Great Leadership Decisions – From Film to Makeup
What happens when your market disappears overnight? From 2004 onwards the photographic industry saw film sales fall by over 30% year on year. For Kodak the aftermath didn’t make for a good case study, just a cautionary tale of painful decline, followed by lingering death in the form of bankruptcy in 2012.
The story of how Fujifilm reacted to a sudden fall in demand of two thirds by 2006 is radically different. The arrival of the digital age forced Fujifilm to completely transform its business which historically had a 70% dependency of film for its profits.
Survival required Fujifilm to boldly diversify and venture into uncharted territory extremely rapidly. This necessitated rethinking and reapplying everything they had built their empire on. So how did they do it?
Ultimately change was achieved by great leadership and a deep understanding of the company’s culture and core competences to develop a visionary strategic plan that was then decisively implemented.
Re-applying an ethos of trust, applying a core competence to new markets.
2006 saw the recently appointed CEO, Shigetaka Komori, bring together his lead team, where he wrote the word “Shinrai”, the Japanese word for trust, on the meeting room whiteboard, declaring “Trust was the new project for Fujifilm”. Since its foundation in 1934, trust had been central to the ethos of Fujifilm. Employees and customers knew they could trust Fujifilm to capture and preserve treasured memories, now this trust would have to be embodied in new products as film was quickly becoming obsolete. To do this, trust in this radical vision would in itself be central to ensuring the employees delivering this ambitious business transformation.
Alongside this ethos of trust, the company had a strong technical competence developed during over half a century of perfecting compounds to create the ultimate colour film. The bold plan was to take the ethos of trust and a technical competence which had developed over 20,000 advanced compounds and apply them to new markets, initially pharmaceuticals and cosmetics.
Cost cutting combined with a brave investment plan.
To make the plan work, commitment and investment would be key. While many would only countenance cost reduction, Mr Komori took the radical move to invest $400m in a new research facility to find new markets for the technological expertise and compounds developed over half a century to create many of the worlds most advanced films. This facility served as a beacon of hope and a channel for Fujifilm’s established culture of innovation and drive.
The results were impressive. Alongside a $5Bn cost reduction programme that saw 5,000 jobs sacrificed, an act that could quite easily have destroyed many companies, a steadfast belief in a visionary plan saw Mr Komori and his team create two powerful new divisions which grew at an astonishing pace.
By 2012 as Kodak filed for bankruptcy, the Fujifilm recovery was well underway with sales exceeding $18Bn. The cosmetics division had made some logical but radical leaps in their thinking and followed up transforming sound uses of proven technologies into high a high end range of skincare products. The deep understanding of collagen used in film manufacture, combined with the knowledge of compounds used to prevent photograph fading, was successfully applied to protect the collagen that exists in human skin from damage from the sun. Similarly, the pharmaceutical division, quickly brought a range of vitamin supplements to market en route to applying the rich archive of complex compound knowledge to create market leading medicines.
Technological leadership and a drive to innovate continues. In 2017 Fujifilm will invest over $1Bn in research and development with projects including a potential cure for Ebola. The business has a broad portfolio of products which also includes printer hardware and LCD screens all of which draw on the technology originally developed in the analogue photo film era. Photography remains close to Fujifilm’s heart, even though film only accounts for 1% of turnover down from 70% at the turn of the millennium.
While many would believe this is a story of great strategy, it is really a story of great leadership. In a recent interview Mr Komori shared his perspective of the five key ingredients for successful leadership:
- Leadership isn’t democracy.
Ultimately the CEO must make decisions “like a wise dictator”. Mr Komori says this isn’t popular in current management thinking, but it is true, “If you make all decisions though a democratic process with everyone agreeing it becomes something mediocre without an edge”. (Mr Komori is humble and keen to admitting that he may not in fact be a wise dictator and acknowledging the risk of a bad dictator)
- Balance of capability.
“It is important to have proper balance between your senses”. For example, “someone with very sharp senses may be able to foresee the future, but what use is that if you can’t make a plan or a proposal? In which case being smart serves no purpose. Equally if a person is smart, but has a cold heart, who is going to follow him? If you have a warm heart, people will follow you”.
After Heart comes Guts, “we Japanese call it stomach, our belly” guts are vital to making decisions and achieving commitment.
Being seen in the field, being there with the staff, being seen doing things yourself, leading by example is key to getting others to follow.
It is important so people can understand what you are trying to achieve. Language is more than the written or spoken word, it includes facial expressions and your whole posture and body language. “If someone looks unpleasant, people won’t follow them”.
Crisis clearly forced Fujifilm’s into a position where only a radical and truly transformational plan would save the company. But Fujifilm’s transformation was only made possible due to the quality of its leadership. Ronald Reagan once said “The greatest leader is not necessarily the one who does the greatest things. He is the one that gets the people to do the greatest things”. In this case Mr Komori happily admits that his success is as a result of harnessing the trust of his employees to make his plan work.
Marcus Mackay – Strategic Planning Director
Mercury Stone Ltd