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Sustainable Growth Through Strategic Innovation

Driving Congruence in Capabilities

Mitsuru Kodama

From detailed reviews of existing dynamic capabilities, this book presents a theoretical model of a strategic innovation system as a corporate system capability to enable a large company to achieve strategic innovation. The book includes in-depth case studies to illustrate the importance of strategic innovation capabilities.
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Chapter 6: New product innovation through dynamic capabilities: the case of Fujifilm versus Kodak

Driving Congruence in Capabilities

Mitsuru Kodama

Extract

Once total global demand for color film peaked in the year 2000, Fujifilm of Japan nosedived into debt by 2005 forcing the company to rapidly restructure. Nevertheless, Fujifilm had accumulated a wide range of technologies in the film business, and also had considerable brand power. Fujifilm had chemical, mechanical and software resources with which it had been taking on the global competition, which, in a sense, also enabled the company to come together and take up the challenge of structural reform. Around this time, Fujifilm took a huge turn towards massive strategy transformation in its “Second Foundation.” Moreover, in this second founding, Fujifilm’s mid-term “Vision 75” business plan included top-down orders in the company to raise new cash cows. This resulted in the company producing hit products one after the other such as the Astalift cosmetics lineup, the similar case search system designed for lung cancer diagnosis support, and the polarizing tack film indispensable to LCD panels. There were massive differences between the strategic reactions of Kodak and Fujifilm when the digital camera appeared on the global scene. In contrast to the structural reforms Fujifilm achieved in the face of attack on its capabilities, Kodak’s strategy was to defend its capabilities. Kodak limited itself to protecting its existing patented capabilities, and was unable to structurally reform its capabilities by seeking out or creating new capabilities for transformation. Using comparative research, this chapter discusses and analyzes differences in strategic approaches of Fujifilm and Kodak, from the perspective of corporate governance reform. The chapter also goes into detail about Fujifilm demonstration of dynamic capabilities through asset orchestration by building of a triad model for strategic communities (SC) spanning both the insides and outsides of the company, which led to the company’s successful strategy transformation. Finally, the chapter presents the concept of “strategic community-based firm” as a new governance system that brings about dynamic capabilities through the formation of strategic communities.

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