Management at Kodak Essay
Kodak belongs to a world-famous company in the imaging business. The company really proved to be rather successful during a relatively long period of time, but in 2011 it faced a critical situation. The situation of technological and social and economic change turned out to be a real challenge for the company. At the beginning of 2012, the company had to file for bankruptcy protection and work on urgent strategies within 2013 in order to improve the situation. The company, which managed to monopolize the imaging industry in 1988, turned out to be not able to adjust to the rapidly changing environment and did not preserve its leading position in the digital world. In order to work out further strategies for the company’s successful development in the future, it is utterly important to understand the real reasons for this failure, whether this was the fault of the top managers of the company or partially also its employees. Some information could be found in the financial data and analysis of the financial situation within the last years. On the surface, the major problem of Kodak was its inability to enter the digital world quickly enough. Still, if to look deeper, it is possible to find information about those individuals, who were engaged within this company and were able to predict this failure, but their ideas were not considered with great attention. “Kodak faced the technological discontinuities challenge, first clearly articulated by my colleague Clay Christensen: new technology has fierce competitors, low margins and cannibalizes your high margin core business. And Kodak did not take decisive action to combat the inevitable challenges.” (Kotter, 2012, p. 2). Based on this data it is possible to conclude that most luckily there were some strategic decisions, taken incorrectly.
Kodak is characterized as an organization reflecting a high degree of complacency starting from the end of the 1980s already. In reality, Kodak started to experience problems long before the digital revolution. The complacency and games of personal interests contributed to the creation of a huge problem for the whole company and its future. The situation was also worsened by the fact that even those individuals, who cared and could offer appropriate solutions and strategies, were not taken into consideration and buried in the hierarchy. Kodak’s failures are considered to be great lessons for all CEOs. Initially, the company was built on the basis of innovation and a change approach. Only those workers, who could support the corporate culture of innovation and change, are able to make the company move forward. However, if the leader of the company is not able to listen to these people, then there is little chance left.
Kodak was founded as a company of ground-breaking technology and was known for its perfect marketing strategies. This approach helped Kodak to become a really global brand with huge sales. The company exercised four key principles: mass production, extensive advertising, focus on customers’ interests, and internal distribution. “It has reorganized itself into three divisions namely graphics, entertainment, and commercial films, digital printing and enterprise, and personalized imaging and document imaging. This move came in early 2012 after the company filed for chapter 11 bankruptcy.” (Larish, 2012, p. 5).
Most experts nowadays are convinced that the major reason for Kodak’s failure was ineffective leadership and management. The leadership style of the company is described as overbearing and bureaucratic. These characteristics could be proved by such facts as changing the employees’ performance evaluation and rewarding system without discussing it with the employees, certainly, such an approach has a serious negative impact on their motivation. Generally, the attitude towards the employees was rather negligent. Such an autocratic leadership style forced almost one-half of employees to leave the company by 2002. Thus it is evident that in order to make the first important steps in further development of the company, it would be necessary to change the leadership style completely. The top manager of the company should become an active participant in team discussions and work on the creation of communication channels for all team members, providing them the opportunities to come out with their ideas and suggestions openly. In other words, the company needs a mixture of participative and democratic leadership styles in order to become successful in the future.
The major disadvantage of the bureaucratic management style is its hinders making quick decisions, which are so much needed in this changing world. Kodak’s top managers were convinced that the future of the film was doomed and that digital imaging would occupy the leading position. “One executive at Eastman Kodak, Larry Matteson, wrote a report to management of the company in 1979 predicting how the film market was expected to change from film to digital by 2010. Due to the hierarchy in the company’s management style, it took too long before measures were taken to make sure that the company put in measures to deal with the expected change.” (Larish, 2012, p. 4). Thus the top managers of Kodak focused on working out the perfect products instead of offering affordable hi-tech products to their customers. The managers did not value their employees and their opinions, which led to the absence of collaboration between the top managers and lower managers and employees. The company was correspondingly not able to respond quickly enough to the changing environment and the needs of its consumers. In addition, Kodak did not start the diversification of its products, focusing only on digital photography. This forced the company to lose its position in the competitive market of technologies. “Kodak was complacent and did not take the threat posed to its key business of film seriously. Despite being in possession of a report by one of its executives, Larry Matteson, the management did not put measures in place to deal with the expected changes in the market. Consequently, Kodak was flat-footed when the reality of digital imagery set in.” (Larish, 2012, p. 4).
Kodak was definitely considered to be one of the greatest brands in the world and the company had to face a lot of criticism in relation to its environmental policy. Soon it occupied the leading position among the polluters in New York City and the whole country. Taking into consideration that this was exactly the moment when more and more people started to become environmentally conscious, such strategy and attitude of the company had an extremely negative impact on its social image. A negative public image is rather dangerous, as it often makes the customers ignore and boycott the products of such companies, which in its turn leads to loosing of profitability for the company.
In 2005 Perez became CEO of the Kodak company. By that moment of time, Kodak continued to occupy the position of a corporate giant, having revenues of $14.3 billion and around 51 000 employees in the whole world. It was the second big seller of digital cameras in the world and the number one in the country. “And its graphic communications business, dealing with printing-related technology and products, was still a work in progress as Kodak that year bought prepress products firms Creo Inc. and Kodak Polychrome Graphics, a joint venture with Sun Chemical.” (Daneman, 2014, p. 12). Analyzing the situation today, it is clear that the digital camera business is over. The photo kiosks or scanners or photo paper business are not in the trend anymore. Thousands of workers had to leave, making the company pay serious costs for pension liability annually. In 2013 the revenues of Kodak made only $3.1 billion and there were 13.000 employees worldwide. What was your greatest management mistake, Perez? Most luckily it was related to his decision to invest millions of dollars in the desktop inkjet printer line, which was abandoned by the company in 2012 already, making only replacement ink cartridges for those printers, which still remain. Perez is not criticized roughly, “People certainly respected what he did in some of his years, and what he tried to do. He was faced at the end of his term, unfortunately, with a less favorable opinion. You have to look at the circumstances surrounding his time. His vision was something to be admired.’ (Daneman, 2014, p. 13). Still, it is necessary to admit that there was really serious and difficult point for the company and the decision, which was taken, was not correct, as the correct one could have led the company to an absolute turnaround.
Clarke has entered the scene, where the company is still facing a lot of serious challenges and they need to be addressed very quickly. Kodak has not yet managed to become competitive in the digital printing business. “The big printing companies are all in the double-digit billions of dollars revenues. The digital printing side for Kodak isn’t quite at a billion yet. If they don’t grow, that will be a struggle.” (Daneman, 2014, p. 13). Some of the challenges for Clarke are related to the poor situation in the picture film business. Kodak continues production of camera film for spin-off Kodak Alaris.
There is an evident need to distance from this film business and this is going to be a serious challenge. Most experts agree that the film business has hung on and there is a need to work out a good executive plan for moving out of the film industry. And still one of the biggest challenges for Clark is to change its attitude, to rebuild its confidence in the company. “The new Kodak is far from out of the woods,” said Brighton Securities’ Conboy. “They are out of bankruptcy, but they aren’t out of the woods. You need to see a company that can consistently raise its revenues and makes profits. We have not seen that yet. We’d like to see it. They need someone strong who can lead them to a profitable and growing future, a future that has not yet arrived despite their emergence from bankruptcy.” (Daneman, 2014, p. 6). Apart from changing the leadership style, the company definitely needs to consider different alternatives, which could be better for it. Once there was already a huge mistake done when in 1975 one of the company’s employees invented the digital camera and this could have been a real breakthrough, still, this idea was ignored and did not receive the free road for further development and bringing dividends to the whole company. At the moment it is necessary to look for other alternatives, for that niche of products, which could lead the company to success. The central product of the company used to be cameras, why not continue in this direction? There is no use entering those spheres, where the competition is so tough, that the chances for Kodak would be minimal.
Overall, Kodak used to be one of the greatest companies in the imaging business; due to the failure of the top management and wrong strategic decisions, the company turned out to be on edge of bankruptcy. At the moment there is an urgent need to reconsider the leadership style and work out new innovative strategies for its development and getting out of this poor situation.
References:
Daneman, M. (2014). Change Starts To Click At Kodak As Old Face Adopts New Profile. New York Times News Service.
Grant, Robert M. Eastman Kodak’s Quest for a Digital Future, 2012
Kodak is at death’s door; Fujifilm, its old rival, is thriving. Why? (2012). The Economist Retrieved from http://www.economist.com/node/21542796
Kotter, J. (2012). Barriers to Change: The Real Reason Behind the Kodak Downfall. Forbes
Larish, J. J. (2012). Out of focus: The story of how Kodak lost its Direction. New Jersey, NJ:
