Do you still take your Polaroid camera out on weekends? If so, you had better buy your film cartridges this year because you won't be able to next year. Polaroid just announced they are getting out of film and entirely into digital photography and printing. Too little too late when compared to Kodak which has the transition now firmly in its past.
Kodak has been the world's undisputed king of photography for over a century. It got out of much of its traditional film and papers business in virtually a flash, ahead of Polaroid which is teetering on the brink of oblivion.
So how did this 125 year old lumbering Fortune 500 giant successfully make such a dramatic transition into its current digital reality where it now commands a leading position in graphic communication? Kodak didn't do it by clinging to old product lines and antiquated marketing approaches.
We interviewed Jeff Hayzlett, Kodak's Chief Business Development Officer and Vice President along with David Lanzillo, Director of Corporate Communication and the company's Vice president of Communications and Public Affairs. When asked where Kodak turns to seek its new direction, Hayzlett said "We look up to ourselves. We got back to who we used to be. Company founder George Eastman remains a constant source of inspiration."
Hayzlett told the story of Eastman's close friend, early investor and business partner Henry Strong who was a leading manufacturer of horse buggy-whips. Strong was also a fan of the incoming automobile and successfully managed the transition of his buggy-whip business profitably through its decline. Strong's move into photography with Eastman ensured his own fortune. Kodak still makes tidy profits from its traditional films and papers business. This now represents only about a third of its revenue versus 70% just a few years ago. "The film business is fine, with good margins."
Kodak now has 19 products, each being number 1, 2 or 3 in their respective markets. Half of these products did not exist 10 years ago. Kodak has made dramatic shifts within its workforce. At its peak in 1988, Kodak had 150,000 people compared to 27,000 today. 60% of the current workforce consists of people who are new to the company within the past four years.
When asked what Kodak's current top three priorities are, Lanzillo answered "Number 1 is growth, number 2 is growth and number 3 is growth."
As part of its growth strategy, Hayzlett said "we have taken our graphics communications group from a being a passive business to $3.6 billion in four years." Acquisition was a big part of that strategy with Kodak having invested $1 billion for CREO, a global leader in the area based in Western Canada and similar investments in other companies. At the same time Kodak was making its acquisitions, it earned $2.5 billion from the sale of its health business.
Kodak's transition was officially completed at the end of 2007 and Hayzlett described it as a big moment. "It is over. We have experienced transformation fatigue from our cost-crushing efforts while pumping into new businesses. The marketing has become explicitly more B2B. We have always been a B2B company because that is the way we have been selling our products. We just didn't really recognize it until recently."
Hayzlett mentioned Kodak nurturing a "culture of innovation" and "accountability" in the same breath. The company has been striving to include accountability as part of its innovation framework. Hayzlett and Lanzillo described the company's "fast program" as its slogan with "fast meaning focus, accountability, simplicity and trust." For the accountability part, Kodak employs an Enterprise Marketing Management System (EMM) across the company "with dashboards or predictive indicators used to monitor and manage campaigns and growth initiatives."
Hayzlett described the company as having established a framework on "How to stay ahead. We continue to invest in research and we make substantial investments in our R&D. Our CTO office has been recently expanded and we have an effective way of defining our marketing strategy. Our CEO leads our strategy council. We also have a brand and development council with representation from R&D, legal and M&A. And we have a marketing operations council whose main task is to leverage our marketing spend."
Throughout its history, Kodak has always kept strong in house technical capabilities and made most of its traditional products from the ground up. This remains unchanged with the company remaining focused on"the crux between material science and imaging science - from dirt on up" says Hayzlett. "We feed cows certain ways to get the right gelatin to put on film."
When asked about human resources, Hayzlett and Lanzillo described this area as containing some newer developments. These include a learning management system being deployed company wide. Employees have an assortment of both mandatory and optional training programs made available to them. These include opportunities to learn from people both internally and from among those who are brought into the company to provide particular insights. For example, the company recently brought in someone who presents a unique approach to communicating stories through photographs that is popular among the people in the marketing and R&D areas alike. Attendance is not mandatory for most people who make their own decisions as to which of these events they opt in or out. But events such as these can become quite popular within the company.
Kodak remains a highly savvy marketing organization, following closely the footsteps of its founders Eastman and Strong. It has transformed itself from a traditional maker and marketer of cameras, film and papers into a key competitor in the digital marketplace in which it now operates. The company successfully made this massive transition in a virtual flash.
Peter Paul Roosen and Tatsuya Nakagawa are co-founders of Atomica Creative Group, a specialized strategic product marketing firm. Atomica helps companies achieve greater returns on their investments in bringing new products to market and their existing businesses. They have co-authored Overcoming Inventoritis: The Silent Killer of Innovation www.atomicacreative.com
