Chapter 5. FujiFilm: Innovating Out of a Crisis

Marcus Guest
7 min readSep 29, 2021


“A peak always conceals a treacherous valley” — Shigetaka Komori. Former chairman and CEO, Fujifilm⁠[1]

Business schools love case studies because they have the power to convey a complete story succinctly — from incident to result — and convey critical points the author wishes to get across. Yet case studies also come in for some justified criticism: They’re often used to try and influence how managers should act today based on what happened yesterday, (in a different time and context) and they are often used to push forward one favoured ‘solution’ by being selective about what the case study focuses on and what it leaves out. Therefore, one should use case studies with care. But, as already noted, business schools love the power of case studies and one of the most popular — beloved by conference speakers and business writers alike — is the Kodak case: The compelling story of the US giant disrupted by a new technology. Except, that’s not the case.

Kodak was founded in 1880 and dominated the camera film industry for more than a century until, as the story goes, it missed the switch from analogue to digital photography and was eventually forced to file for bankruptcy in 2012. Yet this narrative is as wrong as it is simplistic. As many have pointed out⁠[2] Kodak was, in fact, the pioneer of digital photography, having invented the first digital camera in 1975. They were also aware of the changes the digital revolution would unleash on their market. Kodak’s decline therefore didn’t come from a lack of innovation or foresight — it was their (perhaps understandable?) unwillingness to forgo certain profits in their current market ($1.4 billion in 2001) for uncertain profits in a future market. The mistake they made was trying to have both.

Kodak tried to conserve (K) its leading role in a profitable market of today whilst believing it had time to adapt tomorrow. But this was a trap. By the time Kodak finally went in big on digital — becoming the market leader for digital camera sales in 2005 — the world had re-organised (ɑ). Digital cameras were no longer a high-value product — they had evolved into a lower margin, commodity-like offering embedded into millions of mobile phones (many with more than one digital camera to satisfy new user needs for things like ‘selfies’). Kodak’s reluctance to leave the old world they had dominated meant they were too late to adapt to the new world. They had been caught in the conservation trap — trying to conserve their past success in a dying ecosystem that prevented them from adapting to a new reality in time.

Fig. 10: Kodak’s ‘conservation trap’

Despite their love of case studies business schools in the West, (as well as consultants and conference speakers) seem less interested[⁠3] in the case of Fujifilm, Kodak’s Japanese rival. This smaller firm had also been heavily-dependent on camera film sales, which accounted for two-thirds of Fujifilm’s profits at the market’s peak in 2000. And they also suffered dramatically when this market started shrinking, slowly at first, but as the world embraced the new digital revolution, suddenly sharply. By 2006 the market for colour photo film had entered a death spiral, plunging 20–30% per year. By 2010 the market was worth less than a tenth of what it had been just a decade earlier. The disappearance of their main market in the “blink of an eye” was, according to Fujifilm’s CEO at the time, “an earth-shattering event”. Yet, unlike Kodak, Fujifilm not only survived this shock but thrived because of it. Fujifilm was a ‘live player’ — able to do things they had not done before.

Fig. 11: Total global demand for colour photo film

Source: Shigetaka Komori. “Innovating Out of Crisis: How Fujifilm Survived (and Thrived) As Its Core Business Was Vanishing”.

Fujifilm took their mission — ‘to protect the culture of photography’ — seriously. This meant that, even though they knew they had to adapt, they would not abandon their current customers in the coming storm. They would continue to make colour camera film but had to make “decisive cuts” in order to be able to afford to do this in a declining market. However, these cuts were less about maintaining profitability and dividend payments and more about buying the company time to act. And act they did. Fujifilm started “investing heavily in new businesses [they] thought had a promising future” — they focused on industries where they could leverage their specialist knowledge, such as into pharmaceuticals, highly-functional materials and cosmetics[⁠4]. They invested in “polarising plate protective film … an essential ingredient in the manufacture of liquid crystal panels” — a niche industry at the time providing a crucial ingredient for TV, computer and mobile screens. But the new digital and mobile revolutions helped turn “what was only ¥2 billion in sales at the beginning of 1990 [into] ¥200 billion twenty years later, easily making up for the losses incurred” in their core market. The sense of urgency Komori instilled into Fujifilm was essential to their success: “Had we delayed by just another year or two” he reflected later “we would have been right in the middle of the devastating financial downturn in the fall of 2008 and the company might not have been able to survive this double punch”.

Fujifilm’s approach showed Pal’chinskii’s first principle in action: The Japanese firm was able to increase their chances of success by seeking out and experimenting with a variety of new ideas. They invested $1.8 billion a year in their own R&D and made active use” of mergers and acquisitions (M&A) — spending over $6 billion across 40 companies to help them quickly “build a presence” in new markets like software technology, medical devices and inkjet printing: “By acquiring companies that have already left the starting gate and combining their assets with Fujifilm’s expertise [they got] new products to market quickly and easily”. They cast their net wide as they knew, in line with Pal’chinskii’s second principle, that when trying something new the chances of failure were high, due to an lack of knowledge or experience (which even the M&A activity couldn’t alleviate entirely). So Fujifilm hedged their bets, making multiple investments on a small enough scale that any failure was survivable. Should any project, merger or acquisition fail (such as digital cameras did for Kodak) — or should even a dozen such activities fail — they had a chance of off-setting those with success withany number of other ventures (such as the market for polarising plate protective film). Fujifilm acted to give themselves good options — they created the requisite variety of responses needed for surviving and thriving in uncertain times.

Fig. 12: Fujifilm’s High-AQ versus Kodak’s Low-AQ (Same variety of situations faced, but a different variety of responses available)

Fujifilm were also able to quickly identify and select what was working in their local context by developing effective feedback loops between decision-makers and those closest to the action (Pal’chinskii’s third principle). Komori himself (like Pal’chinskii) was not averse to learning from others — he urged his people to ask “outside experts for advice” especially in “those areas where maybe [we] don’t have the internal competence”. But Komori warned Fujifilm’s people not to “rely on outside consultants”: Asking “strangers what you should do about your own company [was] out of the question” as they couldn’t possibly know the local situation better (or care as much) as Fujifilm’s people. He insisted his people “think for yourselves!”. Fujifilm decision-makers were urged to get closer to the action, learn what was working (and what wasn’t) and focus on whatever showed signs of success. This is how Fujifilm inched their way through the storm and out the other side. By January 2012, as Kodak was filing for bankruptcy, Fujifilm posted record annual net sales of $21.4 billion. Komori put their success down to their ability to find new niches — a capability they had to develop whilst being in Kodak’s “colossal shadow”. They acted like modern day mammals, seeking out new sources of value whilst Kodak — the “premier company in photographic film for so long” — acted like the dinosaurs, being “slow to adapt and diversify” as the situation changed.

But why did the Japanese firm seek out a variety of new responses, hedge their bets and focus on learning (in line with Pal’chinksii’s principles) while their US rival didn’t? The hypothesis of this book is that there’s a fundamentally different approach to strategy between the East and the West and that it’s the former which is better suited to more uncertain times, of the type we are now in. Therefore, the next two chapters will explore some more cases from Eastern business and then try to provide a high-level introduction to the Eastern approach to strategy.

1 All quotes in this chapter are taken from ‘Innovating Out of Crisis:

How Fujifilm Survived (and Thrived) As Its Core Business Was Vanishing’ by Shigetaka Komori (2015)


3 Arguably as it’s a more complex story that doesn’t have a neat conclusion such as ‘disrupt yourself before others disrupt you’, which has launched thousands of profitable, consultant-led ‘transformations’.

4 Cosmetics may have seemed an odd choice but the chief ingredient in film — gelatine — is derived from collagen, which makes up 70% of human skin, giving it its sheen and elasticity. The same oxidation process that causes skin to age also causes colour photos to fade over time and Fujifilm had eight decades of research into this process, which they leveraged into anti-aging cosmetics.



Marcus Guest

Govern the state by being straightforward; And wage war by being crafty. — Laozi, Tao Te Ching