Tuesday, May 24, 2005

A Disastrous Kodak Moment

They say that a picture's worth a thousand words, but the photo issued in early May doesn't even begin to do justice to what's going on over at Kodak. In case you missed it, the flacks at Kodak hyped what can only be called the most curious management succession story of the year. Well, second most curious. First place still belongs to Michael Eisner and the wrecking crew over at Disney.

But back to the main story.

If you're not familiar with Kodak, it's the leading film and imaging brand in America. Um, check that. it used to be the leading film and imaging brand in America, long before the likes of Fuji kicked its silver nitrate-based ass in the marketplace. Kodak, at one time, had indeed been the leading brand in its space, with a stranglehold on everything and anything having to do with photography. If you're over the age of 40, chances are your first and second and third cameras were Kodaks. You probably loaded those cameras with Kodacolor film, which you took to your local drugstore to have processed on Kodak paper. If you were serious enough, you filled your own darkroom with Kodak processing chemicals and printed your family portrait of the dog on Kodak paper.

Life before 1980 was indeed a Kodak world. The brand was so strong, in fact, that people would squinch up their noses at the very thought of printing or processing on anything less. Full-length motion pictures were shot, edited and distributed on - you guessed it - Kodak film.

It was a fun party while it lasted. Another victim of Caretaker Management Syndrome, the boys over at Kodak barely sniffed when the folks from Fuji stepped ashore. After all, they reasoned, "We're Kodak. We're a Dow 30 component." It's true. They were.

They aren't any more.

I'm not sure if Kodak people walk around with their heads tilted to the side, but every graph you could find from 1980 onward showed a consistent trend pointing downward. Kodak was bleeding market share. Something had to be done. And Kodak did what Caretaker Managers do best:

Ignored it. Played a little golf. Sold a few more stock options.

Kodak had its big chance to get back in the game a few years later. These little toys called "digital cameras" began to appear. It was a letter-high fastball for Kodak. All they would have had to do - what their shareholders were begging them to do - was slap a Kodak logo on to a digital camera and leverage their brand strength into the digital market.

Kodak management thought it over. Played a little more golf. Sold a few more options. Then decided that they held too much interest in the silver market to actually hasten the demise of silver-nitrate based photography.

Once more, the Board of Directors sprang into action: They totally ignored the digital explosion.

I hope you've saved the May 12, 2005, edition of the Los Angeles Times. If you can, look up page C6, where you'll find a wonderful shot of two smiling, desperate executives. The shot depicts outgoing CEO Daniel Carp forcing a smile as he hands the reins of the company over to Antonio Perez. For those of you without a scorecard, Mr. Perez is charged with navigating the good ship Kodak off of the rocks on to which Captain Carp wrecked it.

Like Napoleon, Captain Carp is "leaving" an empire in a shambles. Of course, that's not how he's spinning it. Carp's flacks will likely tell you that he restored the company to profitability and "embraced digital technology." What he won't tell you is that he "restored profitability" by slashing overhead, employees and costs. He did it by completely avoiding any investment or innovation in Kodak's future. He "embraced digital technology" with two out in ninth, when it was agonizingly clear that everyone BUT Kodak was already in the game.

Cutting costs and starving the business to make plummeting revenue look good. Now there's a tough gig. Figuring out that digital technology is where the market is headed - almost a decade after everyone else has jumped into the market. Amazing.

And what are First Mate Perez's qualifications? Well, to begin with, he was hand-picked by Mr. Carp. Let's pause for a moment and consider that: The successor to the man who wrecked a brand giant was actually hand-picked by the man who engineered the brand's historic, disastrous decline. And what are Mr. Perez's qualifications for resurrecting the once-great Kodak brand? He's a statistical analyst who did hard time at Hewlett-Packard. They're bringing in a numbers guy to fix a brand problem. No wonder the two of them look as miserable as they do.

It's just another wonderful Kodak moment.


Anonymous Anonymous said...

During the early Eighties Kodak showed all new employees a video presentation demonstrating how clever they were. Regarding the threat from Fuji, Kodak execs announced their response...they lowered the price of Kodak products in Japan, figuring that would give these guys such trouble they couldn't possibly mount a marketing effort overseas. Fuji planned decades ahead; Kodak planned through the next week.

2:45 PM  
Blogger Rob Frankel said...

Wow, it just keeps getting better. It's hard to believe that Kodak took less than ten years to destroy a brand that was dominant for well over half a century. What knuckleheads.

8:14 PM  
Anonymous Anonymous said...

It's that vision thing, Rob. They don't have it in Washington, either, where it would be handy but not, I would think, anywhere near as crucial as in the CEO's office. And I guess the parochially-minded complacent sort who is an icon in his own mind can't be counted on to see that 18-wheeler barreling down the road toward him with horn blaring, huh?

10:33 AM  
Blogger Rob Frankel said...

Strange to think that people can make a career out of getting hired to cut costs while revenue declines, but the cost cuts are sever enough to show a profit -- and Wall Street buys it. So these guys keep jumping from job to job, heralded as "turnaround" specialists.

Some people weep for the brands that fall by the wayside. Personally, I think they deserve what they get. I also think that the boards that hire these mugs ought to be held criminally liable!

7:14 PM  
Anonymous Anonymous said...

Uh, you mentioned silver nitrate, it is silver HALIDE!

10:31 AM  
Anonymous Anonymous said...

As a past supplier to these guys I was always amazed at their approach in the name of "teamwork". They still behave as though they're a significant company. They're cost-cutting their way into obsolescence. Can you say "buggy whips"?

11:53 AM  

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