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 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.