The Limits of CEO Magic

When George Fisher announced yesterday that he would be stepping down as CEO of Kodak earlier than expected (he’ll be leaving at the end of this year, although he’ll remain chairman until the end of next year), Kodak’s stock price didn’t even tremble. On the one hand, you could see this as a testament to a well-managed succession process, since Kodak’s new CEO, Daniel Carp, is a company veteran who has been groomed for this position. On the other, and more convincing, hand, you could see the lack of reaction as evidence that Fisher never really delivered as CEO, and that he will not be sorely missed.

It’s impossible to resist drawing larger conclusions from Fisher’s tenure at Kodak, which began in 1993 when he was brought in from Motorola to transform a company that had drifted away from its core business and found itself with too many expenses and not enough revenue. So I won’t resist drawing them.

In the first place, Fisher’s inability truly to remake the company suggests that we should be wary of the idea that there are some executives who can just work magic. Companies (and marketplaces) are complicated organisms, with institutional pressures, competitive realities, and structural weaknesses and strengths that are not transformable simply by an act of will. In this era of CEO worship, it’s all too easy to believe that bringing in the right guy will immediately change everything for the better. But there are significant limits to a CEO’s power. It’s one thing to clean up a company’s balance sheet and make it leaner and more efficient. It’s another to restore it to long-term health. You could say that Kodak’s continued mediocre performance is just proof that Fisher wasn’t “the right guy.” He certainly did not do an ideal job, but it’s more likely that Kodak just wasn’t the right place.

Along those lines, one of the reasons why Fisher stumbled was that Kodak got locked into a price war with Fuji, which it seems to have now weathered but which could break out again at any moment. And the fact that Kodak was so susceptible to a competitor’s adoption of a low-price strategy shows just how tenuous a brand’s strength really is. The great virtue of branding is that it’s supposed to give you pricing power even in the absence of a genuine technological difference between you and your competitors. But what Kodak found out when Fuji started slashing prices is that customers were much less loyal to the magic of the Kodak moment than we thought. Apparently a Fuji moment is just as magical, especially when it’s cheaper.

Finally, whatever Fisher did accomplish at Kodak, he never really got the company turned around the way he wanted on the question of digital technology. There seems to be little question at this point that digital photography is the wave of the future, and that it will make significant inroads into Kodak’s core film business. The problem is that the wave may not arrive (in any size, that is) for a while, and in the meantime investing in new technology hurts Kodak’s bottom line. More than that, fully embracing the digital world is something Kodak is unprepared to do, both in cultural and in organizational terms. Fisher clearly saw the future (he was an interesting strategic thinker), but he also saw all the hurdles Kodak will have to leap to get there. And one wonders if his early departure wasn’t in part the product of his realization that Kodak isn’t ready to leap those hurdles anytime soon, and that perhaps it won’t end up leaping them at all.