Case Study OD In Practice: Diagnosis for Kodak The Digital Revolution

Eastman Kodak Co. recently announced plans to cut its workforce by as much as 21 percent by the end of 2006. This amounts to 12,000 to 15,000 jobs, on top of a reduction in its world-wide workforce by 30,000 jobs back in the late 1990s.

Kodak is betting heavily that it can transform itself from a slow-changing company into operating on the cutting edge of the digital revolution. The Kodak vision is to turn itself into the leader of the electronic age. That could be a major challenge. In the film business, Kodak had virtually no competition for about a century until Fuji came along in the 1980s. In the electronic industry, however, there are a host of international companies like; Sony, HP, Canon, Panasonic, Fuji, Nikon, and Minolta ready to slug it out for the digital-imaging market. Data Collection and Analysis

Kodak polled a widening corps of its managers and called in outside consultants. McKinsey & Co. even conducted trap team, where managers were invited to test out scenarios that might cause problems. Finally, in the late 1990s Kodaks core photo businesses were reshuffled into 17 entrepreneurial units. Such a measured approach to change reflects the very essence of Kodak, a company that has raised careful deliberation some would say procrastination to a high art. But the restructuring was of little benefit. In the last several decades, Kodak dragged its feet while competitors ran away with new markets like instant photography, 35mm cameras, video cameras, video recorders, and copying machines. camera technology. And for over a decade Kodak has struggled to transition to digital-disheartening, considering that Kodak invented the digital

Kodak faces several dilemmas: It must hold down prices on film or risk losing even more market share to Fuji and private-label brands. At the same time, investors want improved returns now. Competition is especially fierce in the color-print film business, Kodaks mainstay. Now it seems that the long-term future of photography is in digital imaging, not film. Kodak has stopped selling reloadable film cameras in the United States, Canada, and Europe. Growth is slowing in Kodaks film products, and Kodak says that film sales will drop at a 10 to 12 percent annual rate over the next three years. Worldwide film sales are expected to start declining for all manufacturers. Kodak is in the dubious position of fiercely competing for a shrinking market.

Diagnosis and Change

The job of making Kodak more effective will require changing a 100 years old culture that guaranteed employment but fostered complacency and resistance to change. controlled the market. Kodaks culture has been described as sclerotic. In the past, Kodak was known to favor caution over risk-taking, which was a feasible strategy when Kodak

Whats so tough about the job of remaking Kodak? First, it is a chemical company that must transform itself, at least in part, into an electronics company. The chemical business, silver halide photography, is mature and slow growing. The electronics business involves translating images into the digital language of computing so that they can be manipulated on computer screens and transported electronically. Until the mid-1990s, chemists traditionally managed Kodak. The two businesses are like an elephant and a mouse.

New Products and Markets Managing its many new ventures will be one of Kodaks greatest challenges, something it has muffed in the past. The company has been moving away from consumer electronics to focus its attention on non consumer applications of electronics. The business and medical communities already see the need for digital imaging. Kodaks digital laser writers and high-end scanners

have been successful with banks and other business and government customers that move large volumes of paper and Kodaks radiography is experiencing strong sales growth.

Virtually every current top manager has a proven track record in bringing new products to market. Now many young managers are being given authority over new product development. A former HP executive who has worked with Kodak says, They know more about the science of imaging, photographs and what people want to do with them than any company in the world. They have great technical capabilities, but theyve lacked focus and application. The problem isnt that Kodak has the wrong vision, but that it has waited until the sky was falling to embrace it.

But dont count Kodak out. Their digital camera business is profitable: in a recent year it was number two of all manufacturers with over 17 percent market share. Kodak is taking advantage of long-standing ties with doctors and hospitals eager to replace X-rays with digital images. The health-imaging business makes more money than photography. Kodak intends to develop and buy companies in the health and commercial imaging and printing markets.

Will Kodaks diagnosis of the problem and its vision bring about the desired changes, and will Kodaks managers, after years in the old culture, be able to break out of the former ineffective patterns?

Questions:

Q1. Q2. Q3. Q4.

What data or information would be necessary to develop a change program at Kodak? What kind of performance gaps can you identify at Kodak? Why is it so important to use diagnosis before implementing a change program? Which kind of problem is Kodak Facing ?

Q5. According to you What are the Feasible Solution Of Kodaks Problem ?