When Cat Stevens sang “It’s not time to make a change” he could have been singing about Kodak two decades later.  In the late 1990s Fuji and Kodak dominated the photographic film business controlling over 80% of the global market. Few could have predicted that within a decade, one would go from printing money to filing for bankruptcy, unable to make a change, while the other would transform into a thriving, diversified corporation.

The meteoric rise of digital photography in the early 2000’s caused panic in the chemical film market.  Both Kodak and Fuji recognized the threat when film sales started to plummet at double digit rates.  Both were keenly aware that they would need to adapt but only Fuji succeeded.  Kodak’s response could be summed up in three words; deny, delay and decline.  Despite having invented the first digital camera in 1975, Kodak remained steadfastly committed to its film business, addicted to historical 70%+ profit margins.   Any tentative steps to pivot toward digital imaging would be quashed as soon as such efforts threatened their core business.

Early in my career, in the mid-1990s, we conducted several strategy programs for Kodak Europe where I witnessed firsthand a company paralyzed by its own success.  All the experienced Kodak managers knew the film business was doomed yet almost everyone was determined to “hang on”.   ‘Just six more, ten more, or eleven more years…until I can retire’ was a common theme.  In 2012, unable to reinvent themselves, Kodak filed for bankruptcy.

If Kodak’s mantra was ‘Deny, Delay and Decline’, Fuji’s war cry was ‘Decisive Diversification’.  In 2004 Fuji’s CEO announced “Vision 75” which became the needed ‘line in the sand’ where Fuji fully committed to reinvent itself.  The strategy was brilliant, the execution was difficult, but it worked.  Here’s what they did…

• Unearthed hidden assets: Fuji discovered their technologies had other valuable applications. For example, the collagen used in film making became the foundation for a woman’s cosmetics line.  Additionally, Fuji discovered their precision chemical coating expertise gave them a competitive advantage in coating LCD screens and solar panels.
• Invested in their future: While Kodak was divesting, Fuji was investing over $9 billion, acquiring companies in high growth areas of healthcare, pharmaceuticals, and electronic materials.
• Restructured: Fujifilm slashed manufacturing capacity by 50%, cutting 5,000 jobs, which was unheard of for a Japanese company. Painful initiatives but necessary ones that Kodak avoided.
• Leveraged their core competencies: Rather than abandoning film entirely Fuji re-focused their imaging expertise to medical systems, becoming a leader in X-ray systems.

By the early 2020’s, photography represented less than 15% of Fujifilm’s revenue while healthcare and specialized materials generate over 55% of the company’s profits.  For sure Fujifilm’s transformation wasn’t painless. Shigetaka Komori, Fujifilm’s CEO faced significant internal opposition when cutting thousands of jobs and shuttering still profitable film factories.   He stated in his book “We had to attack our own business model” ^[1].

What can we learn from Fuji and Kodak:

1. Pivot early and pivot hard while you still have time: Fujifilm began its pivot while still profitable, and with the resources to make their bold moves.  Kodak failed to do so.
2. Leaders are there to shape the future, not to preside over the inevitable:   Kodak and Fuji both recognized the need to pivot but only one leadership team got the job done by attacking their own business model.
3. Restructuring is not a random exercise in blowing things up:  Fujifilm identified skills and technologies that they applied to enter new markets with a competitive advantage.
4. Delay, and deny is NOT a strategy: Appeasing the old guard caused the demise of Kodak.

In today’s rapidly evolving business landscape, the Fujifilm/Kodak story is a contrast in corporate reinvention.  At some point in your career your current business model will become obsolete and need to be updated.  Leadership is about building a bridge …a strategy to lead your business from where it is today, to a viable future.  As your company faces its own disruptions, which path will you choose?

1. Innovating Out of Crisis: How Fujifilm Survived (and Thrived) As Its Core Business Was Vanishing  by Shigetaka Komori 2015