Eastman Kodak is in most certainty the story of an organization that has failed to correctly manage and implement change. The company which was enjoying sales of around US$10 billion in 1981 has a net income of only US$139 million in 2005. Kodak's brand value also slipped down dramatically. An estimated US$2.6 billion was lost owing to the decrease in organization's brand value. A number of factors played an important role in Eastman Kodak's tragic decline. The most important factor that contributed to Kodak's demise was the rigid thinking on part of its management that stopped them from taking timely initiative towards adoption of digital technology in digital communications segment of the company. Another important letdown related to change implementation occurred when Kodak's management failed to realize that it needs to continuously monitor the changes occurring in the environment and then take small continuous steps towards complete adoption of a particular change if analysis reveals that it is good for the overall organizational well being. In the ensuing paragraphs a detailed discussion will be carried out examining what went wrong at Eastman Kodak and what are the possible remedial steps that can be taken.
Problem 1: Kodak missing the information age
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The biggest strategic blunder committed by the management of Eastman Kodak was that it failed to correctly anticipate the needs of changing time. While the competitors around them were constantly innovating and coming up with new products in line with the changing needs of the market, the management at Kodak was happy being stuck with the old products and ways of thinking. A big factor contributing to the amazing collapse of Kodak was management's approach towards finding solutions to strategic problems being faced by the organization. The Rational Thinking Perspective (RTP) was successfully utilized by Kodak in its infancy when RTP was the main perspective being used by leading businesses around the globe but, as time passed and fierce competition started emerging Kodak ignored the need to change its core business technology from silver-halide film technology to the digital technology. This failure to foresee change and sticking to RTP was a huge strategic blunder on part of Kodak's management and could well have been avoided had the management at Eastman Kodak used Generative Thinking Perspective (GTP) to solve the strategic problems being faced by the organization.
Rational Thinking Perspective (RTP) versus Generative Thinking Perspective (GTP)
The followers of Rational Thinking Perspective (RTP) notably Kenneth Andrews argue that the strategy analysis and formulation stages should be carried out with due diligence and with extreme care (Erasmus & Schenk, 2008). The proponents of RTP believe that the issues being faced by organizations are adequately clear and a thorough analysis of relevant data will reveal the future course of direction that should be chosen (Oliver, 2009). The RTP can easily be broken down into four main stages starting from data analysis and setting of strategic objectives followed by planning stage to carrying out the implementation of the defined objectives (Wit & Meyer, 2010). The followers of generative perspective school of thought (GTP) reject the RTP by saying that in the fast paced world of today the rational and systematic logic cannot be used for decision making (Paauwe, 2004). GTP argues that enterprise problems can only be solved by interactive actions. GTP believes that strategy making is a process of reflecting, envisioning, experimenting and learning that can never be neatly organized, programmed or conceptualized (Hoogervorst, 2009).
Strategies to resolve the problem
Kodak totally depended on the strictly logical Rational Thinking perspective (RTP) in the production and sales of cameras and films which allowed competitors to slowly snatch the market share of Eastman Kodak in the camera industry it previously dominated. Kodak could easily have avoided the losses in revenues at the hand of fierce competition from rival organizations had the management used Generative Thinking Perspective (GTP) to tackle the changing environment needs. GTP, with its emphasis on using intuitive approaches to meet emerging challenges in the marketplace, would have helped Kodak's management in foreseeing that it needs to move from the traditional film camera to the digital camera in order to keep in line with changing consumer needs.
Problem 2: Extreme times need extreme measures
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Kodak's lack of initiative to adapt to changing needs of the market was another reason for the organization's gradually faded into oblivion. The management of the organization, led by Daniel Carp failed to realize the looming danger in the forms of innovative product offering by rival organization. The introduction of Mavica, a filmless digital camera by Sony Corporation as early as 1981 should have served as a warning signal for Kodak's management, but the top management failed to foresee the looming signs of a disaster. A provocative management team would have adopted the Continuous Renewal Perspective (CRP) as early as the 1980's to gradually start making progress towards complete adoption of digital technology solutions. The strategy to use CRP would have immensely helped Kodak in maintaining its crown as the undisputed market leader in the camera industry. The Kodak's management woes don't stop here, years later when the digital technology totally rule the camera manufacturing industry, the management is still confused as to whether it should or should not go for DRP as it entails the management to assume the level of risk it is simply not used.
Discontinuous Renewal Perspective (DRP) versus Continuous Renewal Perspective (CRP)
There are two main perspectives that describe how change is brought about in an organization. The first perspective i.e. the discontinuous renewal perspective (DRP) argues that change should be rapid and radical (Cummings & Worley, 2009). The DRP involves a rapid change in the structure, technology, people and strategy pursued by the organization (Lussier, 2008). The supporters of DRP believe it is an excellent process to follow in case an organization has to make a transformational change since it will help the organization to quickly respond to external disruptions and quickly reach a period of smooth growth (Daft, 2009). The other perspective i.e. the continuous renewal perspective (CRP) argues that introducing change in an organization should be a process of continuous improvement (Crowthe & Green, 2004). The proponents of CRP argue that it is a very profitable process to follow for the entire organization, since these changes can be carried out with the accepted organizational framework and value systems without making unnecessary changes to organizational structure (Weick & Quinn, 1999).
Strategies to resolve the problem
In the early 1980's the management of Eastman Kodak should have started the process of slow transforming their key resources from silver-halide film technology to digital technology, but they did not take any concrete step in this regard. Years later, with the rivals now possessing state-of-the-art digital technologies Eastman Kodak is now left with no choice and solution but to undergo a radical revolutionary change towards adopting the digital technology in all stages of the post-digital photography value chain. The management of Kodak must however by very careful in making the transition as any mistake at this point would spell serious trouble for the future of the firm.
Problem 3: Dilemma of choosing between MBV and RBV
Film, paper, chemicals and photo processing were the four areas where Kodak traditionally held supremacy over its rivals but, with the advent of new age of digital technology Kodak could no longer reap benefits out of the old sources of competitive advantage. The fundamental problem being faced by Kodak's management is that Kodak does not hold any advantage over its rival organizations when it comes to possessing new age photography resources such as digitization technology along with storage, retrieval, transmission, manipulation and projection solutions. The advent of digital age has put Kodak in a serious dilemma, in order to compete with its rivals it has to move into the digital printing medium, an area where Eastman Kodak naturally has no experience in. In order to move into the digital printing medium Kodak has to compete with organizations such as Sony, Mitsubishi, and Canon who have their core competency oriented towards the digital technology.
Resource Based View (RBV) versus Market Based View (MBV)
The Resource Based View (RBV) opines that each firm should within its boundaries to find out that precious blend of resources that are valuable, costly and are rare to imitate (Sanchez, 2008). Once an organization's key resources are identified the management should then mount a search to discover for the markets where those resources can be utilized (Matlay, 2005). The RBP is also known as an inside-out approach to organizational decision making whereby an organization's core competency is defined by the way it leverages and exploits its resources (Schwenker & Spremann, 2009). As compared to the RBV, the Market Based View (MBV) emphasis that an organization can only gain crucial advantage over its competitors if it looks towards the threats and opportunities existing in the marketplace (Enders, 2004). The MBV has an outside-in perspective which emphasizes that a firm's position in the marketplace is an extremely important determinant of its success or failure (Woodside, 2008).
Strategies to resolve the problem
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In order to compete with the changing business scenario a new strategy was announced in September 2003 in which Kodak's management aimed to pay complete attention on display and inkjet segments of the market. This change in Kodak's strategy comes with the change in the needs of the target market with customers moving away from the film based cameras to digital cameras. The supreme focus of firms in the photography business is on capturing the customers who believe in printing hard copies of digital images by offering them various options such as desktop inkjet printers, printing at kiosks etc. Kodak has taken up the challenge by setting up minilabs and kiosks where customers can come and easily get a hard copy of their digital photos. Kodak needs to carefully present its offering to its intended target market as it has to compete with a number of settled players with extensive technical expertise in the digital photo-finishing market.
Problem 4: Dilemma between choosing competition or cooperation in strategy
Kodak, facing the daunting challenge of competing with technologically superior organizations launched an aggressive campaign of acquiring companies and latest technologies in order to address the ever changing needs of the consumer market. From the acquisition of Scitex Digital Printing to forming strategic partnership with Verizon Wireless and buying a 50% stake in Nexpress Solutions, Kodak embarked upon a massive strategic partnership making mission that resulted in depressed cash flows for the organization and created disinterest among the investment community. Kodak's decision to aggressively pursue Embedded Organization Perspective (EOP) was seen as a desperate attempt by the organization to build its resource base in the imaging industry, an area where it hardly gives any competition to its rival technologically superior organizations.
Discrete Organization Perspective (DOP) versus Embedded Organization Perspective (EOP)
The Discrete Organization Perspective (DOP) views organizations as autonomous units that compete with other organizations in an extremely hostile external environment (Wit & Meyer, 2010). According to this perspective each organization is taken as being detached from its environment and having a sharply defined boundary that sets it apart from the external world (Ostroff & Judge, 2012). The managers having DOP believe that relationship with other organizations should be kept formal and too much dependency on outside organizations should be avoided since it can lead to the rival firm taking undue advantage of the organization (English, 2011). The Embedded Organization Perspective (EOP) believes that business is not all about being at war with other organizations in the marketplace. According to EOP the main aim of business is value creation and organizations can only maximize value when they work together to achieve a common goal (Wit & Meyer, 2010).
Strategies to resolve the problem
The management of Eastman Kodak should make sure that they do not take hasty merger and acquisition decision as it would send wrong signals both to the investment community and the customers alike. At this crucial juncture in the history of Kodak, each and every decision should be taken keeping the best interests of the organization in mind and in order to do so the management must first thoroughly examine if a merger and acquisition decision will be profitable for the organization and what effect it will produce on potential customers and investors of the firm. The management at Eastman Kodak must first clearly define its intended target market and then develop partnership with organizations which can help Kodak in offering highest quality products and services armed with latest technology to the consumers.
Problem 5: Dilemma between choosing competition or cooperation in strategy
Eastman Kodak faces the dilemma between choosing a globalization or localization strategy. The old and outdated model of sales based on the traditional analogue technology has proved to be successful in some of the emerging Eastern markets predominantly the Chinese market but, in the competitive Western market where the competition is much more severe and rival organizations have developed their core competencies strictly on the more advanced digital technology Kodak needs to quickly get its core technology in line with their competitors.
Global Convergence Perspective (GCP) versus International Diversity Perspective (IDP)
The Global Convergence Perspective (GCP) puts forward the argument of a boundary less world in which people with similar mindset see eye-to-eye. The opponents of GCP argue that imposition of foreign norms, values, behaviours and habits in their home country harms national culture and hurts the feelings of national sovereignty (Wit & Meyer, 2010). As compared to the GCP, the International Diversity Perspective (IDP) argues that world must be kept a diverse place where national cultures are retained and local autonomy is given the highest value (Wit & Meyer, 2010). It is a generally observed phenomenon that in countries where people have strong nationalistic views the International Diversity Perspective (IDP) can be successfully used by multinational organizations in promotion of their products and services while in countries with where nationalistic feelings are far less pronounced the Global Convergence Perspective (GCP can be successfully used for product and service promotion (Wit & Meyer, 2010).
Strategies to resolve the problem
The management of Eastman Kodak needs to realize that while the old and outdated analogue technology may succeed in the emerging Eastern market, there are no bright prospects for the use of this obsolete technology in the more developed Western markets. It is right time now that the management of Kodak build-up a global strategy using the GCP which can help the organization to make use of its silver-halide technology in the emerging markets while at the same time incorporating the much more developed digital technology for producing and marketing its products and services in the Western market.
The management of Eastman Kodak committed a number of mistakes in running the business operation including its complete reliance on internal organizational competencies for an extended period of time and then abruptly changing the strategy to merge with and acquire a huge number of organizations sending wrong signals to the investment community. Although Kodak faces a number of challenges posed by the technologically superior rival organizations but, if it correctly uses management strategies aimed at constantly changing the organizational policies in line with industry benchmarks there are bright chances that Kodak can win back its lost position.