Fujifilm: Transformation from a photographic film maker

The photographic film industry faced a crisis in the early 2000s. Fujifilm successfully overcame the crisis by flexibly corresponding to the change in market condition.

Fujifilm and photographic film industry

Fujifilm was founded in 1934 originally as a photographic film maker and is headquartered in Tokyo, Japan. [1]  In the 1960s, the company was a regional presence just starting to widen its focus globally and playing a distant catch-up to photographic film leader Eastman Kodak Co. But today, Kodak went bankrupt (filed Chapter 11 bankruptcy protection in 2012, ended in 2013), and on the other hand Fujifilm could overcome the industry crisis attributed from digitization, and is now continuing to grow by shifting the focus of the management resources from its traditional business to new areas; Fujifilm has transformed from a narrow photographic film supplier into a diversified company with significant health care and electronic operations. [2]

The traditional photographic film-related business accounted for almost 60% of operating profit in the entire business of Fujifilm in 2000.[3]  However, since then, demand for camera film dropped 90% in 10 years as the digital revolution swept the world, and eventually the sales of the photographic film business fell to 1% of the total sales of Fujifilm in 2011; It actually happened only within a decade.[4]  The first digital moment of the photographic film industry was in 1975 when Kodak invented the world’s first digital camera. Ironically, the technology they introduced was the initial cause of the huge market shrink in the photographic film business starting from 2000, which ultimately led Kodak to bankruptcy. [5]

[Fujifilm Photograhic film, http://photorumors.com/wp-content/uploads/2012/05/Fuji-film-price-increase-USA.jpeg]
[Fujifilm Photograhic film, source: http://photorumors.com/]
Fujifilm’s business segments include Imaging Solutions, Information Solutions, and Document Solutions. In 2000 at a peak time of the photographic film business, 54% of their total sales was from photographic Imaging Solutions business (which include analog film related business) and 46% was from information Solutions business such as medical equipment/electronic materials. [3]  In 2015, the business structure in sales with three core businesses has been largely changed to 14.5% for Imaging Solutions category, 38.3% for Information Solutions segment, and 47.3% for Document Solutions mainly operated by the affiliated company Fuji Xerox. [6]

But how could Fujifilm transform its business so dramatically?

 

The Information Solutions segment: cosmetics and medical diagnosis imaging system

The rapid growing Information Solutions segment, currently includes products used in medical systems, pharmaceuticals, regenerative medicine, life sciences, cosmetics, flat panel display (FPD) materials, industrial products, electronic materials, recording media and graphic systems.

In this segment, the cosmetics category started from 2006 can be described as an instance of how structural reform occurred; Fujifilm entered the cosmetics field, launching its Astalift series of skin-care products in 2007. Since then the company has extended its product lineup beyond the skin-care series to also include base makeup. Astalift continues to grow as a global brand, sold in China, Southeast Asia, and European countries as well as in Fujifilm’s home market of Japan. [7]

It seems that there is nothing in common between photographic film and cosmetics at a glance, but the company set its eyes on similarity in analog film manufacturing technology. Thickness of color photographic film is approximately 0.2mm (the same thickness of human hair). Collagen used in this 0.2mm analog film requires several functionalities as capability to maintain a long-term/stable quality, retain moisture at the time of development, prevent from losing shape by aging degradation and impact in addition to a capability to hold elasticity; the company held a huge accumulation of collagen technology and also unique technology to manufacture various types of collagen. Control of collagen is one of the key technologies required in the skincare cosmetics manufacturing process since collagen is one of the main constituents of cosmetic products. Therefore, the company could successfully enter into the cosmetic industry by implementing their knowhow they had on collagen due to a technical similarity between films and cosmetics manufacturing process. [4]

[Astalift cosmetic products source: http://www.astalift.com.sg/]

Furthermore, Fujifilm introduced medical diagnostic imaging system with the application of digital camera technology, and also places the system as a core in business development for healthcare field. Since the wave of digitization recently becomes a significant influence in healthcare field, this also can be a field where the company can apply its image processing technology most efficiently as an advantage. [8]

[Digital Medical Photographic system: source: https://www.fujifilmusa.com/products/medical/]
[Digital Medical Photographic system: source: https://www.fujifilmusa.com/products/medical/]
As described above, Fujifilm became successful by flexibly corresponding to the risk and business opportunity by digitalization so far. For comparison, Kodak, its rival company, went bankrupt in 2012 because it could not correspond to a business reform of digitization but persistently clung to old technology such as photographic film and digital camera.[9]

 

Future suggestions

As an instance of further advancement with the application of digital technology, the company may step into a completely non-related business field just as they entered in cosmetics business. For instance, the company may actively enter into currently-unavailable service field such as expansion to virtual reality (VR) field requiring a high image processing technology or health checkup at home by applying digital technology as an extension of healthcare business.

(795 words)

 

References

[1] Reuters. 2016. Fujifilm Holdings Corp (4901.T) Company Profile | Reuters.com. Available at: http://www.reuters.com/finance/stocks/companyProfile?symbol=4901.T

[2] Kana Inagaki And Juro Osawa. 2016. How Fujifilm Charted Different Course Than Kodak – WSJ . Available at:

http://www.wsj.com/articles/SB10001424052970203750404577170481473958516

[3] Fujifilm Corporation, Annual reports (2000) Archives. Available at:

http://www.fujifilmholdings.com/en/investors/ir_library/annual_reports/archives/#h2-11

[4] Monocle (2013) Renewal process – issue 60 – magazine. Available at:

https://monocle.com/magazine/issues/60/renewal-process/

[5] New York Times, Estrin, J. (2015) Kodak’s First digital moment. Available at:

http://lens.blogs.nytimes.com/2015/08/12/kodaks-first-digital-moment/?_r=0

[6] Fujifilm Corporation, Annual reports (2016) Segment information. Available at:

http://www.fujifilmholdings.com/en/investors/performance_and_finance/segment_information/

[7] Foundation, N.C. (2011) Fujifilm finds new life in cosmetics. Available at:

http://www.nippon.com/en/features/c00511/

[8] The Economist, K.N.C (2012) Sharper focus. Available at:

http://www.economist.com/blogs/schumpeter/2012/01/how-fujifilm-survived

[9] WSJ Munir, K. (2012) The demise of Kodak: Five reasons. Available at:

http://blogs.wsj.com/source/2012/02/26/the-demise-of-kodak-five-reasons/

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5 thoughts on “Fujifilm: Transformation from a photographic film maker

  1. Fascinating article about the transferability of R&D! I would have never thought that the technology of film could be used in cosmetics and medical diagnosis .

    I believe this post raises the question of what a company should do when its industry faces technological disruption, and its original business model becomes irrelevant.

    The above post seems to be an argument for the company transforming its business model, but I would push back on the wisdom of this.

    ‘Fujifilm’ has significant brand value within its industry of film. Would it not have been of a value add to adapt its business model within the same industry? This is a much more difficult feat as it probably demands greater transformation of its operating model, but is that not the goal you aim for if you want to thrive and not just “survive” as footnote [8] states?

  2. Great read, Kei! On the one hand, Fuji’s diversification into cosmetics and medical imaging makes sense, due to the swell in demand for digital solutions. Also, the move plays to their strength in collagen technology, like you say. But on the other hand, I worry about a complete shift away from imaging solutions and photographic film. While not the focus of your post, the resurgence of analog film has been an interesting and unexpected twist in the narrative that Fuji would have been ill-prepared for if it had lost sight of its historic core competency. Fuji does seem to have responded well with their Instax mini… While there are probably many more highly profitable and innovative applications of Fuji’s technology, such as VR, I wonder what the optimal product mix is so Fuji can accommodate the new ways photographic media is consumed today (e.g. social, insta shots, sharing).

  3. Interesting article. I have owned various Fujifilm cameras, but did not know that Fujifilm is now diversified into other areas like cosmetics. Their foray into cosmetics reminds me of how DuPont reinvented itself from a gunpowder company to a fiber and chemical company. Gunpowder and textile fibers such as Rayon might seem unrelated, but DuPont’s expertise with nitrocellulose in explosives led to a successful pivot to cellulose-based plastics and fibers products. Interesting parallel with Fuijifilm’s know-how with collagen, which bridged the gap between photographic film and cosmetics. It is important for companies like DuPont and Fuijifilm to stay relevant by never stopping to innovate.

  4. I would never have guessed Fujifilm got into the cosmetics game! That’s wild! As several other commenters have mentioned, it’s fascinating to think about how adaptive the company has been in the wake of industry-wide disruption. I wonder though if there’s a risk in moving so far outside of your company’s core competency? At some point, when you’re competing with other cosmetic companies, how do you reconfigure your marketing, R&D, and technology teams to adapt? How do you prepare a company’s (non-digital) culture to shift focus so intently? These feel like questions we’ll be asking ourselves more and more often as we move further into the digital future.

  5. I was very surprised to find that Fujifilm is now a player in the cosmetics industry. While reading this, I kept questioning how difficult it would actually be for Fujifilm to successfully compete in the cosmetics sector. It’s one thing to be able to develop great cosmetics by leveraging the technology that’s been built up over a decade or so to generate great photography, but it’s an entirely different proposition to successfully replicate this in an entirely different sector. I wonder how they’ve gone about marketing their products and competing with established players. At the same time, if they do succeed in this sector, will it open up the industry to other new-tech providers of cosmetics solutions? For instance, in MKT class, we talked about MINK – the 3D-printed cosmetics company. Would the success of Fujifilm open up doors for these new players who’ve been struggling to gain traction in an industry that has seen little innovation? And in the end, who will win in this new battle?

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