Bucks New University Faculty of Design, Media & Management
Innovation Quality and the Internet BM603
CW1- Customer Need & Solution Report
Module Co-ordinator/Tutor: John Hathaway/Chris Cornes Student ID: 21015609 Word count (excluding charts, diagrams and references): 2489
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Contents
1 Introduction
2
2 The Organization
2
2.1 Recent History Timeline……………………………………..……………………..3 2.2 Financial Analysis………………………………………………………………………4
3 External and Internal Environment Analysis 3.1 3.2 3.3 3.4 3.5
7
Market Size and Shares…………………………………………………………….7 Key Competitors Summary……………………………………………………….9 Market Analysis………………………………………………………………………. 9 Value Chain Analysis……………………………………………………………… 11 External and Internal Environment Analysis Conclusion………… 12
4 Innovation Strategy
13
4.1 Search……………………………………………………………………………………. 13 4.1.1 How to Innovate Despite Cash Constraints?......................13 4.1.2 Where to focus?.................................................................14 4.1.3 Search summary…………………………………….……………………… 15 4.2 Select……………………………………………………………………………………..16 4.2.1 Product Concepts………………………………………………………….. 18 4.2.2 Cost Benefit Analysis: Kodak Socialgram camera……………. 19
5 Implementation
20
5.1 S.M.A.R.T. Recommendations………………………………………………..22
6 Conclusion
23
7 References
24
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1 Introduction The aim of this report is to identify the business issues that Eastman Kodak Company is facing and to design an innovative solution to the problem. Firstly, Kodak internal and external environment and the market in which the company operates will be analysed in depth in order to identify problems and potential solutions. Secondly the innovation process will be outlined using the Simple Innovation Model. Finally, implementation recommendations will be produced.
2 The Organisation Eastman Kodak is an American multinational company specialized in photographic equipment and services, founded in 1888 in Rochester, New York, United States. Kodak provides a wide range of products for both customers and businesses: photographic film and plates, photographic chemicals, papers and related supplies, photofinishing equipment, motion picture equipment, retail and business imaging services. Kodak also offers desktop inkjet printers and related supplies. The company is segmented in 3 groups on the basis of products offered (Kodak, 2011a).
Graphic Communications Group (GCG) It offers business services, solutions and media products to a variety of customers in commercial printing, packaging, newspapers, and similar media segments. – – –
Film, Photofinishing and Entertainment Group (FPEG) It offers equipment and services to the professional entertainment industry. – – – –
Prepress solutions Digital printing solutions Business imaging services and solutions
Entertainment imaging Traditional photofinishing Industrial materials Film capture
Consumer Digital Imaging Group (CDG) It offers consumer products and services. – – –
Retail systems solutions Consumer Imaging Services Consumer Inkjet Systems 2
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Employees: 17,100 (Reuters, 2012a) Income 2011: $6,022m (Financial Times, 2012) Revenue 2011: $ -764m (Financial Times, 2012) CEO and Chairman: Antonio M. Perez. Joined Kodak in April 2003 after a 25-years career at HP and Gemplus International (Kodak, 2011a).
2.1 Recent History Timeline 2007 Kodak posts annual profits for the last year (The Economist, 2012). 2009 Kodak decides to suspend cash dividends (Reuters, 2011). 2010 By the end 2010, Kodak has 18,800 full-time employees from about 145,000 during the 1980s. (Reuters, 2012a). 2011 February 3: Kodak investors stage a mini-revolt at a meeting at the New York Stock Exchange, yelling at CEO Antonio Perez and accusing him of having "zero credibility� (Reuters, 2011). Kodak announces plan to sell a portion of its digital patent portfolio (McLaughlin, 2012). 2012 January 19: Kodak files for Chapter 11 bankruptcy protection with the U.S. bankruptcy court in Manhattan (Strydom, 2012). Kodak obtained a $950m, 18-month credit facility from Citigroup (Reuters, 2012d). February 9: Kodak announced that it would exit the digital image capture business and quit its production of digital cameras (Neate, 2012). September 10: Kodak announced plans to cut another 1,000 jobs by the end of 2012 as it works to restructure its business in bankruptcy (Reuters, 2012a). September 28: Kodak announced that it is exiting the inkjet printer business (Reuters, 2012b). November 12: Kodak has reached a $793 million financing deal with bondholders that could take the company out of bankruptcy (Reuters, 2012c).
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2.2 Financial Analysis After posting all-time record $2.5bn profits in 1999 (The Economist, 2012), Eastman Kodak saw its revenue and profit gradually shrinking. In 2007 Kodak turned its last annual profit. Between 2008 and 2011 Kodak posted 4 yearly losses in a row and saw its revenues falling to $6bn from $11bn in 2007 (Financial Times, 2012). The collapse in licensing revenues at Consumer Digital Imaging division and a doubling of losses at its Graphic Communications group led the company to file for bankruptcy protection (Strydom, 2012). (The Economist, 2012)
Income Statement
2011
2010
2009
Revenue
$6,022
$7,187
$7,606
Gross Profit
$887
$1,951
$1,768
Operating Income
$ -600
$ -336
$ -28
Net Income
$ -764
$ -687
$ -210
Diluted EPS
$ -2.84
$ -2.56
$ -0.78 (Financial Times, 2012)
(Financial Times, 2012) 4
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In 2011 the only segment of Kodak to post a profit was its FPEG group, where profits fell by 63% to $34m, on sales down 12% at $1.5bn (Francis, 2012). The other 2 Kodak segments posted multi-million losses: GCG doubled losses to $191m, on $2.7bn sales. Gross profits fell 19% due to industry price competition and increased start-up costs associated with printing systems. Sales at the consumer business were down 36% overall worldwide at $1.7bn: the group posted losses for $349m on $1.7 sales (Francis, 2012). In order to reduce costs Kodak had to quit producing digital cameras (Kodak, 2012a). Kodak's bottom-line loss for 2011 was $764m with sales down 16% at $6bn (Hoovers, 2012).
Cash Flow
(Financial Times, 2012) Liquidity crisis has been one of the main causes that forced Kodak to file for bankruptcy protection. Kodak’s cash flow has been steadily eroding for more than a decade and dropped significantly in 2008. In addition Kodak faces huge costs for pension and other benefits for workers and retirees (Strydom, 2012). Kodak obtained multimillion loans in 2012 but the bankruptcy protection proceedings can potentially have adverse effects on the company liquidity (Kodak, 2011b).
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Cash Flow (mil)
2011
2010
2009
Cash at the beginning of the year
$1,624
$2,024
$2,145
Net Operating Cash
$(998)
$(219)
$(136)
Net Investing Cash
$(25)
$(112)
$(22)
Net Financing Cash
$246
$(74)
$33
Net Change in Cash
$(763)
$(400)
$(121)
Cash at end of the year
$861
$1,624
$2,024 (Hoovers, 2012)
Assets Despite of liquidity problems and debts Kodak is still an asset-rich company. The Kodak patents portfolio includes more than 10,000 patents: together, the technology is valued between $2.21bn and $2.57bn (McLaughlin, 2012). In addition Kodak has a fleet of 100.000 kiosks worldwide (Kodak, 2012a).
Assets
2011
2010
209
Property, plant & equipment, net
895
1,037
1,254
Goodwill, net
277
294
907
87
124
184
--
--
67
264
290
200
4,678
6,226
7,691
Intangibles, net Note receivable - long term Other long term assets Total assets
(Financial Times, 2012)
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3 External and Internal Environment Analysis 3.1 Market Size and Shares The analysis will focus on 2 segments of photographic equipment and services industry: the consumer photofinishing industry and the digital photography industry. Photofinishing services such as developing and printing film, duplicating, enlarging, or retouching photographs are the core activities of Kodak consumer imaging group (Kodak, 2011a). Digital cameras market still offers huge opportunities and it is worth to be analysed, despite Kodak decided to quit digital cameras production. Global consumer photofinishing market The photofinishing industry is struggling to maintain growth due to the mass shift to digital devices and online photo-sharing platforms (The Economist, 2012). In 2016, the segment is expected to decrease slightly in global sales, sliding to $24.7 billion down from $25 billion in 2011 (BCC Rasearch, 2012).
Kodak Kodak shares the majority of the market, followed by HP, Fujifilm and Agfa-Gevaert (Pageau, 2012). Thanks to its past market dominance, Kodak managed to penetrate the market capillary. Despite the company woes, Kodak is still the market leader in photographic processing equipment and services (Kodak, 2011b).
(Kodak, 2011b) 7
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Worldwide Digital Photography Market The global digital photography market was valued $68.4 billion in 2011. The market is forecasted to reach $82.5 billion by 2016 with a 3.8% annual growth rate. Cameras and lenses are the core of the market, representing 55% of global sales. This segment was valued at $37.6 billion in 2011, and is expected reach $49.8 billion in 2016 (BCC Rasearch, 2012). Units sold are projected to reach 155 million units by the year 2017 (PRweb, 2012)
Vendor
2010 market share%
2009 market share%
Canon
2010 digital cameras revenue ($ bn) 7
19
19
Sony
6.6
17.9
16.9
Nikon
4.7
12.6
11.1
Samsung
4.1
11.1
10.9
Panasonic
2.8
7.6
7.6
Kodak
2.7
7.4
8.8
Olympus
2.3
6.1
6.2
Fuji
1.8
4.9
5.4
(Sawa and Yasu, 2011)
2010 Digital Cameras Market Shares
Nikon 13%
Sony 18%
Samsung Kodak Panasonic 7% 11% 8%
Olympus 6% Fuji 5%
Canon 19%
Others 13%
Worldwide camera sales are growing, helped by the economic growth in emerging markets. To win new customers, biggest companies such as Sony and Samsung are investing heavily in innovation (Sawa and Yasu, 2011), as a result they are gaining market share while smaller companies are struggling.
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Kodak The decision to quit the production of digital cameras is part of the bankruptcy restructuration strategy. The digital age opened new challenges that Kodak failed to meet: the sales have been constantly falling and Kodak management decided to exit businesses that are unprofitable (Kodak, 2012a).
3.2 Key Competitors Summary Photographic Equipment and Services industry Manufacturers of photographic equipment and supplies provide cameras, film, developing and enlarging equipment, photographic chemicals and papers, and related supplies (Hoovers, 2012).
Company
Total Revenues 2011
Canon
$45,955M
Fujifilm
$26,679M
Nikon
$11,164M
Olympus
$10,312M
Konica Minolta
$9,332M
Kodak
$6,022M
Agfa-Gevaert
$3,914M (Hoovers, 2012)
3.3 Market analysis Issues in the market The imaging market has undergone disruptive changes in the last ten years with the mass diffusion of digital photography. The digital switch is complete and the market is going through a period of stabilization with few major players sharing a significant part of the market and the rising of niche market trends. The switch to digital photography is complete. The digital camera market in developed economies is near its saturation point and its explosive growth is ending (Zhang, 2010). Film has settled into stable niche Film doesn’t have any market share left to lose and it is now benefiting from a growing base of retrostyle camera lovers (Kirgan, 2012).
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Smart Phones are a threat for digital photography Smartphones are capturing market share from the traditional point-and-shoot camera market. However detachable lenses cameras sales increased by 12% in 2011 (Highbeam, 2012). Professional Photo studios are still profitable Despite of the mass penetration of smartphone cameras and desktop printers, photographic services revenues remains stable. In addition demand for rolled films and traditional photofinishing solutions is still high in emerging markets (Simmons, 2012).
5 Forces Analysis (Porter, 1979)
Bargaining Power of Buyers
Threat of Substitutes
High
High
- Switching costs are very low due to the increasing commoditization of photographic products and sevices. - Wholesalers and dealers have a wide range of choices at their disposal to favor one brand over another.
- Digital image capturing devices are found in laptops, tablets, mobile phones, televisions. - Free, cloud-based storage websites and social networks offer attractive pictures management opportunities.
Rivalry among competitors
High Huge number of competitors active in all segments of the imaging industry (traditional photography, digital photography, traditional and digital printing). power of suppliers
Medium-Low
Threat of new entrants
- Primary materials used in the manufacture of rolled film are becoming more expensive - Kodak develops its manufacturing processes internally and it can turn to the numerous parts manufacturers with low switching costs.
Low High entry barriers due to high costs of development, distribution and R&D make this industry difficult to enter.
(Lucas and Goh, 2009) (Sandstrรถm, 2009a) The customer imaging sector is a highly competitive and saturated industry. The profitability is low due to the commoditization of products, the high R&D investments required and the persistent low consumer confidence in advanced economies. The high penetration of mobile technologies is lowering attractiveness of digital cameras and reducing differentiation opportunities. 10
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3.4 Value Chain Analysis Pre-digital value chain Kodak used to be in total control of its value chain and did everything internally (Weil, 2006). Kodak expertise and assets in every part of the value chain resulted in market dominance.
Storage
Image Capture
Processing
Printing Retail stores
Projection
Post digital age value chain Most of the competences needed to run a successful post-digital age imaging business are lacking. Most of the value-chain is in the hands of competitors.
Retrieval Shaded: Kodak partly involved in this stage White: Kodak not involved in this stage
Digitization Image Capture Digital cameras Film Cameras
Software Scanners Kiosks Online Services
Online Transmission Storage Hard Disks Removable storage devices
Printing Home and retail stores
Manipulation
Projection
The digital age brought an expanse of new stages where Kodak has very little core competency and has weakened Kodak’s ability to maintain market share and competitive advantage (SandstrÜm, 2009a).
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3.5 External and Internal Environment Analysis Conclusion
Problem
Consumer segment failure
The consumer segment has been the core of Kodak operations throughout its history, Kodak expertise, brand equity, worldwide retail leadership and installed base, are valuable assets that can still drive profitability. Disruptive technological change Loss of core competencies
Technology
Loss of competitive advantage Lack of digital culture Market saturation
Challenges
Market
High competition Commoditization of products High operating costs Low profitability
Liquidity
Cash constraints Bankruptcy proceeding
Possible solutions
Digital
Go back in the digital camera market with an innovative product but relatively low investment.
Film
Explore alternative markets for camera film.
Brand
Reposition the Kodak brand among non-professional customers
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4 Innovation Strategy The Simple Innovation Model (Tidd and Bessant, 2009)
Search
Select
Implement
4.1 Search 4.1.1 How to innovate despite cash constraints?
Incremental
Innovation
Radical
Innovation Search Space Model (Tidd and Bessant, 2009) and Porter’s Generic Competition Strategy (Porter, 1980) Bounded Exploration
Co - evolve Industry force
Generic Strategy
Focus Exploit
Established Frame
Entry Barriers
Develop core competencies that can act as entry barriers.
Buyer Power
Less negotiating power because of few alternatives.
Supplier Power
A differentiationfocused firm is better able to pass on supplier price increase.
Threat of Substitutes
Specialized products protect against substitutes.
Rivalry
Rivals can’t meet focused customer needs.
Reframing
New Frame
Environmental complexity
Reframing & Focusing Due to company cash constraints, market issues and rivalry, a return to profitability in the mainstream digital photography market is improbable. Reframing and focusing appear to be the most suitable ways to innovate: this implies no radical changes but a rearrangement of existing elements and a change in the company paradigm.
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In order to contain costs, Kodak should stick to core competencies historically developed in film and paper and deliver in those highly specialised markets. Kodak should meet the digital challenges launching a new product for a niche market collaborating with digital companies.
Reframe methods After filing for bankruptcy protection, Kodak is already focusing on the most profitable activities but the poor results of the consumer segment suggest that this strategy is not enough. Kodak should explore alternative options:
Introduce new elements not embraced by established business models. Different combinations of elements in the environment. Target fringe markets.
4.1.2 Where to focus?
Innovators DNA (Dyer et al., 2011) Action
Description
Observing
Digital retro trend (Frame and reference, 2012) There is a significant cult among the 16-25 years old for dead media and outdated appliances. Digital photography applications like Hipstamatic and Instagram, whose filters simulate photographs taken by analogue cameras, are spreading rapidly. Instagram, owned by Facebook, has more than 30 million users. Niche market film consumers (Wortham, 2012) Film photography is having another bright moment, thanks to some companies like Lomography and the Impossible Project. The latest trend among digital natives, who have never experienced film photography before, is to embrace the imperfections of film rejecting the cold precision of digital photos.
Questioning
What if Kodak switches from mass to niche markets? The latest trends among digital natives show the opportunity to return to profitability exploiting niche trends. Kodak would change its brand perception among younger customers from “family company” to “cool company”. In addition Kodak could boost the sales of film and go back in the digital cameras market with a new premium pricing strategy.
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Associating
Digital and analogue together The future of digital is analogue (Frame and reference, 2012). A union of the emotional features of analogue photography with the social sharing features of digital can result in a successful product.
Networking
Partner with social networks
SWOT analysis (Boddy, 2008) Strengths - Strong Brand equity - High level Research & Development Teams - Competitive capabilities - A Large Patent Portfolio - Tangible assets: Kodak kiosks, Worldwide presence, strong distribution channels
Weaknesses - Corporate culture - Leadership inconsistency - Inability to translate innovation into marketable products - Cash constraints - Wrong pricing strategy - No appeal on yourger customers
Opportunities
Threats
- Growth in digital imaging demand products and services - Traditional film niche comeback - “Retro digital” trend
- Industry saturation - New entrants - Emerging markets Consumers’ progressive abandon of analogue photographic solutions
(Lucas and Goh, 2009) (Sandström, 2009a)
4.1.3 Search Summary Strategic Issues
Wrong pricing strategy The razor-blade pricing strategy proved to be wrong: it commoditized products and reduced consumers’ engagement with the brand. No appeal on younger customers Kodak is generally perceived as a “family company”. 15
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Company Strengths
Competitive Analogue Capabilities Kodak had invested huge in Research & Development gaining a unique understanding of recording and processing images. Assets Photofinishing shops and kiosks all around the World.
Innovation Opportunities
Niche Markets New trends in photography Social Networks Partnerships
4.2 Select The 4 P’s of innovation (Tidd and Bessant, 2009)
Paradigm
Position Shift from “family company” to “cool” and exclusive brand.
From a global multinational giant to a niche-focused company.
Product Social media camera, “retro” analogue cameras lines.
Paradigm From a global multinational giant to a niche-focused company: Kodak should focus the uniqueness and quality of its offerings and appeal to a different and younger range of consumers. Thanks to its production capabilities, wide distribution channels and international presence, Kodak is in a very good starting position in order to follow this path successfully.
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Position Kodak should switch from a razor-blade business strategy to a premium pricing strategy and target a smaller but more profitable segment of population, specifically medium and upper-class digital natives. This change would allow the Kodak brand to be perceived as “cool” and exclusive among that segment of population.
Product
GE Matrix
Operations
Medium
Low
Med Low
Film
Digital cameras
(Brassington and Pettitt, 2007)
Marketing and Sales Photo shops are unattractive - Pop-up stores in shopping centres Razor-blade strategy is unprofitable - Apply premium price strategy
Product Price
Place
High
Inkjet printing
Value chain (Porter, 1985) and the 7P’s of marketing Issues and - proposed solutions. P’s
Market attractiveness
High
(McKinsey, 2008)
Competitive strength
New product launches will be fundamental in the company position and paradigm shift processes. Kodak should launch two new product lines: one for the digital photography market and one for the analogue market. These must differentiate Kodak from digital competitors and boost the sales of film. Kodak has strong analogue capabilities but its traditional products, specifically film, are positioned in the low end of market attractiveness. On the other hand Kodak digital cameras were positioned well in terms of market attractiveness but the company didn’t have the right competitive strengths due to its limited control on the digital value chain.
The company multinational-like structure became unmanageable - Centralize
Traditional media are expensive and ineffective - Promote products on social networks Weak brand image among young customers - Rebrand through new products launch
Promotion
People
Hierarchical structure - Flatten the managing structure empowering middle managers
Process
Lack of digital expertise - Partner with digital companies
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4.2.1 Products concepts Digital: Kodak Socialgram (ADR-studio, 2012) Kodak Socialgram is the first Instagram photo camera. Features:
16 GB mass storage Wi-Fi, Bluetooth and 4G. Touchscreen 3D filter QR Code capturing 4x Optical zoom Led Flash Internal printer Paper cartridge and ink tank Dedicate operating system that puts together Facebook and Instagram App features
With the Kodak Socialgram camera, the user can take pictures with the ease of a point-and shoot camera but with a wide range of post-capture opportunities. Pictures can be shared on Instagram and Facebook or with another Socialgram user through Bluetooth. Pictures can be printed directly on Socialgram Paper Sheets, thanks to the internal printer. Every Socialgram printed photo has the user personal Instagram nickname and a QR code on the front so that it can be followed by another Instagrammer . Socialgram Paper Sheets have glue strip on the retro like a postit and a dedicated space on the front bottom to write and comment.
New Digital value chain Transmission partnership with Instagram
Image Capture
Digitization Print
This product would give Kodak the opportunity to shrink the digital value chain: Kodak would be in control of every stage and gain significant competitive advantage.
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Analogue: New Line of “Retro” Cameras
A new line of vintage film cameras will meet the need of the niche film users that are currently customers of Lomography and The Impossible Project. The launch of this line through pop-up stores and showcases in the shopping centres of the major cities around the World would change the perception of the Kodak brand among young customers from “family brand” to “young and cool brand”. This would boost the sales of photographic film and drive younger customers to the Kodak photo studios and retail shops around the World.
4.2.2 Cost Benefit Analysis: Kodak Socialgram camera Fixed costs: Research and Development R&D expenses were $148 million in 2010 (Kodak, 2012a), when Kodak was still producing digital cameras. Assuming that the resources were equally split among the three company segments, the consumer group would have been receiving about $50 million to be split between desktop printers, digital frames and digital cameras development. On the base of this assumption, the resources needed to develop Kodak Socialgram would not exceed the $20,000,000 mark.
Material and labour costs According to UBM TechInsights (Wren, 2012), the Apple IPhone 4s production cost is $132. The materials cost $102 while $30 is spent on manufacturing (including labour costs, transportation and storage). Socialgram is a less sophisticated device, with less functions and a lower quality touchscreen hence materials cost can be estimated around $50. Given the fairer conditions of Kodak manufacturers, manufacturing costs can be estimated around $60.
Forecast assumptions There are 30,000,000 Instagram users: the goal is to reach 5% of this market in 3 years selling around 1,500,000 units with a yearly sales increase of around 65%. The increasing material and labour costs and the programmed selling price fall would be mitigated by the increase in units sold. At a premium selling price of $280, the breakeven point would be relatively stable ranging from 115,000 to 135,000 units sold. 19
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Yearly Forecast Assumpions Revenue
%
Variable Costs
%
Fixed Costs
%
Price Change
-5
Material Costs
+2
Fixed Change
0
+65
Labour Costs
+2
Volume Change
Revenue/Profit Forecast
Year 1
Year 2
Year 3
Purchase Value
280
266
253
Units Sold
250,000
400,000
700,000
Material Cost
50
51
52
Manufacturing Cost
60
61
62
Unit Contribution
170
154
138
Total Fixed Cost
20,000,000
20,000,000
20,000,000
Total Revenue
70,000,000
106,400,000
176,890,000
Profit (Loss)
21,950,000
41,520,000
76,922,000
Breakeven
Year 1
Year 2
Year 3
Unit Volume
117,647
129,870
143,885
Revenue
$32,941,176
$34,545,455
$36,402,878
5 Implementation Cultural obstacles During its almost centennial dominance of the market, Kodak developed a culture of complacency. Despite its competitive strengths, investment in research, a rigorous approach to manufacturing and good relations with its local community Kodak had become a complacent monopolist. This implied huge innovation inertia and the inability to translate R&D prototypes into marketable products. In addition hierarchical structure of management and bureaucracy prevented the company from responding rapidly to the disruptive innovation of digital photography. Obstacle
Description
Poor change management
Kodak has been huge, stable, and highly profitable for many decades therefore top managers didn’t feel the need to foster real change and Kodak adapted too late to the digital world (Lucas and Goh, 2009).
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Unwillingness to risk
Frank Zaffino, former Kodak Executive declared: “Equipment was okay as long as it drove consumables: executives abhorred anything that looked risky or too innovative because a mistake in such a massive manufacturing process would cost thousands of dollars. So the company built itself up around procedures and policies intended to maintain the status quo” (Sandström, 2009b).
Bureaucracy
Due to the huge size of the company in the 80’s, Kodak management put emphasis on doing everything according to company rulebooks (Sandström, 2009b). The result was the unwillingness to innovate and a fear to do new things.
Inconsistent Leadership
Kodak Strategy changed with each of several recent new chief executives showing leadership inconsistency and lack of business focus (The Economist, 2012).
Hierarchical structure
George M.C. Fisher, Kodak CEO in 1995, stated: “Kodak was so hierarchically oriented that everybody looked to the guy above him for what needed to be done” (Businessweek, 1995).
Lack of communication
Top executives weren’t able to instill the necessary digital culture among middle managers and employees hence Kodak failed to secure the top spot spot in the digital camera industry (Sandström, 2009a).
Fishbone Poor Innovation Framework (Ishikawa, 1990) Kodak obstacles to innovation highlighted in green.
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Lewin’s 3 stage change model (Lewin, 1947) and Kotter’s Change Management model (Kotter, 1996)
Lewin’s
Kotter’s
Kodak potential implementation actions
Freeze
Form guiding coalition
Hire consultants to build digital competencies and coach staff.
Remove obstacles
Identify people who are resisting the change and take action; empower middle managers.
Create Vision
Determine the values that are central to the change and a strategy to execute the change.
Communicate vision
Flatten the management structure and Improve communication between top managers and employees.
Consolidate change
Set goals to continue building on the momentum after short time goals are achieved.
Institutionalize change
Highlight successful change stories and publicly recognize major change contributors.
Change
Refreeze
5.1 S.M.A.R.T. Recommendations
Foster digital culture Kodak should employ digital experts as consultants to instill digital culture in managers and employees and build core competencies.
Flatten hierarchical structure Kodak should remove excess layers of managements improving coordination and communication between managers and employees. Fewer levels of management encourage an easier decisionmaking process.
Management style change Kodak autocratic management style created a fracture between managers and employees. A more democratic style of management will put trust in middle managers and skilled employees and encourage them to make decisions. As a result, they will be highly motivated and committed to the innovation goals.
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Specific
Measurable
Achievable
Realistic
Time-Bound
Foster digital culture
Employ digital consultants
Need for clear company vision and values
Partnership with Instagram and Facebook
3 years
Flatten hierarchical structure
Cut middle layers of management
From autocratic to democratic management style
Can be part of the on-going personnel reduction policy Can be part of the on-going company bankruptcy restructuration
1 year
Management style change
Need for an accurate analysis of management structure Empower middle managers and skilled employees
3 years
6 Conclusion Due to the conditions of the market, the strong competition and the internal company problems, Kodak recovery is far from easy. The company must overcome the cultural and structural issues highlighted by the disruptive effects of digital technology: Kodak should take advantage from bankruptcy protection to shift to a more democratic management structure and foster a culture of innovation. The launch of premium products targeted on niche markets are part of this process of shift from complacent multinational culture to more dynamic and innovation oriented style.
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