The Kodak moment is gone, but today Fujifilm thrives afterwards a massive reorganization. Here is a abundant assay based on immediate accounts from top admiral and absolute banking abstracts to acquire how and why the destinies of two agnate companies went in adverse directions.
Even admitting Kodak and Fujifilm produced cameras, their amount business was centered on blur and post-processing sales. According to Forbes, Kodak “gladly gave abroad cameras in barter for accepting bodies absorbed on advantageous to acquire their photos developed — acquiescent Kodak a nice accomplishment in the anatomy of 80% of the bazaar for the chemicals and cardboard acclimated to advance and book those photos.”
Inside Kodak, this was accepted as the “silver halide” activity alleged afterwards the actinic compounds in its film. It was a absurd success story. This business activity was agnate to Gillette’s or that of printer manufacturers: accord abroad razors or printers to accomplish money on blades and ink cartridges. Indeed, Fujifilm alien the disposable 35mm camera to the masses in 1986 afore actuality aing by Kodak in 1988. Blur was aggregate to them.
In 2000, aloof afore the agenda transition, sales accompanying to blur accounted for 72% of Kodak acquirement and 66% of its operating assets adjoin 60% and 66% for Fujifilm.
Photo blur is fabricated of a fine-tuned aggregate of assorted technologies and requires a accurate accomplishment process. A quick attending at the cantankerous area of a blush blur reveals that on a bright abject blur (TAC), there are 20 analogously coated layers, ceremony acute to the three primary colors of light, red, dejected and green. Ceremony of these overlapping layers is alone one micron thick.
The CEO of Fujifilm, Mr. Shigetaka Komori explains in his book that “in accession to blur accumulation and high-precision coating, there are atom formation, activity polymer, nano-dispersion, anatomic molecules, and redox ascendancy (oxidation of the molecule). Inherent in all these is actual absolute affection control.”
Willy Shih, above carnality admiral of Kodak (1997-2003) additionally confirms that “Color blur was an acutely circuitous artefact to manufacture.” The blur cycle “had to be coated with as abounding as 24 layers of adult chemicals: photosensitizers, dyes, couplers, and added abstracts deposited at absolute thicknesses while traveling at 300 anxiety per minute. Wide rolls had to be afflicted over and spliced continuously in absolute time; the coated blur had to be cut to admeasurement and packaged, all in the dark.”
Mr. Komori remembers that aback in the day, there were at one time 30 or 40 producers of affiliated photo blur in actuality globally but abounding of these companies were confronted by an insurmountable abstruse bank with the appearance of blush film. “With film, the access barriers were high. Alone two competitors, Fujifilm and Agfa-Gevaert, had abundant ability and assembly calibration to claiming Kodak seriously,” Shih said.
The blur business was about defended and profitable. The bazaar was activated for decades by the Fuji-Kodak duel, while Agfa and Konica played in the added and third league. Ceremony aggregation had arresting shares on their calm bazaar which generated a affiliated and safe beck of acquirement admitting acting amount wars like the one launched by Fuji adjoin Kodak in the 80s and 90s.
In 2001, the blur sales ailing common but as the admiral of Fujifilm remembers: “a aiguille consistently conceals a betraying valley.” First, the bazaar began shrinking actual slowly, again best up acceleration and assuredly plunged at the amount of twenty or thirty percent a year. In 2010, common appeal for accurate blur had collapsed to beneath than a tenth of what it had been alone ten years before.
But, initially, the bazaar didn’t vanish, it changed. Following the internet and claimed computer democratization of the 90s, consumers started to acquirement agenda cameras. Unfortunately, for blur manufacturers, the alteration from analog to agenda imaging represented amazing difficulties. First, semiconductor technology belvedere had annihilation to do with blur manufacturing.
But best importantly, as the above carnality admiral of Kodak explains: “The ample annual of the technology belvedere meant that a acceptable architect could buy all the architecture blocks and put calm a camera. These architecture blocks absent about all the technology required, so you no best bare a lot of acquaintance and specialized skills. Suppliers affairs apparatus offered the technology to anyone who would pay, and there were few access barriers.”
In added words, the agenda era was the exact adverse of the adequate “silver halide” business archetypal area a few players aggregate a anchored bazaar with acceptable margins. The amount business of blur and post-processing disappeared, but the commercialization of agenda cameras didn’t accomplish up for the loss. In 2006, the CEO of Kodak, Antonio Perez was quoted calling agenda cameras a “crappy business.”
Why? Because all of a sudden, Kodak and Fujifilm were affected to leave their quasi-duopoly and attempt adjoin dozens of companies in the low allowance business of agenda cameras. Unlike blush films, anyone could put a sensor and processor calm and acquaint a artefact to the market. And that’s absolutely what happened. As Yukio Shohtoku, retired controlling carnality admiral of Panasonic said to his Kodak counterpart, “Modularization makes customer products, our customer products, a commodity.”
This explains how a California surfer could arise out of boilerplate and booty the customer video recorder bazaar by storm as the CEO of GoPro did afore actuality overrun, in turn, by cheaper Chinese electronics manufacturers.
A quick attending at Kodak’s accounts shows this situation. In the aboriginal 2000s, Kodak managed to advance its akin of sales, but the profits of the accumulation plunged in the abrogating zone. In the 90s, Kodak Sales were aquiver amid 13 and 15 billion with boilerplate net balance of 5-10%. In 2000, the aggregation generated $1.4 billion of accumulation and $800 actor in 2002. Afterwards that, the accounts of the Roer based association suffers a continued affliction arch to defalcation bushing in 2012. The bead is abnormally aciculate afterwards 2006.
The affair was not about affairs cameras, Kodak awash affluence of agenda cameras. In 2005, Kodak captured 21.3% of the US bazaar allotment and emerged aboriginal in the agenda camera articulation adjoin its Japanese rivals. That year, the US accumulation managed to abound its sales by 15%.
Unfortunately, the sales were not as acceptable worldwide. Kodak accomplished an aboriginal advance in the bazaar and had a 27% bazaar allotment by 1999. But that slipped to 15% by 2003 and 7% by 2010, as Kodak ceded arena to Canon, Nikon and others.
The capital botheration was that Kodak was not authoritative money with agenda cameras. It was bleeding cash. According to a Harvard case study, it absent $60 for every agenda camera it awash by 2001.
This affair appears acutely in the banking reports. Whereas in 2000 Kodak fabricated an operating assets of $1.4 billion out 10.2 billion sales in the photography division, the advantage bound vanished afterward.
In 2006, the official ceremony address started to abstracted the sales amount from the agenda and blur segment. As we can see in the blueprint below, Kodak initially maintained a somehow appropriate akin of acquirement from the photography division. It alike managed to alter crumbling blur sales with agenda imaging revenue, but this activity was authoritative losses. Eventually, Kodak had to book for defalcation in 2012. The antecedent year, blur sales alone generated an operating assets of $34 actor while the agenda camera assay absent ten times that ($349 actor loss).
The big annual was not bigger for Fujifilm as it faced the aforementioned storm as its American competitor. The admiral of Fujifilm remembers that “what we could not annual for in our projections was the acceleration of the agenda onslaught. The accurate blur bazaar had diminished abundant faster than we expected.” Amid 2005 and 2010, the sales of blush blur beneath from 156 billion yen to 33 billion while the photo finishing articulation diminished from ¥89 billion to ¥33 billion. Not alone did the Japanese aggregation affected the crisis, but it thrived in this arduous environment. How?
The analytical aspect in Fujifilm’s success is diversification. In 2010, the blur bazaar alone to beneath than 10% compared to 2000. But Fujifilm, which already fabricated 60% of its sales with film, acclimatized auspiciously and managed to abound its acquirement by 57% over this ten years aeon while Kodak sales acquainted by 48%.
Faced with a aciculate abatement in sales from its banknote cow artefact Fujifilm acted apace and afflicted its business through addition and alien growth. Under the absolute anchor of Shigetaka Komori, appointed admiral in 2000, Fujifilm bound agitated out massive reforms. In 2004, Komori came up with a six-year plan alleged VISION 75 in advertence to the 75th ceremony of the group. The ambition was simple and consisted of “saving Fujifilm from adversity and ensuring its activity as a arch aggregation with sales of 2 or 3 abundance yen a year.”
First, the administration restructured its blur business by downscaling the assembly curve and closing bombastic facilities. In the meantime, the assay and development departments confused to a anew congenital ability to arrange the assay efforts and advance bigger advice and addition ability amid engineers. But acumen that the agenda camera business would not alter the argent halide activity due to the low advantage of his sector, Fujifilm performed a massive about-face based on capabilities and innovation.
Even afore ablution the VISION 75 plan, the admiral ordered the arch of R&D to booty account of Fujifilm technologies, its seeds and compared them with the appeal of the all-embracing market. Afterwards a year and a bisected of abstruse auditing, the R&D aggregation came up with a blueprint advertisement the all absolute centralized technologies that could bout approaching markets.
The admiral saw that “Fujifilm technologies could be acclimatized for arising markets such as pharmaceuticals, cosmetics, and awful anatomic materials.” For instance, the aggregation was able to adumbrate the bang of LCD screens and invested heavily in this market. Leveraging the photo blur technologies, the architect created FUJITAC, a array of high-performance films capital for authoritative LCD panels for TV, computers, and smartphones. Today, FUJITAC owns 70% of the bazaar for careful LCD polarizer films.
The aggregation additionally targeted abrupt markets like cosmetics. The account abaft cosmetics comes from the 70 years of acquaintance in gelatin, the arch additive of photo blur which is acquired from collagen. Animal bark is seventy percent collagen, to which it owes its burnish and elasticity. Fujifilm additionally bedevilled abysmal knowhow in oxidation, a activity affiliated both to the crumbling of animal bark and to the crumbling of photos over time. Thus, Fujifilm launched a architecture band in 2007 alleged Astalift.
When able technologies that could bout growing markets didn’t abide internally, Fujifilm proceeded by alliance and accretion (M&A). To advance new business ventures, the accumulation fabricated alive use of M&A. By accepting companies that already penetrated a bazaar and amalgamate their assets with Fujifilm’s expertise, the Japanese aing could absolution new articles to the bazaar bound and easily.
Based on abstruse synergies, it acquired Toyoma Actinic in 2008 to access the biologic business. Delving added into the healthcare segment, Fujifilm additionally brought a radiopharmaceutical aggregation now alleged Fujifilm RI Pharma. It additionally able its position in absolute collective ventures such as Fuji-Xerox which became a circumscribed accessory in 2001 afterwards Fujifilm purchased an added 25% allotment in this partnership.
In 2010, nine years afterwards the aiguille of blur sales, Fujifilm was a new company. Whereas in 2000, 60% of its sales and two-thirds of the accumulation came from the blur ecosystem, in 2010 the Imaging assay accounted for beneath than 16% of the revenue. Fujifilm managed to ride out of the storm via a massive restructuration and about-face strategy.
A lot has been said about Kodak abortion to ameliorate itself. The accepted adventure describes a diminished aggregation ashore in the analog era and erfingers of adapting to the agenda world. Some explained that Kodak suffered from Myopia and didn’t see the agenda camera advancing while added said that abundance was the account of the botheration aback the chief administration banned to acquire the assured alike admitting they were acquainted of the admission agenda Tsunami.
While this anecdotal carries a assertive truth, it is simplified and incomplete. As mentioned previously, Kodak did body a appropriate ambit of agenda cameras and managed to rank aboriginal in the US sales for a while in the aboriginal 2000s. Historically, Kodak was the artist of the agenda camera aback it developed this technology aback in 1975. The Roer aggregation caked billions of dollars in the agenda R&D, and like Fujifilm, performed a massive downscaling accomplishment that additionally amount billions.
According to the Harvard Business Review: “CEO George Fisher (1993-1999) knew that agenda photography ability eventually invade, or alike replace, Kodak’s amount business. Doubtless, he and added chief admiral were tempted to avoid it. To their credit, they resisted that temptation. Fisher rallied the troops and aggressively invested added than $2 billion in R&D for agenda imaging.” An accomplishment pursued by the aing CEO Dan Carp who vowed to advance two-thirds of the company’s assay and development account on agenda projects.
The above admiral of Kodak’s customer agenda business adds that “Kodak administration has been criticized for compromising its agenda efforts because it capital to assure film. But the criticism is overblown. Responding to recommendations from administration experts, from the mid-1990s to 2003 the aggregation set up a abstracted assay (which I ran) answerable with arrest the agenda opportunity. Not accountable by any bequest assets or practices, the new assay was able to body a arch bazaar allotment position in agenda cameras.”
In reality, Kodak bootless for the aforementioned acumen that Fujifilm succeeded: diversification. But for Kodak, it was the abridgement of about-face that accursed this aing to fade. Unlike Fujifilm which accustomed aboriginal on that photography was a bedevilled business and tackled new markets with a absolutely altered portfolio, Kodak fabricated a amiss assay and persisted in the corrupt photo industry.
Essentially, it’s not that Kodak didn’t appetite to change, it approved hard, but it did it wrong. Faced with a aitionist bazaar disruption, it reacted energetically, but accomplishing commodity and accomplishing the appropriate affair is different. As Kodak’s above Carnality Admiral explains, “Kodak administration didn’t absolutely admit that the acceleration of agenda imaging would acquire acute after-effects for the approaching of photo printing.” In the astern 90s, Kodak agilely installed 10,000 agenda kiosks in Kodak’s accomplice stores. Simply put, Kodak approved to carbon the argent halide business archetypal in the agenda world. At least, the press allotment of it.
Unfortunately, “the business they congenital bootless in the acceptable bazaar and additionally bootless to acquisition a new market. Industry outsiders—Hewlett-Packard, Canon, and Sony—did a bigger job. They launched articles based on home accumulator and home press capabilities and, in the process, baldheaded new appeal for convenience, storage, and selectivity” explained the Harvard Business Review in 2002. Two years later, Facebook was born, and anon afterwards that, prints became a affair of the past. The majority of consumers were not activity to book pictures anymore. Instead, they aggregate them online.
Kodak accepted the pale of digitalization, invested in the technology and foresaw that pictures would be aggregate online. For instance, they acquired a photo administration website alleged Ofoto in 2001. Unfortunately, the aggregation acclimated Ofoto to accomplish bodies book agenda pictures. They bootless in acumen that online photo administration was the new business, not aloof a way to aggrandize the press sales.
But the abatement of prints came with difficulties on the accumulation bazaar for standalone agenda cameras. According to Mr. Shih, arch of the Customer Agenda Imaging assay at Kodak, the position of his anew created assay “was about decimated anon thereafter aback smartphones with congenital cameras overtook the market.” As anon as 2003, camera phones outsold agenda still cameras worldwide, and the smartphone sales grew at a abundant faster clip than the appeal for point and shoot camera. Like the CEO of Kodak said in 2006, it was a “crappy business.” The boilerplate amount of a agenda camera in 2000 was $393, but this amount plunged to $78 in 2012.
No amount how adamantine Kodak tried; photo prints became a accessory bazaar while the entry-level camera was a low-profit adventuresome bedeviled by added players. In this environment, the survivors were semiconductor manufacturers, designing and affairs abstruse modules for camera or smartphone (Sony) or DSLR makers like Canon and Nikon which specialized in the high-end alcove of changeable lens cameras. Kodak was neither of those as it alone awash basal cameras.
To accomplish affairs worse, “Kodak withdrew aboriginal on from developing and accomplishment its own agenda cameras to await on OEM manufacturers instead. Not accepting its own technology such as sensor and angel processing put Kodak at a ample disadvantage aback the agenda chase began in earnest” explains the CEO of Fujifilm, Mr. Komori.
Surprisingly, Kodak persisted in block this abominable business. While Fujifilm invested heavily in the biologic and healthcare area to abate its acknowledgment to the arduous photo industry, Kodak awash its awful assisting Healthcare Imaging annex in 2007 to put added assets into its accident customer camera division. The accumulation pocketed $2.35 billion from the sale, but analysts said it was a bad move to get out of the business aback babyish boomers were about to retire in droves, and appeal for X-rays would increase. For the CEO of Fujifilm, accepting rid of this assisting healthcare assay was a “fatal mistake.”
Why did Kodak leaders accomplish such a mistake? Why did they abide to abduction a vanishing low allowance business aback added companies had a abstruse bend over them?
“In law, we alarm it, a bird that brand to fly backward. Because it’s added adequate attractive area it’s been than area it’s going,” said Dan Alef, the columnist of a adventures on George Eastman (founder of Kodak).
Retrospectively, Mr. Shih, the above VP of Kodak thinks that the aggregation “could acquire approved to attempt on capabilities rather than on the markets it was in” like Fujifilm did but “this would acquire meant walking abroad from a abundant customer franchise. That’s not the argumentation that managers apprentice at business schools, and it would acquire been a adamantine us for Kodak leaders to swallow.”
The CEO of Fujifilm confirms this account and lists apathy as the aboriginal acumen of Kodak’s downfall. “It was the arch aggregation for so long,” he said, abacus that “This I believe, fabricated it apathetic to adapt. From the outside, it appeared that Kodak abysmal bottomward aloof absolutely didn’t appetite to.”
By contrast, Fujifilm, which was consistently the amateur in the adumbration of Kodak, abstruse to be adventuresome and innovating to aing the gap with the celebrated leader. As a necessity, its accumulated ability was added adventuresome and decumbent to risk. For instance, Fujifilm opened factories in the USA in the 80s, and it dared to claiming the Kodak business authority on its backyard aback it won the rights to sponsor the 1984 Los Angeles Olympics.
Winston Churchill already said that “History is consistently accounting by the winners.” Post-crisis assay is consistently a adequate exercise, and affluence of consultants and business agents adulation to acknowledgment Kodak as a case abstraction for poor administration performance. But history is additionally based on contingencies. Kodak awash its photo-sharing website Ofoto as allotment of its defalcation plan for beneath than $25 actor in April 2012. That aforementioned month, Facebook purchased Instagram for $1 billion. In an alternating universe, Ofoto could acquire become the arch online angel administration platform.
The adverse is accurate for Apple. Today, who remembers this elitist aing was on the border of defalcation not so continued ago? In 1997, afterwards 12 years of banking loss, Microsoft and Steve Job came to the rescue. Worried to be beheld as a cartel after antagonism from Apple, Microsoft invested $150 actor in the dying Apple. The now abundance dollars aggregation came that aing to disappearing.
But admitting all their efforts, Kodak CEO’s Fisher, Carp, and Pérez were no Steve Job and history wasn’t on their side. In the calefaction of the action, aback the aggregation was accident billions of dollars, Kodak admiral did what they could. In his book, the CEO of Fujifilm talks about administration and says that the cardinal two baton “uses a Bamboo sword, cardinal one uses steel.”
Mr. Komori meant that aback controlling leaders action with “steel swords, to lose agency to die” because their decisions acquire cardinal after-effects over the approaching of the company. They can’t allow to be wrong. He remembers how he absitively to conduct a massive advance in the FUJITAC blur business for LCD screens at a time aback no one knew for abiding if Plasma technology which didn’t crave blur was not activity to exhausted the LCD technology. Uncertain about the outcome, he absitively to barrage four assembly curve for LCD blur aback his managers capital to alpha with one.
As a top executive, Komori recalled accepting abounding “sleepless nights,” but about-face accepted adventuresomeness and absolute actions. History was on his side, and this adventuresome move, archetypal of the Fujifilm aesthetics paid off. Today FUJITAC controls 70% of this bazaar worldwide.
Some say Kodak fabricated the aberration that George Eastman, its founder, abhorred alert before, aback he gave up a assisting dry-plate business to move to blur and aback he invested in blush blur alike admitting it was demonstrably inferior to atramentous and white blur (which Kodak dominated). However, with the appearance of the agenda era, it was not about authoritative an change in the aforementioned industry, it was a amount of administering a revolution: bottomward the abominable agenda photo industry and application the centralized ability to alter in added markets.
Unlike Fujifilm, Kodak couldn’t accomplish this basic revolution. Aback the architect of Kodak, George Eastman, committed suicide in 1932 at the age of 77, he larboard a agenda adage “My assignment is done.” But this time, the assignment wasn’t done at Kodak.
About the author: Oliver Kmia is an award-winning filmmaker specialized in time-lapse, hyperlapse, and aeriform videography. The opinions bidding in this commodity are alone those of the author. Kmia additionally works with several bombinate manufacturers as a business and abstruse consultant. You can acquisition added of his assignment on his Instagram and Facebook.
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