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Smith Experts Available to Comment on Latest Kodak Moves to Exit Bankruptcy

Sep 10, 2012
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COLLEGE PARK, Md. – Faculty experts in the University of Maryland’s Robert H. Smith School of Business are available to discuss, and give historical perspective on, the recently announced Kodak-management changes and job cuts as the company maneuvers to emerge from bankruptcy protection.

The Smith School has an in-house facility for live or taped interviews via fiber-optic line for television or multimedia content.

Kodak Misses its Moment

Hank Lucas, the Robert H. Smith Professor of Information systems, has written Searching for Survival: Lessons from Disruptive Technologies (Praeger, 2012). Contact him at 301-405-0100 or hlucas@rhsmith.umd.edu

Lucas’ book includes a chapter "Kodak Misses its Moment." He summarizes it here:

“Kodak is a tragic example of a company that had everything going for it, but was unable to cope when innovative digital technologies came along. Kodak’s demise was brought about not by a single event, but as with many disasters, a series of conditions and events brought the company down." These include:

  • Kodak’s own invention of the digital camera in 1975
  • The firm’s inability to understand that others flooding the market with digital cameras, combined with the Internet, changed the process by which people captured and shared images
  • The company’s rigid bureaucratic structure prevented it from responding quickly to threats
  • Senior management was unable to convince middle managers to move away from their analog, chemical and film mindset
  • Management was distracted by foreign competition (e.g. Fuji) in film and a suit by Polaroid on instant photography
  • Kodak exhibited a certain amount of arrogance thinking that it could control the pace at which consumers converted from film to digital photography
  • The company wanted to protect its cash cow film business as long as possible
  • Over the years Kodak tried to diversify into unrelated fields and then pulled out
  • One hundred-plus years of success and a market share that at times exceeded 90 percent

'Kodak Should Have Folded Earlier'

Brent Goldfarb, associate professor of entrepreneurship and management, recently co-authored "Optimal Inertia: When Organizations Should Fail" in the journal Ecology and Strategy. He says Kodak is one such company that should have "failed," or closed down in an orderly fashion, instead of turning to bankruptcy. Contact him at 301-405-9672 or bgoldfarb@rhsmith.umd.edu.

Goldfarb's position, detailed in this Smith YouTube Channel video, is summarized here:

"Kodak was faced with a particularly difficult problem. The production of film is a very sensitive process, and for this reason Kodak was a rigid organization - small mistakes could have large consequences. This made the transition to digital costly. Ironically, Kodak was reasonably successful in their transition and quickly achieved a market leading position. The problem was that market leadership in a low-margin business is not a great prize. Kodak was not a victim of poor management, rather, the poor circumstance of being on the wrong side of creative destruction; its fate largely unavoidable.

Instead of trying to pursue the digital photography market, (Kodak) would have been better off slowly shutting down while profiting as much as possible from the dying film market. While this is a terrible outcome for Kodak stakeholders, particularly employees, history did not treat the company kindly anyway. They might have been better off trying to provide enough resources to the employees being displaced and to those managing the shrinking enterprise so as to ensure continuity and thereby extracting as much profit as possible from the market. They could then return what's left to the shareholders, whose dividends are increased further with the company not plowing money back into research and development."

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The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, MS in business, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.