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.