BORN!OF!SUCCESS!UNTIL!1984!
8!
4.2.! STAGE!2:!UNDISCIPLINED!PURSUIT!OF!MORE!(1984!UNTIL!1993)!
10!
4.3.! STAGE!3:!DENIAL!OF!RISK!AND!PERIL!(1993!UNTIL!2000)!
14!
4.4.! STAGE!4:!GRASPING!FOR!SALVATION!(2000!UNTIL!2009)!
16!
4.5.! STAGE!5:!CAPITULATION!TO!IRRELEVANCE!OR!DEATH!(2009!UNTIL!2012)!
18!
4.6.! ORGANIZATIONAL!PROPERTIES!DURING!THE!DECLINE!
18!
5.! HOW!TO!RISE!AGAIN:!RESTRUCTURING!AND!THE!SEARCH!FOR!A!PURPOSE! 20!
CONCLUSION!
21!
REFERENCES!
23!
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List&of&Graphs&and&Figures&
Figure!1:!Methodology!.....................................................................................................................................!2!
Figure!2:!Kodak!advertisement!from!1889!.............................................................................................!4!
Figure!3:!Attributes!of!Excellence!...............................................................................................................!7!
Figure!4:!First!stage!of!decline!until!1984!...............................................................................................!8!
Figure!5:!Second!stage!of!decline!1984!till!1993!................................................................................!10!
Figure!6:!Kodak’s!stock!value!and!its!five!stages!of!decline!..........................................................!11!
Figure!7:!Kodak's!workforce!and!stock!value!form!1973!to!2012!..............................................!13!
Figure!8:!Comparison!of!global!market!share!of!Fuji!and!Kodak,!1990!till!2002!.................!13!
Figure!9:!Third!stage!of!decline!1993!till!2000!...................................................................................!14!
Figure!10:!Fourth!stage!of!decline!2000!until!2009!..........................................................................!16!
Figure!11:!Fifth!stage!of!decline!2009!until!2012!..............................................................................!18!
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II!
Kodak:!Rise!and!Fall!of!a!Legend!
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1.
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Introduction&
Kodak! is! an! interesting! case! when! analyzing! corporate! failures.! Once! the! founder! of!
snapshot! photography! and! supplier! of! many! related! products,! Kodak! has! filed! for!
Chapter!11!in!January!2012!and!has!just!resumed!business!in!September!2013.!Despite!
having! invented! the! first! digital! camera! back! in! the! 1980s,! it! is! exactly! this! disruptive!
technology!that!caused!its!final!downturn.!!
The! purpose! of! this! paper! is! to! describe! the! historical! development! of! Kodak! and!
identify! the! key$events,! strategic$decisions! as! well! as! organizational$factors$that! lead! to!
the! decline! of! Kodak,! from! its! founding! in! 1892! over! its! domination! till! the! 1980s,! its!
decline! in! the! 2000s! until! its! reemergence! in! 2012.! By! analyzing! the! external!
(competitors,! technologies,! consumer! preferences)! and! internal! factors! (strategy,!
organization,! leadership,! culture),! the! paper! wants! to! answer! the! following! three!
questions:!!
1) What$organizational$factors$influenced$the$performance$of$Kodak?$!
2) What$leadership$decisions$were$essential$for$the$success$and$failure$of$Kodak?!!
3) What$general$lessons$can$we$drawn$from$these$findings?!
For! this! purpose,! the! paper! is! divided! into! three! main! chapters:! 1)! How! Everything!
Began:!The!Founding!and!the!Way!to!the!Top,!2)!How!the!Giant!Fell:!New!Competition!
and!Disruptive!Technologies,!3)!How!to!Rise!Again:!Restructuring!and!the!Search!for!a!
Purpose.! Each! of! the! chapters! describes! the! key! events! and! analyzes! the! main!
organizational!factors.!!
The!first!chapter!describes!the!development!of!Kodak!until!its!global!domination!in!the!
1970s!and!1980s.!!
The!second!chapter!looks!at!the!difficulties!of!Kodak!with!increasing!global!competition!
and!the!failure!of!adapting!to!the!digital!age!early!enough,!beginning!in!the!1980s!and!
culminating!in!the!early!2000s.!!
The!last!chapter!shortly!describes!the!final!decline!of!Kodak!until!its!file!for!bankruptcy!
in!January!2012!and!the!restructuring!to!its!present!form!and!performance.!!!
The!main!findings!of!the!case!with!the!key!insight!about!general!company!failures!will!
be!summarized!in!the!conclusion.!
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Kodak:!Rise!and!Fall!of!a!Legend!
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Methodology&
In! order! to! analyze! the! downfall! of! Kodak,! the! development! of! Kodak! is! divided! into!
three!phases.!In!each!phase,!the!main!external!events!will!be!described.!In!a!second!step,!
the! organizational! factors! will! be! analyzed! along! three! main! dimensions:! Strategy,!
Structure! and! People! &! Culture! (see! Figure! 1).! This! approach! shall! enable! a! holistic!
analysis! of! Kodak’s! decline.! Thereby,! the! main! focus! lies! on! the! organizational!
transformation!of!the!company!and!how!it!reacted!to!the!various!external!changes.!!
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Figure!1:!Methodology!(own!Figure)!
Additionally! to! this! general! approach,! two! other! frameworks! will! be! used! in! order! to!
analyze!the!organizational!properties!of!Kodak.!!
For!the!first!phase,!the!eight!attributes!of!excellence!identified!by!Peters & Waterman in
their 1982 bestseller In Search of Excellence will be used. As Kodak was one of their
examined cases, it will be interesting to see if there are any missing or controversial properties
if looking at it from today’s perspective .
For the second phase, the actual downfall of Kodak will be analyzed according to Collins five
stages of decline, which he has developed! in! his! 2009! book! How$the$Mighty$Fall.$These!
five! stages! serve! as! a! good! analytical! framework! in! order! to! identify! and! isolate! the!
underlying!root!causes!for!the!demise!of!the!Kodak!Empire.!!
By! looking! at! the! three! dimensions! in! each! phase! and! complement! it! with! the! two!
frameworks! from! Peters! &! Waterman! and! Collins,! the! paper! gives! clear! findings! and!
reasons!for!Kodak’s!decline!!
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How&Everything&Began:&The&Founding&and&the&Way&to&the&Top&
This!first!chapter!describes!the!initial!purpose!of!Kodak!and!what!influence!the!founder,!
George! Eastman,! had! on! the! company.! Next,! it! looks! at! the! diversification! of! the!
company!and!it’s!rise!to!global!dominance!over!the!20th!century.!Finally,!it!analyzes!the!
internal! organizational! properties! that! developed! during! this! period! and! how! they!
impacted!the!performance!of!the!company.!This!serves!as!the!argumentative!fundament!
for!the!next!chapter,!which!will!analyze!the!fall!of!Kodak.!!
3.1. George&Eastman&and&the&Initiation&of&the&Amateur&Photography&Market&
George! Eastman! was! born! in! 1854.! As! an! early! school! drop! out,! he! started! several!
careers.! Eventually,! by! the! age! of! 24,! he! started! to! experiment! with! photographic!
emulsion!formulas!in!order!to!make!photography!simpler,!cheaper!and!more!accessible!
to!the!mass!market.!By!1880,!Eastman!developed!a!new,!less!sensitive!dry;plate!formula!
and! patented! the! respective! processes! in! order! to! be! able! to! produce! them! in! larger!
quantity.! Thereafter,! he! started! to! produce! dry! plates! in! Rochester,! New! York,! and!
eventually! developed! the! film! roll,! which! revolutionized! the! film! market.! Finally,! he!
founded!the!Eastman!Kodak!Company!in!1892!and!started!to!develop!and!sell!film!and!
cameras!for!the!mass!market.!(Kodak, 2010)!!
For! Eastman,! the! initial! goal! was! to! make! picture! taking! affordable! to! everyone.!
Thereby,!he!wanted!to!“make$the$camera$as$convenient$as$the$pencil” (Gavetti, Henderson,
& Giorgi, 2005, S. 1).!For!this!reason,!he!focused!on!continuously!improving!his!products!
in!order!to!guarantee!the!best!picture!quality!for!its!customers.!Furthermore,!he!had!a!
strong! philanthropic! vein,! as! he! donated! a! lot! for! the! development! of! the! Rochester!
community! (e.g.! Rochester! University).! This! early! commitment! to! social! responsibility!
led!to!a!strong!identification!with!the!company,!from!employees!as!well!as!the!general!
society,!that!held!way!into!the!20th!century (Kodak Invests in Higher Education, 1982).!
With! the! introduction! of! “the! Kodak! Camera”! in! 1888,! Eastman! established! the! basic!
building! block! for! the! amateur! photography! market.! This! pre;loaded! camera! for! 100!
photos!was!sold!at!a!low!price!and!had!to!be!sent!back!to!Kodak!in!order!to!print!out!the!
photos!and!reload!the!camera!with!a!new!film.!With!the!slogan!“you$press$the$button,$we$
do$ the$ rest”$ (see! Figure! 2),$ Kodak! was! able! to! simplify! the! photography! process! and!
make! it! accessible! to! the! mass.! This! trend! was! prosecuted! by! the! development! of! the!
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“Brownie”!camera!in!1900,!a!low;cost!card!box;camera!for!$1!that!initiated!the!snapshot!
market.!(Kodak, 2010)!
As! the! amateur! photography! market! developed,! taking! pictures! became! a! central!
element! of! every;day! life.! The! capturing! of! memorable! lifetime! moments! thereby! also!
became! known! as! the! “Kodak$ Moment”.$ ! Over! the! whole! century,! it! described! “the$
memories$that$the$individual$captures$as$a$way$to$celebrate,$share,$and$communicate$our$
most$precious$memories$with$our$friends$and$families.”$
!!
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Figure!2:!Kodak!advertisement!from!1889!(Source:!PhotoSecrets)!
With! the! clear! vision! in! mind! and! the! passion! to! develop! and! improve! the! products,!
Eastman!was!able!to!create!a!general!demand!for!a!newly!introduced!commodity,!which!
did!not!exist!back!then.!By!the!beginning!of!the!1930s,!Eastman!got!sick!(spinal stenosis)!
which! strongly! impacted! his! everyday! life.! As! the! pain! became! unbearable! and! his!
company! was! prospering,! he! committed! suicide! on! March! 14th! 1932,! leaving! a! single!
note!that!says:!“My$work$is$done.$Why$wait?”$(NNDB, 2014)!
3.2. Diversification&and&the&Rise&of&the&Kodak&Brand&
The! success! of! Kodak! continued! even! after! George! Eastman! passed! away.! In! 1935,!
Kodak!developed!its!iconic!Kodachrome!film,!the!first!successful!mass;market!color!film!
that!lasted!for!over!70!years!until!2009.!With!continuous!investments!into!R&D,!Kodak!
continued! to! develop! new! products! and! dominate! the! world! photography! market! way!
into! the! 1980s.! In! general,! Kodak’s! business! model! was! based! on! two! pillars:! the!
developing!and!selling!of!high;quality!film!and!the!printing!of!photographs!with!state;of;
the;art!technology.!!
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Over! this! period,! Kodak! developed! film! that! could! detect! radiation! as! well! as! x;ray!
imaging.!Furthermore,!during!WWII,!it!used!the!microfilm!technology,!enabling!the!US!
military!to!shrink!the!mail;volume!substantially.!Even!the!first!pictures!of!the!earth!from!
orbit! were! taken! by! a! Kodak! camera! and! film.! Thereby! by! the! end! of! the! 1960s,! the!
entire!photography!industry!was!determined!and!dominated!by!Kodak.!(Kodak, 2010)!
3.3. Organizational&Properties&during&the&Rise&
After!looking!at!the!historical,!mainly!external!facts,!the!following!section!analyzes!the!
internal!organizational!properties!that!developed!and!influenced!the!performance!of!the!
company.!!
Strategy!
The! main! strategy! of! Kodak! during! its! first! 100! years! of! existence! was! a! “Razor! Blade!
Strategy”! (Gavetti, Henderson, & Giorgi, 2005, S. 2).! Thereby,! as! already! mentioned!
above,!Kodak!focused!mainly!on!developing!its!film!products!while!providing!low;cost!
cameras!to!the!mass!market.!The!main!source!for!revenue!was!the!selling!of!films!and!
the! printing! of! high;quality! photographs.! Thus,! “No$matter$what$they$said,$they$were$a$
film$company.$Equipment$was$ok$as$long$as$it$drove$consumables”$(Swasy, 1999).!
Structure!
Over!the!time,!Kodak!developed!a!highly!centralized,!autocratic!structure.!This!led!to!a!
huge,! inflexible! bureaucracy,! which! caused! a! general! stodginess! and! slowness! of!
decision!making.!Together!with!a!high!respect!for!authority,!these!factors!slowed!down!
the! development! of! new! products! and! the! move! into! new! businesses! (Boudreau &
Berman, 1992, S. 5).!!
People!&!Culture!
Since!its!foundation,!George!Eastman!put!a!lot!of!effort!in!creating!an!employee;centered!
culture,! as! he! saw! them! as! the! most! valuable! asset! of! the! company.! Over! time,! Kodak!
introduced! several! programs! in! order! to! establish! a! value;driven! culture! that!
appreciates! and! values! its! employees! (Fallon of Eastman Kodak receives Gantt medal,
1983); (Yeung & Berman, 1997, S. 326-327).!
First,! Kodak! was! one! of! the! first! to! introduce! a! profit;sharing! program! for! every!
employee.!Second,!it!established!a!suggestion!program,!which!enabled!its!employees!to!
bring!up!various!concerns!about!efficiency!measures,!cost;cutting!initiatives!and!process!
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improvements! and! discuss! it! with! their! superiors! on! a! regular! basis.! Third,! Kodak!
focused!on!an!internal!promotion!system!and!homegrown!management.!Every!CEO!was!
recruited! internally! until! 1993,! when! M.C.! Fisher! from! Motorola! became! the! first!
external! CEO.! Fourth,! Kodak! contributed! a! lot! to! Rochester! and! the! society! and!
established! strong! interpersonal! connections! through! recreational! activities! (e.g.!
softball,!bowling,!photography!club).!(Paul, 1984, S. 56-57)!
By!focusing!on!organizational!culture,!shared!values!and!corporate!social!responsibility,!
Kodak!was!able!to!create!a!loyal!and!committed!work!force.!The!employees!were!proud!
of! being! part! of! the! “Kodak! family”! and! have! a! lifetime! employment:! “I’m$ safe.$ My$
mother,$the$Big$Yellow$K!is$there$and$it’s$going$to$protect$me$for$the$rest$of$my$life.” (Paul,
1984, S. 55)!Accordingly,!Kodak’s!workforce!didn’t!feel!the!need!for!establishing!a!labor!
union!and!remained!non;unionized!over!the!whole!time:!“Even$to$this$day,$this$company$
does$ not$ have$ a$ labor$ union.$ Its$ attitude$ toward$ the$ general$ public$ make$ paternalistic$
feudalism$ look$ like$ participatory$ democracy”$ (Paul, 1984, S. 54).! Overall,! all! the!
procedures! and! policies! in! the! company! where! established! in! order! to! maintain! the!
status!quo:!“All$CEOs$were$recruited$inMhouse,$leading$to$low$risk$taking$and$innovation$in$
manufacturing$processes.”$!!
The! downside! of! this! culture! and! safe! environment! was! the! huge! influence! on! the!
working!attitude!and!innovative!capabilities!of!the!company.!As!a!local!writer!describes:!!
“Kodak$workers$are$usually$punctual$about$arriving$and$leaving.$When$the$doors$open$at$
the$end$of$the$day,$the$rapid$migration$is$impressive.“$Furthermore,! the! low! recruitment!
rate! of! external! employees! led! to! a! rather! closed! environment! that! was! hardly! ever!
shaken!up.!This!lowered!the!possibilities!of!brining!in!new!ideas!and!challenge!existing!
norms!and!practices,!thereby!limiting!creativity!and!innovation.!!
Another! problem! of! the! culture! for! innovation! was! the! limited! sharing! of! internal!
knowledge.! Even! though! Kodak! was! able! to! continuously! invent! new! products,! the!
rather! closed! hierarchical! culture! hindered! the! sharing! of! knowledge.! As! the! former!
Director! of! Analytical! Science,! Dr.! John! D.! Baloga,! described:! “This$ used$ to$ be$ a$ closed$
society,$ where$ some$ researchers$ kept$ their$ records$ in$ locked$ safes.$ Some$ of$ them$ were$
crushed$when$the$secrecy$went$away.”$Even!when!Kodak!invented!the!first!digital!camera!
in!the!1970s,!it!failed!to!recognize!its!significance!for!the!future!photography!industry.!
The! management! simply! feared! to! invest! into! a! technology! that! could! its! core! film!
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business!(Newman, 2012).!As!the!inventor!of!the!digital!camera,!Steven!J.!Sasson!states:!
“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.”!
3.4. Interim&Conclusion&
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Figure!3:!Attributes!of!Excellence!(Source:!own!Figure,!based!on!Peters!&!Waterman)!
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As!this!first!chapter!has!shown,!Kodak’s!dominance!of!the!global!photography!industry!
can! be! traced! back! to! the! continuous! improvement! of! its! core! film! products! and!
experimentation!with!various!different!technologies!in!related!fields.!But!nevertheless,!
Kodak!failed!to!use!these!discoveries!to!serve!its!core!purpose.!!
Event!though!Peters!&!Waterman!defined!Kodak!as!an!excellent!company!in!1982,!some!
of! the! eight! attributes! were! hardly! existing! or! about! to! become! weaker! (Paul, 1984, S.
59).!It!certainly!focused!on!productivity!trough!people!and!was!hands;on!value!driven.!
Furthermore,!Kodak!stacked!to!the!knitting!by!staying!with!businesses!already!known.!It!
also!stayed!close!to!the!customer,!as!various!products!were!developed!directly!together!
with! the! customers! (especially! in! the! medical! business! segments).! Nevertheless,! it!
lacked! substantially! in! a! simple! and! lean! staff,! as! the! hierarchy! within! the! company!
became!a!huge!burden!for!flexible!and!innovative!solutions.!Accordingly,!it!had!a!strong!
!
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bias!towards!a!centralized!organizational!structure!and!eventually!failed!in!pursuing!a!
bias!for!action!(see!Figure!3).!
These!properties!slowly!weakened!Kodak’s!organizational!structures!and!the!ability!to!
react!to!fundamental!changes!in!the!external!environment.!The!next!chapter!will!analyze!
the!decline!in!more!details.!
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4.
How&the&Giant&Fell:&Competition&and&Disruptive&Technologies&
This!chapter!looks!at!the!decline!of!Kodak!over!its!last!40!years!by!using!the!5!stages!of!
decline! developed! by! Collins! (2009)! (see! Figure! 6).! The! framework! is! very! useful! in!
analyzing!the!downfall!of!any!company,!because!it!does!not!just!look!at!the!actual!period!
of!decline.!Rather,!it!takes!the!underlying!root!causes!into!account,!the!actual!“disease”!
that! infested! the! organization! at! a! certain! time! and! slowly! but! steadily! affected! the!
performance!of!the!organization.!Based!on!the!findings!of!the!last!chapter,!the!following!
part!will!illustrate!the!actual!reasons!for!decline!of!Kodak!in!each!stage!in!more!detail.!
4.1. Stage&1:&Hubris&Born&of&Success&until&1984&
!
Figure!4:!First!stage!of!decline!until!1984!(Source:!own!Figure)!
In! the! first! stage! of! decline,! a! company! is! becoming! highly! successful! and! the! people!
believe!that!it!will!continue,!regardless!of!what!the!company’s!future!decisions!are.!Thus,!
the! company! tends! to! have! a! certain! degree! of! arrogance! by! ignoring! other! external!
factor!as!part!of!their!success,!especially!luck.!In!other!words,!leaders!tend!to!ignore!the!
“why”$of!their!success!and!solely!focus!on!the!“what”.!Furthermore,!they!neglect!the!role$
of$ their$ primary$ flywheel! and! fail! to! renew! it! with! the! same! amount! of! effort! and!
dedication.! This! leads! to! a! declining$ learning$ orientation,! i.e.! a! flatter! learning! curve.!
(Collins, 2009)!
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In!the!case!of!Kodak,!this!kind!of!behavior!can!be!observed!way!back!in!the!1970s.!Based!
on!its!ongoing!success,!Kodak!started!to!ignore!the!threat!of!any!competitors!and!strictly!
believed!in!the!superiority!of!its!own!products.!Even!Peters!&!Waterman,!besides!their!
categorization! of! Kodak! as! an! excellent! company,! see! some! first! signs! of! hubris! and!
decline!of!learning!orientation.!One!example!is!Kodak’s!instruction!booklet!for!a!printer,!
which! was! 15! pages! long! compared! to! the! one! from! 3M! which! was! only! 1! page! long!
(Paul, 1984, S. 59).!This!shows!how!unconcerned!Kodak!dealt!with!its!competitors!and!
just! delivered! standardized! products! without! superior! services.! Mainly,! Kodak! was!
“competing$through$its$marketing$rather$than$taking$the$harder$route$of$developing$new$
products$and$new$businesses.”!!
Another!sign!of!hubris!was!the!continuous!education!of!Kodak’s!workforce.!Even!though!
education! of! the! workforce! might! be! a! vital! part! for! a! company’s! success,! the!
uncontrolled!pursuit!of!more!without!controlling!for!any!return!on!investment!is!fatal.!
Accordingly,! the! education! program! led! to! rising! costs! and! declining! time! to! actually!
improve!the!processes!or!products!of!the!company.!As!a!former!sales!manager!of!Kodak,!
Charler! P.! Conroy,! explains:! “Many$ […]$ [were$ educated]$ far$ beyond$ their$ intelligence.$ It$
increased$ the$ cost$ of$ doing$ business$ and$ the$ products$ were$ slowly$ being$ escalated$ out$ of$
the$market.”$(Paul, 1984, S. 59)$
Beside!the!internal!inefficiencies,!Kodak!also!faced!rising!competition!from!new!market!
entrants,! first! and! foremost! from! Fuji! Photo! Film! Corporation.! Fuji! was! the! main!
competitor!in!the!imaging!business!and!steadily!increased!its!global!film!market!share!
throughout! the! 1990s! until! it! eventually! overcame! Kodak! around! 2001.! Furthermore,!
Kodak! faced! serious! competition! in! its! other! business! segments.! With! the! rise! of! new!
digital!technologies,!Kodak’s!core!imaging!business!became!more!and!more!threatened.!
New! competitor! like! Sony! steadily! gained! in! power,! while! Kodak! kept! missing! the!
chance!of!hopping!on!the!newly!emerging!digital!trends.!Lastly,!new!printing!giants!like!
Hewlett;Packard!and!Xerox!got!a!lock!on!printers.!!
All! of! these! new! competitors! and! trends! hit! Kodak! in! a! time! where! the! organization!
wasn’t! ready! and! willing! to! change! internally.! The! general! attitude! of! Kodak’s!
management!was!pretentious!and!no!one!actually!really!knew!how!to!deal!with!serious!
competition!(Forbes, 2004).!After!all,!“[Kodak$was][…]the$imaging$company$of$the$world.$
[They]$ […]$ literally$ had$ no$ competition$ for$ so$ long,$ management$ hadn’t$ become$
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accustomed$ to$ it.$ Historically,$ if$ there$ was$ a$ competitor,$ Kodak$ would$ blow$ them$ away”.$
With!this!notion!in!head,!if!becomes!clearer,!why!Kodak!didn’t’!move!into!the!digital!age!
early!enough!(despite!having!access!to!the!technology).!As!the!later!CEO!Antonio!Perez!
says:! “A$ notion$ that$ is$ based$ on$ the$ success$ was$ that$ maybe$ if$ Kodak$ doesn't$ move$ into$
digital—the$imaging$world$will$never$move$into$digital”$(Morozov & Morris , 2009, S. 22).$
As!it!turns!out,!this!notion!was!based!on!strong!hubris!and!ignorance!of!the!reality.!!
This!end!of!the!first!stage!of!hubris!can!be!set!somewhere!around!the!mid!1980s.!The!
Author!chose!the!1984!Olympic!games!in!Los!Angeles!as!the!turning!point,!when!Kodak!
lost! the! position! as! the! official! film! of! the! games! to! Fuji! Film! (Gavetti, Henderson, &
Giorgi, 2005).! It! can! be! seen! as! the! result! of! the! continuous! underestimation! of! the!
competitors! and! the!overestimation! of! the! own!capabilities!and! superiority.! It! was! the!
first! time! that! the! Kodak! empire! was! challenged! (especially! in! the! own! market)! and!
represented!a!sever!shock!for!the!company.!
4.2. Stage&2:&Undisciplined&Pursuit&of&More&(1984&until&1993)&
!
Figure!5:!Second!stage!of!decline!1984!till!1993!(own!graph)!
In! the! second! stage,! companies! are! spoiled! by! their! success! and! expect! even! more$
growth,! thereby! pushing! the! organization! to! its! limits.! This! leads! to! undisciplined$
decisions!with!expansions!that!do!not!fit!the!core!values!of!the!company!and!do!not!drive!
its!economic!engine.!Furthermore,!the!availability!of!easy!cash!by!the!on;going!success!
decreases$the$cost$discipline.!This!uncontrolled!growth!makes!it!difficult!for!the!leaders!
to!find!the!right$people$for$key$positions!in!their!organization.!This!leads!to!the!breaking!
of! Packard’s$Law,! which! states! that! no! company! can! continuously! increase! its! revenue!
faster!than!its!ability!to!get!the!right!people!at!the!right!positions.!By!breaking!this!law,!
the! organization! starts! to! fill! key! positions! with! wrong! people.! But! by! having! wrong!
people!at!the!key!positions,!the!company!needs!more!centralised!and!bureaucratic!rules!
and! procedures.! This! drives! away! the! right! people! even! further! until! the! organization!
has!a!bureaucratic$culture!of!average!performance!rather!than!disciplined!excellence.!!
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Figure!6:!Kodak’s!stock!value!and!its!five!stages!of!decline!
!(Source:!own!graph,!stock!value!data!retrieved!from!Yahoo)!
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People!start!to!think!in!terms!of!having$a$job$rather!than!responsibilities.!(Collins, 2009)!
During!the!second!stage,!Kodak!still!performed!above!average!and!enjoyed!rising!stock!
value.! The! main! source! of! income! was! still! the! selling! of! high;quality! film.! The! newly!
elected!CEO!Colby!Chandler!was!still!a!traditional!home!grown!manager.!!
As! predicted! in! Collins’! model,! Kodak! strongly! diversified! during! this! period.! Starting!
from!an!imaging!and!printing!business,!it!acquired!a!copier!service!business!from!IBM,!
Clinical!Diagnostics!for!in;vitro!blood!analyzers,!Mass!Memory!for!producing!floppy!disc!
and! even! Sterling! Drug,! a! pharmaceutical! company.! This! highly! unrelated!
diversifications! into! various! different! industries! show! that! Kodak! started! to! make!
undisciplined!decisions!with!expansions!that!do!not!fit!the!core!values!of!the!company!
and!do!not!drive!its!economic!engine.!
Furthermore,!Kodak!started!to!cut!costs!by!1983.!Among!others,!the!major!cost!driver!
was!its!large!workforce,!which!reached! its!maximum!in!1988!with!145’300!employees!
worldwide.! Within! a! short! period! of! time,! Kodak! decided! to! reduce! the! workforce! by!
over!115’000!employees!(Morozov & Morris , 2009, S. 26),!which!was!highly!conflicting!
with!its!core!values!and!the!tradition!of!lifelong!employment!(see!Figure!6).!Even!though!
the!lifelong!employment!has!always!been!an!illusion,!it’s!is!much!more!the!radical!cut!in!
numbers!which!shocked!the!employees!impacted!the!functioning!of!the!organization!as!
a!whole.!!
In!the!year!1990,!Kay!Withmore,!another!Kodak!internal!hardliner,!took!over!as!CEO.!He!
tried!to!steer!the!company!into!the!digital!age.!But,!rather!than!recognizing!the!potential!
of!the!digital!technology!in!changing!the!way!of!the!imaging!industry,!he!tried!to!pursue!
a! hybrid! strategy:! film;based! digital! imaging! (Freeman, 2004, S. 10).! The! goal! of! this!
strategy!was!to!regain!the!pioneering!position!that!Kodak!once!had!and!lead!the!way!in!
the! newly! emerging! digital! photography! world.! As! Kay! Whitmore! explained:! “As$ this$
company$did$with$blackMandMwhite$and$colour,$we$intend$to$set$the$standards$and$lead$the$
way$in$filmMbased$digital$imaging.”!!Nevertheless,!core!activity!and!main!source!of!money!
should!still!be!photographic!film!and!paper.!Accordingly,!Kodak!introduces!a!Photo!CD!
system! in! 1990,! which! would! allow! the! customers! to! digitalize! their! photos! and! save!
them!on!a!CD!in!order!to!watch!them!on!a!TV.!But!the!system!was!never!fruitful!and!was!
abandoned!shortly!after.!!
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Overall,! Kodak! did! pursue! an! undisciplined! diversification! in! order! to! answer! the!
increasing!competition!in!its!core!business.!Fuji!steadily!increased!its!market!share!and!
Kodak! tried! to! answer! by! diversifying! and! shape! the! market! with! new! hybrid!
technologies.! On! the! other! hand,! Kodak! tried! to! lower! its! costs! and! thereby! cut! its!
workforce! drastically! over! a! short! time.! This! disturbed! the! functioning! of! the!
organization.!Together!with!the!already!existing!bureaucratic!culture,!people!more!and!
more!started!to!think!in!terms!of!having!jobs!rather!than!responsibilities.!!!
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Figure!7:!Kodak's!workforce!and!stock!value!form!1973!to!2012!!
(Source:!The!Economist,!2012)!
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Figure!8:!Comparison!of!global!market!share!of!Fuji!and!Kodak,!1990!till!2002!!
(Source:!Gavetti,!Henderson,!&!Giorgi,!2005,!S.!11)!
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4.3. Stage&3:&Denial&of&Risk&and&Peril&(1993&until&2000)&
!
Figure!9:!Third!stage!of!decline!1993!till!2000!(Source:!own!Figure)!
In!the!third!stage,!the!decline!oft!the!organization!becomes!slightly!visible.!Nevertheless,!
leaders!tend!to!amplify$the$positive!and!ignore$the$negative!data.!They!set!big!goals!and!
take! decisions! without$ fundamental$ empirical$ validation,! exposing! the! organization! to!
high! risks.! If! something! goes! wrong,! they! tend! to! blame$ it$ to$ external$ factors! or! even!
other!people.!Furthermore,!team$dynamics!in!this!stage!start!to!change,!as!they!tend!to!
develop! towards! either! a! consensus! or! dictatorial! way! of! decision;making! process.!
Above!all,!leaders!can!even!start!to!detach!themselves!form!their!people!by!amplifying$
status$symbols$and$hierarchy.!Last!but!not!least,!when!confronted!with!the!brutal!reality,!
organizations! tend! to! reorganize$excessively,! causing! the! company! to! focus! on! internal!
issues!rather!than!external!ones.!(Collins, 2009)!
In!1993,!M.C.!Fisher!became!the!first!external!CEO!of!Kodak.!Prior!to!joining!Kodak,!he!
worked! at! Motorola! from! 1976! till! 1993,! where! he! became! CEO! in! 1988.! Fisher! had! a!
radically! different! strategy! and! wanted! to! transform! Kodak! back! into! an! imaging!
company!within!the!next!five!years!(Smolowitz, 1995, S. 39).!Therefore,!he!disinvested!all!
unrelated!businesses!and!focused!on!imaging.!As!he!said!in!1994:"We$have$only$one$way$
to$go,$and$that's$forward$with$imaging$and$photography.$People$are$beginning$to$believe$
in$themselves$again,$and$in$the$company's$ability$to$be$successful.$But$we've$got$a$long$way$
to$go”!(Wiseman, 1994).!He!wanted!to!offer!digital!products!throughout!the!whole!value!
chain! of! imaging,! including! capturing,! digitization,! storing,! printing! and! sharing.! “They$
want$to$be$the$World$Bank$of$imaging,$to$offer$a$KodakMbranded$solution$for$anything$you$
might$want$to$do$with$images,”$said!Matthew!Troy,!an!analyst!at!Citigroup.!
During! the! analog! photography! world,! Kodak! used! to! develop! and! sell! most! of! its!
products! on! its! own.! Alliances! were! rare.! But! Fisher! realized! that! this! is! not! possible!
anymore! in! the! digital! age! and! started! to! form! alliances! with! major! computer! and!
software! companies! (Holstein, 1998).$ "This$ is$ not$ like$ the$ photography$ world,$ where$
Kodak$is$so$big$we$can$do$most$of$it$ourselves.$This$is$a$much$bigger$world$with$a$lot$of$
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very$sophisticated$players.$We$will$select$carefully$who$we$will$work$with.”$Meanwhile,!he!
increased! the! investment! in! emerging! markets! (mainly! China)! in! order! to! gain! a!
substantial! market! share! in! traditional! film! business! in! these! markets! (Mendes, 2011);!
(Ma & Karri, 2005).!!
Even! though! this! strategy! seemed! to! be! well! elaborated,! Fisher! couldn’t! change! the!
internal!culture!of!Kodak!in!order!to!transform!the!organization.!The!structures!were!to!
hierarchical!and!executives!still!avoided!confrontation!and!worshipped!authority.!As!E.!
Fram! from! the! Rochester! Institute! of! Technology! explains:! "They're$ trying$ to$ change$
from$a$chemical$culture$to$a$digital$culture”$(Holstein, 1998).$“You$can't$change$this$Kodak$
culture$overnight”$(Wiseman, 1994)$
In!order!to!support!the!transformation,!Fisher!set!up!different!teams!in!order!to!get!over!
the! stodgy! culture! and! rethink! the! way! Kodak! is! doing! business! (e.g.! one! to! look! for!
growth! opportunities,! one! for! better! time;to;market).! But! nevertheless,! he! couldn’t!
reach!down!to!all!levels!of!the!organization.!“Fisher$has$been$able$to$change$the$culture$at$
the$ very$ top.$ But$ he$ hasn’t$ been$ able$ to$ change$ the$ huge$ mass$ of$ middle$ managers,$ and$
they$just$don’t$understand$this$[digital]$world.”!
One! reason! for! this! ongoing! detention! could! be,! that! existing! assets! and! employees! no!
longer!were!relevant!in!the!world!of!digital!photography!(e.g.!chemical!technicians,!film!
process!technicians!and!color!printer!operators)!(Morozov & Morris , 2009, S. 23).!The!
digital! age! needed! a! new! kind! of! mindset! and! skills! that! could! only! be! found! in! new!
employees.! Therefore,! Fisher! started! to! get! new! people! on! board,! which! better! suited!
the!requirements!of!the!digital!world.!Furthermore,!he!began!hiring!top!executives!away!
from! computer! printer! companies! (e.g.! Lexmark! and! HP).! After! all,! these! employees!
would!bring!expertise!in!consumer!electronics!and!software!development.!At!the!same!
time,!he!closed!traditional!film!processing!facilities!and!laid!off!long!served!workers.!He!
trimmed! pension! benefit! packages,! which! negatively! affected! the! morale! (Morozov &
Morris , 2009, S. 23).!!
After!all,!Fisher!introduced!a!lot!of!new!products!for!the!digital!photography.!But!they!
could!not!make!up!for!the!loss!in!revenue!from!the!film!selling!business.!This!shows!that!
he!tried!to!amplify!the!positive!and!ignore!the!negative!data.!The!goal!of!making!Kodak!a!
big!digital!imaging!company!was!desirable!and!aligned!the!organization!towards!a!clear!
goal.!But!many!decisions!seemed!to!have!been!made!without!empirical!validation.!Some!
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of! the! employees! even! blamed! 9/11! for! the! fall! in! film! sales,! a! clear! sign! of! blaming!
external!factors!instead!of!the!own!mistakes.!Lastly,!Kodak!did!try!to!reorganize!itself,!
thereby!further!focusing!on!internal!problems!rather!than!potential!external!threats.!All!
these!factors!show!that!Kodak!was!in!the!third!stage!of!decline,!which!proceeded!to!the!
fourth!stage!by!the!turn!of!the!millennium,!when!Daniel!A.!Carp!becomes!the!new!CEO!
4.4. Stage&4:&Grasping&for&Salvation&(2000&until&2009)&
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Figure!10:!Fourth!stage!of!decline!2000!until!2009!(Source:!own!Figure)!
In! the! fourth! stage,! the! demise! of! the! organization! is! now! fully! visible! and! the!
management! needs! to! take! the! right! decisions! in! order! to! prevent! further! decline.! For!
the!most!part,!companies!tend!to!pursue!a!row$of$different$dramatic$moves!to!revise!the!
decline,! which! eventually! worsens! the! whole! situation! even! further.! In! other! cases,! an$
external$charismatic$leader!is!hired!in!order!to!bring!the!company!back!into!game.!The!
inconsistent,! hastily! pursued! changes! and! renewals! in! this! stage! lead! to! increased!
confusion$ and$ cynicism! in! the! organization,! as! the! core! values! get! eroded! and! people!
start!to!lose!the!faith!in!the!organization.!(Collins, 2009)!
Carp!was!once!again!a!homegrown!manager.!When!he!took!over!as!CEO!in!January!2000,!
Kodak!was!about!to!lose!its!market!share!majority!to!Fuji!(see!Figure!6).!Moreover,!the!
company's!revenues!and!net!income!further!declined,!as!film!sales!dropped.!And!so!did!
the! shares,! which! dropped! by! 66%! by! 2001.! At! the! same! time,! Kodak! reduced! its!
workforce! by! 49%! since! 1989! (7,300! in! 2002! alone).! The! decline! of! Kodak! finally!
became!foreseeable!during!this!time.!In!order!to!address!this!decline,!Carp!adopted!a!full!
digital! strategy! and! transformation! plan! in! 2003,! which! should! had! been! finished! by!
2008.!But!it!was!taking!time!for!Kodak!to!understand!that!it!was!an!image!company,!not!
a!film!or!camera!company.!!
In!2005,!Antonio!Perez!becomes!the!new!CEO,!after!coming!to!Kodak!from!HP!in!2003!
(Diversity Best Practices, 2006).! As! Perez! played! a! central! role! in! formulating! the! new!
digital! restructuring! plan! for! Kodak,! he! had! a! clear! focus! in! mind:! He! wanted! to!
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transform! Kodak! into! a! printer,! packaging! and! software! company.! He! was! convinced!
that!Kodak!could!sill!play!a!major!role!in!the!digital!market:!“So$Kodak$is$very$late$to$the$
digital$space.$But$Kodak$was$not$late$in$investing$in$digital.$It$was$very$rich.$It$hired$very$
good$people$and$those$people$were$actually$doing$the$right$things”$(Morozov & Morris ,
2009, S. 22).$ Thereby,! selling! licensing! fees! from! Kodak’s! intellectual! property! mainly!
financed! the! R&D! expenditures.! As! Perez! further! describes:! “In$ the$ last$ fifteen$ years,$
Kodak$ developed$ one$ of$ the$ most$ impressive$ intellectual$ property$ portfoliosMin$ digital$
capture,$image$processing,$pixel$technology$and$all$sorts$of$things$M$actually$a$leader$in$all$
of$ those$ spaces.$ Now,$ why$ didn't$ they$ commercialize$ that?$ I$ don't$ know”$ (Morozov &
Morris , 2009, S. 22)$
In!terms!of!employees,!this!restructuring!had!a!huge!impact!on!the!composition!of!the!
workforce.!By!2007,!more!than!50%!of!the!remaining!employees!had!joined!Kodak!since!
the! launch! of! the! digital! strategy! in! 2003.! Furthermore,! in! order! to! support! the!
organizational! transformation! once! again,! Perez! introduced! the! rule! of! the! thirds.!
Thereby,! this! rule! says! that! in! any! organization,! one;third! of! the! staff! will! readily!
support!a!change,!one;third!can!be!convinced,!and!one;third!will!be!unwilling!to!make!
the!shift.!Therefore,!he!assembled!a!group!of!people!who!were!skeptical!by!nature.!He!
then!makes!suggestions!on!how!the!company!could!be!improved.!During!the!following!
discussions,! many! employees! have! contributed! to! the! strategy! of! coming! up! with! new!
digital! services! and! new! ways! of! commercializing! existing! technology.! Thus! these!
employees!like!being!part!of!the!conversation!for!change,!spread!the!word!throughout!
the!organization!that!Perez!was!a!good!leader!and!after!all! I!helped!to!influence!many!
others.!!
By!2008,!Kodak!emerged!from!the!digital!transformation!and!Perez!was!convinced!that!
they! could! now! conquer! the! digital! world.! As! he! stated! in! 2008:! “It$is$with$great$pride$
that$I$introduce$the$new$Kodak,$a$company$with$a$new$spirit$and$winning$attitude.$While$
completing$ a$ difficult$ and$ unprecedented$ business$ transformation,$ we$ also$ created$
breakthrough$ products$ and$ services$ that$ feature$ Kodak's$ hallmark$ innovation,$ winning$
customer$ acceptance$ and$ critical$ praise$ for$ a$ brand$ renowned$ for$ its$ smart$ use$ of$
technology.$In$2008$and$beyond,$we$will$leverage$the$innovative$thinking$of$Kodak$people$
to$ deliver$ on$ our$ commitments$ to$ shareholders$ and$ increase$ the$ value$ of$ this$ great$
company.”!(Yahoo, 2008); (Morozov & Morris , 2009, S. 37)!
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4.5. Stage&5:&Capitulation&to&Irrelevance&or&Death&(2009&until&2012)&
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Figure!11:!Fifth!stage!of!decline!2009!until!2012!(Source:!own!Figure)!
Finally,!in!the!fifth!stage,!the!financial!strength!of!the!company!has!declined!by!so!much!
that!it!has!reached!a!point$of$no$return.!The!organization!is!either!sold!out,!manages!to!
sustain!an!existence!of!insignificance!or!just!dies.!!
The!final!stage!of!Kodak’s!decline!starts!with!the!end!of!production!of!the!Kodachrome!
film! in! 2009.! This! iconic! product! was! the! breakthrough! for! the! photographic! industry!
back! in! 1935.! By! giving! up! the! production! of! this! film,! Kodak! reached! a! point! of! no!
return.!As!affordable!digital!cameras!were!replaced!by!mobile!phones,!the!sale!of!digital!
cameras! dropped! drastically! as! well,! leaving! Kodak! with! nothing! else! to! sell.!
Furthermore,!high;end!SLR!cameras!were!and!still!are!dominated!by!other!competitors!
(Canon,! Sony).! Thus,! Kodak! lost! it’s! source! of! steady! cash;flow! and! wasn’t! able! to!
establish!a!sustainable!digital!brand.!It!was!only!a!matter!of!time!until!Kodak!had!to!file!
for!Chapter!11,!which!happened!in!January!2012.!
4.6. Organizational&Properties&during&the&Decline&
Strategy!
During!the!period!of!decline,!Kodak!not!only!suffered!under!inconsistent!leadership,!but!
also! strategic! changes! with! each! one! of! the! several! new! chief! executives! during! the!
1990s! and! 2000s.! It! started! as! an! imaging! company,! diversified! widely! into! hardly!
related!fields!and!eventually!refocused!on!printing.!!
But! during! this! whole! time,! the! one! constant! was! the! continuous! try! to! retain! the!
existing! meaning! of! photography! or! at! least! be! the! leader! in! redefining! it.! But! after!
realizing!that!digital!was!the!new!determinant!of!the!photography!market,!it!was!already!
too!late!for!Kodak!to!move.!“Overall,$the$switch$by$consumers$to$digital$photography$[…]$
[came]$ on$ faster$ than$ expected,$ cutting$ deeply$ into$ the$ film,$ paper$ and$ photofinishing$
businesses![…]”!(Dobbin, 2003).!But!the!hope!was!that!Kodak!might!be!able!to!slow!the!
!
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shift!to!digital!through!aggressive!marketing.!The!various!leaders!didn't!anticipate!how!
fast! digital! cameras! would! become! commodities! (with! low! profit! margins,! as! every!
competitor! raced! into! the! market)! (Sheridan, 1998).! Thus,! in! the! digital! world,! Kodak’s!
Razer!Blade!strategy!didn’t!work!anymore.!
Structure!
In! terms! of! structure,! Kodak! remained! rather! centralized.! Especially! the! fact! that! the!
chairman,!CEO!and!president!are!under!one!position!confirms!that!tendency,!as!he!has!a!
lot! of! decision;making! power.! Nevertheless,! there! were! also! attempts! to! make! the!
structure!less!centralized.!!Everyone!that!is!involved!in!creating,!selling!and!servicing!a!
certain!product!are!grouped!together,!rather!than!reporting!functionally!to!the!CEO!(e.g.!
finance,! marketing! and! research).! Moreover,! Kodak! changed! from! three! business!
segments!(Imaging,!Health,!Chemicals)!to!two!(Imaging!and!Chemicals).!
People!&!Culture!
Last!but!not!least,!the!people!and!culture!of!Kodak!changed!as!well!during!its!decline.!As!
we! know,! many! of! Kodak's! problems! can! be! traced! to! the! successes! of! its! past.! It!
remained! resistant! to! change! of! long;established! ways,! e.g.! hierarchical! culture! that!
believes! in! the! omnipotence! of! leadership.! Even! Perez! couldn't! get! people! to! openly!
disagree! with! him:! "If$ I$ said$ it$ was$ raining,$ nobody$ would$ argue$ with$ me,$ even$ if$ it$ was$
sunny$outside.“$After!all!the!pressure!to!rethink!the!business!just!didn't!seem!that!great.!
There! was! no! felt! crisis.! And! the! change! from! Photograph/chemical! Company! to! a!
electronic/digital!company!is!hard.!When!Kodak!realized!that,!it!was!already!too!late.!!
!!
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5.
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How&to&Rise&Again:&Restructuring&and&the&Search&for&a&Purpose&
Strategy!
After! emerging! from! Chapter! 11! in! September! 2013,! Kodak! has! got! a! totally! new! face!
and!transformed!to!a!packaging!and!printing!company.!As!Antonio!Perez,!CEO!until!early!
2014!describes:!”We$have$emerged$as$a$technology$company$serving$imaging$for$business$
markets$ –$ including$ packaging,$ functional$ printing,$ graphic$ communications$ and$
professional$ services.”$ ! The! digital! camera! business! has! been! shot! down! completely.!
Furthermore,!the!photo!kiosk,!document!scanner,!camera!film!and!photo!paper!business!
have! been! sold! off (Daneman, 2014).! Thus,! besides! the! name,! the! new! Kodak! doesn’t!
share!a!lot!with!its!bankruptcy!predecessor.!
The! newly! elected! CEO! Jeff! Clarke! (March! 2014)! has! a! Silicon! Valley! background.! It! is!
expected! that! he! will! focus! on! R&D! in! order! to! improve! its! packaging! products!
(including! smart! packaging! solutions),! develop! next! generation! writing! system! and!
increase! its! capacity! related! with! its! workflow! software! (Kodak, 2014).! Thus,! it! moved!
from!an!imaging!company!to!a!full!packaging!and!service!company.!!
!Structure!
Many! of! the! old! structures! have! been! redesigned! in! order! to! counteract! the! old!
bureaucratic! tendencies.! When! Perez! took! over! in! 2005! as! CEO,! Kodak! was! still! a!
corporate! giant,! with! roughly! 51’000! employees! worldwide! and! the! biggest! seller! of!
digital!cameras!in!the!US.!Today,!the!whole!digital!camera!business!has!been!shut!down!
and!the!company!has!around!13’000!employees!worldwide.!(Daneman, 2014).!
People!and!Culture!!
One!of!the!biggest!challenges!for!Clarke!will!be!to!finally!get!rid!of!every!related!business!
activity!in!the!film!business,!as!there!are!still!some!minor!activities!and!products!from!
the!pre;bankruptcy!era.!As!a!Kodak!retiree!explains:!"He's$going$to$have$to$migrate$out$of$
the$film$business,$and$that's$going$to$be$a$challenge[...]$Hopefully$printing$...$can$become$an$
economic$engine$that$lets$the$company$continue$to$exist.$The$film$business$has$hung$on,$I'm$
kind$of$surprised$they've$been$as$successful$as$it$has$been$...$in$the$last$10$years.$The$new$
guy$is$going$to$have$to$execute$a$plan$to$move$out$of$the$film$biz$at$some$point$and$get$rid$
of$ the$ assets.“$ (Daneman,! 2014).$ However,! the! biggest! challenge! for! Clarke! will! be! to!
build!up!confidence!in!the!company!again.!
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Conclusion&
The! case! has! shown! various! external! and! internal! factors! that! led! to! the! decline! of!
Kodak.! On! the! one! hand,! Kodak! had! to! face! increasing! competition! in! its! core! imaging!
business,! especially! during! the! 1990s.! Furthermore,! the! digitalization! of! the! imaging!
industry!continuously!drove!down!film!sales!numbers!and!led!to!the!emergence!of!new!
technology!leaders,!including!Sony!and!Canon.!!
Despite! the! fact! that! Kodak! was! the! leader! in! digital! technology! development! almost!
until! its! final! decline,! it! never! used! its! technological! advantages! in! a! way! that! would!
support! its! core! purpose.! It! rather! diversified! into! barely! related! businesses! (like!
pharmaceuticals)! as! Kodak! saw! its! core! competency! in! developing! film! based! on!
chemical! processes.! Furthermore,! Kodak’s! management! was! convinced! that! as! long! as!
Kodak! didn’t! move! into! the! digital! era! and! change! the! imaging! industry,! no! one! else!
would.!!
The! explanation! for! this! kind! of! behavior! can! be! traced! back! to! many! internal! factors.!
Frist,!Kodak!developed!a!strong!hubris!due!to!its!long;lasting!success!over!almost!100!
years.!This!was!visible!both,!at!the!management!level!as!well!as!the!general!workforce.!!
Second,! Kodak’s! culture! built! up! upon! strong! hierarchy! and! patriarchal! leadership.!
Thereby,!there!was!hardly!any!discussion!and!controversy!within!he!company.!!
Third,!all!the!CEOs!were!home!grown.!Together!with!a!strict!hierarchy,!they!could!run!
the! company! almost! unopposed.! The! organization! didn’t! feel! any! crisis! and! the!
management! wasn’t! able! and! willing! to! accept! any! disruptive! change! in! the! imaging!
industry.! Thus,! the! flywheel! of! success! slowly! stopped! turning! and! once! the!
management!tried!to!make!it!rotate!again,!it!was!already!too!late.!!
Thus,!to!sum!up,!the!main!reason!for!Kodak’s!decline!was!simple:!The!organization!was!
not! aware! of! its! initial! core! purpose!! If! George! Eastman’s! initial! goal! of! “making$ the$
camera$ as$ convenient$ as$ the$ pencil”! would! be! taken! as! the! underlying! and!
unquestionable! purpose! of! Kodak,! it! would! have! realized! that! the! digital! technology! is!
not!a!threat,!but!much!more!the!next!step!in!making!image!taking!and!sharing!of!lifetime!
moments! more! convenient! for! everyone.! The! Kodak! moment! could! have! been! digital.!
But!Kodak!acted!too!late.!!
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In! conclusion,! the! paper! shows! four! general! lessons! for! organizational! transformation!
(Cable,!2012):!First,!an!organization!should!not!focus!too!much!on!the!existing!business!
model.!In!any!transformation,!the!right!business!model!is!essential.!Thus,!it!needs!to!be!
adapted!to!any!external!change!in!the!best!possible!way.!Second,!a!company!should!start!
innovating! before! it! needs! to.! This! allows! more! flexibility! and! time! to! react.! Third,! a!
company! should! continuously! take! new! risks! and! try! different! things! rather! than! wait!
for! the! big! breakthrough.! And! fourth,! when! pursuing! a! new! big! strategy,! a! company!
should! always! look! for! partners! with! similar! interests! in! order! to! mitigate! risk! and!
enable!synergies.!
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