Middle management at Kodak resisted the shift to digital photography, filtering information and impeding the CEO's efforts to change the culture. They feared losing their positions in the company if it changed strategies and embraced new digital technologies. This resistance from middle management is identified as a major reason for Kodak's decline as it failed to transition quickly enough to digital.

1. Kodak Bottleneck

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

3. This presentation provides some interesting
explanations to the decline of Kodak in the
shift to digital imaging…

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

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

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

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

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

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

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

11. My friend Bengt
Järrehult often says
that the bottleneck is
always just below the
top of the bottle.

12. 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…

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

14. Forcing profound changes upon a company isn’t easy for
executives, particularly when these changes will have plenty
of political consequences inside the firm.

15. 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...

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

17. 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. . .

18. … 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…

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

20. … 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…

21. … 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.”

22. One wouldn’t
expect someone
who was top
management to
blame top
management.
Nevertheless, he’s
got a point.

23. 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.

24. 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.

25. Find out more about Kodak:
www.christiansandstrom.org