The document discusses how Fujifilm adapted to the transition from film to digital photography. While many film manufacturers went out of business, Fujifilm invested early in digital technology and developed its own image sensors. It launched affordable compact digital cameras in the late 1990s and grew its digital business. However, Fujifilm's film business declined significantly from 2000 onward, forcing it to close film plants and lay off employees. Fujifilm transitioned further into medical imaging and printing to compensate for the film losses. The story examines both Fujifilm's strategic response to disruption and how the town of Greenwood, SC was impacted.

3. Fujifilm means digital?

4. It sounds like a contradiction in terms?

5. And it is. With the rise of digital imaging,
many film manufacturers have gone out
of business or suffered.

6. Kodak has demolished many of
its buildings in Rochester (NY).

8. Ilford collapsed.

9. Agfa went bankrupt and was
demolished in 2005.

10. Konica is also gone.

11. Polaroid is resting in peace.

12. The explosion
30
25
20
15
10
5
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Number of film and digital cameras sold in the
United States (guess which one is digital…)

13. With the shift to digital imaging, many film
manufacturers have become business history.

14. But what about Fuji?

15. I couldn’t find images of
spectacular Fuji explosions on
flickr or youtube…

16. While this may not be the most
scientific method, one can conclude
from this that Fuji has been better off
than the others…

17. We’ll take a look
at Fuji and try to
figure out what
happened…

18. Our story starts in Greenwood, South Carolina.

19. One of those small, heartland America
places, far away from Hollywood, the
White House and Wall Street.

24. The city is dressed up in many colours during
the annual South Carolina flower festival.

26. Guess who sponsored this one?

27. Fuji moved to Greenwood in 1988-89 and this
became the US headquarter for the firm.

30. Entering the United States was a big step for
Fuji since this was the homeground of its
main rival…

31. Kodak…

32. Before entering ‘Kodak land’, Fuji had
expanded in Europe and Asia.

33. This was the last resort for Kodak in the
bloody price war back in the 1980s and 90s.

34. Fuji had been on the rise for some decades.

35. Kodak used to be more or less alone as a
global, strong player in the film business.

36. Fuji was the only true challenger…

37. … With aggressive price policies, clever
marketing and good products, Fuji entered
market after market.

44. … And forced Kodak to fire
thousands of employees.

47. If Kodak was the Ford of the camera industry
which popularized photography and made it
affordable for everyone…

48. … Then Fuji can be thought of as the Toyota
or Honda of the camera industry…

49. … Initially they competed on lower labour costs, but
emerged as a serious threat through operational
excellence and lower prices.

50. The Greenwood site expanded and
employed more people.

51. In 1996, new manufacturing sites were built:

52. quot;The success of our four existing Greenwood
factories has enabled us to add Fujifilm's
primary product, color 35mm film, to the
growing list of goods produced by Fujifilm
Greenwood's excellent Associates…

53. … The growth of the Greenwood complex is
unparalleled in Fujifilm's history and is due
not only to our increasing presence in the
U.S. market, but also to South Carolina's
superior business environment.quot;
//Akira quot;Mikequot; Kumai, President of Fujifilm's
South Carolina operations

54. quot;We are very proud to announce the opening
of this new facility for packaging our Fujicolor
35mm film.quot; // Osamu quot;Samquot; Inoue

55. Those were happy days, for Greenwood and Fuji.

56. But at the same time, a threat to the entire film
business started to emerge…

57. … Digital Imaging.

58. In 1981, the camera industry was shaken when
SONY launched their Mavica, a camera that used
floppy discs instead of film.

59. In Japan it was referred to as ’the
Mavica shock’. This event put
digital imaging on the roadmap.

60. Many companies invested
in and launched their own
’Mavicas’ during the 1980s.

61. Should a company like Fuji then enter this market
and cannibalize on its film business?

62. Well, if they won’t then someone else would capture
the market since many companies invested in digital
imaging already in the 1980s.

63. So Fuji entered and came up with a
Mavica style camera came up with
something similar in 1988.

64. The “DS-1P” was the world's first
digital camera with removable media.

65. But that did not imply any
revenues. In fact, none of the
Mavica style cameras lead to
any commercial success.

66. The Mavica was simply not the
way forward to digital imaging.

67. But Fuji had learnt a lot
about digital imaging by
entering at this point.

68. A lot of internal development had been done
and with this competence, it became much
easier to follow the advances in the field.

69. Advances were made in the area of digital
imaging, but Fuji was not part of the
coming applications of digital imaging.

70. One of the first digital
cameras was a
Kodak/Nikon product,
launched in 1991.

71. Digital backs were developed for
high-end professional cameras.

72. In 1994, Apple launched the QuickTake camera.

73. After 1988 and through the early
1990s, Fuji was not very active in the
area of digital photography.

74. The company developed various
digital imaging services but stayed
away from the cameras…

75. It was still not obvious what a
consumer friendly and cheap digital
camera should look like, so Fuji
waited and kept itself updated.

76. And besides, the price war against Kodak
required a lot of resources.

77. All this changed in 1995…

78. … When Casio launched the QV10.

79. This is a landmark event in the
history of digital imaging.

80. It had an image quality of 0,25 Megapixels
and required 4 AA batteries.

81. Not the greatest gadget
mankind has invented.

82. But the concept of
having a LCD screen and
this design turned out to
be very attractive.

83. The Japanese camera firms now realized that
this was the way forward to a mass market for
digital imaging and started to invest heavily.

84. Fuji and the others worked jointly in an industry
association to solve critical technical issues.

85. Moreover, they made sure that the structure
was modular, so that each individual
component could be improved separately.

86. Instead of fighting battles about standards,
each company could instead focus on the
product and reducing R&D costs. This created
a healthy competition - each one
differentiated within the defined settings.

87. The modular, standardized structure
also implied that consumer electronics
companies could work
on each component.

88. Memory cards…

89. Image sensors…

90. LCD screens…

91. Each
component
was now
subject to
rapid
improvement.

93. From 1996 and on,
Fuji kept launching
better and cheaper
compact cameras all
the time under the
‘Finepix’ brand.

94. During the years up until 2000
film sales actually increased.
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1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

95. So it must have been
tempting to go for film
and avoid
cannibalizing on it,
especially bearing in
mind how big and
bulky the digital
cameras were
at this point.

96. But Fuji chose
instead to go
further into digital
imaging. In 1999
they launched a
series of what they
refer to as Super
CCD sensors.

97. Many of the
Japanese camera
firms like Nikon
and Olympus just
bought those
components from
firms like Sanyo.

98. But Fuji chose
instead to develop
their own image
sensors. New
generations of
those CCDs were
now launched at a
furious pace.

99. This big guy, the FinePix 4700, was launched in
2000. It had 4,3 Mpixels and 3X Zoom.

101. Look at the
charger! Back
then those
products
consumed quite
a lot of energy
and had poor
batteris.

102. Indeed a bulky product - but the
cameras became smaller, cheaper
and better very rapidly.

104. New models became old within only a year since
better ones were introduced at such a pace.

111. Unlike the others, Fuji kept investing in
their own CCDs. They bought the
manufacturing plant of Tohoku
Semiconductor Corporation in July
2003 and started production in 2004.

113. The market for compact cameras started to decline
already around 2005 after having grown about 50
percent annually for many years.

114. Who needs 12 Megapixels anyway?

115. Around this point, digital cameras and mobile
phones started to converge…

116. Since Fuji produced image sensors and other
components, they could sell those to Nokia,
Sony Ericsson and Samsung, thereby turning
the threat into an opportunity.

117. In addition to this, Fuji started to develop
more advanced models, focusing on other
attributes such as optics.

119. Fuji also started
to manufacture
Digital SLR
cameras for
professional
photographers
and ’prosumers’.

124. Though this
market was also
highly
competitive, it
kept growing
and being here
seemed better
than the fading
compact camera
segment.

126. Fuji also built a business around
printing digital photos:

127. So this means that Fuji
did fine and prospered?

128. Wait a minute…

129. Remember?
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130. While Fuji climbed the new mountain, its film
business was collapsing from 2000 and on.
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1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

131. Back in Greenwood, Fuji had to lay off people in
2006, for the first time ever.

133. The coating and film facilities for 35mm film
were closed and 200 people had to leave Fuji.

134. After these layoffs about 1000 employees
were still working at the Fuji plant.

135. The decline in film was inevitable.

136. Many other towns like Greenwood
suffered from the death of film.

137. In March 2008, Fuji stated that the
decline in film forced the firm to close
two more film processing plants.

138. The site in Crawfordsville, Indiana, lost 105 jobs.

139. These kind of layoffs can be particularly hard to
cope with for smaller towns…

140. quot;Several people are struggling with the closingsquot;
//David Long, Crawfordsville chamber of commerce

144. Many other Fuji sites throughout the world
have been closed over the last years.

145. A look at Fuji’s annual reports gives the
impression that the growth in digital
imaging did not entirely match the
company’s decline in film.

146. Below, you can see the revenues and operatin
income for Fuji’s ’imaging solutions’ business,
which includes both film and digital
photography (in billions of Yen).
Revenue Operating income
2002 746,6 48,7
2003 831 56,7
2004 815,5 43,5
2005 743 -7,1
2006 689,4 -75,7
2007 605,4 -42,6
2008 547,1 -2,4

147. Fuji has been through some tough times.

148. The CEO, Mr. Shigetaka Komori made the
following statements in 2005:

149. ”Over a two-year period beginning in 2005, we
poured approximately 200 billion Yen into carrying
out bold, worldwide structural reforms targeting the
Imaging Solutions segment.”

150. ”While thouroughly
enjoying a sharp
performance
improvement with a
sense of pride, we
cannot at all loosen
the reins on our
reform and
transformation
efforts.”

151. ”In conclusion, I would like to thank or stakeholders
for their steadfast support and understanding as we
strive to achieve our goals.”

152. ”Noteworthy examples of our progress include the
expanded marketing of digital cameras that
incorporate our new technologies to create superior
image quality.”

153. One gets the impression that this transformation
has been tough, both financially and emotionally.

154. Film had been the flagship of Fuji since
it was founded in 1934 and it had now
gone down to less than 3 percent.

155. As film declined and the market for digital
cameras became increasingly saturated, Fuji
chose to move further into medical imaging.

157. Once again, Fuji decided to expand in Greenwood.

158. “Fuji Photo Film, Inc. announced today that
its Medical Products Division in Greenwood
has begun totally-integrated manufacturing
of the newest generation of dry medical
imaging film for the North American market.”

159. “Additionally, the company
announced a $100 million
expansion of the PS Plate factory to
expand production of Computer-to-
Plate (CTP) printing plates for the
graphic arts industry.”

160. Fuji representative Mr. Watanabe
stated: “The production of digital
dry imaging film in Greenwood
gives Fujifilm the opportunity to
provide the North American medical
community with the world's newest
and best medical imaging products
from right here in South Carolina…

161. … Use of digital CTP printing plates in the U.S. and
Canada has grown ten-fold in the past four years
and now accounts for over 50% of the market
because they substantially increase our customers'
efficiency and productivity. This expansion will allow
us to expand CTP production to meet the growing
needs of our North American customers.quot;

162. And needless to say, Greenwood and South
Carolina were very happy about this:

163. Governor Mark Sanford:
quot;We're very pleased to see one of
our leading corporate citizens
continue to bring new products
and new expansions to our statequot;

164. quot;Fujifilm's $1.4 billion investment is
definitely a nice shot in the arm for our
economy as well as a great example of
what's to come if we continue our focus
on quality of life and improving our
state's underlying business climate.quot;

165. Summing up, it seems that both Fuji and Greenwood
survived the digital imaging revolution.

166. Many learnings emerge from this story,
both about how to handle a
technological shift and how societies
can harness the forces of globalization.

167. Starting with Fuji…

168. While entering digital imaging at an early
point, Fuji decided to wait with the big
investments until the Casio QV-10 camera
defined the core elements.

169. After this, Fuji invested aggressively in digital
imaging and built up their own competence in CCDs.
This enabled the company to be at the forefront,
which is necessary once a ’pixel war’ breaks out.

170. Producing components also implied that the
shift to mobile cameras became an
opportunity rather than a threat.

171. And once the pixel war was over, Fuji started to
focus on other performance attributes like optics.

172. Entering the
emerging
prosumer
segment was also
a way to leave the
over-populated
and maturing
compact camera
segment.

173. In addition to this, Fuji showed a willingness
to cannibalize on its film business. This is
absolutely necessary – if Fuji hadn’t done it,
someone else would have…

174. The diversification efforts related to medical
imaging also implied that the company could
survive the decline in film.

175. Today, the ‘Imaging Solutions’ business accounts
for around 20 percent of Fuji’s revenues.

176. Let’s go back to Greenwood one last time…

177. The town was also hit by the death of film.

178. Many jobs were destroyed.

179. But new ones were created, and
Greenwood managed to attract those.

180. A global company like Fuji can choose to
locate new facilities anywhere in the world.

181. And they chose Greenwood.

182. This illustrates that the winning societies of today
are the ones which maintain good relations to their
corporate citizens and provide an attractive
environment for business.

183. Greenwood has done so.

184. So the Fuji-Greenwood partnership lives on,
even after the shift to digital imaging.

186. Image attributions

187. Sources
www.fujifilm.com
Annual Reports, 2002-2008
www.wyff4.com
findarticles.com
findarticles.com

188. Sources
Wikipedia
I’ve realized that everyone refers to books,
but no one reads them. Wikipedia is the
opposite, everyone reads it, but no one
refers to it. So I thought I’d start doing so…

189. Christian Sandström is a
PhD student at Chalmers
University of Technology in
Gothenburg, Sweden. He
writes and speaks about
disruptive innovation and
technological change.
www.christiansandstrom.org
christian.sandstrom@chalmers.se