Story of KODAK Change Management Failure

Story of KODAK Change Management Failure
Submitted To: Submitted By:

Sir Basit Afzal Abbas Rafi
Muhammad Usman
Tabinda Yousaf
Subject: Change Management
I. Abstract
Eastman Kodak, 133-year-old firm, has stunned the world, announcing in January 2012 that it
has put to its camera business. Kodak was founded by inventor, George Eastman, and its little
yellow film packages became one of the world’s most popular brands. It, indeed, was an
American industrial icon. However, the company has struggled to keep up with the competitors
who were quicker to adapt to digital era and filed for Chapter 11 protection bankruptcy in mid-
January 2012.
II. A History of Innovation

The story of the Kodak began with the manufacture of dry plates in 1879. George Eastman,
Kodak’s founder and one of the greatest entrepreneurs, received a patent of his plate-coating
machine in London. In 1880, Eastman began the commercial manufacture of dry plates. His
successful venture in manufacturing dry plates caught the eye of Henry A. Strong and a
partnership company, the Eastman Dry Plate, was formed in 1881. In 1883, the company
unveiled film in rolls with a universal roll holder that would be suitable for nearly every plate
camera available at that time. In a year later, the company was renamed as the Eastman Dry Plate
and Film Company and in 1889, the name of company became the Eastman Company. “You
press the button, we do the rest” was its motto in 1888, which opened the door to mass market
consumer photography. The company has been called as Eastman Kodak Company since 1892
and was well-known for its pioneering technology and innovative marketing. In 1969, the film
that was manufactured by Kodak was used on the Apollo 11 missions. Kodak has become a
pioneer in the development of digital cameras in 1975. An Eastman Kodak engineer created a
3.6kg device with a cassette tape as the equivalent of today’s memory card and took 23 seconds
to expose each image. In 1976, Kodak accounted for 90 per cent market share for photographic
film and 85 per cent camera sales in America. It proved that Kodak was a recognized brand that
was both profitable and achieved high levels of sentiment from customers. Until the 1990s, it
was rated as one of the world’s five most valuable brands.
III. The Rise and Fall of Kodak

Since the formation of Kodak, the company has remained the world’s leading film provider. Its
revenue peaked at nearly $16 billion in 1996 and its profits reached at $2.5 billion in 1999.
However, since the turn of the century, the fortunes of the once world’s leading photographic
firm has plummeted. Kodak reacted the digital revolution slowly, hence, it experienced revenues
plummet from $ 15 billion to $9.4 billion in 2009. According to the Economist, the revenue was
down to $6.2 billion in 2011. According to MarketResearch.com, the recorded revenues were
$4,114 million in December, 2012, a drop by 20.1% compared to 2011.The firm which
employed over 145,000 workers worldwide, also announced cuts of thousands of jobs and by
early 2012, its shares were just trading at around 40 cents dropped from $40-45.
IV. Reasons for failure
Failure to adapt the new technology

Kodak and its rival, Fujifilm, saw their traditional business would become obsolete. But Kodak
failed to adapt new technology adequately. Kodak’s unwillingness to change its efficient ability
to make and sell film in developing digital technologies lost the chance that could have
maintained the leading position in digital image processing.
Disruptive innovation
George Fisher, who was a CEO of Kodak from 1993 until 1999, decided to produce digital
cameras and offered customers the ability to post and share the pictures online. Although Kodak
made a large amount of business out of digital cameras with revenue reaching $5.7 billion in
2005, it lasted only for few years before camera phones entered the market.
Lack of integration external and internal knowledge

Kodak made efforts to outsource its camera manufacturing to fill the gaps in expertise, and the
outsourcing management failed to achieve the integration of external knowledge with its own
internal knowledge which is essential to further innovation. As a result, Kodak cannot compete
with its rivals in digital market.
Complacency
Complacency also played a part in Kodak’s failure. Despite a hefty investment in R&D and
good relations with customers, Kodak overflowed with complacency. Although Kodak knew that
rapid changes in the market and technology would come, they failed to adapt the changes
promptly and adequately.
Inconsistent Leadership and losing focus

The strategy of the company changed with each of several CEOs. Kodak went through
numerous restructuring whenever there was a change in the leader in the organization. Every
new CEOs brought new priorities and the pursuit of the company goal was also easily changed.
The latest CEO, Antonio Perez, had started focusing more on printing business, which was
already dominated by Hewlett Packard, rather than manufacturing camera capability.
V. Conclusion
Kodak case study was an eye-opener that provides me a great deal of insights into running the
business with technology. In order to maintain the company success, the company should have
moved into the digital world well enough and fast enough. The rapid and continuous changes in
its technologies should encourage an attitude of preparedness. Kodak case clearly shows that no
matter how good the products are, it cannot be a future-proof. Therefore, to become successful in
any industry, it must have the ability to adapt to its consumer tastes. If a company fails to offer
the products and services that consumers demand, there is a high probability that they will alter
their allegiance to a better product. Consumer buying habits, new products and services are
things that must be constantly be reviewed, analyzed and modified as needed. Since the world
has been dramatically changed by technology, the company needs to constantly innovate,
develop the ideas and avoid complacency. In addition, Kodak case proved that entering into
unrelated industries will not only result in failure but also lose the focus on core products and
services. So, it is obvious that focusing on continuous improvement matters for long term
success.

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Story of KODAK Change Management Failure

Submitted To: Submitted By:

Subject: Change Management

II. A History of Innovation

III. The Rise and Fall of Kodak

IV. Reasons for failure

Failure to adapt the new technology

Lack of integration external and internal knowledge

Inconsistent Leadership and losing focus

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