Friday, January 20, 2012

The New Kodak?

I took the Kodak plant tour some 35 years ago. It was, of course, their corporate heyday. Kodachrome was king and their black and white films and paper were the industry standard. Their industrial chemicals (including, by the way, the smell that is added to natural gas so a human will detect a leak before something explodes) were largely by-products of their major products. Their research departments attracted the best chemists and engineers. They were model corporate citizens – reclaiming nearly every drop of their solvents – recycling plastics, even the film cans – returning their waste water to Lake Ontario cleaner than it was when they drew it out. They paid their employees well and most of them considered their jobs as long-term.

Kodak declared bankruptcy this week -- and with a gazillion dollar loan from Citibank to keep their corporate officers paid their huge salaries their spokesman promised that they would emerge from bankruptcy a smaller but stronger company. A second announcement, published in the British Journal of Photography, was a scramble to assure the gravely concerned world that their film division was profitable and that they intended to stay in the film business “as long as it remains profitable.”

It seems to me that thinking smaller but stronger might have been a good idea some time back. Yes, the market for film has declined – but it sure hasn’t vanished. Yes, the market for Kodachrome declined to a few percent of its peak. Yes, the market for black & white film in 220 lengths declined. Umm – wouldn’t that have been a good time for smaller but stronger thinking? Seems to have worked for Ilford (now part of Harmon – that was astute enough to pick up a good thing and keep it going.)

But big corporations aren’t good at getting smaller, or even appreciating a small, profitable market. Having spent a good part of my career at Boeing, you can trust me on this one. Every time the market for airplanes declines the mantra of “diversification” can be heard in the halls of power. As soon as the market for airplanes recovers, the mantra changes to “core competency” and the smaller and (usually) profitable sidelines are thrown to the wolves as being not worth the company’s attention.

Will Kodak get the picture and really emerge smaller and stronger? I’ll bet not. A huge, hierarchical company is a lot like a giant cruise ship – it turns very slowly (Kodak purposely slowed their entrance into digital photography because it endangered their very profitable film division) – it costs so much to operate that it has to have lots of income – it has a single purpose and changing it to do something else is nearly impossible.

Kodak’s recovery strategy for the past several years has been to sell off patents (of which they own a huge number) and sue for patent infringement on the ones they keep. They decimated their research activities, and laid off a large number of employees by outsourcing their silver paper production – and Kodachrome processing – and …. Doesn’t sound like a recipe for long-term stability to me.

I’ll bet that their corporate inertia is so huge that they will not succeed at “smaller but stronger.” as a sort of holding company for their smaller divisions. In fact, I wouldn’t be a bit surprised if they sold off their film division as too small to be viable in their corporate environment. I hope so – maybe Harmon will buy them and start making Kodacharome and TXP in 220 length again. After pretty much jettisoning their research department, I doubt that they will achieve a prominent position in the digital world. Not a rosy prognosis for a company that once was so respected.

As a film and wet darkroom hanger-on, I want to support the companies that are stating that they are in it for the long haul in a niche market, not just as long as it is profitable.

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