How Fujifilm survived

Sharper focus
Jan 18th 2012,
THE biggest oddity of Kodak's woes and Fujifil's !e"italisation is that, as we #ut it
in a sto!y this week, $Kodak a%ted like a ste!eoty#i%al %hange&!esistant Ja#anese
fi!, while Fujifil a%ted like a fle'ible (e!i%an one)$ The a!ti%le looked ostly at
Kodak, sin%e it is the news* an i%oni% (e!i%an #owe!house lies at death's doo!)
+ut a %lose! e'aination of Fujifil is also wa!!anted to unde!stand how it ade the
t!ansition away f!o fil,in #a!ti%ula! afte! Kodak filed a lawsuit against the
Ja#anese fi! alleging #atent inf!ingeent on Janua!y 1-th) .he!e Kodak is t!ying
to oneti/e its 012 in its one %o!e business, #hotog!a#hy, the digital iaging se%to!
a%%ounts fo! only about one&fifth of Fujifil's !e"enue, down f!o o!e than half a
de%ade ago)
How Fujifil su%%eeded se!"es as a wa!ning to (e!i%an fi!s about the dange! of
t!ying to take the easy way out* %o#eting th!ough one's a!keting !athe! than
taking the ha!de! !oute of de"elo#ing new #!odu%ts and new businesses) (t the sae
tie, it is a !einde! to Ja#anese e'e%uti"es that thei! %onstant o!oseness and
defeatis is is#la%ed* the %ount!y's fi!s a!e well #la%ed to su%%eed if they a!e
willing to !efo! thei! businesses)
3higetaka Koo!i, Fujifil4s boss 5#i%tu!ed6, e'#!esses adi!ation fo! Kodak in an
inte!"iew #!io! to the lawsuit, %alling it $the st!ongest %o#any 7 e"e! saw)$ He
ente!ed his fi! in 189-, when the (e!i%an fi! towe!ed o"e! its Ja#anese !i"al in
e"e!y way) $7ts situation fills e with a bit of !eg!et and eotion,: he says about
Kodak4s woes)
;ike Kodak, Fujifil !ealised in the 1880s that #hotog!a#hy would be going digital)
;ike Kodak, it %ontinued to ilk #!ofits f!o fil sales, in"ested in digital
te%hnologies, and t!ied to di"e!sify into new a!eas) ;ike Kodak, the folks in the wildly
#!ofitable fil di"ision we!e in %ont!ol and late to adit that the fil business was a
lost %ause) (s late as 2000 Fujifil %ounted on a gentle 1< o! 20&yea! de%line of fil
,not the sudden f!ee&fall that took #la%e) .ithin a de%ade, fil went f!o 90= of
Fujifil's #!ofits to basi%ally nothing)
7f the a!ket fo!e%ast, st!ategy and inte!nal #oliti%s we!e the sae, why the
di"e!gent out%oes> The big diffe!en%e was e'e%ution)
Fujifil !ealised it needed to de"elo# in&house e'#e!tise in the new businesses) 7n
%ont!ast, Kodak seeed to belie"e that its %o!e st!ength lay in b!and and a!keting,
and that it %ould si#ly #a!tne! o! buy its way into new indust!ies, su%h as d!ugs o!
%hei%als) The #!oble with this a##!oa%h was that without in&house e'#e!tise,
Kodak la%ked soe key skills* the ability to "et a%?uisition %andidates well, to
integ!ate the %o#anies it had #u!%hased and to negotiate #!ofitable #a!tne!shi#s)
$Kodak was so %onfident about thei! a!keting %a#ability and thei! b!and, that they
t!ied to take the easy way out,: says @! Koo!i)
.hen sales f!o fil de"elo#ing and #!inting we!e dwindling, fo! instan%e, soe
!e"enue %ould still be gained by installing kiosks to #!int digital #hotos) Aet whe!eas
Fujifil had its own syste, Kodak needed to #a!tne! with anothe! fi!,and thus
sha!e the in%oe) @o!eo"e!, whe!eas Fujifil %ould a##ly the kiosk te%hnology to
othe! businesses in its digital&iaging di"ision, Kodak %ould not be%ause it did not
own the te%hnology) The Ja#anese %o#any was also able to st!ike a deal to #la%e its
kiosks in .ala!t sto!es, whi%h ga"e it s%ale) Today Fujifil %ont!ols nea!ly B0= of
the #hotofinishing a!ket in (e!i%a, whe!eas Kodak's sha!e is only 1<=, a%%o!ding
to 7+73.o!ld, a !esea!%h fi!)
Fujifil's su%%ess stes in #a!t f!o a de%ision in 2000 to s#end a!ound C1)9 billion
fo! an additional 2<= stake in FujiDe!o', the fi!'s joint "entu!e with De!o', when
the st!uggling (e!i%an fi! was in need of %ash) This allowed Fujifil to %ont!ol the
joint "entu!e4s st!ategy and to %onsolidate its hefty ea!nings) .hen fil began its
swift de%line, the %o#any had a %ushion of ea!nings)
Fujifil also fo%used on a##lying its te%hnologies in new a!eas) Fujifil's e'#e!tise in
nanote%hnology fo! #la%ing %hei%als onto fil, fo! instan%e, was %a!!ied o"e! to
a##lying %oseti%s to fa%ial skin) E'#e!ein%e with #hotosensiti"e ate!ials hel#ed it
with fine %hei%als and indust!ial ate!ials) Today, Fujifil's edi%al&iaging
e?ui#ent business is g!owing ?ui%kly, and it has a%?ui!ed any fi!s in the se%to!,
in%luding #aying C1 billion in 2e%ebe! fo! 3ono3ite, an (e!i%an ult!asound
e?ui#ent ake!)
5.hen #!essed whethe! he wants to buy Ely#us, the Ja#anese %ae!a and edi%al
de"i%e ake! laid low due to a %o!#o!ate go"e!nan%e s%andal, @! Koo!i de%lined to
answe!) (sked whethe! the +!itish boss, @i%hael .oodfo!d, did the !ight thing by
#ubli%ly e'#osing the finan%ial isdeeds o! whethe! he should ha"e handled it
inte!nally, @! Koo!i adaantly stated* $7t was the !ight way)$ (nd the s%andal
!e#!esents a "e!y !a!e %ase fo! Ja#anese %o#anies, he hastens to add)6
(s a !esult, Fujifil be%ae a u%h o!e di"e!sified %o#any than Kodak) Ha"ing a
longe!&te! "ision, it in"ested a lot) This was $daaging$ to the fi!'s sho!t&te!
#!ofitability, in the wo!ds of @! Koo!i, but the bet #aid off) $.e ha"e o!e '#o%kets'
and 'd!awe!s' in ou! %o#any,$ he e'#lains,a eta#ho! fo! diffe!ent te%hni%al a!eas
that b!ing in !e"enue)
(lthough Fujifil did any things !ight, its #e!fo!an%e has not been unbleished)
(fte! the !e%ession hit, the fi! has had to !est!u%tu!e again) 3ales and #!ofit both
fell in the fi!st half of the %u!!ent fis%al yea!, and its sha!es lost one&thi!d of thei!
"alue in 2011) 3till, the %o#any is in a st!ong #osition to do well in ost of its
businesses)
(nd Kodak> $The!e was %o#lete and utte! denial$ about %o#etition f!o Fujifil,
a%%o!ding to one of the fi!4s fo!e! senio! e'e%uti"es, who !e?uested anonyity
sin%e his %u!!ent e#loye! would not want hi to s#eak about #!e"ious wo!k) He
!e%alls the !ea%tion at the %o#any's head?ua!te!s in 0o%heste!, Few Ao!k, in 188<
on the day that Gonsue! 0e#o!ts, an (e!i%an aga/ine, !e#o!ted that the
Ja#anese %o#any's fil was as good as Kodak's) 7nstead of being ala!ed,
e"e!yone ag!eed it si#ly wasn't t!ue)
$Kodak's ono#oly was the #!oble H 7t always belie"ed it had a Iod&gi"en !ight to
100= of the a!ket,$ he says) $7t ne"e! bothe!ed to look o"e! its shoulde! at what
was %oing u# f!o behind)$ 7nstead, Kodak !elied on its b!and)
The $Kodak oent:, he e'#lains, was a way to s%a!e #eo#le that unless they
bought a little yellow bo', thei! ost i#o!tant eo!ies !isked !uin) (d"e!ts at the
tie de#i%ted s%halt/y iages of a toddle!s' bi!thday o! a fathe! dan%ing with his
daughte! on he! wedding day) $The ads we!e eant to ake you %!y, and if you
%!ied, that eant you would #ay an e't!a B< %ents fo! a !oll of fil):
.hat a!e the lessons f!o the su!#!ising stuble and the e?ually su!#!ising su%%ess>
Fi!st is the need to %annibalise oneself) 3e%ond is the i#o!tan%e of e'e%ution in
addition to st!ategy) +ut ost i#o!tant, fi!s ust !esist looking fo! a agi% wand
when ha!d wo!k in needed)
Aet the!e is an e"en bigge! lesson in this) 7t is easy to think that %o#anies %an
%o#ete by outsou!%ing #!odu%tion and fo%us on de"elo#ing and a!keting) +ut
any inno"ations bubble u# f!o the fa%to!y floo!) E"en (##le, a aste! in
outsou!%ing and o!%hest!ating anufa%tu!ing, has in&house e'#e!tise and
o%%asionally a%?ui!es %e!tain te%hnologies) Today, as debates !age in (e!i%a o"e!
the deg!ee to whi%h !etu!ns on %a#ital e'%eed those f!o a%tual business o#e!ations,
and the !elati"e e!its of e#loyent in anufa%tu!ing "e!sus the se!"i%es se%to!,
the histo!y of Kodak is o!e !ele"ant than e"e!)