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

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Kodak Bottleneck

by Chris Sandström on Nov 12, 2009

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Kodak Bottleneck — Presentation Transcript