Kodak Bottleneck

This presentation provides some interesting
explanations to the decline of Kodak in the
l i h d li fK d ki h
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
ey e b oug t to t e ga o a d a e accused o
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
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
gp g p p y y
executives, particularly when these changes will have plenty
of political consequences inside the firm.

Business Week wrote
B i W k
about this in 1997:
“The old‐line
manufacturing culture
g
continues to impede
Fisher’s efforts to turn
Kodak into a high‐tech
growth company.
Fisher has been able to
Fisher has been able to
change the culture at the
very top...
very top...

… But he hasn’t been
able to change the huge
g g
mass of middle
managers, and they just
don’t understand this
[digital] world.”

Giovanni Gavetti
Giovanni Gavetti
interviewed Fisher (the
CEO in the 1990s) after
he’d left the company:
“I think that the fear
“I thi k th t th f
drove paralysis that
manifested itself as time
manifested itself as time
went on, to rigidity with
respect to changing our
strategy
and I didn’t see that at
the start. . .
h

… we really had to work
very aggressively to get
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
we were in the picture
business…

... That digital was just a
technology just like film
was, and that picture
d th t i t
business opportunity was
gigantic, and
gigantic and
there was a future for
them. . .

… Their arguments
would be all over the
would be all over the
map. . . Kodak can’t
succeed in this market.
We’ve
tried some consumer
products before and
d t b f d
failed miserably. There is
no money in this
no money in this
business; it’s all low
margin. . .There
is a new set of
competitors. . .we don’t
know anything about
k hi b
them…

… I also believe firmly. . .(that) digital imaging was
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
p p g g
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
p
who was top
management to
management to
blame top
management.
management
Nevertheless, he’s
got a point.

If the stair structure
starts to shake
starts to shake
because of a storm,
those people who are
who are
currently climbing it
will be very scared
be very scared,
and hold on to the
structure, even
structure even when
it’s falling down.

Sources
Gavetti, G., 2005b. Kodak: Interview with Dr.
Gavetti, G., 2005b. Kodak: Interview with Dr.
George Fisher (DVD). HBS Publishing.
Lucas, H.C., Goh, J.M. (2009) Disruptive
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.

Christian Sandström is a PhD
student at Chalmers
University of Technology in
Gothenburg, Sweden. He
G h b S d H
writes and speaks about
disruptive innovation and
disruptive innovation and
technological change.

Christian Sandström is a PhD
student at Chalmers
University of Technology in
Gothenburg, Sweden. He
G h b S d H
writes and speaks about
disruptive innovation and
disruptive innovation and
technological change.
But what happened to Kodak?
B t h th d t K d k?

Christian Sandström is a PhD
student at Chalmers
University of Technology in
Gothenburg, Sweden. He
G h b S d H
writes and speaks about
disruptive innovation and
disruptive innovation and
technological change.
But what happened to Kodak?
B t h th d t K d k?
Find out more:
Find out more:
www.christiansandstrom.org