And Another One Bites The Dust

Kodak has made it official.  Another once great American post World War II manufacturer is officially and completely out of the manufacturing business.  From now on they are a "high-level system design and advanced research and development" company.  They join IBM, NCR, GE, GM, Ford and a host of other once dominating manufacturing companies who are gone, dying or rapidly bailing out of manufacturing.

The official academic and financial sector explanation is that Kodak was unable to master the technology switch in the photo business from film to digital.  In fact, Kodak had been hammered by Nikon, Canon and others in the film manufacturing business long before digital photography became the standard.  The beginning of the end for Kodak probably dates all the way back to the 70's.

Their story is the same as the rest of the dinosaurs of American manufacturing.  They made so much money for so many years under the traditional American management system that they fooled themselves into believing they were well managed.  With their functional hierarchical organization, strong financial functions whose mission was to control manufacturing, management systems focused on direct labor cost and efficiency, MRP systems, a quality approach focused on minimizing the 'cost of quality', and all of the rest ... Alfred Sloan's whole ROI package designed to thrill Wall Street.  It all came unglued as soon as the Japanese showed up with their different management scheme.

The American management system only succeeded as long as the rest of the world was digging out of the rubble of a world war.  Kodak and the rest of the American manufacturers never outperformed anyone except other American companies managed by the same system, under which it is fundamentally impossible to optimize manufacturing.  Just like GM was able to best Ford and Chrysler, but has been consistently outgunned - and outmanaged - by Toyota and Honda, Kodak was great so long as they only had to compete against Polaroid and other companies managed just like them.

It is hard to watch American manufacturing stubbornly hanging onto the old management scheme that has never shown itself able to compete against a lean management system.  The problem is attributed to high labor costs, excessive regulation,lack of worker skills ... everything except management.  The business schools still teach the old management principles, and traditionally managed American companies can only outsource manufacturing to survive.

How many times does this story have to be told before we get it?  As pessimistic as it sounds, I am becoming convinced that it will never change, and that all of the Fortune 500 manufacturers from the 1970's have to fail, and be replaced with a new generation of lean manufacturers before the message gets through.  The mulish arrogance with which the professional management community rationalizes the loss of another 27,000 American manufacturing jobs at Kodak is nothing short of maddening, but it is very predictable. 

In the immortal words of Queen in 1980 ...

Another one bites the dust
Another one bites the dust
And another one gone, and another one gone
Another one bites the dust ......

Comments

[Eric H]

Canon and Nikon are not in the film manufacturing business. Fuji is the primary film manufacturer in Asia (and AgFa in Europe), but they never really competed with Kodak on price, variety, and tech films. Kodak started out in the camera manufacturing business in order to sell their film and processing, but they were never a player in the professional film camera business. The problem isn't that Kodak can't compete in the film business, it is that film is a dead industry. They may have cornered themselves the same way Ford did with the Model T.

You might make a case that Kodak, an early developer of electronic sensors, never realized the potential of that technology. Digital photography was, in the beginning, an inferior alternative to film, a classic example of Christensen's Innovator's Paradox. They made a decision not to cannibalize their own business from the bottom. About 5 years ago, Kodak decided to switch their emphasis to the development of those sensors and to other peripherals (printing), but it was never clear where they intended to go. Nikon and Canon waited until the bugs had mostly been worked out of CCD technology before making the switch to digital photo equipment (I doubt Nikon makes their own sensors, but Canon probably does). But even *they* risk being creamed by the crop of ultra inexpensive CMOS sensors; they are so easy to make with a completely different technology that there are many, many competitors in that field.

Not only is the manufacturing changing, but the market is, too. It made sense to hire pros when film photography was a science, but now that everyone has a camera in their cell phone, invite 50 people to a wedding, take 50 pictures each, and the results are likely to turn up a dozen lucky and far more personally meaningful shots than the pro would. The evolution of the imaging market is not over and Nikon and Canon are by no means the clear victors. Kodak's new pro-quality digital cameras were coming along quite nicely, and I know of several pro photographers who use them. On a quick search, I found that the Aptus 75 is a 33.3 Megapixel camera, where the high end Nikon is 17 Mp ( I think, I haven't searched).

http://www.leaf-photography.com/pages/products/Aptus75.aspx

Tellingly, Kodak automated most of its film manufacturing processes some 15-25 years ago, so the problem was definitely not labor cost. The basic problem is that film is dead and Kodak went out on top of that game, but that they never learned how to manufacture anything else for the reasons you outline above.

[Eric H]

I just checked the link and realized it isn't obvious that the Leaf Aptus 75 is, ... er, *was* a Kodak product.

http://graphics.kodak.com/US/product/digital_photography/default.htm

[Mark Graban]

When I was a grad school intern at Kodak in 1998, their official corporate strategy/policy was that they would somehow sell MORE film and paper in the digital world. I think they assumed that digital would always be inferior and that it would somehow inspire people to move into "real" photography. Inventor's dilemma indeed. They were pretty delusional for a while.

It's a sad situation in Rochester NY. In '98, the "big three" all had gone through major downsizing (Kodak, Xerox, Bausch & Lomb) and it hasn't gotten better since. Kodak abandoned a whole campus and withdrew to their old "Kodak Park" facility that dates back to the start of the company I believe. Very sad.

[Ellen Weber]

Kodak is another example in Rochester, where I live, of big business that did not or could not look to innovation as a pathway forward. Their workers could not change top managements' minds. Kodak clung to a past pattern that grew into ghosts that slipped away and many people went down with their ship. What can small and medium business firms learn -- because these giants nosedived. I'd love to see that topic explored even more because there are great ideas at this site.

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