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Now innovations are an active link of all spheres of society activity. It is impossible to present the modern world without as already carried out innovations and become habitual, and without future innovations, promoting further evolution. The majority of scientists agree in opinion that innovations turned into the main motive power of economic and social development. Innovative activity led the world community to new, higher step of development.
INNOVATION AND ENTREPRINEURSHIP BEHAVIOUR ON BASIS OF THE EASTMAN KODAK COMPANY
Submitted 02 November 2012
Now innovations are an active link of all spheres of society activity. It is impossible to present the modern world without as already carried out innovations and become habitual, and without future innovations, promoting further evolution. The majority of scientists agree in opinion that innovations turned into the main motive power of economic and social development. Innovative activity led the world community to new, higher step of development. The main purpose of my essay is to explain the role of innovations in economy and entrepreneurial process. Also my goal consists in description of fundamental behaviour of entrepreneurship giving an example of activity of well-known and long-established company. It is Eastman Kodak Company.
My essay is constructed in the following way: in a chronological order we will go over the Kodak history from the foundation to bankruptcy and indentify what actions, activities and behaviours of Kodak meet the criteria of fundamental behaviour of entrepreneurship and what do not. According to four steps of the innovation management process we observe the establishment and development of famous company and what role it plays in economy and society. We observe the life cycle of Eastman Kodak and indentify stagnation and decline period brining to reasons it.
Eastman Kodak Company is the American company, the world famous producer of photo equipment and photo and film goods. Kodak's head office is in Rochester, New York in the United States and has branches all over the world. The company was founded by George Eastman in 1880 and after operating for more than 131 years, Kodak filed for Chapter 11 bankruptcy in January 2012.
In the 1888, George Eastman with a slogan "You press the button — we do the rest" presented to amateur photographers of the whole world the first simple camera. Thus, tiresome and difficult process of photography became simple and available. Brilliant creative idea with social implication and its exploration and implementation created a commotion in society and technology.
First of all, it is necessary to clarify what innovation is and reasons of success for Kodak. Innovation is a process of turning ideas into new opportunities for value creation and putting these into widely used practice. In other words, innovation is not only a new idea, and it is successful commercial implementation of this idea being accompanied with opening of new markets, as it was in a case about Kodak, new organisational strategies, processes and so on.
Applying to Kodak, new idea was to make photography process "not more difficult than pencil use" and also to make photographing available to the majority of people. The better way to describe the process of implementation of this idea is to do it according to the innovation management process including four steps or stages. Stage one consists in ideas generation according to established environment. Eastman's purpose and main idea was popularization of photo. It is necessary to notice here that we have dealing with new technology which is always accompanied with big risk. Probably people won't take new technology. Thus we are approaching to the second stage of management innovation process.
Stage two includes evaluation of opportunity and ideas screening. The photos existed since the beginning of the 1800s, but process of their receiving was very difficult and it was subject only to chemists and scientists. It was naturally enough that people showed a great interest to photos because they had never seen anything like that before. Opportunity to do the pictures by themselves and not to spend a lot of money seemed fantastic. It was gold mine and George Eastman understood it.
In the 1880 Henry Strong and George Eastman found the Eastman Dry Plate Company which was renamed later as Eastman Kodak Company. In the 1885, the roll film was presented to the public. Roll film was used in motion pictures by the first film makers. The first camera that called Kodak is appeared several years later. But the cost price of the camera didn't suit Eastman and he started to employ new chemists to proceed with research. It was third and fourth stages of management innovation process that involve resource acquisition and implementing the idea, respectively. In the 1900, Eastman achieved the purpose — the new Brownie camera with a film on 6 shots was on sale for 1 dollar. New technology could be shared among people.
Despite cheap cameras the company was receiving an enormous profit. Kodak Company used the razor-blade business model which was innovative as far back as 1900s. This business model consists in sale of the main product at very low price, sometimes below cost, and then the main profit overworks on sale of spare parts, expendables or other connected goods or services. Thus the price of camera film made up the one fifth part of camera price.
Up to 1976, Kodak dominated the mark for film sales by 90% and 85% of camera sales in the U.S. It is difficult to overestimate Kodak's contribution to economy and society. Impact of Kodak on the economy consists in appearance of new market and competitors that were able to compete with Kodak thereby lower prices and better quality of products and service was appeared. Therefore company assisted to develop economy, create wealth and competitive environment and reduce flow of imports and balance of payments deficits. Moreover the company offered a large number of workplaces all over the world, thereby preventing unemployment.
Contribution to technology and society is also great. The Kodak presented on the market the first mass camera for reasonable price.
However the success of the company wasn't eternal. Strong and seemingly unbeatable competitive position resulted in a complacent corporate culture lacking creative thinking. Kodak's senior managers were satisfied with the status quo of the company and felt no need to explore other ventures. In spite of approaching digital age the company continued to do an emphasis on the core business.
The company broke the main concept of corporate entrepreneurship, which consists in remaining competitive. It is necessary to be competitive for large organisations. Because of the development, application and expansion of new technologies, new products, ventures and patents, organisations need to be at the forefront of innovation. Organisations that are stagnant and continue 'business as usual', find that they fall behind, lose their market position and decline.
It occurred within the Kodak Company. According to Greiner’s model of organisational growth we can observe Kodak’s life cycle. The life cycle of an enterprise is stages set of development which organisation cycles during the existence. This theory is considered within management and means passing by the organization of several stages of development (analogy to live beings): formation, growth, maturity, death. Life cycle has the following appearance: origin and formation, growth when the firm actively fills the segment of the market chosen by it, a maturity when the firm tries to keep an available share of the market under the control and the last stage when the firm quickly loses the share of the market and is forced out by competitors.
After a maturity the following stage of life cycle of the enterprise comes which involves either re-growth of the company or a decline stage. The maturity stage can into stagnation and decline for the several reasons: appearance of competitors in the market, high turnover of staff, market disappearance. As I already mentioned above the reason of losses of the Kodak is that the company couldn't replace core business in time. Digital photo century came, and the market of film cameras gradually decreased. The paradox is that the problem of Kodak didn't consist in lack of technological innovations. The Kodak Company invented a first-ever digital camera in the 1975. But it wasn't pleasant to the management because a camera didn't need a film on which the Kodak business model 'razor-blade' was. Only in the 1990's, Kodak planned to move into digital technology but only as a sideline business.
According to Ichak Adizes' ten stages of corporate life cycle we can draw an analogy between the Kodak and the seventh, eighth and ninth stages. The seventh stage is called aristocracy and consists in a confident position in the market, but in the same time excessive self-confidence and slow development. We can observe this stage on the Kodak example in the 1980s. Kodak was so sure of its competitive position in the U.S. that no attention was paid to the Japanese competition that entered the U.S. market – Fujifilm. As a result, Fujifilm won Los Angeles Olympics sponsorship rights and achieved a permanent placing in the U.S. market.
It should serve as the first lesson to the Kodak. Instead, the company got confused in itself and in its internal processes more strongly without paying attention to changing environment. There is no tendency to efficiency increase, changes and needs of the client. It is the eighth and ninth stage which is described by Adizes: recrimination and bureaucracy.
The Kodak company was incapable to see the future changes and changed so slowly that couldn't introduce digital technologies in a short time. It became the main barrier in further development of the company. When the Kodak completely entered the digital market, this market was already occupied by competitors with better and cheaper product than Kodak had.
In such cases which the Kodak Company faced, development of core business is absolutely useless. It all the same that to try to rearrange chairs on sinking ship. Leading brands with incurably sick core business should render the same services, but in a new way. Change of core business is extremely difficult accomplishment because it demands recognition of that fact that smoothly running business will die off soon.
Of course the Kodak Company undertook a number of attempts in order to return former positions in the market. The system of on-line storage of photos 'Kodak Gallery' was developed by the company. The Kodak also created the line of the top cameras with the simplified system photo transfer on the computer. But these innovations only delayed bankruptcy of the company. All attempts to return the position in the market appeared overdue.
In my opinion, Kodak possessed all key factors which would allow remaining a leader in the future. The option which, in my opinion, provides the maximum chances of success consists in investments into the new enterprises competing to Kodak's activity. In May 2001, Kodak purchased Ofoto, an online photography service, but it was too late.
Anyway, on 19 January 2012, Kodak filed for Chapter 11 bankruptcy protection. No one knows what will happen with the company in the future. There is nothing else left for entrepreneurial organisations to do but learn from negative experiences of Kodak and transform them into knowledge.
Thus, we observed the long history of Eastman Kodak Company and cited the connection between activity of this company and fundamental behaviour of entrepreneurship. The Kodak Company made a huge contribution to development of economy, a science and society. George Eastman showed how from innovative idea to construct big and successful business. Slightly less than hundred years the company was the leader in its market thereby showing not only ability to create an innovative product but also faultless management and behaviour of the company as a whole. Unfortunately, closer to the end of the 20th century the company became the hostage of own success. Inability of adapt to constantly changing market realities led to a bankruptcy condition.
LIST OF REFERENCES
Stokes, Wilson and Mador, “Entrepreneurship”, 2010
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Czarniawska, 2005. Global ideas: How ideas, objects and practices travel in the global economy.
Cyert & March, 1963. A behavioural theory of the firm. Englewood Cliffs
From Wikipedia, “Kodak Gallery”, viewed 24 October
From Wikipedia, “Eastman Kodak”, viewed 24 October
Dr. Ichak Adizes, 2004, Managing Corporate Life Cycles, 2nd Edition, Published by the Adizes Institute, viewed 28 October
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managers and new business creation, Cambridge university press, viewed
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