Kodak Bottleneck

Christian Sandström holds a PhD from Chalmers University of Technology, Sweden. He writes and speaks about disruptive innovation and technological change.

This presentation provides some interesting explanations to the decline of Kodak in the

shift to digital imaging…

(The images in this presentation come from Kodak’s abandoned site in Järfälla, outside of Stockholm, Sweden)

The place has been subject to a lot of Creative Destruction.

There seems to be a curse over firms which experience a fundamental shift in the underlying technology.

Top management usually get the blame for the demise of big companies like Kodak…

… They’re brought to the gallow and are accused of incompetence, greed, arrogance and too much focus on

short term profits.

Of course, the chief executives bear a lot of responsibility, for anything in a company…

… But that doesn’t imply that they are the biggest problem.

My friend Bengt Järrehult often says

that the bottleneck is always just below the

top of the bottle.

Middle management has a lot to lose, or

win. It is populated by people who still want to climb the ladder,

who’ve been steeped into the corporate

culture and are pretty good at company

politics…

And moreover, middle management is the function that filters out information in the company, in both directions.

Forcing profound changes upon a company isn’t easy for executives, particularly when these changes will have plenty

of political consequences inside the firm.

Business Week wrote about this in 1997:

“The old-line

manufacturing culture continues to impede

Fisher’s efforts to turn Kodak into a high-tech

growth company. 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.”

Giovanni Gavetti interviewed Fisher (the CEO in the 1990s) after he’d left the company:

“I think that the fear drove paralysis that

manifested itself as time went on, to rigidity with respect to changing our

strategy and I didn’t see that at

the start. . .

… we really had to work very aggressively to get

middle management first of all

understanding what we were trying to do and believe that this was a

story of opportunity, that we were in the picture

business…

... That digital was just a technology just like film

was, and that picture business opportunity was

gigantic, and there was a future for

them. . .

… Their arguments would be all over the map. . . Kodak can’t

succeed in this market. We’ve

tried some consumer products before and

failed miserably. There is no money in this

business; it’s all low margin. . .There is a new set of

competitors. . .we don’t know anything about

them…

… I also believe firmly. . .(that) digital imaging was everything in the future. Therefore we were either going to be in the picture space. . .or we weren’t. If we were going to

be in it, we’d have to make an all out assault on digital imaging which meant a step function change.”

One wouldn’t expect someone

who was top management to

blame top management.

Nevertheless, he’s

got a point.

If the stair structure starts to shake

because of a storm, those people who are currently climbing it will be very scared, and hold on to the

structure, even when it’s falling down.

Sources

Gavetti, G., 2005b. Kodak: Interview with Dr. George Fisher (DVD). HBS Publishing.

Lucas, H.C., Goh, J.M. (2009) Disruptive technology: How Kodak missed the digital photography revolution, Journal of Strategic Information Systems 18 46–55.

Swasy, A., 1997. Changing Focus: Kodak and the Battle to Save a Great American Company. Times Business.

Find out more about Kodak:

www.christiansandstrom.org