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Eastman Kodak and the Paradigm Shift

A strange thing happened as I prepared to start my working day with a hot cup of coffee and the local newspaper.

The headlines in the business section read “What would a Kodak bankruptcy mean?”

Turns out a guy by the name of Joel Barker was right.

For those of us who at one time worked for the former photo giant this news would not come as a surprise. Eastman Kodak has been having problems for nearly three decades. It started with some competition in the traditional photographic business, was compounded by invention of digital photography and was finished off by a healthy dose of managerial incompetence.

An industry giant is in critical condition and the prognosis for recovery is grim.

Looking back thirty years ago one would never believe that a company of this size, who was by far the best in its business with a world-wide reputation for quality products, could ever fall so far. Kodak was the Microsoft of its generation, built by George Eastman an entrepreneur known for innovation and a commitment to research and development the company thrived under Eastman’s leadership.

While George Eastman is best known for Eastman Kodak Company and Kodak film, those of us who grew up in the Rochester area remember him most for his philanthropy and the Kodak bonus. As one of the outstanding business leaders of his time, Eastman donated more than $100 million to various projects throughout his lifetime including, the Eastman School of Music, Rochester Institute of Technology, Massachusetts Institute of Technology (MIT), Eastman School of Dentistry at University of Rochester, he started the Community Chest which later became the United Way and built Rochester’s Eastman Theater.

Staunchly anti-union, Eastman paid high wages and superior benefits to his employees and early on in his business career he began planning on sharing dividends on wages to all Kodak workers. Eastman felt that the prosperity of an organization was not necessarily due to inventions and patents, but more to workers' goodwill and loyalty, which in turn were enhanced by forms of profit sharing. In 1919, Eastman gave one-third of his own holdings of company stock then worth $10 million to his employees.

So, just how could a company built by a man who believed so strongly in the value of his workers fall?

Quite simply, its leaders beginning in the 1980’s made the decision to set and follow their own vision and model for business instead of the vision and business model set by George Eastman himself.

In his book Psychology for Business Efficiency Eastman stated that to become efficient in business one must first determine clearly and wisely the end to be gained by the business. To accomplish this, he must;

  • Rightly apprehend the best available means for attaining the end
  • Acquire the skills in employing that means
  • Devote themselves resolutely and unswervingly to the attainment of the end
  • Have the knowledge of the material factors and process with which the business is concerned and the skill to deal with them
  • Have the skills to both listen and influence

I often wonder how many of those in leadership positions at Kodak ever took the time to read Eastman’s advice on running a business. Even more bothersome is knowing the culture of attaining and training a highly skilled workforce and a commitment to research and development continued on the manufacturing floor until the early 1990’s.

As a Manufacturing and Equipment Reliability Consultant, I will be forever grateful for the education I was given by Eastman Kodak, from my courses in a skilled trades apprentice program to Reliability Engineering courses at RIT, Kodak paid for it all. Training at our company was never an issue, if applied to your job it was it was not only available, it was approved and never questioned.

It was an eight week course I took to become a Quality Improvement Facilitator (Kodak’s 1990’s version of six sigma black belt) where we were introduced to Joel Barkers concept of paradigms and the importance of having a vision of the future.

In this course we were shown a video where Mr. Barker describes the ruin of companies who went belly up because of simple shifts in technology and innovation. Throughout the film he stresses the importance of shaping your company’s future by being focused on the future instead of the present. He also stated that innovation and changes in technology are often developed, presented and ignored by companies focused on the present instead of the future.

Had Kodak’s leaders listened to Joel Barker they might have recognized that in 1975 the first digital camera was made in their own research labs as a technical exercise. In 1986, Kodak scientists invented the world's first megapixel sensor, capable of recording 1.4 million pixels that could produce a 5x7-inch digital photo-quality print and in 1990 Kodak developed the Photo CD system and proposed "the first worldwide standard for defining color in the digital environment of computers and computer peripherals. Only a few years later the line was discontinued when our own management deemed digital photography, too complex, too expensive and grainy.

The paradigm shift had presented itself and was pushed aside to focus on today. Fuji Corporation had created competition in the consumer film business and Rochester needed to focus on the lagging indicators of costs and profits. The ground work for failure was set, as Joel Barker said “No one will thank you for taking care of the present if you have neglected the future.”

To today’s leaders at Eastman Kodak who are presently looking to sell its patents in Digital Technology I can only say; “Your work is done. Why wait?”

In 1981 Eastman Kodak employed 60,400 people in Rochester, NY. Today that number is less than 7,100.

  

Doug Plucknette

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