The big picture - interview with Eastman Kodak CEO George Fisher - Cover Story

Chief Executive, The, Nov, 1995 by J.P. Donlon

George Fisher stepped into Eastman Kodak's CEO frame after the company had endured four restructurings over seven years. After two years, the questions facing him now are: How fast can Kodak grow and how soon?

When George M.C. Fisher became chairman, president, and chief executive of Eastman Kodak in December 1993, he walked in the rarefied atmosphere of being one of America's most admired CEOs. Prior to joining Kodak, he had been CEO of Motorola since 1988, the hand-picked successor of the founder's son, Robert Galvin. Fisher's aggressive push for Six Sigma quality and going head-to-head with Japanese rivals earned the Schaumburg, IL-based communications and electronics company a reputation as a world-class competitor. Before Motorola, Fisher spent 10 years in research and development with AT&T Bell Laboratories. (The only grand old icons of U.S. technology business not on Fisher's CV seem to be GE and IBM. But at the time of his Kodak move, he reportedly was on the short list to succeed IBM's John Akers.)

What, aside from a generous pay package, would induce an executive to leave a high-flier such as Motorola for a dowdy photography giant whose lackluster financial performance led to the ouster of its previous CEO, Kay Whitmore? Under Whitmore the Rochester, NY-based company endured four restructurings over seven years. Earnings limped along at 5 percent of sales. After decades of dominating the industry, Kodak also had lost ground to rivals such as Fuji Photo Film. The core issue is as much cultural as technical: Kodak is a $13.6 billion chemicals company trying in fits and starts to master the electronic revolution that it knows is the future of imaging. For the past 20 years, the company - which pioneered mass-market photography and remains the largest maker of silver halide-based film - has been haunted by the challenge of embracing the new technology without risking the cashflow still spewing from the old.

Meanwhile, competition in Kodak's basic film business has grown at a time when annual growth in film consumption has slowed from 10 percent to about 4 percent. In addition to Fuji, Germany's Agfa and 3M in the U.S. have gained shelf space and offered retailers a private-label discounted alternative to Kodak's familiar yellow-and-black box. Despite this, Kodak still commands about 40 percent of the world film market and is gaining share in some countries. Brand recognition remains high, as does the company's reputation for quality.

Fisher, 54, has sought to leverage this basic strength along with the company's technical expertise "to pursue growth as never before." During his first year, he set a course to become "a world leader in imaging," and to reduce cycle times and cost. Although he has had no experience in turnarounds, Fisher has changed how Kodak operates. He divested five businesses in eight months and used the $7.9 billion in proceeds to eliminate more than $7 billion in debt. He altered the organizational structure, elevating two dark-horse insiders to assist him in chief operating positions. He created a new management team that includes Senior Vice President and Chief Marketing Officer Carl Gustin, who came from DEC and previously, Apple. "Fisher has great dedication to technology," Gustin explains. "We're adding marketing to a company that didn't have much of it."

At the heart of Fisher's plans is a strategy that calls for rapid production and marketing of products related to electronic imaging. This includes electronic still cameras, video, and PC-based multimedia graphics. New distribution channels include nontraditional outlets such as Circuit City, CompUSA, and discount electronic stores. Kodak kiosks are popping up in shopping malls, allowing walk-up customers to make their own copies from existing prints. Gustin reckons Kodak's digital imaging is growing 40 percent a year.

Next year, Kodak intends to launch its Advanced Photographic System, a film camera format that will take advantage of digital technology to provide new benefits to traditional picture-taking. The system was developed jointly by a consortium of photographic companies including Kodak, Fuji, Canon, Nikon, and Minolta. Expected to advance picture-taking simplicity to a significant degree, APS uses a new type of film cartridge that can store up to 40 images.

Digital cameras also can be used with PCs, much as VCRs are with TVs today. Today, professional electronic cameras cost $20,000. Kodak's DC40 is priced at $995, with the expectation that, like VCRs, prices will drop to a more affordable $300. Kodak reckons that 52 billion pictures are taken globally each year, and less than 2 percent have anything done to them after the initial prints or slides are made. Gustin would like to see utilization boosted to 4 percent or 5 percent. Kodak also is developing inexpensive cameras and film processing for markets such as China and South America.

At Motorola, Fisher vigorously lobbied for USTR support in a battle for telecom market access with NTT. In a similar complaint, Kodak claims Fuji unfairly bullies retailers in the Japanese photographic market outside of Tokyo to keep them from carrying Kodak. Fuji counters that Kodak dominates the U.S. with its Qualex photofinishing subsidiary and with exclusive deals with dealers such as Eckard Corp., from which Kodak seeks to buy its photo-processing operations.