The Latest Kodak Moment

A fellow member of LinkedIn’s Next Gen Market Research community recently posed the question, “With Kodak blowing up, I'm thinking about why a company with such a strong tradition for MR failed so miserably? What responsibility do researchers have for influencing the business?”

Several people gave thoughtful responses regarding the role of research at Kodak and in large organizations in general.  Yet all were rooted in the underlying assumption that if research identifies a digital opportunity, then digital must be the solution.  Case closed.  To this native Rochesterian, that myopic viewpoint ignores the nuance of conducting business in my hometown – and the critical factors that one must acknowledge in order to understand what really happened over at Kodak.

I am a vocal advocate for (and creator of) business-influential research; I would love it to be the case that strong market research could have prevented Kodak’s current woes.  And I am not ruling out the possibility that somewhere in the walls of Kodak Park, there were misguided or misused research reports, researchers with inadequate influence, or executives with a rampant distrust of research they needed to heed. 

The thing is, it didn’t take market research to see what was happening in the photo/imaging space 10-15 years ago. It took a trip to Best Buy. Kodak wasn’t ignorant to digital cameras, they invented them.  In 1975.  (If you don’t believe me, look it up on Wikipedia.)

The scenario at Kodak runs deeper than market projections and customer satisfaction.  And it’s incumbent upon us as researchers to understand all of the business dynamics, not just the consumer-related ones.  When I think about the sustainability of Kodak, a few points of consideration immediately come to mind:

1) A full scale change in a company’s entire business model requires visionary and powerful leadership.  And the courage to take the bullets when you shred apart a dying but familiar cash cow operation, lay-off thousands of hard working employees, and make the other thousands of loyal employees unhappy by forcing change.  Not too many CEOs want to be the person to spawn that blood bath, and then clean it up.

2) Stockholders think short term. Film had a huge profit margin, and Kodak had nearly universal market share in the US.  Digital has minimal profit margins, and some big competitors that make Kodak a more minor player.  I’m going to wager an educated guess that stockholders were not lining up telling Kodak to make a change that would render the company unprofitable for a few years, in order to be sustainable in the long run.  That is not typically the way the stock market works with companies that have been around for 100 years.

3) Kodak employed tens of thousands of manufacturing workers in the US.  I have to imagine that there was some political pressure to save their jobs.

4) Rochester itself is arguably in a talent pool crisis, as alternative employment opportunities are limited. I went to one of the best public high schools in the country, 20 minutes from Kodak HQ.  Dozens of my friends went off to Harvard, Michigan, Dartmouth, Penn, Cornell, Stanford... and almost none of that intellectual firepower came back to Rochester.  The Wall Street Journal makes a very convincing argument that Kodak was never going to turn around and innovate in Rochester, and as much as I have a soft spot for my birthplace, I agree.  (You can find the article here:  http://online.wsj.com/article/SB10001424052970204124204577153053662634584.html?mod=googlenews_wsj)

Now put yourself back in Kodak's shoes:  a) needing to entirely reinvent a 100+ year old company, b) either moving locations altogether or staying in a market that struggles to attract talent and has to compete with the likes of Silicon Valley, and c) knowing that any change means eliminating of tens of thousands of local jobs and training the remaining tens of thousands on totally new skills.

In hindsight, it seems clear that Kodak needed to run with digital technology when its engineers first invented it.  But in practicality, it’s not too difficult to see why they didn’t. 

So what responsibility do researchers have for influencing the business?  As researchers, we can and should strive to be heard, and to influence business decisions – otherwise our function lacks purpose.  But if executive management is to trust us and consider us part of their team, we also need to understand the full spectrum of what it is we’re influencing.  In influencing the long term success of a company, we might also be influencing the short term loss of jobs, the deteriorating vitality of a city, and the declining value of stockholder portfolios.  With the responsibility of success comes the responsibility of failure, and the humility to understand that external powers of influence will sometimes win out in spite of our efforts.