term paper example kodak

8/18/2019 Term Paper Example Kodak

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Running head: EASTMAN KODAK CO - ORGANIZATIONAL BEHAVIOR FAILURE 1

Paper prepared for partial satisfaction of the requirements for EMSE 6005.10: Organizational Behavior forEngineering Manager.

Organizational Behavior Determinants of the Eastman Kodak’s Demise –

The Innovative Giant of the 20th Century Trying to Resurface after a Near-Death

Experience

George Washington University

Abstract


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EASTMAN KODAK CO - ORGANIZATIONAL BEHAVIOR FAILURE 2

This paper is an overview of the organizational behavior determinants that

caused the failure of one of the biggest innovative giants of the 20 th century – Eastman

Kodak Co. Its purpose is to diagnose “Kodak’s 30-year long slide into bankruptcy”

(Knowledge@Wharton, 2012), and derive possible lessons learned about the most

critical aspects by applying knowledge about major organizational behavior concepts

from individual-, group- and organizational level, such as organizational strategy,

leadership, resistance to change, organizational restructuring, top management’s

mental models etc.

In order to provide a balanced overview of both company’s failures andsuccesses and as objective analysis as possible, the findings from the detailed literature

review are framed like a SWOT analysis. The intention is to give credits where credit is

due, and point out mistakes or bad strategic decisions that could have been avoided.

Given the fact that Kodak is still in the process of restructuring after its

bankruptcy and results of this process are yet to be seen, the author of this paper

refrains from making any definitive comments about Kodak’s future prospects.

Keywords: Eastman Kodak Co., Organizational Failure, Organizational Behavior,

SWOT Analysis.


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Organizational Behavior Determinants of the Eastman Kodak’s Demise –

The Innovative Giant of the 20th Century Trying to Resurface after a Near-Death

Experience

Eastman Kodak Company (commonly known as Kodak) is an early technology

company founded at the end of 19 th century which used to be world renowned for its

imaging solutions and dominant position in the photographic film market. With

innovations such as “the first roll film; the first electronic color separation scanner to

prepare images for printing; the first cameras to go to the moon, and the first digital

camera” (Kodak, 2014) Kodak used to be considered a poster company for innovation,technological advancement and disruptive technologies, and a superb consumer

company. Also, at some point Kodak was literally ubiquitous – it was a marketing giant

whose “tagline ‘Kodak moment’ entered the common lexicon to describe a personal

event that demanded to be recorded for posterity” (Eastman Kodak, n.d.).

Yet, this well-run technology-driven company that never lost its technology roots

started declining in the 1980s, got overrun by competitors and eventually filed for

Chapter 11 bankruptcy in 2012. The reasons for such an epic fail can be looked for

anywhere, but most analysts opine that they are embedded in:

Kodak’s inability to recognize and adapt to rapid market change fast enough;

Kodak’s organizational culture of complacency i.e. resting on its laurels:

Kodak’s internal organizational inertia that protected the “golden goose” – the

film-making segment of the business.

The following text aspires to be a balanced overview of both Kodak’s failures and

successes throughout its entire history, and as objective analysis as possible. The text


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presents the findings from a detailed literature review about Eastman Kodak Company,

organized in the SWOT analysis framework. The intention is to give credits where credit

is due, and point out mistakes or bad strategic decisions that could have been avoided.

The text will not contain any definitive statements on Kodak’s future prospects, because

the company is still in the process of restructuring after a bankruptcy and results of this

process are yet to be seen.

History of the Company

It is always really difficult to provide a succinct summary of the evolution of any of

the world’s greatest companies that have such a rich history like Kodak. Yet, at the riskof oversimplifying the facts related to Kodak’s over-130-year long history, we provide

the following timeline:1

“1879 – George Eastman … goes to London to obtain a patent on his plate-coating

machine” (Das, Nair and Baker, 2012).

1880 – Eastman begins the commercial manufacture of dry plates in Rochester, New

York (Ibid; Kodak 2014d).

“1881 – Eastman and businessman Henry Strong form a partnership called the

Eastman Dry Plate Company” (Ibid).

1884 – George Eastman patents photographic film stored in a roll (Usborne, 2012). “In

1884, the Eastman-Strong partnership had given way to a new firm -- the Eastman Dry

Plate and Film Company -- with 14 shareowners” (Kodak, 2014d).

1888 – Eastman trademarks the name “Kodak”; the first Eastman Kodak camera is

released (Usborne, 2012).

1 Sources used for this section are almost directly cited.


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1889 – The Eastman Company was formed (Kodak, 2014d).2

“1891 – The company opens its first international manufacturing site in … London …

taking advantage of Europe's booming photography market” (Usborne, 2012).

“1896 – The 100,000th Kodak camera is manufactured…” (Das, Nair and Baker, 2012).

1900 – The Brownie camera, which is credited with bringing photography to the

masses, is launched at a price of $1 (Usborne, 2012).

“1919 – George Eastman gifts one-third of his Kodak stock – worth roughly $10 million

at the time – to employees” (Das, Nair and Baker, 2012).

1920 – A chemicals subsidiary to supply acetic acid and other photographic chemicalsto Kodak is established (Ibid).

“1922 – Kodak produces 147,000 miles of motion picture film a year, using one-twelfth

of the silver mined annually in the US” (Usborne, 2012).

1925 – George Eastman … hands over presidency of the company to William Stuber ”

(Usborne, 2012).

“1929 – [Eastman] Introduces its first motion picture film designed for making movies

with sound tracks.

1930 – [Eastman] buys a gelatin manufacturing plant in Peabody, Massachusetts, and

forms Eastman Gelatin Corporation.

1932 – George Eastman, suffering from a painful spinal disorder, commits suicide with a

bullet to the heart.” (Das, Nair and Baker, 2012).

1969 – Kodak manufactures the film used on the Apollo 11 Moon landing (Usborne,

2012)

2 “The company has been called Eastman Kodak Company since 1892, when Eastman Kodak Companyof New York was organized.” (Kodak, 2014d).


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“1975 – Kodak becomes the first company to make a digital camera” (Ibid)

“1980 – Kodak enters the clinical diagnostic market.” (Das, Nair and Baker, 2012)

“1981 – Sales cross the $10 billion mark” (Ibid).

“1994 – [Eastman Kodak Co.] spins off its chemicals business, Eastman Chemical Co,

to help pay down debt.” (Das, Nair and Baker, 2012); Apple launches one of the first

consumer digital cameras, the QuickTake, which is made by Kodak (Usborne, 2012).

“1997 – Stock touches all-time high of $94.38” (Das, Nair and Baker, 2012).

1999 – Heidelberger Druckmaschinen AG buys Kodak’s digital printer, copier/duplicator

and roller assembly operations (Ibid).

“2004 – Kodak [gets] kicked off the Dow Jones Industrial Average” (Das, Nair and

Baker, 2012); “… finally abandons the film camera” (Usbor ne, 2012).

“2005 – Ranked No. 1 in U.S. digital camera sales. Kodak is the largest digital camera

retailer in the US, raking in up to $5.7bn in sales” (Das, Nair and Baker, 2012; Usborne,

2012)

“2007 – Kodak falls to fourth biggest digital camera retailer. The last year Kodak turns

an annual profit.” (Usborne, 2012)

“2009 – After 74 years of production, Kodak stops selling 35mm color film; decides to

suspend cash dividends.” (Ibid)

“2010 – By the end 2010, Kodak has equivalent of 18,800 full-time employees. Its digital

camera market share has fallen to 7 percent, ranking seventh behind Canon Inc, Sony

Corp, Nikon Corp and others, according to IDC” (Das, Nair and Baker, 2012).


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“2011, Sept 26 – Kodak borrows $160 million against its credit line, raising fears about

its liquidity; Dec 27 – 30 - Three directors step down from board, including two from

private equity firm KKR & Co” (Das, Nair and Baker, 2012).

“2012 Jan 10 – Kodak announces a new business structure that divides its film group

into its two other business units; files a lawsuit against Apple Inc accusing it of infringing

four patents related to digital camera images; Jan 19 – Files for Chapter 11 bankruptcy

protection with the U.S. bankruptcy court in Manhattan” (Ibid).

“2012 Feb 7 – The Image Sensor Solutions (ISS) division of Kodak was sold to

Truesense Imaging Inc” (Eastman Kodak, n.d.); From August 24 to September 28,Kodak announced its intentions to sell or exit several of its businesses; Sep 10, 2012 –

Kodak announced plans for restructuring. March 12, 2014 – Jeffrey J. Clarke is

appointed Chief Executive Officer (Eastman Kodak, n.d.)

As one can easily see, this is a timeline filled with innovations, top management

turnover, dramatic changes in the industry and internal turmoil.

The next section presents the SWOT analysis of Kodak, and starts with Kodak’s

strengths.

Strengths

Notable Founder and Leader – George Eastman

In modern organizational behavior theory parlance, George Eastman, the

founder of Eastman Kodak Company, who is “heralded as the father of popular

photography and inventor of motion-picture film” (International Museum of Photography


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and Film, 2014), can most accurately be described as a t ransformat ional leader 3

(Robins and Judge, 2015, 345 - 349). Namely,

George Eastman envisioned Kodak as the best imaging company in the world

whose success would come from incredibly user-friendly products. He registered

the trademark Kodak, designed the famous “K” logo, and came up with one of

Kodak’s most famous slogans “You push the button - We do the rest”. (Gavetti,

Henderson and Giorgi, 2005; International Museum of Photography and Film,

2014; Eastman Kodak, n.d.);

Eastman set Kodak’s guiding principles: “mass production at low costs,

international distribution, extensive advertising, and customer focus, and growth

through continuous research” (Gavetti, Henderson and Giorgi, 2005, 1);

He was a superb intellectual and innovator – invented and patented the dry-plate

coating machine; started the commercial manufacture of dry imaging plates;

invented the roll film etc. (Ibid). Eastman had the ability to seize opportunity and

capitalize on early adoption of technology (Sarkar, 2013);

He was a great visionary and “collected” new technologies that weren’t produced

in-house – bought the patent for Velox photographic paper in 1899 (Eastman

Kodak, n.d.);

He manifested individualized consideration – in 1919 George Eastman gave one

third of his stocks in Kodak to the employees as a gift (Das, Nair and Baker,

2012).

3 According to Robins and Judge (2015) leadership is a group-level organizational behavior concept.


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George Eastman was a great philanthropist – he donated more than $100 million

throughout his life to different educational and arts institutions, public parks,

charities etc. (International Museum of Photography and Film, 2014).

Leading by example, Eastman set the course for Kodak as a major technology

and innovative company with a stellar reputation.

Corporate Strategy

Three main courses of Kodak’s corpo rate strategy are particularly important,

and contributed greatly to Kodak’s success: 1) innovation strategy; 2) product

diversification strategy, and 3) adverting/ branding strategy.

Kodak’s innovation strategy was touched upon in the previous section, and will

be further elaborated in the next section.

Kodak is also known for its product diversification strategy 4 (most vigorously

pursued from 1983 to 1993 (Gavetti, Henderson and Giorgi, 2005, 2)) which can best be

illustrated with:

Kodak’s sizable portfolio of different products and broad products categories

such as: consumer computer printers; commercial printers; printer paper; digital

cameras; film cameras; photographic film; medical diagnostic imaging

equipment, and slide projectors (List of products manufactured by Kodak, n.d.);

The variety of Kodak’s geographic markets including, among others, United

States, Western Europe and Japan (United States Court of Appeals, 1994).

4 Companies are said to be pursuing a product diversification strategy when they modify their existingproducts and/or add new products to the product range in order to enter into related or unrelatedbusinesses and/or enter into new geographic markets (Linton, 2014; Nath, Nachiappan and Ramanathan,2010, p. 317).


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On the other hand, some analysts (such as Matterson as cited in Newman, 2012)

caution that Kodak might’ve went too far with diversification and made a mistake. In

their opinion, Kodak should’ve focused on “finding new applications for its core

technology” instead of “chasing new business lines and markets – companies buying

copiers, for instance, or hospitals buying diagnostic machines” (Matterson as cited in

Newman, 2012).

And last but not least, Kodak is known for its aggressive advertising/ branding

strategy that delivered immense recognition of the brand (Kodak was an iconic brand).

Most baby boomers and generation X individuals recognize Kodak’s logo from 1971with the box and graphic “K” element which epitomizes Eastman’s favorite letter K

(Eastman Kodak, n.d.; Kodak, 2014a). The following slogans and taglines are also well

known:

“You push the button - We do the rest.” (George Eastman, 1888)

The tagline “Open Me First” for the Christmas campaign launched in the late

1950s, which continued to be used during the next decade for its holiday

advertising (Douglass, 2013, p. 43; “Eastman Kodak Co.,” 2003)

“The Times of Your Life” (song by the Canadian singer Paul Anka, released in

1975) (Douglass, 2013, p. 43; Times of your life, n.d.)

• “Kodak: America’s Storyteller” from 1979 referring to Kodak’s camera (Douglass,

2013, p. 43; “Eastman Kodak Co.,” 2003).

• The tagline “Kodak Moment” which in common lexicon means a personal event

that should be recorded for future generations (Eastman Kodak, n.d.) etc.


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Kodak is the only company in the world to have a national park named for one of

its products (Kodachrome film) – the Kodachrome Basin State Park in Utah. It is also

well known in popular culture. For example:

Paul Simon’s song "Kodachrome" which appeared on his 1973 album “There

Goes Rhymin' Simon” is named after the Kodak 35mm film Kodachrome

(Kodachrome (song), n.d.);

Kodak is mentioned in the opening lyrics of the song “Give Me Everything“ by

Pitbull featuring Ne-Yo, Afrojack and Nayer.

Strong Innovative Capability

According to the summary of relevant studies on technological capability in

Balbinot (2005, p. 35 - 37), the innovative capability of a company is its ability to carry

out basic research; develop and integrate technology independently; develop

technology through minor innovation, and ability for basic process design. The level of

development of this capability depends on avai lable resou rces inside and outside the

company, and the innovat ion s trategy pursued by the company, and can be assessed

by the number of new patented products.

Judging by the scientists (human resources) who were working there and the

famous inventions/ patents created by the company, Kodak definitely had a strong

innovative capability (Knowledge@Wharton, 2012). What follows is a list of some of

Kodak’s most famous scientists (Eastman Kodak, n.d):

Color scientists: Bryce Bayer, David MacAdam;

Polymer chemists: Harry Coover; Maurice Loyal Huggins;


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Physicists: Perley G. Nutting, physicist and founder of Optical Society of

America; Loyd A. Jones, camouflage physicist; F. J. Duarte, laser physicist and

author;

Experts in optics: Rudolf Kingslake; Warren J. Smith;

OLED (organic light-emitting diode) scientists: Steven Van Slyke; Ching W. Tang;

Film scientists: Kenneth Mees, film scientist and founder of the Kodak’s research

laboratories; Arthur Widmer, special effects film pioneer and receiver of an

Academy of Motion Picture Arts and Sciences Award of Commendation.

Another indication of Kodak’s advanced innovative capability is company’s

expendi tures for research and development (R&D) .

Table 1 Investments in R&D by Eastman Kodak, 1982 – 2001 (in millions $)

(Gavetti, Henderson and Giorgi, 2005, p. 11)

Sales R&D R&D/Sales1982 10,185 710 6.56%1983 10,170 746 7.34%1984 10,600 838 7.91%

1985 10,631 976 9.18%1986 11,550 1,059 9.17%1987 13,305 992 7.46%1988 17,034 1,147 6.73%1989 18,398 1,253 6.81%1990 18,908 1,329 7.03%1991 19,419 1,337 6.89%1992 0,183 1,419 7.03%1993* 16,364 1,301 7.95%1994** 13,557 859 6.34%1995 14,980 935 6.24%1996 15,968 1,028 6.44%1997 14,538 1,230 8.46%1998 13,406 922 6.88%1999 14,089 817 5.80%2000 13,994 784 5.60%2001 13,234 779 5.89%

* Kodak sold Eastman Chemical Company off** Kodak sold its non-imaging health businesses off


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The first roll film; the first electronic color separation scanner to prepare images

for printing; the first cameras to go to the moon, and the first digital camera are Kodak’s

most famous innovat ions (Kodak, 2014c).

We now continue to the analyze Kodak’s weaknesses as part of its SWOT

analysis.

Weaknesses

Struggling to Find the ‘Right’ Business Model

Critics say that Kodak’s bus iness model was focused on film making and photo

printing for too long. Film making was considered the core business, the “golden goose”that should’ve been protected at all cost. Actually, Kodak should’ve sooner rather than

later decided which business it was in (Avi, 2013) and what its core business should be

(Sarkar, 2013).

Another problem is the change of course of strategies or implementation of failed

busin ess strategies (“wrong” strategies for the “right” time) in 1990s and 2000s

(Johnson, 2012), such as:

Excessive diversification and “getting into other businesses such as

pharmaceuticals, medical diagnostics, copiers, and computer hardware.”

(Newman, 2012);

The “razor blade” strategy as implemented by Fisher (see further below).

And finally, at the core of Kodak’s failure is the lack of any technology forecastwhich led to a prolonged situation in which Kodak squandered three major “digital

opportunities” (Johnson, 2012; Pachal, 2012):


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The opportunity to quickly bring to market and commercialize the digital camera

that was actually invented by its engineer Steve Sasson. Also, the design of

Kodak’s digital cameras for both professionals and amateur photographers was

unappealing. Moreover, Kodak failed to keep up with its competitors: Canon,

Inc., Fuji Photo Film, Co. Nikon, Sony Corp., and Hewlett Packard Co. (Gavetti,

Henderson and Giorgi, 2005, p. 15) which introduced a lot of new and useful

features in their products that consumers really liked and appreciated such as

face detection, smile detection, in-camera red-eye fixes etc. (Pachal, 2012).

The opportunity to rule the market of photo sharing . It will soon become an

almost unknown fact that Kodak actually invented the world’s first wi-fi enabled

camera in 2005 – the EasyShare-One, because Kodak killed the line after small

sales.

The opportunity to enter the market of photo viewing because it was too focused

on protecting its photo printing segment and missed the major change in

consumers’ behavior – taking images with smartphones and sharing them on

Facebook, Instagram etc.

Resistance to Change

One of the str ongest sources of Kodak’s resistance to change is probably its

organizat ional c ul ture which many authors describe as a “culture of complacency”

(Grayson, 2012; Knowledge@Wharton, 2012; Kotter, 2008; Kotter, 2012 ; “The lastKodak moment”, 2012; Johnson, 2012; Pangarkar, 2012). In the case of Kodak this

meant: a) content with the status quo; b) strong reliance on customers’ loyalty; c)

absence of any thought of a possible failure; d) lack of initiative or lead; e) inability to


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derive lessons learned from both past failures and past successes; f) organizational

inflexibility and diminishing agility; g) failure to anticipate and keep up with the digital

revolution.

This culture of complacency was in such a stark contrast to the culture that

Kodak was built on – a culture of innovation and change (Kotter, 2012), and cost Kodak

dearly. Its impact on Kodak’s overall performance and long-term market position can

best be illustrated with the example about Kodak’s rivalry with Fujifilm over the

sponsorship rights of the 1984 Los Angeles Olympics. Fujifilm, which entered the U.S.

market offering lower-priced film and supplies, won the sponsorship rights, and its film

became the official film for this Olympics. This helped Fujifilm establish a dominant

position in the film-making market (“The last Kodak moment?”. 2012; Eastman Kodak,

n.d.).

Another source of Kodak’s inability to embrace and adapt to change is the lack of

a clear business strategy to adapt to change and its organizational structure. “Adapting

to technological change can be especially challenging for established companies like

Kodak … because entrenched leadership often finds it difficult to break old patterns that

once spelled success. Kodak’s history shows that innovation alone isn’t enough;

companies must also have a clear business strategy that can adapt to changing times.

Without one, disruptive innovations can sink a company’s fortunes — even when the

innovations are its own.” (Knowledge@Wharton, 2012).

Turnover of Most Recent CEOs and Their Mental Models

When Kodak’s traditional core business (film-making) became obsolete, Kodak

was still slow to change. Its sluggish attempt to give up the “golden goose” and embrace


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the digital can be attributed to the turnov er of CEOs since 1972, and the mindset of

i ts more recent execut ives (Jackson, 2011; Douglass, 2013).

Kodak had seven CEOs with relatively short tenures in the past 42 years: Walter

A. Fallon (1972 – 1983); Colby H. Chandler (1983 – 1990); Kay R. Whitmore (1990-

1993); George M. C. Fisher (1993 – 1999); Daniel A. Carp (2000 – 2005); Antonio M.

Pérez (2005 – 2014), and Jeff Clarke (March 12, 2014 – present) (Pangarkar, 2012;

Eastman Kodak, n.d.).

In 1981 Walter A. Fallon supported the “extensive research effort that looked at

the core technologies and likely adoption curves around silver halide film versus digital

photography” lead by the Head of Marketing Intelligence – Vince Barabba (Mui, 2012).

The study took into account multiple factors (such as: the cost of digital photography

equipment, the quality of images and prints, the interoperability of various components

etc.), and showed that “digital photography had the potential capability to replace

Kodak’s established film based business” (Mui, 2012). On the positive side, the study

also showed that there was still time to prepare for this disruptive technology, but Fallon

dismissed its findings which later proved to be remarkably accurate.

Before joining Kodak in 1993 George Fisher had been running Motorola. His

hiring was a way to bring fresh ideas in Kodak (Newman, 2012). As Jackson (2011)

describes him, he was “a thoughtful and well-regarded manager” and “a technologist to

his fingertips”, so he should’ve fully understood that the digital revolution was coming.

As a matter of fact, under Fisher, “Kodak had been planning its digital strategy for most

of the 1990s” (Crook, 2012). Yet, Fisher didn’t want to make the hard decision to

abandon Kodak’s f ilm-making business, and let film and digital co-exist. He also


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attempted to adapt Kodak’s “razor blade”5 business model for production and sale of

digital cameras by bundling together inexpensive cameras and high margin films

(Mojonnier, 2012). That was a failed attempt to delay the coming of the digital

technology (“The last Kodak moment?”, 2012).

Finally, it seems like Kodak faced one of the harshest and turbulent times in its

more recent history while Antonio M. Pérez was its Chairman and CEO. Pérez will be

known for: shutting down film factories; outsourcing manufacturing and eliminating

27,000 jobs; heavy investments in digital technologies and new services; failed attempts

to build up a high-margin printer ink business - as a former Hewlett-Packard executive

he pushed Kodak toward the market of consumer and commercial printers (Sarkar,

2012); Kodak’s involvement in litigations in order to generate revenue, and filing for

Chapter 11 bankruptcy (Eastman Kodak, n.d.).

Generally speaking, according to Rosabeth Moss Kanter of Harvard Business

School (as cited by The Economist (“The last Kodak moment?”, 2012), Kodak’s

executives “suffered from a mentality of perfect products, rather than the high -tech

mindset of make it, launch it, fix it”. They didn’t handle criticism well, and weren’t willing

to take risky steps and create breakthroughs. Another problem is that they were stuck in

the “We-are-in-the-film-manufacturing-business” mindset for too long, and ironically

didn’t see digital photography as a disruptive technology (Mui, 2012). Hartung (2011)

and Douglass (2013) share the same view about Kodak’s reluctance to market the

digital photography technology that it invented – “top executives long viewed their own

5 “Razor and Blade” strategy of commercialization of two complementary products (closely linked to eachother) that are of unequal value, but represent a profitable business in such a way that the loss assignedto the master product is excellently compensated by the benefits attributed to the consumable (Picker, R.,2010).


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discovery of digital technology as potentially cannibalizing their profitable film

manufacturing business”, and “chose to ignore the potential and game-changing nature

of a new digital world.” (Douglass, 2013).

Opportunities

Current Process of Restructuring

On January 19, 2012 Eastman Kodak filed for Chapter 11 bankruptcy protection

and by February 15, 2013 it produced a plan for two-year long reorganization and

restructuring (Pangarkar, 2012; Usborne, 2012; Kodak, 2014c; Eastman Kodak, n.d.).

During the bankruptcy, Kodak sold or spun the following businesses off: digital and

photographic film patents; photo kiosks; online photo-sharing, and consumer printing

and document scanners (Kodak, 2014c). In practical terms, the restructuring plan

encompasses:

Reduction of the number of employees (Douglass, 2013);

“Sharpened focus to commercial markets” (Kodak, 2014c);

Streamlining of Kodak’s complex infrastructure (Ibid);

Large cost reductions (Ibid);

“Digital transition in packaging markets” (Ibid);

“Dynamic growth in the market for printed electronics, sensors, fuel cells and

other printed products” (Ibid);

$100 million investment in innovation in 2014 alone (Fletcher, 2014) etc.

The whole undertaking should make Kodak “leaner, stronger and ready to grow”

(Kodak, 2014b).


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“Building on a Technology Heritage” (Kodak, 2014c)

The company also plans to take advantage of its technolog ical base 6 that

includes: “over 7,500 commercial imaging patents and patent applications”;

“technological expertise … in materials science, deposition…, and digital imaging

science”; extensive knowledge of various industries that it has been serving since

1990s, and “historic role in photography” (Kodak, 2014b).

According to Kodak’s official website, company’s R&D and innovation activities

will be focused on the following technologies: 1) material science (interfacial science)

including electronics materials, inks and dispersions, and polymer science; 2) image

science including image quality, secure data embedding, and functional image science;

and 3) deposition science (non-contact and contact deposition device design, MEMS,

laser writing, and micro-fluidics (Kodak, 2014b).

Threats

Controversies Related to Eastman Kodak Co.

Finally, we present the controversies involving Kodak which put Kodak’s

reputation and future prospects at risk.

1) Eastman Kodak resigned its national membership in the Council of Better

Business Bureaus on March 26, 2007 after a prolonged dispute with the BBB of

Upstate New York regarding the way Kodak handled consumer complaints or

requests for product repair. Kodak’s official stand on this matter was that 1) “99%

of all complaints forwarded by the BBB had already been handled directly with

the customer”, and 2) BBB’s news releases on its website had been consistently

6 For definition see: Shenhar, A. J. & Adler, P.S. (1996). The technological base of the company In G. H.Gaynor (Ed.). Handbook on technology management (4.1 – 4.17). New York: McGraw Hill.


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inaccurate, selective, and missing facts about Kodak’s customer care service

(Eastman Kodak, n.d.). Regardless of this decision, Kodak should still try to

deliver high quality customer service and custom er sat isfact ion .

2) Environmental controversies – “Kodak has been widely criticized by

environmentalists and researchers as one of the worst polluters in the United

States” (Ibid). In 2002, it ranked as seventh largest polluter in the United States

based on the “Toxic 100” index (Ibid). “In 2004, the Citizens' Environmental

Coalition (CEC) of New York awarded Kodak one of its "Dirty Dozen" awards to

highlight its consistently high rates of pollution” (Ibid). In our opinion, Kodakshould pay closer attention to the impact its production facilities and processes

have on the environment, enforce a strong corpo rate social respo nsibi l i ty

strategy , and manifest ci t izenship behavior.

3) Patent litigations – On one hand, Kodak filed lawsuits against Apple Inc,

BlackBerry maker Research in Motion Ltd, South Korea's Samsung Electronics

Co and Taiwan's HTC Corp. for infringing on its patents which, according to

critics, was an effort to create new revenue streams during turbulent times (Mui,

2012; Sarkar, 2013). On the other hand, “in 2010, Apple filed a patent -

infringement claim against Kodak. On May 12, 2011, Judge Robert Rogers

rejected Apple’s claim that two of its digital photography patents were being

violated by Kodak” (Eastman Kodak, n.d.).

Lessons Learned about What Caused Kodak’s Demise

The reasons for Kodak’s downfall in the past 40 years from an organizational

behavior standpoint can be summarized as:


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Organizational culture of complacency (Grayson, 2012; Knowledge@Wharton,

2012; Kotter, 2008; Kotter, 2012; “The last Kodak moment”, 2012; Johnson,

2012; Pangarkar, 2012) which, among other things, led to loss of innovation

power (Kotter, 2012), and inability to keep up with its competitors (“The last

Kodak moment?”, 2012; Eastman Kodak, n.d.; Johnson, 2012; Pachal, 2012).

Changes of strategic course and implementation of failed strategies during 1990s

and 2000s (Avi, 2013; Johnson, 2012; Knowledge@Wharton, 2012; Mojonnier,

2012; Newman, 2012; Pangarkar, 2012; Sarkar, 2013).

Short tenure and quality of the more recent executive teams coupled with a

problematic mental model – lack of imagination, myopia and losing connection to

the customer base (Pangarkar, 2012; Mojonnier, 2012).

Lack of technology forecast and foresight which led to a complete failure to seize

a significant share of the global digital imaging market (Johnson, 2012; Pachal,

2012).

“Hubris in terms of marketing” (Sarkar, 2013).

Concluding Remarks

Apparently, the aforementioned aspects are serious weaknesses and competitive

deficiencies but they need to be weighed against Kodak’s current strengths and

capabilities. For now, it is still too early to say whether the current process of

restructuring and extensive investments in innovation in 2014 will truly reanimate

Kodak, and bring it to the forefront of innovation and creation of disruptive technologies

where it once belonged.


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