Kodak Company was founded by George Eastman in 1888. The founders were focused on making photography an experience that could be enjoyed by everyone. The company thrived to become one of the leading brands globally in photographic films and camera sales. As Daneman (2013) affirmed, the company grew from one man operation to a company that employed over 13,000 employees. The firm’s growth was characterized by its innovative ability, built both on technology and leadership. The company was managed through a philosophy of encouraging growth and development. The value and principles were accomplished through investment in continuous research, fair treatment of employees, as well as reinvestment of profits to allow the business expand. For a number of years, people admired Kodak cameras and accessories. Indeed, the firm formed the hallmark of photography. Kodak’s success made it resistant to change thus leading to its failure.
Background of the Company
George Eastman’s intention of creating the company was to make photography an activity that could be enjoyed by all. His motivation behind finding the company was his humble beginnings that influenced his innovative capabilities. At the age of fourteen, Eastman was already an entrepreneur who had found success in the insurance industry and later became a banker. The inspiration to venture into photography industry was derived from his constant vacation trips that necessitated use of a camera. The ancient cameras were cumbersome and relied on plate technology, which made them bulky. Notably, it drove Eastman to embark on an innovative journey that finally led to development of a Kodak camera in 1888 (Kodak, 2018). The wet plate technology required chemicals, tanks and wet plates to develop a photograph. Besides, the cameras were bulky and had to be placed on a tripod stand. Innovators thus invested in research that resulted in development of film technology. Eastman considered venturing into manufacturing of the roll film that would be used in the cameras as more profitable than even developing the cameras (Ericson, 2012). He thus made a decision to invest in the photography consumables. He embarked on a journey to strengthen the Kodak as a trusted brand that would deliver consistent quality, even to amateur photographers.
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The visionary leadership provided by Eastman led to a consistent growth of Eastman Kodak Company to become one of the leading brands in photography business. The company grew from an initial workmanship of one person to over 13,000 employees that were accommodated in a campus of over fifty acres (Daneman, 2013). However, Eastman decided to take his life in 1932 after struggling for a long time with a debilitating disease that affected his provision of leadership to the company (Ericson, 2012). Eastman contribution to the success of Kodak Company led him to be recognized as a visionary leader, a pioneer, and inventor, a champion of inclusion, and a philanthropist. Eastman business and leadership philosophy provided a background for further success of the company. It thus grew to become a market leader in both camera sales and photographic films.
Eastman built a company that was characterized by innovation both at the technology and leadership level. The firm relied on four main manufacturing principles that included mass production of goods at a low cost, investment in international distribution, engaging in extensive advertisement, and having a customer focus (Kodak, 2018). Eastman developed a philosophy that mainly depended on an aspect of fostering growth as well as development facilitated through engagement in continuous research, fair treatment of employees, and reinvestment of profits to help in business expansion. The business principles used by the founder of Kodak Company reflected the modern day corporate mission, vision statements, manufacturing standards, and branded platforms of technology companies that are currently business leaders such as Microsoft and Intel (Lipkin, 2013). Eastman thus relied on a leadership and business philosophy that was conventionally beyond his time. He also embraced characteristics that made him a charismatic leader. His leadership included taking personal risks and a consideration of worker ’s needs through establishment of a welfare program that enabled profit sharing. Eastman was an epitome of philanthropism during that time and his donations are estimated to be over $100 million (Kodak, 2018). The leadership and business philosophy created by its founder thus contributed to Kodak’s success even after his exit.
Historical Milestones of Kodak Company
Eastman ’s leadership was instrumental to the company success till the time of his death in 1932. The firm invested in manufacturing of films and cameras, with its headquarters based in Rochester, New York (Ericson, 2012). The company vertically integrated into the camera business by becoming the first to produce films that were used in making Hollywood motion pictures that had sound tracks. The firm’s success in terms of manufacturing and sales of cameras and films made Eastman to reward his workers by gifting them one-third of the company stock, which translated to approximately $10 million at that time (Kodak, 2018). The company grew at a rapid pace thus making it become globalized with a diversified presence that saw its operations cut across the globe. The company held over 8,000 active commercial imaging patents that allowed it to maintain its competitiveness in the photography industry (Kodak, 2018). However, the company was declared bankrupt in 2012 after it failed to compete effectively with emerging firms that had placed much focus on digital photography (Daneman, 2013). Kodak was the first company to invent digital camera technology. The inventions should have propelled it into a lucrative future that would have seen it become a giant firm in the digital age. Instead, invention of the digital camera led to a decline of Kodak due to its leadership failure to take a decisive action to invest in the technology.
Fall of Kodak Company
When Kodak Company first discovered the digital camera, the outfit failed to focus on system two thinking. People in leadership position should identify situations that are retrogressive and ones that are progressive and then make necessary changes that facilitate continued success of an organization. Moving from a one position to another signals a movement from system one thinking to system two thinking. While system one thinking might be too intuitively compelling, moving to a logical system two promotes competitiveness of an organization (Bazerman & Moore, 2013). Steven J. Jasson was a Kodak employee; he invented the first digital camera (Ericson, 2012). By making the invention, he challenged the decision-making skills of Kodak Company leadership. The employee presented the management with a choice that they had never had before. For a long time, the company had relied on the legacy of innovation that had enabled them introduce photographic film as well as a high-margin chemical imaging business that helped in propelling the firm into a successful and the most profitable company in the industry.
Kodak management thus decided to stick to the photographic film and chemical imaging despite the invention of digital technology. The leadership thus chose system one approach which is an intuitive thinking that is automatic, effortless and emotional (Bazerman & Moore, 2013). Because the incumbent methodology had contributed to the entire success of the company, leaders made decisions that were only applicable to their area of expertise. Indeed, they had become so much attached to the technology which made it impossible for them to diverge into a new expertise (Prenatt, Ondracek, Saeed & Bertsch, 2015). The invention of a digital camera introduced a technology that was considered beyond the legacy of the firm. The technology challenged the company leadership to think beyond its technological comfort zone. The company failed to utilize a logical approach to decision making that would have seen them move from film-based technology to digital technology (Bazerman & Moore, 2013). Perhaps, if the company could have adopted the digital technology, its fortunes would have been much different. Adopting system two thinking incorporates a process that is much longer compared to system one thinking. Further, it also involves conscious and logical evaluation of issues to assist in coming up with more critical decisions. In most cases, businesses rely on both systems to make decisions.
Kodak Company was unable to come to a more rational decision due to the dilemma in decision making that was created by invention of the digital camera. A Kodak employee, Lawrence Matteson, engaged in research and authored a detailed report concerning disruption that had been created by invention of digital camera. The employee detailed how the company would have transitioned from film to digital technology over a period of time that went up to 2010 (Groesser & Jovy, 2016). The analysis done by the employee involves application of system two thinking in decision making. Despite presentation of the report to the Kodak leadership and management, they made a costly gap due to poor decision-making ability. Also, they failed to utilize creative decision making models to help make decision on the new innovative and creative invention that had been developed (Bazerman & Moore, 2013). The leadership ’s failure to capture predictions made in the report led to the company’s failure to pursue a path that would have been outside the film technology. The market for photography became revolutionized by the digital technology. Most clients discovered new ways of engaging in photography which contributed to lowering of competitiveness of Kodak. Eventually, the film market became obsolete thus driving Kodak out of business (Prenatt et al., 2015). An application of steps of creative decision making model to the company indicates that the leadership made poor strategic decisions. An invention of digital camera by Kodak employee could not guarantee the company its future due to poor strategic decision making.
The Kodak leadership failed to address the problem posed by digital photography in good time since they did set aside the technology for a number of years after its invention. The period of complacency gave room to other competitors in the industry to invest in digital photography and enter the digital market before Kodak (Prenatt et al., 2015 and Lobdell et al., 2018). As at 1995, other companies that included Nikon, Fuji, Sony, and Olympus had creatively explored the digital technology and released their versions of digital camera. Canon also released its version that was specifically targeted to professional photographers. Kodak followed suit in 1995, and released a digital camera that could be utilized by amateurs (Prenatt et al., 2015). Apart from lack of progress in camera sales, Kodak also experienced a downfall in film sales as it lost most of its market share to Fuji. Film-technology business was Kodak ’s coveted business that had helped it to grow.
Kodak entered the digital photography business long after its competitors had already exploited the market. Kodak joined the business twenty years after its first invention of the technology. If the leadership had utilized Matterson ’s report that was drafted in 1979, they would have had a strategy in place to increase their competitiveness and dominance in the photography business (Grant, 2010). Unfortunately, its leadership’s lack of decisiveness was detrimental to Kodak’s success; digital photography has grown and replaced the film technology. Further, it has also paved way for other advanced technologies that have revolutionized the photography industry. New competitors have also come on board to reduce the market share including Lexmark and Hewlett Packard. The firms have created copiers that enable instant picture printing. Phillipe Khan also invented mobile phone camera in 1997, two years after Kodak’s entry into digital market (Prenatt et al., 2015). The invention reduced sales in Kodak’s camera segment, which had now turned into their core business.
Kodak Company had created a big market for its products by invested in photograph consumables. As indicated in the earlier parts, film sales constituted a major part of its business. The company had created a legacy through its consumables side that mainly consisted of film photography business. The leadership thus sought to implement the same business model in its digital imagery business (Prenatt et al., 2015). In addition, it wanted to extend use of film, paper and chemicals into digital cameras, photo output using inkjet printers and on-line photo services. The company pictured that it would continue to realize high value sales from products that included photographic paper and ink. However, the growing trend in photography consumers involved a preference to observe the photos on screens as opposed to making printed copies. Therefore, Kodak was still stuck at the concept of taking and processing pictures.
The consumer driven market became intense with competition. Kodak released its DC40 digital camera in 1995 and a year later, other companies introduced over twenty-five brands that fell in the same category with the Kodak brand (Ericson, 2012). The market dynamics became favorable for other firms to invest in the industry. Competitors easily gained market share as a result of high volume production, low-barrier entry as well as compressed margin expectations. Kodak created EasyShare technology that would enable people to access and share their digital photos. The technology, however, failed to make it in the digital market as it could not keep pace with the continuously evolving consumer and digital market expectations (Prenatt et al., 2015). Despite the company offering a bundle that included cameras, software, and a website that allowed online photo finishing, the firm failed to achieve its market dominance.
Kodak ’s digital strategists failed to accept that customers no longer felt the urge to print photos on paper and instead felt comfortable storing them and sharing electronically. The firm’s leadership mainly considered pure digital market as small and in the process of development hence completely failed to break away from the company traditions mainly centered on phot retailing (Bazerman & Moore, 2013). The managemnet mostly relied on a business model that majorly focused on consumables. The company thus continuously displayed that they did not have a grasp of the consumer-driven digital market space. Their profitability was thus hit and began flopping in the early 2000s. The company operations were thus characterized by unprofitable sales of digital consumables and cameras. They were also involved in massive employee layoffs as from 2003. The business incurred massive debts in a bit to strategize its operation. Eventually, it was declared bankrupt in 2012. Notably, this marked the end of a company that had initially displayed visionary leadership and innovative and creative decision making.
Recommendations
In the event the company emerges from bankruptcy, the new chief executive officer will be faced with an opportunity and a challenge of transforming the historic organization back to successful operations trajectory. The leadership should thus tailor their approach of decision making based on the business challenges that they experience in operating and business environment. Incorporating system one and system two thinking is critical to make sound management decisions that will allow the company regain its competitiveness in the photography market. Kodak fall from its successful past was mainly based on decision-making as opposed to emergence of digital technology (Ericson, 2012). Application of creative decision making model that incorporates problem recognition, immersion, incubation, illumination, as well as verification will allow the management have an all-round outlook of the organization and its environment of operation to make proper strategic decisions.
The new leadership and management of the company should aspire to keep an open mind that encourages application of change when the company is faced with market adversity. The leadership should possess ability to adapt their decision making skills and strategies to suit the context or situation that it needs to address (Power & Mitra, 2016). The company should make decisions that are simple but are able to address complex situations that either requires immediate or delayed reactions. The decisions made should constantly support the strategic goals developed by Kodak Company. The leadership could also consider utilizing a trusted advisor or a business coach who would provide honest commentary about situations. The management should also learn from reviewing accomplishments of the company as well as its history to avoid doing mistakes that contributed to the company ’s downfall. The decisions made should be aimed at preserving the future of the company.
Conclusion
Kodak Company is a typical example of firms that have gone down due to non-strategic leadership decisions. The company ’s failure in 2012 can be attribute to overconfidence, over precision and overstatement of leadership and management when determining organization’s future. Indeed, its fall cannot be attributed to emergence of digital technology but lack of strategic decision making by management. Kodak Company was the first to invent digital technology. Despite a report by one of its employees that would have helped it transition from film technology to digital technology photographing, the company grew confident in its vertical integration to the point that it did not want to abandon its past innovation of film technology and chemicals used in the photography industry. Eventually, other competing companies embraced digital technology and developed products that were in line with the emerging consumer-driven market. When the company eventually chose to adopt digital technologies, its rivals had already secured a large market share thus leading to its decline. In future, the management should utilize creative decision making models in order to make solid strategic decisions.
References
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Daneman, M. (2013, September 9). Kodak CEO: We kept a company alive. USA Today . Retrievedfrom http://www.usatoday.com/story/money/business/2013/09/04/kodakbankruptcy-ceo-restructuring/2761425/
Ericson, P. (2012, February 10). Is Kodak’s epic decline the fault of its leaders? Rochester Business Journal . Retrieved from http://www.rbj.net/article.asp?aID=190312
Grant, R., M. (2010). Contemporary Strategy Analysis (7th Edition). Hoboken, NJ: John Wiley & Sons, Inc.
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Power, D. J., & Mitra, A. (2016). Reducing'Bad'Strategic Business Decisions. Drake Management Review , 5 (1/2), 15-21.
Prenatt, D., Ondracek, J., Saeed, M., & Bertsch, A. (2015). How Underdeveloped Decision Making and Poor Leadership Choices Led Kodak into Bankruptcy. Inspira: Journal of Modern Management & Entrepreneurship , 5 (1), 01-12.
