Fujifilm is bringing its expertise, innovation and quality focus into the regenerative medicine, cosmetics and pharmaceutical sectors. Shigetaka Komori, Chairman and Chief Executive Officer of FUJIFILM Holdings Corporation, explains where the inventive multinational has already had success in its new ventures, and where the company is headed next.
Abenomics is having a historic impact on the Japanese economy, but we’re interested in learning the private sector’s perspective in this transformation. What would you say has been the impact of Abenomics on the private sector and indeed on Fujifilm specifically?
Ever since we partially lost our economically competitive power, companies in the electronics field, including Fujifilm, were damaged. Over this long period of time, politics left us in a disadvantaged position by neglecting us. They were moderating us and the prime ministers changed frequently. It’s very confusing; not positive and not strong in terms of both economic policy or domestic policy. When Mr. Abe became the prime minister, he stated very positively what he would do, especially for the economic sectors. He began to improve the administration and he began to change the unfair high tax for companies, relaxation of regulations for the economy, and other economic activities. Through Abenomics, the excessive yen appreciation was adjusted and corporate performances, especially those of exporting companies, improved. It had a positive influence on the stock market, followed by financial asset and personal consumption increases. He began to change it. He specially focused on changing the deflation trend. That was very important.
Since then, everything has gotten better and better. The industry has returned to the moderate ratio, before the financial crisis of 2008. The regulation is going to decrease, especially in the regenerative medicine area; and over these past few years, the oil price has dropped significantly. The economic situation turned very nicely, and due to these changes, Japanese companies’ real power will revert back to us. Now we make regular profit, and everything is going well. So, going forward, the economic growth is on our side – the private sector.
Fujifilm is doing very well in this regard. You have a history going back to 1934, introducing photographic film to Japan. Unlike your biggest rival, Kodak, you were able to adapt and innovate. In the face of all of your core businesses evaporating, you succeeded to transform the company, under your leadership, to post record profits last fiscal year, ended March 2015, and ¥118 billion ($1.04bn) net income. What would you attribute this impressive growth to?
I believe that the biggest reason for our success is that we adapted to the new wave. After 180 years of the history of photographic materials, the market decreased dramatically. Since its foundation, Fujifilm was always a challenger and we took the drastic measure of diversification in this new environment in a way that Kodak, our competitor, did not.
Fujifilm’s transformation is legendary, not only here in Japan, but around the world. If you had to say what is the single most important decision you made in this transformation, what would it be? How did you innovate out of crisis?
Both Kodak and Fujifilm had the same understanding of circumstances, but our reactions and the way we handled it was different. We felt that having small reforms, ad hoc changes to the business strategy would not be enough for us to survive. We felt that we must do something drastic to recover, to survive and to grow. At that time, I decided we need a very sharp, drastic, powerful reconstructing, in a very short term of maybe two or three years. Each decision had to be speedy, dynamic, and bold.
A lot of this diversification and growth was supported by M&As. Since 2000, you used ¥720 billion to diversify significantly, especially with your acquisition in the pharmaceuticals sector, Toyama, in 2008, and your billion-dollar acquisition of SonoSite after that. How difficult was it to find synergies between these new sectors and the core competencies that you developed over 80 years at Fujifilm with your photographic business?
When we enter a new segment – for example, the pharmaceutical sector – we find M&As very important. As an example of climbing Mount Fuji, instead of starting the climb from level one, at the lowest, it’s easier to climb from level five. In order to buy time, we utilize M&As. When we decide with which companies to conduct M&As, first we study whether they have something outstanding. Then, second, we look to see if they have something we don’t have. Lastly, we make sure that we can have synergies with the company, and we can see a clear future with them. It is important that we can climb up to top of the mountain.
When you merge these with your core competencies, the new skills and knowledge of the companies, how difficult is it to come up with groundbreaking products such as the anti-influenza drug Avigan, which is expected to show efficacy against the Ebola virus? This is maybe the future of Fujifilm. How do you develop such groundbreaking work?
Regarding Avigan, which is a very powerful anti-viral medicine, this was already in the pipeline of Toyama Chemical when we acquired that company. Another strong product that is in the pipeline is the Alzheimer’s medicine. The societal cost for patients with Alzheimer’s is ¥100 trillion per year. That is nearly US$1 trillion per year, including private costs and public costs. It’s a big burden, so we are in hurry. We also have other medications in Fujifilm’s pipeline, including drugs to combat cancer.
In the meantime, we bought companies like Cellular Dynamics International, based in Madison, Wisconsin, the leading company that develops and manufactures induced pluripotent stem cell (iPSC) for drug discovery support. With this acquisition, we expect to contribute to the industrialization of regenerative medicine.
I read a quote of yours that said that healthcare is the biggest challenge facing mankind at this moment. Is this the future, do you believe, of Fujifilm, the regenerative medicine and the pharmaceutical sectors?
Yes. Especially, in the pharmaceutical area, manufacturers have spent much time and money to this day to make new medicine; but there are still unmet medical needs. We came from sectors outside of the pharmaceutical area. We have different types of technology, which allowed us to take care of DDS (drug delivery systems). Not only the material itself, but we can also develop the ways to carry and achieve effectiveness. For example, we are now proposing a very small patch, made up of micro-needles, enabling medicine to be absorbed into the body, without injection. In that sense, with our technology, we can show different and more effective ways as a pharmaceutical company.
Is this how you would explain Fujifilm’s DNA? Fujifilm has pioneered many products over the years, from the digital camera to computed radiography. Now you’re going to go into pharmaceuticals. Is this what allows you to stay a pioneer and stay an industry leader, this ingenuity to keep inventing new products? In this way, is regenerative medicine the next sector where you think you can pioneer new products?
First, the Alzheimer’s medicine will be an innovative product.
In terms of regenerative medicine, we have materials and management resources, including for example Cellular Dynamics International, a bio venture company in the United States, which manufactures IPS cells. By applying our engineering technology with very scientific and mechanical ways, we can have larger-scale production with consistent quality. Japan Tissue Engineering is another subsidiary. This is one of the most advanced companies for cell culture in Japan. Also, we have proprietary technology to produce a recombinant collagen. Since collagen is a primary ingredient of photographic film, and we have been studying this for many years, we can work to produce collagen that can be scaffolded for culturing cells. We have a strong portfolio in the regenerative medicine area.
I remember you sponsored the Olympics in Los Angeles even before Kodak did in America. The quality of your products speaks for itself. That’s the start of it. Fujifilm has always been very strong at branding in America, but I would say maybe it’s still synonymous with photography, copiers or more of the past 60 years. Now Fujifilm is getting into regenerative medicine, cosmetics and pharmaceuticals. How are you working to communicate the new Fujifilm brand in these sectors? How difficult is that?
In the cosmetic area, we need very strong marketing, which is very difficult to establish. Famous cosmetics companies have been working to increase their brand power for many years, including L’Oreal, Shiseido, and other cosmetic companies. It is always very difficult to catch a woman’s heart.
The greatest and strongest weapon for branding or marketing is the product’s quality, which is high-grade and innovative. For us, it has always been, and it will continue to be that way.
Are you going to be actively promoting the brand in pharmaceuticals and regenerative medicine, as well, in America?
For the pharmaceutical business, we will cooperate with the big pharmaceutical companies and utilize their marketing root. Pharmaceuticals present a challenge for us to play by ourselves in the market.
In other areas, like photographic and highly functional materials, we can utilize our brand image. Fujifilm is recognized as a technology company, so we can communicate the brand in these sectors on our own.
As Japan’s largest investor and second largest trading partner, the mutual benefits between America and Japan can never be overstated. With, of course, the TPP being signed, there is an expectation that this will much stronger, as well. We believe that Fujifilm really is a case study of success that already embodies the synergies between America and Japan from Fuji Xerox, of course, this partnership that you’ve had since the ‘60s. In your opinion, what synergies can be gained from combining Japanese business culture with American business culture? What power is in between that?
American people are very strong in coming up with new ideas, concepts and systems. On the other hand, Japanese people are very strong in the industrialization to make these products. In my understanding, our greatest strength in producing high quality products efficiently comes from this combination of American ideas, systems and thoughts with Japanese productivity.
One of your legacies here at Fujifilm is your commitment to giving back to society, which is a very Japanese virtue that we’re trying to communicate to our international audience, especially in terms of reducing CO2 emissions. Why is this concept of giving back to society so important to Fujifilm’s corporate culture?
We want to produce and sell high quality and innovative products. We offer not only products or services themselves, but we also develop our products with some solution. Our current CSR medium-term plan philosophy is not only to take on the social responsibility of addressing the output of CO2, but also to have a more proactive approach. We want to actually solve the social problems with our products or services, combining both our profit and our social merit. It’s a combination, they stand together. Companies that take on a going concern will also generate values, which in turn will be given back to society. By doing that, you’ll also become more profitable. It’s a cycle.
In many ways, Abenomics aspires to make Japan’s economy more international. We believe Fujifilm is already a case study success in this regard. What advice would you give to other Japanese CEOs and chairmen who want to follow in Fujifilm’s footsteps and create global companies? What are the keys to internationalization, for you?
Japanese companies have very strong potential in terms of R&D, engineering and production processes. And not only is it in advanced technology, but also in their fundamental power of resources. For example, we work on R&D not only for the short-term direct target, but also for the preparation of fundamental powers, digging deeply with our technology. From the American way of thinking, they may come up with waste of management power. American companies like to work directly. The balance of short-term profit and a long-time prospective is important.
A lot of Japanese companies have high potential. The important thing is to go out into the world more. In order to keep being a leading company, we have to provide top-quality products and services with our leading-edge, proprietary technologies. We launched Open Innovation Hubs in Tokyo, Silicon Valley and Tilberg (The Netherlands) to link the business partners’ challenges, ideas and potential needs, and to co-create innovative products, technologies and services with our proprietary technologies. So we must grow further and further.
In line with the G7 campaign, I just want to ask for a final message to these leaders who will be reading this report about Japan. What is the new brand of Japan they should have in their minds, as Japan leaves behind two decades of deflation? What’s the new Japan?
The Japanese economy had difficulties with low growth for many years, but it doesn’t mean Japanese companies lost their power. We will continue to create new value, meeting the needs of society with our cutting-edge technologies. High quality, innovative quality of products, and rich culture is the brand of Japan.