MNG3702
Exam Prep
May/June 2018
Case Study per TL102/1/2018
1. APPENDIX A: EXAMINATION CASE STUDY-Kodak is at death’s door; Fujifilm, its old rival, is
thriving. Why?
The Eastman Kodak Company (referred to simply as Kodak) is an American technology company
founded in 1888 when it was known for its pioneering technology and innovative marketing. “You
press the button, we do the rest,” was its slogan in 1988. By 1976 Kodak accounted for 90% of film
and 85% of camera sales in America. Until the 1990s it was regularly rated as one of the world’s five
most valuable brands. The company’s ubiquity was such that its “Kodak moment” tagline entered the
common lexicon to describe a personal event that was demanded to be recorded for posterity. The
company build one of the world’s first digital cameras in 1975.
Then came digital photography to replace film, and smartphones replace cameras. Kodak’s revenues
peaked at nearly US$16 billion in 1996 and its profits at US$2.5 billion in 1999. Then Kodak’s financial
struggle began as a result in the decline in sales of photographic film and its inability to adapt to a
world in which digital photography had become pervasive and available in just about every cellular
telephone.
Fujifilm Holdings Corporation, better known as Fujifilm, is a Japanese company and one of Kodak’s
competitors. Fujifilm is very similar to Kodak in many aspects, but has been faring much better in the
age of pervasive digital photography. Both companies have seen their traditional business being
rendered obsolete and both companies have been aware of the advent of digital photography.
Whereas Kodak has been unable to adapt to this new environment, Fujifilm has successfully
weathered the storm and is still today a profitable and sustainable company. Observers point to a
number of key differences that led to Fujifilm adapting more successfully to its changing environment
than Kodak.
The first difference can be found in corporate culture. Kodak had a culture of complacency, ironically
cultivated by its massive success and near monopoly in instant film photography in the USA. Despite
its strengths – hefty investment in research, a rigorous approach to manufacturing and good relations
with its local community –Kodak has become a complacent monopolist. Fujifilm was also aware of the
threat of digital photography surging towards it like a tsunami by the 1980s, but in response, it
developed a three-pronged strategy. First, Fujifilm squeezed as much money out of the film business
for as long as possible. Second, Fuji prepared for the switch to digital photography. Lastly, Fuji
diversified into new lines of business.
The second difference between Kodak and Fuji can be found in the inconsistency in the Kodak
leadership, which meant that Kodak’s strategies changed with every new CEO. As a result, the
company was never able to diversify successfully. For example, George Fisher, CEO from 1993 until
1999, focused on Kodak’s expertise in digital imaging rather than in chemicals, and mass-produced
digital cameras until camera phones destroyed that business. The latest CEO, Antonio Perez, who took
charge in 2005, insisted that digital printing would save Kodak. At Fuji, technological change sparked
an internal power struggle. At first, participants in the consumer film business, who refused to see the
looming crises, prevailed. But the eventual winner was Shigetaka Komori, who chided them as “lazy”
and “irresponsible” for not preparing better for the digital onslaught. Named boss incrementally
between 2000 and 2003, he set about overhauling the company. He spent around US$9 billion on 40
companies since 2000. He slashed costs and jobs. In one 19-month period, he booked more than ¥250
billion in restructuring costs for depreciation and to shed superfluous distributors, development labs,
, managers and researchers. “It was a painful experience”, says Mr Komori. “But to see the situation as
it was, nobody could survive. So we had to reconstruct the business model”
The third difference between the Kodak and Fujifilm companies can be found in its ability compete in
a changing market environment. Kodak executives were not used to competing in a high-technology
world in which speed-to-market is critical to success. Hence, they were more committed to making
perfect products than to getting products into the market as quickly as possible and fixing the
shortcomings in later models. Even when Kodak decided to diversify, it took years to make its first
acquisition. It created a widely admired venture-capital arm, but never made big enough bets to
create breakthroughs. By contrast, rather than simply trying to convert its film camera business to a
digital camera business, Fujifilm tapped its chemical expertise for other uses. Film is a bit like skin –
both contain collagen. Just as photos fade because of oxidation, cosmetic firms would like you to
think that skin is preserved with anti-oxidants. In Fuji’s library of 200 000 chemical compounds, 4 000
are related to anti-oxidants. Therefore the company launched a line of cosmetics which is sold in Asia
and Europe. Fuji also successfully branched out into other pharmaceuticals, liquid-crystal display
(LCD) panels for television sets and other electronic devices. Today, Fujifilm makes only 1% of its
revenue from photographic film. The fourth difference between the companies can be found in its
ability to identify target markets for the future. While many high technology companies were
achieving great success in emerging markets, Kodak’s failure to read the emerging markets correctly
cost the company dearly. Emerging markets generally switched early on from analogue to digital,
many emerging markets leapfrogging from having no cameras straight to using digital on the back of
the rapid adoption of cellular telephone technology.
Whereas Fujifilm has mastered new tactics and survived, Kodak, like so many great companies before
it, seems to have run its course and is on the brink of simply fading away.
Source: Available online: http://www.economist.com/node/21542796 [Accessed 25 November 2017].
2. Study Unit 3 Discussion Questions-Organisational Learning
(1) Explain why dynamic capabilities are necessary in strategic change.
Dynamic capabilities are those capabilities that help organisations to learn new capabilities
they require to adapt to environmental changes.
Organisations cannot only depend on what they are good at today; they also have to change
and acquire new capabilities that will ensure their future success. Whether or not an
organisation possesses dynamic capabilities essentially determines its ability to learn and to
change. Without dynamic capabilities, organisations will not be able to adapt to drastic
changes in their environment, or be able to benefit from innovation.
Organisations differ in their ability to acquire new capabilities. Organisations that can learn
and adapt will be capable of dealing with change, and will accordingly be better able to
survive and prosper in the long term. Only sustainable competitive advantage over the long
term is the ability to learn and adapt.
In considering the case study above, how did the dynamic capabilities of Kodak and
Fujifilm differ? Try to identify at least three key differences.
In considering the dynamic capabilities of the two companies, it becomes clear that Kodak
and Fujifilm differed fundamentally in at least three key respects
• Culture. While Fujifilm was initially slow to change due to the influence of the old
school, it was eventually able to overhaul itself. By contrast, Kodak was never really
able to escape its culture of complacency.
• The mental models of the executives. While Kodak continued to see itself as
primarily a camera company, Fujifilm defined its expertise more broadly and, as a
result, was able to diversify more successfully.
, • A lack of market knowledge. The lack of market knowledge, for example about
emerging markets, meant that Kodak was not able to develop appropriate strategies
for dealing with potential new markets.
(2) Explain the relationship between individual learning and organisational learning.
The learning process can be seen as a cycle with four different activities as follows:
• Concrete experience – this occurs when a person acts in a certain way. The concrete
experience is followed by a process of thinking and reflecting on the experience.
• Abstract conceptualisation – this occurs when certain ideas or theories are
extrapolated from the reflection.
• Active experimentation – this occurs when the new ideas or concepts are
deliberately tried in other similar settings to see what the results are.
• Individual learning is the key to organisational learning. Organisations do not learn,
individuals learn. The process of organisational learning thus starts with individual
learning.
The second phase of the process is where learning is shared with other members of the
organisation until it becomes commonly accepted practice or knowledge.
Organisational learning is continuous and experimental, because the acquisition of
knowledge is not a guarantee that mistakes will not be made. Making mistakes of figuring
out what works or what does not work in different situations is an important part of learning.
However learning takes place in an organisation, it is the transfer of knowledge to other
individuals that will ultimately lead to organisational learning.
There are mechanisms that organisations can use to encourage organisational learning.
The organisation should be a supportive learning environment for example mistakes and
experimentation are tolerated. It should have a concrete learning process and practice. It
should promote learning and reinforce learning behaviours. The organisation should pay
attention to barriers of organisational learning. The organisation should ensure that a proper
knowledge management system is in place and that all organisational members follow the
system. The organisation should reward and motivate individuals who transfer knowledge.
Staff members who have benefited from learning investments should share newly learned
knowledge at staff meetings.
(3) Identify the barriers to organisational learning.
Organisational learning can be defined as the organisational processes of learning and
adapting. There are three major barriers to organisational learning:
• Constrained thinking / dominant general management logic – this stems from the
way managers conceptualise their business. It is a set of broad assumptions that can
be thought of as structures. Managers make critical decisions about the strategy
and allocation of resources based on this and the more dominant the logic, the
more it acts as a barrier to learning and change.
• Management ignorance – managers often assume that they know all about their
business and their industry and that there is no need to learn any more. In this
instance, ignorance and arrogance present a barrier to learning.
• Absorptive capacity - it refers to the ability of an organisation to recognise the value
of new, external information, to assimilate it and to use it to address business
problems. It is a strategic capability and differs from organisations, therefore some
will be able to learn, adapt and innovate quicker than others.
Let us revisit the Kodak case study and consider the definition provided by Garvin in the
context of Kodak versus Fujifilm. Would you say that the definition is complete? What
else would you add to the definition?
The one element that Garvin did not consider explicitly in his definition is the element of
managerial sense-making. If we consider again the case of Fujifilm and Kodak, both
, companies had the foreknowledge that digital photography was coming, and both
altered their behaviour in response. The key difference was the way in which the two
companies interpreted (made sense of) the threat and accordingly altered their
behaviour. While Kodak simply attempted to adapt to the new technology, Fujifilm
fundamentally (and successfully) changed their business model – something that Kodak
was never able to do.
(4) Explain the role of absorptive capacity in organisational learning with the help of practical
examples.
Absorptive capacity refers to the ability of the organisation to recognise the value of new,
external information to assimilate it and to use it to solve business problems.
Absorptive capacity is a strategic capability and it differs for different organisations, so that
some organisations have a higher absorptive capacity than others and would accordingly be
able to learn faster and adapt more quickly to their environment or to innovate.
There are four dimensions that determine the absorptive capacity of an organisation:
• Acquisition of external information – this term refers to the ability of the
organisation to acquire relevant information from its external environment. Speed
is an important element of acquiring information – the better the quality of the info
and the sooner it is obtained, the better the organisations chances are of
developing some sort of advantage.
• Assimilation of acquiring information – assimilation of information refers to the
ability of the organisation to analyse and make sense of the acquired information.
The ability of the organisation to interpret and understand the implications of the
new information to their business is crucial as is its responsibility to share this info
and knowledge across the organisation.
• Transformation of knowledge – this term refers to the abilities of the organisation
to combine new knowledge with existing knowledge and to develop new insights.
• Applying new knowledge – the real benefit of absorptive capacity occurs when
organisations the transformed knowledge and new insights to improve their
business operations and to develop new innovations and business venture.
The ultimate outcome of absorptive capacity is that organisations with a high level of
absorptive capacity will be able to develop competitive advantage as they will be able to be
more dynamic in the context they operate in.
Knowledge management ensures that knowledge is used effectively and efficiently for the
long term benefit of the organisation.
What were the barriers to learning that prevented Kodak from successfully adapting to a
digital world? Give specific examples from the case study, and specifically consider all the
different elements that determine absorptive capacity.
In the case of Kodak, we can find examples of all three major barriers to learning and their
interrelationship is evident. They are the following:
• Constrained thinking. The dominant logic of the Kodak management team was that they
were a camera and digital imaging company. This clearly constrained their thinking, and
their search for new opportunities was limited to opportunities related to the camera
business. For example, when they entered the emerging Chinese market, it was with the
intent of selling photographic fi lm rather than digital imaging.
• Ignorance and lack of foresight on the part of management. Management’s ignorance
was evident from the fact that Kodak executives were not sure how to compete in the
fast-moving technology market. Rather than getting products to the market as quickly as
possible and fixing them in due course, they wanted to launch perfect products, which
meant that they always lagged behind their more technology-oriented competitors, such
as Sony and Canon.
• A lack of absorptive capacity. Kodak was also limited by its lack of absorptive capacity.
Exam Prep
May/June 2018
Case Study per TL102/1/2018
1. APPENDIX A: EXAMINATION CASE STUDY-Kodak is at death’s door; Fujifilm, its old rival, is
thriving. Why?
The Eastman Kodak Company (referred to simply as Kodak) is an American technology company
founded in 1888 when it was known for its pioneering technology and innovative marketing. “You
press the button, we do the rest,” was its slogan in 1988. By 1976 Kodak accounted for 90% of film
and 85% of camera sales in America. Until the 1990s it was regularly rated as one of the world’s five
most valuable brands. The company’s ubiquity was such that its “Kodak moment” tagline entered the
common lexicon to describe a personal event that was demanded to be recorded for posterity. The
company build one of the world’s first digital cameras in 1975.
Then came digital photography to replace film, and smartphones replace cameras. Kodak’s revenues
peaked at nearly US$16 billion in 1996 and its profits at US$2.5 billion in 1999. Then Kodak’s financial
struggle began as a result in the decline in sales of photographic film and its inability to adapt to a
world in which digital photography had become pervasive and available in just about every cellular
telephone.
Fujifilm Holdings Corporation, better known as Fujifilm, is a Japanese company and one of Kodak’s
competitors. Fujifilm is very similar to Kodak in many aspects, but has been faring much better in the
age of pervasive digital photography. Both companies have seen their traditional business being
rendered obsolete and both companies have been aware of the advent of digital photography.
Whereas Kodak has been unable to adapt to this new environment, Fujifilm has successfully
weathered the storm and is still today a profitable and sustainable company. Observers point to a
number of key differences that led to Fujifilm adapting more successfully to its changing environment
than Kodak.
The first difference can be found in corporate culture. Kodak had a culture of complacency, ironically
cultivated by its massive success and near monopoly in instant film photography in the USA. Despite
its strengths – hefty investment in research, a rigorous approach to manufacturing and good relations
with its local community –Kodak has become a complacent monopolist. Fujifilm was also aware of the
threat of digital photography surging towards it like a tsunami by the 1980s, but in response, it
developed a three-pronged strategy. First, Fujifilm squeezed as much money out of the film business
for as long as possible. Second, Fuji prepared for the switch to digital photography. Lastly, Fuji
diversified into new lines of business.
The second difference between Kodak and Fuji can be found in the inconsistency in the Kodak
leadership, which meant that Kodak’s strategies changed with every new CEO. As a result, the
company was never able to diversify successfully. For example, George Fisher, CEO from 1993 until
1999, focused on Kodak’s expertise in digital imaging rather than in chemicals, and mass-produced
digital cameras until camera phones destroyed that business. The latest CEO, Antonio Perez, who took
charge in 2005, insisted that digital printing would save Kodak. At Fuji, technological change sparked
an internal power struggle. At first, participants in the consumer film business, who refused to see the
looming crises, prevailed. But the eventual winner was Shigetaka Komori, who chided them as “lazy”
and “irresponsible” for not preparing better for the digital onslaught. Named boss incrementally
between 2000 and 2003, he set about overhauling the company. He spent around US$9 billion on 40
companies since 2000. He slashed costs and jobs. In one 19-month period, he booked more than ¥250
billion in restructuring costs for depreciation and to shed superfluous distributors, development labs,
, managers and researchers. “It was a painful experience”, says Mr Komori. “But to see the situation as
it was, nobody could survive. So we had to reconstruct the business model”
The third difference between the Kodak and Fujifilm companies can be found in its ability compete in
a changing market environment. Kodak executives were not used to competing in a high-technology
world in which speed-to-market is critical to success. Hence, they were more committed to making
perfect products than to getting products into the market as quickly as possible and fixing the
shortcomings in later models. Even when Kodak decided to diversify, it took years to make its first
acquisition. It created a widely admired venture-capital arm, but never made big enough bets to
create breakthroughs. By contrast, rather than simply trying to convert its film camera business to a
digital camera business, Fujifilm tapped its chemical expertise for other uses. Film is a bit like skin –
both contain collagen. Just as photos fade because of oxidation, cosmetic firms would like you to
think that skin is preserved with anti-oxidants. In Fuji’s library of 200 000 chemical compounds, 4 000
are related to anti-oxidants. Therefore the company launched a line of cosmetics which is sold in Asia
and Europe. Fuji also successfully branched out into other pharmaceuticals, liquid-crystal display
(LCD) panels for television sets and other electronic devices. Today, Fujifilm makes only 1% of its
revenue from photographic film. The fourth difference between the companies can be found in its
ability to identify target markets for the future. While many high technology companies were
achieving great success in emerging markets, Kodak’s failure to read the emerging markets correctly
cost the company dearly. Emerging markets generally switched early on from analogue to digital,
many emerging markets leapfrogging from having no cameras straight to using digital on the back of
the rapid adoption of cellular telephone technology.
Whereas Fujifilm has mastered new tactics and survived, Kodak, like so many great companies before
it, seems to have run its course and is on the brink of simply fading away.
Source: Available online: http://www.economist.com/node/21542796 [Accessed 25 November 2017].
2. Study Unit 3 Discussion Questions-Organisational Learning
(1) Explain why dynamic capabilities are necessary in strategic change.
Dynamic capabilities are those capabilities that help organisations to learn new capabilities
they require to adapt to environmental changes.
Organisations cannot only depend on what they are good at today; they also have to change
and acquire new capabilities that will ensure their future success. Whether or not an
organisation possesses dynamic capabilities essentially determines its ability to learn and to
change. Without dynamic capabilities, organisations will not be able to adapt to drastic
changes in their environment, or be able to benefit from innovation.
Organisations differ in their ability to acquire new capabilities. Organisations that can learn
and adapt will be capable of dealing with change, and will accordingly be better able to
survive and prosper in the long term. Only sustainable competitive advantage over the long
term is the ability to learn and adapt.
In considering the case study above, how did the dynamic capabilities of Kodak and
Fujifilm differ? Try to identify at least three key differences.
In considering the dynamic capabilities of the two companies, it becomes clear that Kodak
and Fujifilm differed fundamentally in at least three key respects
• Culture. While Fujifilm was initially slow to change due to the influence of the old
school, it was eventually able to overhaul itself. By contrast, Kodak was never really
able to escape its culture of complacency.
• The mental models of the executives. While Kodak continued to see itself as
primarily a camera company, Fujifilm defined its expertise more broadly and, as a
result, was able to diversify more successfully.
, • A lack of market knowledge. The lack of market knowledge, for example about
emerging markets, meant that Kodak was not able to develop appropriate strategies
for dealing with potential new markets.
(2) Explain the relationship between individual learning and organisational learning.
The learning process can be seen as a cycle with four different activities as follows:
• Concrete experience – this occurs when a person acts in a certain way. The concrete
experience is followed by a process of thinking and reflecting on the experience.
• Abstract conceptualisation – this occurs when certain ideas or theories are
extrapolated from the reflection.
• Active experimentation – this occurs when the new ideas or concepts are
deliberately tried in other similar settings to see what the results are.
• Individual learning is the key to organisational learning. Organisations do not learn,
individuals learn. The process of organisational learning thus starts with individual
learning.
The second phase of the process is where learning is shared with other members of the
organisation until it becomes commonly accepted practice or knowledge.
Organisational learning is continuous and experimental, because the acquisition of
knowledge is not a guarantee that mistakes will not be made. Making mistakes of figuring
out what works or what does not work in different situations is an important part of learning.
However learning takes place in an organisation, it is the transfer of knowledge to other
individuals that will ultimately lead to organisational learning.
There are mechanisms that organisations can use to encourage organisational learning.
The organisation should be a supportive learning environment for example mistakes and
experimentation are tolerated. It should have a concrete learning process and practice. It
should promote learning and reinforce learning behaviours. The organisation should pay
attention to barriers of organisational learning. The organisation should ensure that a proper
knowledge management system is in place and that all organisational members follow the
system. The organisation should reward and motivate individuals who transfer knowledge.
Staff members who have benefited from learning investments should share newly learned
knowledge at staff meetings.
(3) Identify the barriers to organisational learning.
Organisational learning can be defined as the organisational processes of learning and
adapting. There are three major barriers to organisational learning:
• Constrained thinking / dominant general management logic – this stems from the
way managers conceptualise their business. It is a set of broad assumptions that can
be thought of as structures. Managers make critical decisions about the strategy
and allocation of resources based on this and the more dominant the logic, the
more it acts as a barrier to learning and change.
• Management ignorance – managers often assume that they know all about their
business and their industry and that there is no need to learn any more. In this
instance, ignorance and arrogance present a barrier to learning.
• Absorptive capacity - it refers to the ability of an organisation to recognise the value
of new, external information, to assimilate it and to use it to address business
problems. It is a strategic capability and differs from organisations, therefore some
will be able to learn, adapt and innovate quicker than others.
Let us revisit the Kodak case study and consider the definition provided by Garvin in the
context of Kodak versus Fujifilm. Would you say that the definition is complete? What
else would you add to the definition?
The one element that Garvin did not consider explicitly in his definition is the element of
managerial sense-making. If we consider again the case of Fujifilm and Kodak, both
, companies had the foreknowledge that digital photography was coming, and both
altered their behaviour in response. The key difference was the way in which the two
companies interpreted (made sense of) the threat and accordingly altered their
behaviour. While Kodak simply attempted to adapt to the new technology, Fujifilm
fundamentally (and successfully) changed their business model – something that Kodak
was never able to do.
(4) Explain the role of absorptive capacity in organisational learning with the help of practical
examples.
Absorptive capacity refers to the ability of the organisation to recognise the value of new,
external information to assimilate it and to use it to solve business problems.
Absorptive capacity is a strategic capability and it differs for different organisations, so that
some organisations have a higher absorptive capacity than others and would accordingly be
able to learn faster and adapt more quickly to their environment or to innovate.
There are four dimensions that determine the absorptive capacity of an organisation:
• Acquisition of external information – this term refers to the ability of the
organisation to acquire relevant information from its external environment. Speed
is an important element of acquiring information – the better the quality of the info
and the sooner it is obtained, the better the organisations chances are of
developing some sort of advantage.
• Assimilation of acquiring information – assimilation of information refers to the
ability of the organisation to analyse and make sense of the acquired information.
The ability of the organisation to interpret and understand the implications of the
new information to their business is crucial as is its responsibility to share this info
and knowledge across the organisation.
• Transformation of knowledge – this term refers to the abilities of the organisation
to combine new knowledge with existing knowledge and to develop new insights.
• Applying new knowledge – the real benefit of absorptive capacity occurs when
organisations the transformed knowledge and new insights to improve their
business operations and to develop new innovations and business venture.
The ultimate outcome of absorptive capacity is that organisations with a high level of
absorptive capacity will be able to develop competitive advantage as they will be able to be
more dynamic in the context they operate in.
Knowledge management ensures that knowledge is used effectively and efficiently for the
long term benefit of the organisation.
What were the barriers to learning that prevented Kodak from successfully adapting to a
digital world? Give specific examples from the case study, and specifically consider all the
different elements that determine absorptive capacity.
In the case of Kodak, we can find examples of all three major barriers to learning and their
interrelationship is evident. They are the following:
• Constrained thinking. The dominant logic of the Kodak management team was that they
were a camera and digital imaging company. This clearly constrained their thinking, and
their search for new opportunities was limited to opportunities related to the camera
business. For example, when they entered the emerging Chinese market, it was with the
intent of selling photographic fi lm rather than digital imaging.
• Ignorance and lack of foresight on the part of management. Management’s ignorance
was evident from the fact that Kodak executives were not sure how to compete in the
fast-moving technology market. Rather than getting products to the market as quickly as
possible and fixing them in due course, they wanted to launch perfect products, which
meant that they always lagged behind their more technology-oriented competitors, such
as Sony and Canon.
• A lack of absorptive capacity. Kodak was also limited by its lack of absorptive capacity.
