Academic journal article Business Case Journal

Kodak's Challenge: Surviving the Disruptive "Winds of Change"

Academic journal article Business Case Journal

Kodak's Challenge: Surviving the Disruptive "Winds of Change"

Article excerpt

On June 1, 2006, the house lights dimmed at the Wall Street Journal's All Things Digital conference. On the large screens flanking the stage, a film called the "Winds of Change" started. In the film, a dignified white-haired spokesman standing in front of sentimental images of puppies, babies, balloons and birthday parties began talking about the "golden days" at Kodak--the days of the "Kodak moment" in photography. Signaling a shift in the tone of the film, the spokesman looked straight into the camera and said, "Get's ya misty, doesn't it? Yep, they shoveled on the schmaltz pretty thick--but that kinda crap doesn't work anymore." Now people wanted everything to be digital, the speaker stressed, becoming more frenzied as he spoke about digital photography and Kodak's role in it. The viewing audience chortled when the speaker intoned,

   You thought they (Kodak) were just hiding out waiting for this
   'digital thing' to blow over didn't you? Oh, sure. For a while they
   were like, 'Ohhh, there's no way digital's going to catch on' ...
   But now Kodak's back!

With swelling enthusiasm, the spokesman extolled Kodak's research and development in digital photography, ending by pulling at his hair and exclaiming, "You were a Kodak moment once and by God, you'll be one again.. .only this time its digital. Whooo-yeah!" (1)

The spokesman appeared somewhat startled by his own outburst and sheepishly walked off stage as the film ended and the lights came up. Wall Street Journal columnist, Kara Swisher then welcomed Kodak CEO, Antonio Perez to the stage to the audience's vigorous applause and cheers. Paul Simon's song, "Kodachrome" played as Perez took the stage.

Swisher began her interview saying, "That was a really funny movie. I liked that film!" Her first question, however, was not so approving. "What happened," she asked as Perez settled into his chair, "What from your perspective happened at Kodak--because it was one of the greatest brands in history?" (2)

Perez responded without hesitation, saying:

   First of all there was this notion that came out of incredible
   success. The notion was that maybe if Kodak doesn't move into
   digital-the imaging world will never move into digital.

   ... They (Kodak) were running a business with gross margins between
   60-70% and those things are hard to let go, especially when you are
   confronting a business model that is going to give you, if you are
   lucky, something around 30%. So that means that you have to change
   the whole company. From the way you design, to the way you
   manufacture, to the way you distribute, you know ... the whole
   thing. It is very tough.

   So Kodak is very late to the digital space. But Kodak was not late
   in investing in digital. Kodak was very rich. Kodak hired very good
   people and those people were actually doing the right things. Li
   the last fifteen years, Kodak developed one of the most impressive
   IP (intellectual property) portfolios--in digital capture, image
   processing, pixel technology and all sorts of things... color
   management, you name it--actually a leader in all of those spaces.
   Now, why didn't they commercialize that? I don't know. (3)

Referencing Kodak's transition from traditional photography to digital, Swisher asked, "So, how did you get the film people out-because it's a film company?" Perez described his approach saying,

   Basically, the model that I used when I visited the factories was
   looking at the audience and say, "How many [of you] have a digital
   camera? At that time it was about 60%, and I would say, well, you
   are the problem we have. We either move to digital--we either do
   this transformation effectively--or this company basically will
   cease to exist. There is nothing else. There is no time to argue
   about it.... This is over. We are already very late but we do have
   the tools that we need to make this happen. … 
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