
Eastman Kodak’s recent filing for bankruptcy protection in the US has been met with a plethora of explanations detailing the company’s supposed failure to embrace the digital age in camera and image technology, but perhaps the real lesson in Kodak’s potential demise is more general and potentially affects all companies that have a longstanding and high-yielding knowledge base in an industry that undergoes rapid technological change. But the issue of Kodak is not so simple as the emerging mantra that the company failed to respond to the digital age of imaging. Eastman Kodak did respond to that change (specifically for more than 25 years), but the problem perhaps lies in how they responded.
For those of us who worked in the commercial news and magazine sectors in the 1980s onwards, the claim that Kodak failed to respond to technological advance is odd – and I certainly have a very different set of memories about this company in addition to the yellow envelope of sentimental family holiday snaps that currently swamps the mass media.
In 1984 I was a skint student and started doing some freelance and temp work at Time Out, mostly on the new (and 1st) TO Film Guide, but due to a shortage of staff cover in the music section, increasingly on the listings side of the magazine and with occasional forays onto the news desk. At that time, the daily round consisted of typing onto column lined paper, complete with the need for typed hyphenation and other page furniture. But this laborious process, in which the line between the average journalist and the print room was far closer than it is now, was quickly replaced by the arrival of a large quantity of large grey computer terminals that displayed, if memory serves me, text in a kind of sickly yellow/brownish colour. From that point onwards, all text would be entered into these machines and the print process changed for good.
The name on the programs running on these grey terminals was ATEX, a company owned by Eastman Kodak. ATEX had been producing cutting edge newsroom computer systems from the early 1970s in its base in Lexington, Mass., and by 1979 it had patented its Text Editing & Display System that enabled text to be typed and displayed with the guarantee that every line would end with a complete word (source: The Cole Papers: http://www.colepapers.net/tcp.archive/cole_papers_01/TCP_01_01/atex.html), and technology that enabled text insert in 1975, and the move toward interactive page makeup systems was in place. In 1981, ATEX was sold to Eastman Kodak for $77million (same source).
The acquisition clearly heralded Eastman Kodak’s early move into computer technology in an industry in which there was an opportunity for commercial activity with early adopters. In 1984 ATEX launched its Total Publishing Environment system on the market, running on AT&T computers. Two years later ATEX combines with Eikonix - a company that made its name in digital imaging - to launch an electronic prepress system. Over the next couple of years, Eastman Kodak’s strategy of corporate alliances continues and ATEX is working in close partnership with IBM, but ultimately to no avail other than the significant fact that ATEX systems would run on IBM computers.
By 1992 according to The Cole Papers archive, Kodak had decided that ATEX was no longer a part of its future plans, and was sold. In the mid 1980s the systems ATEX were developing and bringing to markets across Europe and America, were cutting edge and transformative, clunky in retrospect, yes, but nonetheless they were early entrants into an industry that would become a major driver for digital, technological innovation.
Apart from the various machinations of ATEX, this episode clearly belies the claim that Eastman Kodak was a moribund and slow adopter of computer and digital technologies. It is evidence that prior to 1981, Eastman Kodak had identified the changes that were taking place and were trying to adapt to the new technology. As recently as 2005, Eastman Kodak was working with IBM on digital imaging systems that enhanced picture quality in mobile phone cameras, but seven years later, the company is facing closure.
Yes, Kodak failed to make an impact in the home consumer digital market, but the failure was not one of denial, as is being claimed, but perhaps one ultimately of the inflexiblity of corporate structure. But even as recently as 2004, leading business academics were highlighting the efficiency of Kodak’s adaptation to the new technology and its markets through strategic corporate alliances. The FT states that Eastman Kodak’s revenues peaked just two years before these strategies were recognised ‘at more than $16bn, while employee numbers reached some 130,000.’
According to Robert M. Grant and Charles Baden-Fuller’s article ‘A Knowledge Accessing Theory of Strategic Alliances’ (Journal of Management Studies, January 2004, (c) Blackwell Publishing), on Eastman Kodak’s transition from chemical to digital imaging:
‘During its first 100 years of development, Kodak established a highly integrated corporate structure that was very effective in integrating knowledge of optical, polymer, silver halide, technologies; consumer and professional markets; largescale, low-cost manufacturing; and worldwide distribution. However, the digital imaging revolution required Kodak to extend its knowledge base into ‘infoimaging’ – including new technologies ranging from electronic sensing to file compression.
‘Many of the rules and organizational routines that Kodak had developed for managing traditional photography were not well-suited to the faster moving world of digital imaging (Grant and Neupert, 2003). In particular, when CEO George Fisher requested the company to introduce a fully digital camera for the consumer market, he was told that the company’s standardized system of phases and gates would require three years of development. Through an alliance with Apple Computer, the camera – the Apple Quicktake – was developed and brought to market within seven months (Pinto, 2000). Digital imaging’s need for differentiated rules and routines to achieve fast response capability and compressed product development and manufacturing cycles resulted in Kodak’s widespread use of strategic alliances in its digital imaging business.’
Many of these alliances came as the result of successive revamps to Eastman Kodak’s digital strategy. Perhaps the problems with a reliance on corporate alliances (and acquisitions) is that they tempt the core business to remain the same, to protect its areas of longstanding specialism and to try and maintain profits in diminishing markets, especially when the route map of future technologues is difficult to judge. Eastman Kodak formed productive alliances with some of the most prominent companies in the new technology revolution – Apple amongst them – but it is the persistence of its old and core corporate structures that could be its downfall. Knowledge is worthless without meaningful product, and product at the right time and at the right price. As Apple has shown, product is key, and speed of response is its mutual key. Grant and Baden-Fuller might of been premature in highlighting the success of Kodak’s alliance strategy in 2004, back then it was working and indeed those authors did apply considerable caveats to their example. But one claim they do make, and I apologise to them for borrowing and adapting their work, is that good strategic corporate alliances should not be about knowledge acquisition but about accessing that knowledge and, as Grant and Baden-Fuller state:
‘…alliances contribute to the efficiency in the application of knowledge; first, by improving the efficiency with which knowledge is integrated into the production of complex goods and services, and second, by increasing the efficiency with which knowledge is utilized.’
In this process, Eastman Kodak’s problems seem to reside, a lack of efficiency in utilizing knowledge, translated into a lack to fully integrate new technologies into corporate structures.
I did not set out as the new year broke us ungently into 2010 with a resolution to read more books by comedians this year, but that is what has happened. In 2009, I read no books by comedians. In fact, my dislike of the celeb book craze is generally so profound as to be akin to a personal, anti-crap crusade. But now I find myself weakening, and maybe that’s because in my early adult years (1970s) most of the books by comedians were, it seemed to me, nothing more than sad confessionals, ghost written on behalf of shabby racists who spent their working lives trading weak punch lines in rooms full of small-minded bigots. Now there are at least alternatives.