Strategic Management – Implementation of Strategy (FujiFilm Case & 5S Framework)

Strategy Implementation – Core Logic

• Strategy implementation = turning strategic intent into observable, repeatable, and profitable action.
• Lecturer’s 2-step approach:
  1. Identify all “Critical Tasks”.
  2. Align each task with the 5S framework (Structure, System, Skills, Staffing, Shared values).
• Ethical / practical implication: Execution failure, not bad strategy, explains most corporate collapses.

Identifying Critical Tasks

• First organisational element required for execution; they are the “few things that MUST go right”.
• Must support BOTH sides of a strategy: • the value proposition (raise WTP) • the cost agenda (lower costs).
• Example 1: Ducati 1996
  • Goal: raise consumer WTP for Italian high-performance motorcycles yet cut cost.
  • Critical tasks ⇒
  1. Standardise components.
  2. Centralise manufacturing.
  3. Expand outsourcing.
• Example 2: Schindler in India (mid-1990s)
  • Context: 75\% of lifts sold by 4 incumbents; Otis ≈ 50\% share; market price-sensitive; after-sales service a deal-breaker.
  • Critical tasks ⇒
  1. Build local mgmt / sales / maintenance teams.
  2. Acquire India-specific know-how in tech + quality.
  3. Keep tight cooperation with European plants to import global know-how.

Aligning Critical Tasks to the 5S

• 5S =
  1. Structure – the formal/informal blueprint of tasks & authority.
  2. System – metrics, rewards, budgets, IT, routines.
  3. Skills – collective competences; training & development.
  4. Staffing – right people in right roles.
  5. Shared values (Culture) – the unwritten rules that shape behaviour.
• Principle: every critical task must be “owned” by every S.

STRUCTURE – Making Information Manageable

• Purpose: slice information processing into manageable blocks (span of control).
• Key elements: task division, responsibilities, lines of authority, communication flows.
• Matching rule: structure follows strategy. E.g., global expansion ⇒ country-focused orgs to nurture local loyalty.
• Canonical multi-divisional (M-form) visualised in slides: BOD ➔ Senior Exec ➔ Corporate Staff (R&D, Finance, etc.) ➔ Divisions (each with full functional mini-orgs).
• Shared-activity structure: some functions (Sales, R&D, Manufacturing, Distribution) are pooled across divisions to reap economies of scope.
• Divisional GMs act like mini-CEOs – complete P&L responsibility.

SYSTEM – Metrics, Rewards, Processes

• Core rule: “Establish the measures that matter and set performance expectations.”
• Mature vs. emerging businesses need different KPIs:
  • Established ops: \text{Revenue},\;\text{Earnings},\;\text{ROE},\;\text{ROA} …
  • Emerging ops: milestone progress (prototype, launch, user adoption).
  • IBM 1990 template:
    • Mature: Profit, Cost, Productivity.
    • High-growth: Growth %, Market share.
    • Emerging: Milestones, prototype tests.
• Rewards must reinforce strategy:
  • Case: Jamie Dimon (large bank). Actions – scrapped perks, tied comp to profit, stock options based on performance.
• Budget systems can be weaponised (reallocate scarce R&D $ to contests; use Corporate VC for exploration – Fuji example later).

SKILLS – Capability Building

• Execution fails if people lack know-how.
• Tools: training programs, leadership education (e.g., GE’s Crotonville leadership centre), job rotation, external courses.

STAFFING – Getting & Keeping the Right People

• Elements: recruitment, promotion, succession planning, performance feedback.
• Fuji case will illustrate: internal memos from top 1 000 staff; importing outsiders; decentralised ownership.

SHARED VALUES (Culture)

• Definition: collective behaviours, attitudes, actions.
• Peter Drucker: “Culture eats strategy for breakfast.”
• Healthy culture → autonomous execution, peer pressure, trust, resilience.

Extended Case Study – FUJIFILM’s Second Foundation

(Applying every 5S lever)

1. Context & Shock

• Founded 1934 as photographic-film maker; dominated analog imaging for decades.
• Late 1990s: digital tidal wave. Industry volumes ↓ 20{-}30\% per year.
• Films provided \approx60\% of Fuji profit ⇒ by \sim2010 that fell to zero.
• Competitor outcomes: Agfa bankrupt 2005; Kodak bankrupt 2012. Fuji survived & thrived → “second foundation”.

2. Komori’s Overall Strategy

• Shigetaka Komori (CEO 2000-present) goal: use core photography technologies to enter new growth arenas.
• Five tech platforms extracted from film heritage:
  1. Highly functional materials (chemicals, coatings, nano-manufacturing).
  2. Medical imaging & life sciences.
  3. Graphic arts (printing, plates, inks, workflows).
  4. Documents (via Fuji Xerox).
  5. Optical devices (lenses, sensors).

3. Komori’s Critical Tasks

• Intensive R&D collaboration across labs/businesses.
• Seed entrepreneurial mindsets within a formerly hierarchical firm.

4. STRUCTURE Levers

1. Restructuring (cost take-out)
   • Cut > {2.5}\text{ billion}, mainly in film.
   • Laid off 5\,000 employees by 2006.
2. Decentralisation
   • Built 6 new divisions → eventually 14 business units.
   • Made division managers true owners; culture of flexibility + entrepreneurship.
3. Centralised R&D governance
   • Early-stage, high-novelty focus; 76\% of total R&D spend on new tech (vs. sustaining film).
4. Organisation-chart evolution
   • 1998: functional & product divisions under central committees.
   • 2006: matrix of imaging, information, document solutions; specialised research centres for each tech platform.
5. Venturing
   • > 40 acquisitions:
     • 2000 – 1.6\text{ billion} to lift Fuji Xerox stake (now 75\% owned).
     • ¥650\text{ billion} on healthcare targets (2000-present).
     • 2008 – Toyama Chemical 1.4\text{ billion}.
     • 2011 – SonoSite 995\text{ million}.

• New-product timeline (2000-07): Super CCD, digital X-ray (FCR Profect CS), trans-nasal endoscope, ASTALIFT cosmetics, Metabarrier/Oxibarrier supplements, Frontier 700 minilab, etc.

5. SYSTEM Levers

• Budget competition for internal R&D ➔ tougher hurdle rates.
• Increased use of Corporate VC for tech scouting.
• Revenue mix 2010s (approx): Imaging 15\%, Information 38\%, Document 47\% – revenue doubled vs. 2000.

6. SKILL Levers

• “Scout & Train”: hired talent from Toshiba; sent engineers to external training.

7. STAFFING & SHARED VALUES

• CEO held small lunch meetings with middle managers for two-way feedback.
• Asked top 1\,000 employees to write 2-page memos – involved them in renewal narrative.
• Net result: entrepreneurial, experimentation-friendly culture sustained.

8. Performance Evidence

• Consolidated revenue grew to ¥\approx1\,133\text{ billion} in imaging plus ¥933.9\text{ billion} information etc.; doubled vs. 2000 baseline.
• Maintained profitability whilst Kodak collapsed.

9. Ethical / Societal Angle

• Retraining & redeployment softened lay-offs.
• Medical & life-science ventures contribute to public health (e.g., Avigan antiviral, SonoSite ultrasound for point-of-care diagnostics, Astalift skincare for ageing demographics).

Cross-Lecture Connections

• Strategy formulation (previous lectures) sets direction; implementation (today) supplies the muscles.
• Critical-task logic mirrors Porter’s activity-system map: choose the few activities that create unique value & fit.
• 5S resembles McKinsey 7-S Model minus Style & Strategy (already assumed).

Key Take-aways for Exam

• Always start execution planning by listing critical tasks. Tie each to at least one of the 5S.
• Structure MUST mirror the strategy’s information-processing needs; mismatch ⇒ bottlenecks or turf wars.
• Systems (metrics + rewards) are the fastest lever to trigger behaviour change.
• Skills & staffing can be upgraded via targeted training, external hires, or acquisitions.
• Culture is the most powerful but slowest lever; leadership storytelling & symbolic acts matter (e.g., Komori’s memos, Dimon cutting perks).
• FujiFilm = gold-standard pivot: protected cash, harvested core capabilities, invested early in adjacencies, reshaped organisation, preserved innovative culture.