Name : Rachel Florentcia Tirtaatmadja

SID : 6923589
Module Title : 310HRM - Innovation and Change  
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Introduction
Creativity is the grounds for innovation. Creativity has to be converted into action for
innovation to take place. Innovation is the implementation of creative ideas within an
organization. An organization obtains a specific change in a product, service or business process
after innovation occurs (CIMA, 2007).

Eastman Kodak Company, a USA based company founded in 1888 and commonly
known as Kodak has been a leading company of printing and photography for over a century
globally. The company is famous for providing imaging solutions for businesses and individual
customers. Headquarter of Kodak s situated in Rochester, New York, USA, and operated largely
in USA, Europe, and Asian markets. The innovative production techniques followed by the
company in leading period are low cost manufacturing, global distribution, high customer
orientation, and extensive promotional campaigns on mass media. The heritage of company is a
culture of creativity and innovation and invested heavily in research and development. The
company has faced drastic decline in business in late nineties due to lagging behind on digital
technology and photography.

This paper attempts to examine Kodak’s dilemma and its strategies for the
implementation of creativity and innovation. The document further explores how such a change
would be managed and successfully implemented by the organization. An assessment of the
faced risk and barriers has been done in order to recommend an appropriate strategy for the
management of the company to follow.

Evaluation of Kodak Dilemma and Strategies

Despite the long success record of Kodak in nearly a century long business in segments
of film photography with only one main competitor Fuji Films in global markets. The marketing
strategy followed by Kodak is termed as ‘razor-blade strategy’, i.e. an aggressive sales at low
costs as high production volumes an leading edge in research and development facilitated low
cost production of cameras and photo graphic films. Company has also made profits in
developing and printing services at retail outlets. The business has been highly profitable for the
company in post World War II period and company has expanded globally. The complementary
products like film and printing technology were the actual profit sources for the company. On the
other hand, introduction of digital photography in late 1990s affected drastically in Kodak
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business and sales started declining drastically. Innovative management aimed at finding new
ways to serve the customers in a better way by means of which organizational excellence is
achieved. This is to stay ahead in the competition and ensure the development of both the
employees and organization itself. The general process model for managing innovation in the
organization was suggested by Morris, (2011). The major failures of the companies are
discussed below:

Identification or Creation of Problem

Starting from the problem identification gives an idea to the management. Kodak was
facing issues in the inability to rapid changes in business strategy in view of transformational
change of digital photography. Beginning of 1990s was the point where Kodak management
refused to perceive the drastic changes in company revenue due to preference of consumers to
new digital technology. On the other hand, company has increased investment in improving
photographic film technology and introducing new improved versions in consumers markets.
Feasibility
Necessary resources especially funds and innovation capital have to be sufficient. This
was not the case with Kodak, as the company failed to achieve market share and retain its
customers who moved to digital technology products. The late response of company to start
innovation in digital technology and continuous investment in traditional photography innovation
technologies become the actual reason of further decline in profits. A feasible project has the
necessary resources to finally solve the problem in a way that meets all the required standards
(Morris 2011). Thus the company was unable to estimate the future of photography and
technological growth of complementary products like embedded cameras in mobile phones that
limit the dependence of common consumers on Kodak cameras and photographic films
(Economist 2005).
Solution
Finding the right solution is central to the creative process model. Learning initiates
creativity which in turn repays the organization by excelling in finding new ways to perform
business (CIMA, 2007). Kodak needs to invest sufficient amount of resources in research and
development in order to secure their market share and customer base. In contrast, Despite the
invention of required digital technology in Kodak cameras, 2007 was the last year that shown a
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profit due t to complacency of top management. Thus Kodak need change in strategy in the
beginning of 1990s to invest in exploring digital technology and shift the existing technologies to
exploit the potential of new opportunities of digital photography in global markets.
Feedback
Morris (2011) recommended that regular feedback after implementation of solution is
also important. Market responses and changes in top management behaviour to guide the
organization in appropriate strategic direction were important. Thus consumers’ feedback and
reports on sales and market share changes were the main sources for the company to gauge the
impacts of strategic changes made.

Need for Change Management at Kodak

The contrast between Kodak's customary business and digital was as extraordinary as the
rhythm is distinctive because of the type of abilities need to make the change. Though, the top
management knows that they need a disruptive change, yet they failed to react accordingly. In
contrast to Senge's (1990) proposition of a learning association that slowly adapt to change as a
continual procedure was argued by Hamel and Prahalad (1990) and favoured drastic or
transformational changes in view of the changes observed in information technology revolution
in organizations. According to Mendes (2015), Kodak needs re-engineering and restructuring of
human resources and expanded utilization of new digital technology invested in Kodak.
However, the strategic planning failed to respond quickly to the needed changes in organization,
though they were capable of managing these changes as industry leaders for over a century.
Thus, learning organizations cannot operate and stay competitive by adopting continuous change
during revolutionary technology period like that of digital photography revolution (Porter 2008).
Kodak also faced an issue of complacency from the top management, though, the CEO was a
technology expert but failed to respond at the required rate, otherwise the company would not
face enormous strategy failures in later stages ((Forbes 2012).

Analytical Tools for Change Management at Kodak

Kodak needs to consider the aspects where change is required. Rapid change with a rapid
pace creates a change resistance in the employees. On the other hand change leaders remain
under pressure to finish the process within a limited time and funds. They have to relate the issue
of employee burnout to the top management and make necessary adjustment at the same time
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they are required to negotiate the proper deadline by which to finish the job (Mathew, 2011). The
important change models applied in this case are as follows:
Force Field Analysis
This analysis is performed to evaluate driving and resistance forces acting in Kodak in
1990sm, during the period of revolutionary change requirements. The forces mentioned in
company analysis of Mendes (2015) are given below:

Driving Forces Restraining Forces

 Creativity and innovation  Lack of long term vision

resources  Complacency of senior
 Inventor of digital management
photography  Inability of top management to
 Market leaders in foresee the technological and industry
photography changes
 Trained and capable human  Lack of drive to make necessary
resources changes in products
 New opportunities in digital  High resistance in employees to
Stabl adopt new market changes
photography and imaging
e Quasi –
technologies
Stationary
 Expansion to new markets
Equilibrium
 Resources and technological
R&D
 Share holders cooperation in
expansion to new businesses

Source: Adapted by Author

Thus the change leader in Kodak will have to work on two fronts – the members of the
organization and the top management. Using a Systematic Approach of leadership may be useful
for a change leader to manage change for Kodak in effective derived benefits in a systematic
approach is way (Beerel, 2009).
Lewin’s Model of Change management
A change model supports creativity and innovation in the organization. Lewin’s, (1951)
change model described by Armstrong, (2006) is applied on Kodak case as:
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Unfreezing:

At this point the present situation is analyzed and it is seen if there is any deficiency in
the present state of situation that require change. This step states that there is a risk of people in
organization not accepting the change and supporting the present balance. Such as failure to
foresee the future markets of DSLR cameras, Kodak lost majority of its market share. The
process of change started in Kodak in January 2012, when company filed for assurance of
liquidation under article 11 in USA. The company decided to cease the production of digital
cameras, digital image casings, and pocket camcorders and decided to concentrate on corporate
digital imaging solutions market only. The liquidation was allowed and Kodak has offered sale
for business scanners, photographic film, and other related businesses. Further, after receiving
permission for liquidation financing, Kodak sold licenses and patents for a large sum of $525
million to IT companies like Google, Apple, Amazon and many others (Mendes 2015).

Changing:
According to Lewin (1951), this stage requires organising and mobilising the resources
required to bring about the change. In case of Kodak, as a result of liquidation financing
initiatives, company has followed a change management plan. According to Antonio M. Perez,
CEO of Kodak, declared authoritative changes and extended cost structure decreases to mirror
Kodak's key spotlight on the Business, Bundling and Practical Printing Arrangements and
Endeavor Administrations business, and the business procedures of its Customized Imaging and
Record Imaging businesses (Kodak Website 2016). In words of Perez, "Kodak is turning into a
more engaged and intensely scaled organization," Perez further added that management perceive
that Kodak should essentially and speedily decrease present cost structure, which is intended for
a much bigger, more enhanced arrangement of businesses (Kodak USA 2012). Another change
initiative was repositioning of senior executives to appropriate locations to increase the speed of
restructuring and create advantages for new products and consumer future needs fulfillment.
Refreezing:

The change is stabilized by initiating new responses into the concerned employees and
resources (Armstrong 2006). As a result of change management, Kodak gained the complex
operational rebuilding and successfully divided in three major segments of Digital Printing,
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entertainment and commercial photography, and Graphics solutions for enterprises. Though, this
step resulted in downsizing of workforce by roughly 3,700 employees globally till end of 2012,
but company managed to save the declared sum of $330 million in compensation of these
employees (Kodak website 2016). Hence, the business of three segments started harmoniously
after making these changes and equilibrium is achieved in Kodak to a certain extent.

Adaptation of Change in Kodak

Innovation is a different sort of spending than most of the others where the risk is high
with the involvement of different components of the firm and their resources for collaboration,
therefore, both the management and the employees cannot afford to have a back seat attitude
(Gersick, 1991; Schaeffer et al 2011). On the other hand it is a reality in today’s world that the
pioneering innovation is the key to an organization’s success and survival. There is no alternative
to proactive response to the transformational changes in industry if Kodak wants to achieve
competitive advantage (Stone and Keating, 2010). In this aspect, Mendes (2015) compared the
Resource Based View (RBV) by Barney (1991), and the Market Based View (MBV) of Porter
(2008). This is differentiated against the MBV, especially taking after Porter competitive strategy
in change management process that proposes firms ought to rather persistently take their
surroundings as the beginning stage while deciding strategy. In view of MBV approach, Kodak
has largely extended product lines in traditional technology and adopted a gradual change
strategy despite being the pioneer in digital technology. On the other hand, MBV approach
demands rapid changes in company strategy in view of the fast environmental changes and
Kodak was not able to capitalize the resources when the change was actually required.

Barriers to Implementing Change at Kodak

Barriers overshadowed the implementation of required strategic changes. According to
Lindsay et al., (2009), the three factors below work as barriers towards innovation.

1. Employees Resistance:
It can come from in various form of peoples’ attitude. Staff of Kodak who is being
benefitted from the status quo may block the creativity and innovation in the organization. Too
much expectation from innovation, arrogance to use certain group’s innovation, reluctance to
learn, and professional protectiveness also block the progress of innovative ideas being
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implemented. The behaviour of top management and complacency in response has shown this
barrier, the management of Kodak adopted to keep on investing in increasing the performance f
photographic film technology, rather than restructure and repositioned the research and
development department to adopt new digital technology solutions.

2. Organizational barriers:
Kodak fails to identify real opportunities and fails to collect information from the
members of the organization. As the company was leading the industry for over a century,
therefore, it was expected to be proactive in this era of technology as well and influence the
change management process from the very beginning of digital technology era.

3. External Barriers:
Sometimes due to environmental factors an innovated technology may become useless in
some areas. The introduction of new competitive digital technology solutions by Sony and
Cannon, increase in use of cameras improved performance in mobile phones, and the avoidance
of photographic film technology due to environmental pollution concerns are some external
barriers affected the company’s decisions.

Recommendations
The recommendations for enhancement of change management process at Kodak are
given below:

1. The systematic and consistent approach of change management was proposed by

Senge (1990) in learning organization, but Kodak needs to follow the transformational and
evolutionary changes in implementing the research and development of new digital technologies
in view of MBV of Porter (2008). Top management at Kodak should use a mixed view
recognized by Systematic Approach for enabling both the employees and top management of
Kodak to appreciate each other’s interest and limitations. As a result both groups can find it
easier to make the best adjustments in strategies.
2. A change manager has to effectively design the line of authority and delegation.
This will enable the manager and employees of Kodak to balance their role of authority and
control (Beerel, 2009). Therefore, the change management training and hiring of young and
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dynamic professionals will not only reorganize the core processes at the company, but also add
the value to the products features and expertise.
3. The organization must center its endeavors on development in all product
offerings, in this way defending and keeping up its premium market position (Ouden 2012).
Innovation is the key competitive advantage of Kodak that can assist them to improve the
technology further in order to launch separate products at low prices in three business segments.
Further, the launch of new products is suggested to be supported by special promotional
campaigns and instruction manuals that further instruct the consumers about the power of Kodak
products. Wide-ranging advertising was one of the key success factors of organization since the
beginning, therefore latest social media tools and digital advertising techniques will prove to be
effective and cost sensitive.

Conclusion
Innovation and change management cannot be fruitful without a proactive strategic
planning, proper monitoring, good leadership and participants’ willingness and skills. These
activities require a positive approach and a proactive attitude of senior management which is not
observed in the case of Kodak. Despite, marker leadership, ample technological and innovative
resources, pool of talented and qualified human resources, the company was not able to change
the business strategy at the right time. The outcome for the company was optimal market share
losses and liquidation financing in the end. The company is recommended to stay proactive t the
technological changes and innovation capabilities effectively at the right time.
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