Why Fujifilm Survived (& Kodak Didn't)
for a long time two companies dominated the silver-based photographic film industry Eastman Kodak and Fujifilm for decades the two companies Clash for dominance in their individual and Global markets then very suddenly those Markets started to fall apart for a long time digital photography was 30 years away then suddenly it was here annihilating the old silver-based film industry Fujifilm saw this coming and it still hit them hard but amazingly they emerge from the digital transition a larger but transformed company Kodak didn't how in this video we're going to look at how and why Fujifilm survived the destruction of its most important industry but first I want to remind you about the newsletter check out the newsletter to read the entire scripts for previously released videos including those you might not have seen before the sign up link is in the video description below I try to put one out every week maybe two alright back to the show Fujifilm was founded in 1934 as a subsidiary of the digney pond Celluloid company Japan's first cinematic film manufacturer today the company's known as Daiso died in the Poland had previously approached Global leader Kodak and its founder George Eastman to build a photographic film Factory in Japan kodak's Engineers thought the climate to be too humid to produce high quality film so Eastman declined in response died Nippon with financial support from the Japanese government started Fuji photo film in need of high quality Water and Air the company established its first factory at the foot of Mount Fuji in Minami ashigada City in Kanagawa I can only presume that explains the name unlike its competitors the company decided to produce its photographic film internally rather than importing it from abroad hiring a German Emulsion specialist for some technical expertise this emphasis on developing their own technology despite the difficulties it would take several years to produce its first product became a key part of their culture and strategy Fuji is known for spending more than his peers on r d shortly before World War II the company researched how to make color photography film this was difficult in color photography we create a colorized image by mixing together the three primary printing colors cyan magenta and yellow to create a good picture if the balance is even slightly off then there are issues your white shirt might have a bluish or reddish tinge to it in the photograph which is obviously unacceptable color photographic film is made up of some 20 overlapping evenly coated layers of functional particles about 20 micrometers thick producing such film requires near semiconductor quality control however the war put a temporary pause on the company's work the Japanese military government commandeered its facilities for the war effort Fujifilm finally completed their color film product in 1948 its release along with a series of popular products like amateur roll film in 1952 and black and white rule film in 1958 set the company apart from their nearly 30 or so domestic competitors around that time Japan reopened its markets to foreign competitors including Kodak the Rivalry between Kodak and Fujifilm is legendary at the start the differences between the two were massive in 1963 Fujifilm generated revenue of about 75 million dollars Kodak on the other hand had 1.1 billion Kodak had a globally recognized brand and seemingly unlimited resources they had their own silver mine and cattle ranch to produce the silver and gelatin necessary for their film the war had interrupted kodak's Imports into Japan but in the 1950s these Imports resumed Fujifilm enjoyed preferential treatment in its domestic Market an import quota until 1968 and a tariff thereafter but that is no guarantee of success Japanese consumers still saw Kodak as a superior brand and Fujifilm for having lower quality product but over time Fujifilm narrowed the technical proficiency Gap and improved their standing by 1970 their films outperformed kodaks in certain technical areas for instance their color films required less light to retain a picture Fujifilm leveraged this technical proficiency to ultimately hold on to its niche in the Japanese high-end prosumer and professional photography space the Crux of their strategy involved the rollout of a mini lab retail push that allowed third parties to provide a speedy one-hour development creating a powerful and enduring Network others followed but Fujifilm had first mover Advantage by 1994 there were 13 400 mini labs in Japan Kodak also helped by botching their Japanese Market entry strategy Outsourcing their marketing to a third-party distribution firm which did not do much but cut prices consistently low prices resulted in Kodak occupying the low end space in Japan in 1972 Fujifilm started selling into United States Market using their own brand they were not able to break through into the drugstore Market which stayed loyal to Kodak but it did find ground in American supermarkets they then broke through into the niche movie and professional photographer spaces heavily focusing on technical quality they sponsored big sporting leagues like the NBA and the Olympics they were the official sponsor of the 1984 Olympics in Los Angeles in 1982 they won an Academy Award for technical Merit for their a250 Motion Picture film the world's fastest color Motion Picture negative film all of this solidified Fuji's position has the quote-unquote superior quality film their Rising success 13 market share in the United States in 1995 eventually caused political problems first the 1993 lawsuit by Kodak for dumping Kodak lost that one the Fujifilm set up a color film paper lab in South Carolina to ameliorate concerns and then a July 1995 petition from Kodak it alleged that Fujifilm had colluded with the Japanese government to shut Kodak products out of the Japanese Market Fujifilm held 70 market share in Japan Kodak on the other hand had less than 10 percent market share seemingly atypical for a company used to having 40 plus percent share in developed markets but I already explained what happened here and Fujifilm defended itself vigorously against this lawsuit eventually resulting in the World Trade Organization rejecting the lawsuit in 1998. like I said the back and forth between the two companies was legendary they competed in price sponsorships and even in court like two nights locked in single combat except it is now the 1990s and these big heavy nights are fighting on thin ice by the time the WTO came out with its decision in 1998 the two were no longer so intent on fighting one another one of the enduring Mysteries surrounding kodak's failure in the digital photography age is how long they knew about it both Kodak and Fujifilm long recognized that the future was in digital imaging producing many Digital Imaging Technologies themselves in 1975 one of kodak's employees Steve sassen put together CCT chips from Fairchild and analoged a digital converter from Motorola and a Kodak lens to produce the first digital camera this early product weighed 8 pounds was the size of a toaster and did not produce good imagery but employees in Kodak knew it was the future predicting that by the 2000s silver-based Imaging products would be no more Kodak scientists produced some high quality image sensors including a 1.4 million pixel CCD sensor in 1986. a
great laboratory product but one that failed to take hold in the market due to high price and the lack of proper peripherals like PCS the company's explorations of digital photography often never led to anything more than a patent and certainly not a new successful business kodak's positioned in traditional film is one of the greatest business models ever discovered how on Earth can any of these things compare they never could settle on a plan for Kodak in the digital era and hesitated in pursuing things that didn't quite fit with it for instance in 1976 Kodak had a printer with a microprocessor the ectoprint the ectoprint was simpler and more reliable than its rival at Xerox but they failed to aggressively chase the market unfamiliar with the business model of renting out heavy equipment fujifilm's Diversified business gave them plenty of warning of what was coming in 1981 Fujifilm released a new product for Diagnostic x-ray Imaging replacing x-ray film with a photosensitive plate the resulting product Fuji computed radiography came out in 1983 and is still used today and then came the digitization of plate making producing assets for Publications like magazines digitization made it possible for a computer with graphic software to Output the whole thing on a single piece of film one of the sales managers in the division at the time shigataka komori saw this and began worrying over a future where film was no longer needed at all Fujifilm was used to working hard and fiercely competing but they always knew that if they produced a great product and sold it at a decent price they would always have a business but with image digitization none of the hard work spent making such a great product would matter the years spent on developing specialized Technologies for photography would be for naught recognizing this challenge Fujifilm in 1980 appointed minoru onishi as its new president the new president introduced a strategy with three aspects first they sought to produce original Digital Imaging Technologies and be a Pioneer in that space this is similar to what Kodak did starting in the 1970s Fujifilm tried to develop their own Imaging sensors in 1988 they had the Fujifilm ds-1p their first digital camera second Fujifilm attempted to milk the analog Cash Cow by widening the quality gap with digital by improving the quality of these film images they might prolong the life of the business and third the company needed to build new business lines outside of digital photography or analog photographic film in the mid-1980s Fujifilm started investing in all sorts of diversifications some were on businesses peripheral to the core photography and imaging businesses like inkjet and Optical disk others were developed based on the core Technologies for photographic film manufacturer for instance cancer Pharmaceuticals done in concert with a Nobel prize-winning scientist the problem for Fujifilm was that the current business was still doing very well in the 1980s they had finally surpassed Kodak in terms of Technology they had released popular products like the 1986 Fujifilm quick snap one of the first modern style disposable cameras this one-time used camera grew rapidly and was very profitable the Japanese economy was also doing well then film sales were Sky High in 1986 Fujifilm generated operating profits over 600 million USD the core industry success interfered with the company's attempts to diversify away from it success led to excuses for it to continue digital will never be as good as analog digital won't take over everything the transition will be at least 30 years away right for some reason I am reminded of the Golden State Warriors NBA team this is weird but humor me for a few years they promoted a two-time line plan to develop a cluster of new Superstars to smoothly replace their aging ones when now and win in the future too that plan has not succeeded fujifilm's two timeline plan didn't either same as kodaks in 1995 Casio released the first consumer digital camera that was a commercial hit the qv10 digital camera costs 833 dollars a whole lot back then the image quality was still nowhere near that of silver-based film and the battery life was not only terrible but significantly dropped after a few charge cycles but a camera did have a 1.8 inch color LCD screen for the first time someone can look at the pictures they just took without needing to develop them first other electronics companies like Sony followed suit but the ccd-based digital cameras failed to sell the Imaging quality remains subpar the shutter speeds work great the batteries didn't last long and they cost a whole lot photographic film and camera sales held out against these vintages and even reached their highest level in 2000 but just a year later Global demand for color film rapidly began to decline at a rate of 20 to 30 percent a year what happened was the widespread proliferation of the CMOS image sensor for all of their effectiveness ccds were specialty chips that required expensive and power hungry peripherals and this limited their inclusion into other products CMOS image sensors on the other hand produce worse digital images than ccds at first but where silicon semiconductors like any other necmos semiconductor Fab can leverage what they learn from making other chips to produce huge amounts of CMOS image sensors for low prices I discussed this in my video about image sensors but in the mid-1990s process nodes finally became sophisticated enough to produce higher quality active pixel CMOS image sensors and then in 1999 mobile phones started including them and that was the final piece of the puzzle as they always say the best camera is the one that you have with you the rest is history CMOS image sensors became history's fastest ramping semiconductor product and it became the beginning of the end for the silver based film camera in 2004 with its Core Business imploding fujifilm's CEO the aforementioned shigataka komori announced a plan the medium term plan was called Vision 75 named for the company's forthcoming 75th anniversary in 2010 and sought to guide the company Beyond its roots towards a new success Vision 75 had three steps the first was to implement strategic reforms Fujifilm employed some 15 000 people in large photography film factories all across Europe Japan and the United States this was a lot of expensive infrastructure that the shrinking business could no longer afford starting in 2006 Fujifilm spent 1.8 billion dollars cutting jobs closing factories and canceling sales Partnerships with distributors Fuji's other big domestic competitor Konica exited the photography business entirely but komori never considered leaving the business later writing fujifilm's Mission I believe then and I believe today is to preserve and sustain the culture of Photography it is not a question of making or losing money no doubt the film Market would continue to shrink we knew but that was precisely why I thought Fujifilm had to continue giving its support to the miracle of Photography Fujifilm still produces film today the second part of vision 75 is to find a new profitable growth business Fujifilm like Kodak had a good position in digital cameras but selling cameras was and still is a terrible business the money was always in producing and selling the film not the camera anyone could slap together a bunch of components to make a cheaper camera photographic film once provided sixty percent of Fuji's sales and two-thirds of its profits digital cameras were not going to replace this leading Fujifilm to transition to entirely new markets many of these markets grew out of the technology behind their film business for instance fujitec as I earlier mentioned Color Film is made up of multiple photosensitive layers on top of a base in the 1950s Fujifilm produced tack or triaxatate celluloids to use in its bases Tac is highly transparent with a smooth surface leading Fujifilm to start selling it to a wild range of industries from electrical insulation to anime but the product really found is footing in the LCD industry LCD screens use polarizing plates to help light pass through the liquid crystals in the LCD in the 1980s LCD makers started using fujitec as a protective covering for their LCD screens polarizing layers fujitec became widely used wherever LCDs were from calculators to televisions by the 2000s it had become a billion dollar business Fujifilm needed more of this fujitec served as an inspiration for fujifilm's next steps so the company reviewed all of the Technologies they had in their Laboratories and after a year identified six priority businesses they were Digital Imaging producing high-end digital cameras and the like optical devices this business is known as fujinon and they produce lenses for broadcast television security cameras and the like Specialty Chemicals or materials this is along the lines of the fujitec business fujifilms specialty lines serve the solar panel touch panel or semiconductor Industries they even produce photo resists just thought that was cool Graphics these are items for digital printing and also includes the company's work on in-house inkjet technology documents printers and office copier solutions for businesses this was mostly dominated by the company's Fuji Xerox joint venture in 2021 this division now called Fujifilm business Innovation was the company's largest business line accounting for 30 of total revenue and then there is the healthcare business fujifilms diversification into there I think is the ultimate expression of their commitment to survival I briefly before mentioned Fuji's x-ray film products the company also sold endoscopes ultrasonic devices and Healthcare Imaging systems for the healthcare industry but starting in 1996 Fujifilm started to file a whole lot more patent applications for pharmaceutical products it took a brief dip during the end of the century and then skyrocketed thereafter fujifilm's medical care equipment related patent applications began to grow at about the same time too Fujifilm started producing skin care cosmetics Pharmaceuticals and dietary supplements seems a bit random though but there is actually a lot of crossover with photography Film Production while making film Fujifilm learned a whole lot about emulsions suspending one substance in another oxidation the process of Aging photos and chemicals and collagen the major ingredient of gelatin a substance used for making film they went back to these expertises and sought New Market applications for them they augmented this r d surge with Selective Acquisitions several Medical Imaging companies in 2006 and a big one in 2008 of Toyama chemical worth nearly 1.5 billion dollars
for its 2008 fiscal year Fujifilm reported the highest sales that had ever achieved in its history 2.8 trillion yen or roughly about 27 billion USD up 100 from the 1.4 trillion yen in 2001. operating profit over that same time went up from 149 billion yen or 1.4
billion USD to 207 billion yen Fujifilm in 2008 is a far more Diversified company Imaging products like digital cameras went from 54 of company revenues to just 19 percent 2008 turned out to be a bit of a high point the business was hit hard by the global financial crisis and the subsequent strengthening of the Japanese Yen revenues declined and the company has basically treaded water since 2015 at about 20 billion dollars a year in Revenue but I would say that that is a far better fate than what befell Kodak from 2005 to 2010 Kodak sales declined from 11 billion dollars to 5.9 billion dollars Fujifilm sales on the other hand grew nearly 50 percent Business Schools have been studying kodak's situation for many years now at the start Kodak did follow a similar path to Fujifilm for instance they also shrank the film manufacturing business in 1999 cutting 1.2 billion dollars in costs and 20 000 jobs 20 of payroll but they could never move beyond the idea of selling film and providing photography services prior CEO Colby Chandler tried diversifying investing in floppy disks batteries artificial snow and pharmaceuticals but his successors K Whitmore and George Fisher reversed his diversification drive and doubled down on Imaging notably in 1993 Kodak spun off their own specialty chemical business which was formed all the way back in 1920 and got just eight percent of their sales from Kodak today Eastman Chemical is a 10 billion dollar company and part of the fortune 500. there is your diversification right
there they also sold off their Sterling Winthrop drug unit its over-the-counter consumer drugs business which included Bayer Aspirin was generating over one billion dollars a year Kodak had also began researching and filing pharmaceutical and medical equipment patents at about the same time as Fujifilm but in 1996 they withdrew from these and doubled down on photography dubbing themselves an Imaging company in the end Kodak tried to develop or promote new digital Technologies to fulfill the Imaging needs of their customers in 2001 they released the Easy Share digital camera to the market which sold well Kodak produced some great well-reviewed digital cameras and in the 2004-2005 period they actually held leading market share in the U.S digital camera space but they like Fujifilm quickly learned that digital cameras were a terrible business other companies entered the market taking away market share their share shriveled to seven percent in 2010 and the company made more money from licensing its digital technology patents in 2005 Kodak entered the inkjet printer business going head-to-head with well-funded technology giants like Hewlett-Packard this most likely came at the behest of new CEO Antonio Perez who came from HP Perez's foray into inkjet was a terrible idea and they turned net losses of 1.2 billion in 2005 and 691 million in 2006. in 2007 the company sold its last valuable asset its Healthcare division which included radiology and medical printing products saddled with high debt and pension liabilities Kodak struggled along for five more years before finally filing for bankruptcy at the heart of it the big difference between the two seems to have been this Kodak was a consumer brand with a strong technology base Fujifilm on the other hand began as a technology company that happened to find itself selling to Consumers so when their consumer businesses vanished Fujifilm found it easier to go back to its roots and move on Kodak could not Kodak and Fujifilm got to where they were because they were really good at chemistry and Manufacturing Precision chemicals they had no expertise in producing semiconductors or Electronics Fujifilm saw this and decided to move on relying on their chemical expertise to diversify into new businesses I think it is interesting that the company still keeps the film in their name as an indication of where their technological expertise first came from Kodak decided that it could not or should not do the same stuck on a sinking ship they threw all the possible life rafts overboard and went down with that ship alright everyone that's it for tonight thanks for watching subscribe to the Channel Sign up for the newsletter and I'll see you guys next time
2023-06-06 15:35
