History and Core Business
Eastman Kodak Company or Kodak to many, is an American multinational that specializes in photographic equipment, film, digital imaging and other related products. The company was established in 1889 by George Eastman in Rochester, New York. Kodak used to be one of the five most valuable brands in the world. In the 1970s, the company had a 90% market share of all the film sold in America and 85% of the entire market share for cameras. It peaked financially in 1996 with a US$ 16 billion revenue mark and up to US$ 2.5 billion in net profits. Soon after, the company’s fortunes dwindled. In 2011, it reported a US$6.02 billion in revenues and even bludgeoning stock price. It reduced its workforce by 90% and is on the brink of Chapter 11 bankruptcy.
Similarly, Fujifilm Holdings Corporation or Fujifilm, is a multinational photography and imaging company very much like Kodak but was established in 1934 on the other side of the world, Japan. The company enjoyed a near monopoly of the film market in Japan, growing so much that in the middle of 1950s, the company was able to catapult itself into overseas markets. In 1980 the company achieved “world class” status, sponsoring the 1984 Los Angeles Olympics and gaining a foothold on the American market. Unlike Kodak, Fujifilm is a thriving, agile organization. It moved into digital photography but only to link it to its film business and then focused on developing new lines of business. The company now has a holding company for investments in other businesses; it has films, digital processing businesses, a successful cosmetics subsidiary, a subsidiary that supplies components for LCD manufacture among others.
Figure 1 Kodak's 5-Year Market Capitalization and Stock Price
Figure 2 Fujifilm's 5-Year Market Capitalization and Stock Price
Managing Innovation
The comparison of the two companies highlights a stark reality between them. In the face of change and the need to innovate, Kodak is a crawl-speed turtle and Fujifilm a speeding rabbit. The digital age of photography was looming as early as the late 1980s. Kodak’s reaction was that of a complacent monopolist – to believe that its brand carried more value than its operations. Managers of Kodak believed that their product is “perfect” and that customer loyalty would hold up, after all it was one of the most admired companies of its time. Instead customers switched from film to digital in a heartbeat, leaving the ill-prepared giant wondering what just happened. When it did realize what was happening, it created a way of diversifying but was too slow and un-entrepreneurial to make quick work of possible investments.
Fujifilm on the other hand, acted like a clutch player in the dying seconds of the game, it made quick work of tradition to survive. This is very uncommon for a Japanese company since the Japanese value long-term relationships. But Fujifilm’s management had to jettison that principle, removing hundreds of personnel from its filming business as it was transitioning to its other business lines. It used its intellectual property to go to businesses that are remotely related to film such as cosmetics. It rode the wave of change and innovated along the way, something that the executives from Kodak never felt like doing.
Managing by Example
Kodak on the other hand, suffered from flip-flopping corporate strategy, from focusing on diversification and acquisitions to going to an all-digital stance. While all the business propositions appeared logical, the execution of those strategies were all wanting. Right now, Kodak is suffering because the top executives failed to read their market and failed to react quickly.
Ethics and Social Responsibility
Both companies have exhibited social ethics and responsibility, with no cases of environmental problems or issues so far. Both companies have been regarded highly due to the level of appreciation and attention they provide their employees, co-workers, suppliers, and stakeholders. However there have been slippages here and then by Kodak, especially after it lost to Fujifilm deliberately for the sponsorship of the 1984 Olympics. It began trying to pull its weight, filing cases on unfair trade in both America and Japan. These were rebutted squarely by Fujifilm, calling Kodak “irresponsible”.
Kodak now is trying to make a business suing Apple and HTC for intellectual infringements over what it believes are patent rights the company owns.
Extent of Management Change
In Fujifilm, the father of innovation Shigetaka Komori, overhauled the entire firm to survive. In Kodak, the top leaders rested their laurels on their brand and crashed. This is the in a nutshell the extent of how management changed in the companies with Fujifilm doing a 180 degree change and Kodak deciding to do so when it was already too late.
For a Japanese company to severe its traditional ties, Fujifilm became a truly global organization. For a well-entrenched company that resisted change, Kodak became irrelevant. For a company that values its heritage, Kodak is now reduced to a fraction of its old glory, in terms of manpower, finance and global influence.
Building Flexibility in an Organization
The lessons that can be learned from the case of Kodak and Fujifilm are as follows:
Do not put your eggs in one basket – clearly diversification is key. Kodak had the opportunity to diversify into many other profitable business lines but chose not to do so because of their full belief in the superiority of their brand and the loyalty of their customers. Both of those assumptions did not hold up. In addition to that, the company suffered from what is known as Paralysis by Analysis, which is characterized as a condition wherein no decision is made because managers are waiting for perfect information to make the decision. This normally never happens in real life, no assumptions can be ascertained as fully accurate, no calculation as real as what will happen in real life. The closing down of business and moving out into new lines require innovation and guts.
Think out of the box - the traditional business lines of both companies were closing down fast but new opportunities were emerging for both. Unfortunately, only Fujifilm was able to think out of the box enough and Kodak decided to resist the winds of change as much as possible. Fujifilm had to bite the bullet, even if it meant making very difficult sacrifices and even if it went against the very same tradition that established the company, it did so and then thought of ways of using that momentum to re-establish itself. Kodak never thought of doing anything tangent to its business lines, it went into a pharmacy line but only to find a place for its displaced chemical research department, failing eventually. It moved into acquisitions but without its heart into it, was never much of a factor. In the end, Kodak simply resisted change.
Change is Inevitable – change, the type that disrupts, diminishes and destroys businesses will always occur. Kodak suffers because it did not respect change. Its managers saw change coming, it had time to prepare. But the company believed in its size, in its achievements, in its previous glory and did not see that even the smallest ripple in the water could change the game. Fujifilm saw the same thing coming but decided to ride change rather than fight it. For a company that large, it went back to its entrepreneurial roots and made the right changes where it could to turn the disadvantage of a failing industry its advantage. With that attitude, Fujifilm remains one of the most significant companies in Japan and the world.
References
Silverman, P. 2012. Kodak vs. Fujifilm: Lessons Learned Looking at Winners and Losers in the Digital Photography Market. PaulSilverman.Com. Retrieved from http://paulbsilverman.com/2012/01/31/kodak-vs-fujifilmlessons-learned-looking-at-winners-and-losers-digital-photography-market/
Finnerty, T. 2000. Kodak Vs. Fuji: The Battle for Global Market Share. Retrieved from http://www.pace.edu/emplibrary/tfinnerty.pdf
The Economist. 2012. The Last Kodak Moment? Retrieved from http://www.economist.com/node/21542796
Yahoo! Finance. Fujifilm Holdings Corporation. Retrieved from http://finance.yahoo.com/echarts?s=FUJIY+Interactive#symbol=fujiy;range=5y;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;
Yahoo! Finance. Eastman Kodak Company. Retrieved from http://finance.yahoo.com/q/bc?s=EKDKQ&t=5y&l=on&z=l&q=l&c=
