Commentary & Analysis
FREE Kodak Moments: Graphic Communications Group Steps Up Pace; Carp Steps Down
Earlier this month,
By Cary Sherburne
Published: May 25, 2005
Earlier this month, Eastman Kodak Company announced that its President and Chief Operating Officer Antonio M. Perez would become Chief Executive Officer effective June 1 with the retirement of current Chairman and CEO Daniel A. Carp after 35 years of service with the company. Carp will remain as Chairman until January 1, when Perez will add Chairman to his CEO and President titles.
Carp recruited Perez from Hewlett-Packard where he was a corporate vice president and a member of the company's Executive Council after 25 years of service. Carp has led Kodak’s “digital transformation,” and tagged Perez as the leader who would continue to advance Kodak's success in digital markets.
WhatTheyThink spoke with Carp at the On Demand show to get his views on Kodak, past and present. We also took a look at some of the application-specific work Kodak was showing at On Demand as the company continues to integrate its graphic communications portfolio.
Interview with Daniel A. Carp
WTT: Mr. Carp, thank you so much for taking time to speak with us today. It is my understanding that the plan from the beginning in bringing Mr. Perez on board was that he would assume the role of CEO on your retirement.
DAC: Yes. We have known each other for a number of years, and during our discussions leading up to Antonio joining Kodak, we spent a lot of time discussing the go-forward strategy to make sure that we were on the same page. You wouldn’t really want to have the President and CEO operating with different strategic intents.
WTT: When you look at the Kodak organization, and the “three-legged stool” you often speak about—Health Care, Consumer and Graphic Communications—what are the synergies across those three organizations?
DAC: The elements that cut across these three business areas tend to be image science technology, algorithms and the ability to manipulate images and transform them from analog to digital and back to analog. Another way to look at the commonalities would be in terms of workflow and databases—all three business areas rely heavily on both.
WTT: Last month, ratings agency Standard & Poor's cut its rating on Kodak debt to speculative or junk status in a move that could make it more costly for Kodak to borrow money. What impact do you see that having in the short- and long-term?
DAC: The agencies are concerned about the rate of drop in our traditional business as compared to the rate of growth on our digital businesses. They need proof that we can get cost contained fast enough. But we are in this business for the long term; it is not a quarter-over-quarter business. This rating change adds a couple of basis points to our borrowing; that is all. We have the team, the technology and the strategy in place, and quite frankly, if we try to run our strategy on a quarter-over-quarter basis, we will subperform.
WTT: Kodak shipped 900,000 point-and-shoot digital cameras to domestic retailers in the January-to-March 2005 quarter—41% more than in the first quarter of 2004—and its market share rose to 20.4% from 18.1% a year ago. This represents more units shipped than any of your Japanese rivals. And you also recently announced that you were entering the digital camera market in Japan. How are digital camera sales going for you in Japan on their home turf?
DAC: We have done well in Japan , but still have a lot more work to do. The primary reason we entered that market is because it is one of the most demanding markets in the world, from both a consumer and commercial perspective. I want all of our businesses to be in that market. We are not going into Japan head first to try to take over the market. Rather, we want to learn from that demanding consumer market, from their quality demands, to make our offerings more competitive.
WTT: It is my understanding that the majority of Kodak film sales are in the entertainment industry (i.e., Hollywood). What are you hearing from your friends in Hollywood relative to their long-term preference for film versus digital?
DAC: There are two parts to this answer. In the motion picture industry, the production workflow is the capture of images on film, working on them in digital, and then output back to film, often by printing to interim film and then final film. Capture and output are not going digital anytime soon. You can't yet get the quality in digital that they require. The other consideration is the future of distributing movies digitally to theaters. The barrier there is the cost to retool theaters, averaging $100,000 to $150,000 per theater. It is an ROI question, and the technology is still changing too quickly. If they make that retooling investment now, the next step in technology development is just around the corner and they may need to retool again too quickly. It is a matter of deciding when to make that jump. I don't see that happening over the next three to four years.
WTT: What are some of the areas of research in which Kodak is involved that you think will play a "change agent" role in terms of innovation and new applications?
DAC: In the commercial print space, there are really three areas:
- The effective use of customer information. That is an area that is really rudimentary at this stage in the industry. We are developing workflow to make this work better, and working with database companies to help customers achieve these goals.
- The industry is sitting on a time bomb of convergences of different customer solutions that is a disruptive force. Kodak will be involved in helping that happen more smoothly.
- We believe the streaming inkjet technology we have under development will shake up the market and will impact the first two areas that I mentioned above. It will really open up the opportunities for on demand printing and workflow if this technology achieves what we think it will be able to do.
In terms of our Health business, we are doing a lot of work around the workflow of archiving systems. We believe patients will take control of their own medical records, and our hospital information systems are aimed at that trend. Second is the area of computer aided diagnosis. This obviously does not eliminate the doctors, but it takes care of a lot of the basic diagnostic efforts and makes physicians more productive. These technologies may also be able to uncover things that might have been missed with a manual analysis.
In the Consumer business, everything will be wireless. Images will be moved seamlessly, wirelessly. We have the nodes in place for anytime access, whether it is the photo machine at the CVS store in your neighborhood or through e-mail distribution or in an online store that will allow consumers to create custom photo albums.
What crosses across all three of these areas, as I indicated earlier, is workflow and databases. In the commercial print environment specifically, the data flow will continue to increase and we will need to have workflow that can handle that increased data flow efficiently.
WTT: Kodak is doing a lot of research into nanotechnology. Will that technology cross all of Kodak's business areas?
DAC: This is important research for us and it does go across all of our businesses. Even film uses nanotechnology—there are 17 layers of material on film. NexPress uses nanotechnology in terms of the imaging system. We are doing lots of research in the labs for the future, but we are leveraging our research to deploy nanotechnology into today’s products as well.
WTT: Have you thought about what you will be doing next?
DAC: In 1969 when I was a senior in college, I went to work for Kodak. Now after 35 years, it is time to step back and look at what I want to do with my life. I have had a great career at Kodak and I deeply care about the company. But I am looking forward to new challenges.
WTT: Mr. Carp, thank you so much for taking time to speak with us. Are there any parting thoughts you would like to share?
DAC: I am very proud of the transformation this company has made to digital. It is not due to me; it is the whole team, including Antonio. I am proud of the dedication of Kodak people and what they have accomplished. And I have to say that Jim [ Langley ], Barb [Pellow], Homi [Shamir] and Jeff [Jacobson] are the most customer-focused people I have ever worked with. This team has built something important, really based on what the customer needs. There is no question that there are challenges ahead, because we are really integrating five different cultures in the Graphic Communications Group: KPG, Creo, NexPress, Versamark and Kodak. But the key factor is that everyone wants to make a difference in an industry they love.
Kodak at On Demand: The Applications
To frame its growing portfolio, Kodak’s Graphic Communications Group chose to showcase three business applications in its extensive booth, which was the combined space that would have been used by Kodak, Versamark and KPG prior to the consolidation.
- Customer Relationship Management (CRM)
- On Demand Book Production
- Auction House
The CRM application showed a membership campaign for a fictional record company, Universal Hits, and was really the star of the booth. In this application, a long-run four-color personalized solicitation letter was produced using the Kodak Versamark VT3000. Once the prospect returns the solicitation letter with completed data, the form is scanned via a Document Imaging Scanner and the data is utilized to create a personalized welcome letter printed on the NexPress, with a tip-on personalized plastic membership card printed on a Kodak Versamark DS4350 inkjet printing system. In this latter part of the process, pre-printed welcome letters were fed through the DS4350 which read the information already printed in the letter, tipped on a blank plastic card, and printed the new member’s information on the card, all inline and at high speed. If an initial solicitation letter was not responded to, the application generated a reminder postcard in a follow-up effort to gain a response. The reminder postcard also reflected the recipient’s choice of music and offered discounted concert tickets as an added incentive to respond. The application was completed with a point of purchase poster produced on a NovaJet 1000i for use in stores.
From a workflow perspective, the solution integrates Datalogics DL100 and EFI's Digital Storefront and OneFlow into what could be operated as fully automated lights out production, with variable rules established in DL100 and Digital Storefront templates that incorporate the data file into the final applications in an interactive way through the Web.
On Demand Book Production was shown using a Kodak Digimaster E125 to produce black & white 7x9” book blocks 4-up and the NexPress 2100 with the NexGlosser to produce high-gloss full color covers for Jack London’s The Call of the Wild. The assembly and finishing process was manual, using a Polar cutter and a C.P. Bourg off-line perfect binder.
The third application was a promotional campaign for the auction of estate pieces in which two 16-page versioned catalogs highlighting different art genre were printed on the NexPress 2100, and a double-sided, tabloid-sized poster promoting the auction produced on the NexPress 2100 and KPG DirectPress 5634 DI. Versioned sales flyers highlighting different sales items were printed on the NexPress 2100, the KPG DirectPress 5634 DI and the Canon 5100 to round out the demonstration.
Kodak NexPress 2100 at On Demand
While Kodak still has a workflow challenge ahead in terms of fully integrating its portfolio, clear progress on that path was demonstrated at On Demand, and you can expect to see more at Print ’05. In the less than two years since the formation of the Kodak Graphic Communications Group, the company has made remarkable progress. Underlying all of the work to date is a clear dedication to the company’s heritage of managing color consistency across all of its technologies, a capability which is becoming increasingly important in a world of hybrid digital and offset workflows.