Another China Syndrome

or

Behind the Irony Curtain

It is ironic that one of the most respected CEOs of Kodak inadvertently set the stage for its collapse with one of his greatest successes.

George Fisher (Kodak Chairman and CEO 93-00) succeeded in creating a strong relationship between Kodak and China - a relationship that not only gave film a new lease on profit life but also shut the door on Fuji doing so in China.

Mr. Fisher relating his Chinese experiences in 1999.
Used without permission, this still is from C-SPAN video, which provides
an opportunity to hear the delightfully boring drone of political discourse 
without pundits telling us what to think.

An irony is that this forced Fuji to move away from heavy dependence on film while it did the opposite for Kodak.  Fuji used expertise in chemistry and materials to move into businesses such as thin films for LCD screens and cosmetics.  Kodak Research dabbled in technologies for application in markets beyond photographic film, but these were never seriously pursued while the cash still spurted from the cow.

The Chinese text says,
"Purchase will help bankrupt American Company."

The next irony is that the ongoing high profit at relatively low cost of film prompted MBA schooled managers to greet new product proposals with a standard response - "until the business  proposition is more profitable than film, we'd be crazy to invest in cannabalizing our high profit products. Surely you don't need an MBA to get it that this would be irresponsible and plain stupid.”

Steve Jobs' quotation comes to mind. "I cannabalize my products so others can't." It apparently takes the absence of an MBA to appreciate being competitive is not just about profits.

Image used without permission from
https://www.cultofmac.com/70330/is-apple-really-cannibalizing-everything/
Worth a look.

This is not merely conjecture.  Personal references come to mind.  Presented with an electronic display product with projected margins of 10 to 15%, the manager with decision rights created a facial expression combining disdain and fear, and blurted, “Why would I invest in that when I can make so much more investing in film?”  

After venting frustrations to another manager, this advice was delivered.  “You want to know how to get a project to go around here?  Staple a can of film to it."

Fisher, by renewing the profitability of Kodak film, unintentionally removed reason for his management to transition inventions to products.

The film profits should have made it "safe" to innovate. Instead, the profits made it easy to remain complacent and continue to cost-cut to higher profits.  High profit margins became an addiction.  All other activity was judged against the profitability of photographic film.  Unless one was in the Greeting Card business, such margins were nearly impossible to attain, and plans for entry into many promising businesses in markets outside of film-based photography were never seriously pursued, underfunded, or scrapped prior to market entry.

What kind of margins do you think these folks enjoy
on a little ink, paper and emotional creativity?
Good for them.
Adventures in joint ventures proved them to be lovely people.
And that Kansas City BBQ is absolutely fabulous.

The demise or exit of one film competitor after another was offered as proof by the some of Kodak management that it was winning . To suggest the time for film profitability was past and that being the last dinosaur standing was not "winning" but competitive laziness was disparaged as being disloyal. This in turn prompted an exodus of those voices who urged Kodak should change while it could, not only when it had to. In short, rejecting the people that Kodak needed to retain.

A last irony. The sunk cost in infrastructure that provided such a formidable competitive barrier during the heyday would, when film profit declined, become a mill stone around its neck, dragging profits down ever faster even as Kodak leadership tried to regain level flight by cutting costs and downsizing  faster than profits fell.  And no amount of cost cutting for efficiency will right the flight when overcapacity ices the wings.

Once one of the largest and most productive manufacturing facilities in the world,
Kodak Park became a liability.

Text provided by Ed Covannon, with additions by Randy Fredlund.

The Nominations Are In

Yes, the nominations are in, and I'm proud to say that I have been nominated for:

Best Supporting Actor

In A Documentary

About A Failed Company

While Sipping A Beer

It was a privilege to perform alongside such greats as Steve Sasson and John McCoy.  I could not have reached this pinnacle without them.  

Click on the 'Working Nation" link below to see the the performance of a lifetime.  I even have a speaking line, just past 3 minutes.  No, I don't think the makeup artist was nominated.  And if you think the archival photo of me is bad, you should have seen it before I "improved" it.

WorkingNation: FutureWork 

A Story of Yesterday & Today

I hope you enjoy the performance.  I'd carry on longer about it, but I need to go work on my acceptance speech.

The New Kodak !

A perspective from guest blogger, Ed Covannon.

With humility, three caveats about the following commentary on my Kodak experiences.

“All happy families are alike; each unhappy family is unhappy in its own way.”

― Leo Tolstoy, Anna Karenina

Tolstoy's Kodak Pass was among the assets
shed during bankruptcy.

I've found Tolstoy's observation sadly true when I've tried to unpack the dynamics that have led the individuals and organizations I've experienced. I've also found that persistence in applying analytic rigor, adequate data collection and contextualization sometimes provides useful ex post insight.  Or at least the illusion that such activities can make some sense out of what has happened.

My second caveat is that blame is not the name of the game being played here. Hindsight bias dogs commentary on past events. Pre facto, there were advocates and objectors to the decisions, but the reality of the moment was that no one had a sense of certainty in the outcome at the time...that sense of obviousness which unpacking the situation afterward possesses.

Per my experience with complex systems -  systems needn't break all at once or even at all.  They may accumulate short sighted modifications that cumulatively cause the system as a whole to fail. Like straws breaking the camel's back, the order and specific straws are not critical.  And knowing one is placing a straw at the time of placement is often impossible.

Third caveat. Entries must have a narrative focus, and so will be restricted in scope to a particular dynamic. In reality, many actors played many roles, including the systems themselves where both no one was responsible and everyone was responsible. Many individually well-intentioned but inadequately informed actions combine to create a breakdown. Grid-locked traffic is a case probably familiar to everyone. Every participating car was responsible, no one wanted it, yet in every car, everyone contributed to it.  The hope is that even a little insight, provided here, will be instructive.  Knowing something of the early indicators could convince you to turn your car in a different direction.

Focus: CEO Intent

The happiest Kodak I experienced was Kodak under George Fisher.

George was happy, too!

He brought warmth, confidence and energy to the company in ways worth study and documentation. He was in every way, an exemplary CEO. Kodak stock prices were at their highest under Fisher before the steady decline that marks Kodak in the 21st century.

Under Fisher a significant paradigm shift occurred and major reorganization.

Kodak Divisions in 1994

Kodak was transformed into a new company. The business units were given high levels of autonomy while the corporate core and non-core businesses would be moved to lesser direct decision making.

For R+D, the transformation from monolithic corporate resource to becoming multiple R+D labs dedicated to these new leaders was challenging and destabilizing. In the culture of labs was the conviction that the labs "laid down the tracks" down which the engine of the company was bound to travel. Suddenly, multiple separate tracks were being demanded, and demanded immediately.  And the tracks branched out in numerous new directions.

In the meantime, the newly powerful business units focused, or perhaps better said, were forced to focus on near term profitability. - cutting anything resonant with the old corporate overhead and inefficiency.

This bold reorganization set the stage for what followed.

Expect more insight from Ed in the future.

Pull Together As A Team

"Have you seen the chart? 

It's a helluva start, 

It could be made into a monster 

If we all pull together as a team."

- Roger Waters

“We’ve got to pull together as a team!”  How many times have you heard that from some boss?  In my experience, the ones who talk the most about the “team” know the least about what the word really means.  

Most groups referred to as “a team” are really nothing more than a rabble.  They may have been assigned a task where full cooperation and collaboration is expected for the benefit of all, but that rarely comes to pass.  Why?  Because the rewards are doled out on the basis of individual contribution.  “Got to get rid of those poor performers, you know.  They’re holding the rest of us back.”

This is particularly true in the situation where a sports squad is struggling or a company is failing.  There is little faith that the prescribed goals will be reached, and worse than that, no one really believes the goals and assignments are the ones that will turn things around.  In this environment, which cries out for excellent team performance, the opposite is fostered.  If WE can’t outrun the bear, I only need to run faster than you.

I’ve had the pleasure of being a member and also being the coach of a few real teams, both on the playing field and at work.  I assure you that in every one of these cases, not all the members of the team were equally gifted or equally hard working.  What these teams had going for them was that for all the members, achieving the goal was more important than individual recognition.  Additionally, the stronger performers did not spend time berating the weaker ones.  Oh, all right, there are always times when someone says, “Did you see what Fredlund did today?” but such comments are not used to ostracize anyone.  The coaches or managers and the stronger members did their best to create a situation where the weaker members could contribute effectively and in ways that everyone could feel good about.

“Play for your teammates,” was the mantra of Omar, my assistant coach for a teen soccer team.  What he meant was that a player did not have to show off how good he was by playing “for himself.”  He was most valuable to his team when he made it easy for his teammate to take the shot, make the pass, or cover the attacker.  And when his teammate would do the same, they both became better.  And when all 11 would play for each other?  Magic...sheer magic.

One of the finest players ever played in this league.
She moved on to bigger things and led the world in scoring.

We coached a team of mostly modestly-talented players to a league championship on the basis of playing for each other.  To his credit, the one “star” on the team finally realized that putting a lesser player in position to score was at least as good as scoring himself. “I don’t play my 11 best,” said a coach I once knew, “I play my best 11.”  Think about it.

In the corporate world, teamwork is often sabotaged on a grand scale by the structure imposed.  Divisions and sub-divisions are established within the company with little incentive to collaborate.  The accounting systems, ostensibly provided to track and verify performance, actually serve to create boundaries across which little good is allowed to pass.

At the Big Yellow Box, the “silos” of Company Divisions and Business Units created barriers that prevented cross-pollination, hybrid vigor, and playing for your teammates.  If a bright young employee happened to be working in Consumer Products, but had an idea for a product or improvement for Professional Products, work on the concept would be discouraged to the point of not even communicating the idea.  “What are you working on that for?  That’s not a Consumer Product.  What do you think you’re being paid for?”

This assertion is not completely true in light of the company suggestions system.  However, that system, designed by Mr. George Eastman himself in 1898, which was intended to foster teamwork across boundaries and job titles, was discontinued at least in part over concerns that rewards were being set up.  

The original Disc camera was a marvel of manufacturing.  The assembly process entailed properly placing the parts into the casing, securing all with a single screw, and then fastening the cover over then entire assembly.  The screw made doubly sure that the clip-together parts stayed where they belonged.  But it was really redundant, since the cover and snap fasteners did the job well without the need of this manual operation.

That's Disc, not disk.

A suggestion was provided through the formal suggestion system that the screw be left out of the assembly.  Doesn't sound like much of a saving, but when you multiply the cost of the screw and the cost of the manual operation of inserting the screw by 20 million, it adds up to real money.  So the maximum $50,000 award was presented to the assembly line worker who made the suggestion.

What's wrong with that?  Nothing.  But it was widely rumored that the someone in design engineering, who could not receive an award for the cost saving due to the fact it was part of his job responsibilities, tipped the worker off.  The rumor went on to indicate that perhaps some percentage of the award was shared.  We'll never know.  Should the company care if the effect is right?  Evidently, it did care, and the suggestion system was discontinued some time later.

(Note that I cannot verify this screw suggestion story, but even if it is an urban legend, the fact that it was part of the company mythology speaks volumes.)

Similar to the case of poorly motivating small groups, the incentives for the company units were all wrong.  Yes, there were exceptions, but the rule dictated that if something extra, even something very inconsequential, needed to be added to a widget made by Consumer Products so that Professional Products could sell the widget, the addition was extremely unlikely.  It was a cost, and even if the sales by Professional Products had the potential to more than cover that cost, it would not happen.  Why would this be the case?  Because the accounting system would not allow sales credit to Consumer Products for anything sold by Professional Products.  No common goal.  No playing for your teammates.

Being on a decent team is always rewarding, and most important when your group is in need of a boost.  But when a sports squad is full of players vastly superior to the competition, or when a company is making huge margins on its products with little pressure from other corporations, such concerns are deemed unimportant.  Great success is a narcotic that delivers feelings of omnipotence and engenders little teamwork unless the coach or boss is exceptional.  Like Mr. Eastman.

I think I’ll let Roger Waters finish this post.  I can’t think of any more appropriate words.

"And did we tell you the name of the game, boy?

We call it Riding the Gravy Train."

(Pink Floyd album cover "Wish You Were Here" and "Have a Cigar" graphics reproduced without permission.  Considering the amount of support I've given their albums and concerts, they should not complain.)

Coincidence? Unlikely.

I enjoy old technologies.  They are concoctions of matter organized in a way that once suited a need, but whose time has passed.  In fact, I was enjoying just such a technology this morning when I unfolded the newspaper to read the business page.  I could not help but notice two articles separated by the happy account of two brothers who had parlayed their gardening hobby into a long-term and growing business.

The Consumer Electronics Show (CES) is in full swing in Las Vegas.  I have attended this premier event in the electronics arena many times.  Thankfully, I no longer need to enjoy the chaos and overwhelming challenge of trying to sift through the cacophony to find the important and relevant nuggets presented in massive displays or hidden in obscure booths well off the main floor.

The magnitude of effort many companies pour into this show is amazing.  And not only the effort is impressive...the glimpse they provide into the future of technology is often the stuff of what was science fiction only a few years prior.  The forward-thinking find the show incredibly exhilarating.  This year, a myriad of drones, affordable 3D adaptations for cell phones, curving displays and self driving cars all carry us toward the future.

But what's this I see through my reading glasses?  At the fountain of the future, Kodak is introducing a reborn Super 8 movie camera.  I know I've been waiting for this...how about you?  No?  Maybe this is for Steven Speilberg and Quentin Tarantino, since they are so fond of shooting film.  

Is my calendar in error?
Is this April 1?

I can just hear the Ungrateful 8 sequestered in a conference room in the bowels of Kodak Office:

"CES is around the corner...what can we announce?"
"Ya know, Boss, I was listening to 'Carry On My Wayward Son' on my record player the other day..."
"Eureka!  That's it!  We'll appeal to the same people buying vinyl records by coming out with a new film camera.  The Millennials will love it!  We'll rebuild the film business, boys!"
"So we'll bring back the Retina line of still cameras?"
"Not sure.  I think maybe we need a twist."
"I hear most people like pictures that move these days."
"Comic book super-hero flicks are big."
"Perfect!" shouts the Boss.  "We'll bring back Super 8!"

OK, so with microprocessors and optical sensors and the like, one could certainly build a fine consumer movie film camera with 2016 technology, but is anyone really clamoring to go to Walgreen's to process his film?  And where will Walgreens send the film for processing? And what will the developed film be projected with?  Heaven forbid that the experience will be sullied by digitizing the film and displaying the result electronically.

I don't have any answers.  Neither does Fortune.

In the coincidentally (?) unrelated article on the other side of the page, layoffs in Research and Development were announced.  

The company that saw well enough to capture the world's images for over 100 years is completely bereft of vision.

The Company That Hired Me

I was hired in the early 80’s by an absolutely amazing company.  It was a powerhouse, generating profits that most companies could only dream about.  Everything was coming up red and yellow roses.

These were everywhere.

An indication that this company was something more than a mere widget maker occurred to me long before working there.  It was my introduction to KPAA, the Kodak Park Athletic Association, a company funded sports and hobby program.  There were clubs and teams that all the employees could enjoy.  The Camera Club was the largest of its kind in the world, where one could rent cameras, obtain very inexpensive supplies, and make prints.  My Dad used to take me there to make enlargements, nearly for free.  

Another facet of KPAA was the its summer softball leagues for kids, and not just for those of employees.  Anyone could play.  Just gather together a bunch of friends from the neighborhood, sign up, and ride your bikes to the field.

I could have shown you a glorious image of one of these shirts,
but I displayed my boyhood shirt on the wall next to my office back in '04.
Some jerk stole it.
Yes, I know, he did me a favor, but I still hope he got cooties from it.

Even better, the program ran on weekdays during working hours.  Full-time employees oversaw the action and made sure we did not descend into Lord of the Flies behavior.  It was an incredible benefit to the community.

On the day I was hired, the company employed over 60,000 people in Rochester, NY.  It was the peak, the summer solstice, the zenith.  From that day forward, the number of employees and the fortunes of the organization began to dwindle.  One might be inclined to infer that I was the cause, but I remind you that correlation is not necessarily causation.

As a neophyte member of the technical staff, there were numerous forms to fill out and papers to sign.  I really only remember one which would have some importance much later, but when one is flush with the joy of finally being employed in a good-paying job, not much thought goes into where one’s signature is going.

Did you read it thoroughly?
I don't think I did either, on May 2, 1983.
There is at least one clause I'd never sign up for now.

A few weeks after I was hired, I took my lunch to a table in one of the courtyards mixed in among the massive buildings at the Elmgrove Plant.  I was shocked to see a band setting up.  Unannounced, a very competent 4-piece combo serenaded my consumption of salami and cheese.  It was a shame that those viewing the noontime movies weren't aware of the music.

I was to work in the Integrated Circuit Design area.  The design center was located on the third floor of Building 1 of the sprawling manufacturing center that was created to pump out all the Disc cameras in the world.  That’s “Disc,” not “Disk.”  Shortly before I arrived, the plant had done just that.  Consider the manner in which the product was introduced...before a single camera was sold, 20 MILLION were manufactured and stored until the May, 1982 release.  20 MILLION !!!  Who does such things?

As part of the team designing a new generation of Disc cameras,
I received this trophy after the project shipped.
When I heard that the marketing guys had signed Telly Savalas
to advertise this telephoto camera, I knew I had found a home.

Well, only certain types of organizations can afford or manage such releases.  The government comes to mind, in the form of the Post Office and stamps.  And monopolies.  While the company went to great pains to prove otherwise, it was effectively a monopoly for many years because the chemical science and huge capital necessary to "build film" made competing with the giant very difficult.  Considering that the scientific and manufacturing base was coupled with business and marketing arms that were some of the best, and it was no surprise that the company dominated the creation of images throughout the world.

On occasion, a camera would be made with clear plastic covers
so that the mechanical guys could see their parts meshing, mating, whirling and twirling.
Great fun to watch.
The green circuit board I designed just sat there, except for a blinking "ready light,"
and maybe a flash now and again.

But often monopolies sow the seeds of their own demise with actions necessary for protecting their turf.  In 1954 (following similar action in 1921) the company had to endure a "consent decree" from the US government to keep from running afoul of the Sherman Act (anti-trust law).  As a result, film and processing could not be bundled together for a single price.  

While that may seem a minor inconvenience for a giant of a photographic company, the latent effect was that the company became much less of a photographic company and much more of a film company.  While flexible photographic film, the pride of George Eastman, was certainly a source of great profit before that time, and for years after, the reliance on a single type of product in a varied marketplace would prove limiting.  More so as the market began to change.  And more importantly, the psyche of the company became warped.  Decision makers strove to extend the life of film at the expense of all else, sending the company in dubious directions.

It is time

It has been years since that major film company declared bankruptcy.  It has been years since many good people were "impacted," not only in association with Chapter 11, but also along the way on the long slide into unprofitability that made the bankruptcy inevitable.

There have been numerous articles explaining the demise of the film giant.  It was this, it was that, they were blindsided, no one could make the transition they needed to make, it was predicted by the Mayan Calendar, and so on.  The accounts are true, to a point.  They look at one facet or another, and make valid points, but the story is much more complex.  And none of the accounts have the viewpoint of an insider.  Not only an insider's viewpoint, but that of insiders without the benefit of the potent management Kool-aid. 

Maybe this WAS the reason.

So this new forum has been created.  A cast of tens of thousands have something to say, and though this blog will certainly not be comprehensive, there will be a broad examination of the carcass of the once great company. Many will be encouraged to contribute.  

The intent is to provide anecdotal evidence exposing the myriad of reasons for the failure.  The actual experiences of those inside the Big Yellow Box.  And by airing these often astounding stories and observations, provide insight into how other businesses and corporations can avoid the same result.

Is your curiosity piqued?  I certainly hope so.  I hope you are moved to read and respond to every post, lauding the insights, and pointing out the errors and the inconsistencies.  Or better yet...contribute!

The story is too large for anyone to know it all, but your viewpoint is invaluable.  Particularly if you accompanied us on the company's ride into oblivion.