Discussion Paper Series

AGISSS
Gakushuin University
No.2020-1
Managing Exploration Persistency
in Ambidextrous Organizations-Case of Fujiﬁlm and Kodak-

Tomoatsu SHIBATA, Yasunori BABA, Jun SUZUKI

Association of Gakushuin International Social Sciences Studies
1-5-1 Mejiro, Toshima-ku, Tokyo 171-8588 JAPANManaging Exploration Persistency in Ambidextrous Organizations-Case of Fujifilm and Kodak-

Tomoatsu SHIBATAGAKUSHUIN University, Japan
1-5-1, Mejiro, Toshima-ku, Tokyo, 171-8588, Japane-mail : shibatatomoatsu@gmail.com

Yasunori BABA
University of Tokyo, JapanJun SUZUKI
National graduate institute for policy studies, Japan

Abstract
The concept of ambidextrous organization, which is allowing exploration and exploitation tocoexist within an organization, has attracted considerable interest and is useful in understand thecorporate transformation process. We aim to advance the framework of ambidextrous organization byincorporating the aspect of exploration persistency. Our in-depth case study revealed contrasting
persistence of exploration for new technology and new business between Fujifilm and Kodak throughanalysis of patent data from 1982 to 2012. Also, we discuss how the degree of exploration persistency
is influenced by the effects of exploitation and knowledge accumulation within ambidextrous
organization.
Keywords: Fujifilm, Kodak, technical change, ambidextrous organization, exploration persistency

11. Introduction

Fujifilm and Kodak competed for photographic film business until the global demand for film
plunged with the advent of digital cameras (digicam) in the 2000s. The fates of these two companies
differed: Kodak filed for bankruptcy protection in 2012 but Fujifilm developed new businesses tobecome a “total healthcare company” centered on medical care. Having competed for the samebusiness over many years, they had similar core technologies. Their top five technical fields in termsof cumulative patent applications between 1983 and 2012 were identical: optics, audio-visual, textile
machines, basic materials, and computers. The changes in their ratios of applications in these five
fields followed similar patterns and they displayed similar patent application behaviors while retaining
similar core technologies, as described later.

Even if companies have the same capacity at some time

point and compete in the same market environment, their fates may differ.
Some recent academic research on these two companies has been published and valuable lessons
can be learned from investigation of these companies. For example, Kodama and Shibata (2016)
proposed the concept of knowledge convergence through boundary vision from an in-depth case studyof Fujifilm. Also, Ho and Chen (2018) suggested there was a systematic way for incumbent firms tonavigate technological disruption by comparative case studies of Fujifilm and Kodak. They showedthat disruptive technological change does not necessarily render all technological competences
embedded in a firm’s products obsolete. In addition, Shibata et al. (2019) advanced the framework of
ambidextrous organization by incorporating the concept of product substitutability through an in-depthcase study of Fujifilm, and they showed the corporate transformation process can be understoodeffectively from the perspective of ambidextrous organization.
This paper aims to advance the frameworkof ambidextrous organization through a comparative

case study of Fujifilm and Kodak by incorporating the aspect of persistency. An ambidextrous2

organization exhibits simultaneous exploration and exploitation. Exploration, an innovative corporate
activity, involves identifying the seeds of new businesses and/or markets and nurturing them.
Exploitation entails refinement and development of existing knowledge, know-how and experience
accumulated in a company’s current core businesses to develop improved products and services(March, 1991; O’ Reilly and Tushman, 2004; He & Wong, 2004; Govindarajan & Trimble, 2005;
Markides & Charitou, 2004; Adler et.al., 1999; Holmqvist, 2004; Katila & Ahuja, 2002). Within theambidextrous concept, compared with exploitation, exploration is an experimental or trial-and -error
process carrying the nature of uncertainty.
Therefore, undertaking exploration requires time and costs. This nature of exploration requires
difficult decision making regarding whether the company should maintain its original explorationand direction. Companies have to change their direction of exploration if they realize they are headingin the wrong direction. The degree of pursuing a direction with a definite goal in exploration is called
exploration persistency in this study.
Also, an ambidextrous organization has the natural tendency to transfer some management
resources from exploration to exploitation due to short term results of exploitation, compared with
exploration which requires long term endurance. As a result, exploitation activity tends to hinder anambidextrous organization from doing exploration activity persistently. Therefore, shedding light on
exploration persistency will be useful for advancing the framework of ambidextrous organization.
On the other hand, there have been studies of the persistency of innovation in general, which has
long remained an important research topic (Guarascio and Tamagni. 2019).

At the firm level,

innovation persistency can be understood as a fundamental source of long-run competitive advantage.
However, existing research on innovation persistency has not distinguished between exploration andexploitation although there is a broad consensus that exploration and exploitation are necessary
different elements in a firm’s innovation process (March, 1991, 1996, 2006). Therefore, more in-depth

3consideration focusing on exploration persistency is useful for advancing our understanding ofinnovation persistency.
Nevertheless, existing literature has not fully investigated exploration persistency in the context
of an ambidextrous organization. Our aim is to propose the effectiveness of exploration persistency
to enhance the framework of ambidextrous organization as well as innovation persistency. To illustrate
this, the present paper mainly draws on patent data to assess the degree of persistency in exploring
new technology. Through case studies of Fujifilm and Kodak, we found contrasting strategies of
persistency of exploration from as early as the 1980s until 2010. For example, although Kodak andFujifilm embarked in the same direction of exploration toward digital cameras and medical care,
Fujifilm maintained a persistent direction of exploration, whereas Kodak frequently changed direction,
as described later. Thereby, this study provides an alternative explanation to the very well-studied andextensively discussed Kodak and Fujifilm case.
Here, we show persistency matters when a company explores new technology and new business as
an ambidextrous organization. Accordingly, incorporating this aspect of exploration persistency
should advance the usefulness of the ambidextrous concept. Also, we argue how exploration
persistency is influenced within an ambidextrous organization, and we discuss

two factors, aknowledge accumulation effect and an exploitation effect.
The rest of this paper is structured as follows: Section two describes theoretical considerations
while reviewing related studies. Section three explains our methods and data. Section fourdemonstrates an in-depth case study using patent data and shows that unlike Kodak’s, Fujifilm’s
exploration was persistent. Section five summarizes findings and discusses the effectiveness of the
aspect of exploration persistency.

42. Ambidextrous organization and exploration persistency
2.1 Ambidextrous organization
Sustainable corporate growth requires two types of corporate activities, exploration andexploitation, which differ in objective and character (March, 1991). Exploitation addresses issues
including efficiency, control, certainty, and variance reduction, whereas exploration addresses
research, discovery, autonomy, and innovation (March, 1991). Biases toward exploration will
have a negative impact on company profitability due to the costs and time involved. Conversely,
biases toward exploitation can enhance short-term profits while being detrimental to long-termcompetitiveness, due to neglect in fostering new business. Thus, balance between exploration andexploitation is important (McCarthy and Gordon, 2011; Gibson and Birkinshaw, 2004).
In general, however, biases towards exploitation can occur easily, as exploitation is directly
linked to business performance. Rather than engage in time- and resource-consuming exploration,
inertia arises by focusing on improving and upgrading existing core businesses. Yet, without
undertaking exploration, firms may fail in the face of change. Organizational ambidexterity refers
to the ability of an organization to both explore and exploit (O’Reilly and Tushman, 2013).
Achieving both is difficult, as each requires different skills, capability and structures.
Structural ambidexterity requires the separation of divisions specializing in
exploration and exploitation of a firm’s main business, with activities of these divisions
pursued autonomously and concurrently. Because the objectives and types of activities
involved in exploration and exploitation differ, the mechanisms for incentivizing staff,
employee characteristics, leader characteristics, business processes, and learning andorganizational culture should differ (Junni et al., 2015; Mom et al., 2015; Dixon, Meyerand Day, 2007). For instance, ambidextrous organizational culture consisting of diversity
and shared vision has been conceptualized (Wang and Rafiq, 2012). Lack of a suitable5

mechanism connecting exploration and exploitation activities may result in isolation of
the former from the company’s main lines of business, leading to interdivisional conflicts
within a company.

Also, structural ambidexterity requires skilled management of strategic contradictions (Smith
and Tushman, 2005) and top management shared leadership (Mihalache et al., 2014). This
organizational model should focus on creating synergies rather than discord between divisions.
Some studies reported the importance of upper management in presenting organizational visions
to both entities and supervising the allocation of resources (Tushman and O’Reilly, 1997;
Lubatkin et al., 2006). Others emphasized the importance of information sharing andcommunication by middle management and front end staff (Govindarajan et al., 2005).
Although studies of structural ambidexterity have not yielded completely consistent results,
they generally confirm that a combination of exploration and exploitation is positively associatedwith the sustainable competitiveness of a company (He and Wong, 2004; Govindarajan andTrimble, 2005; Junni et al., 2013; Turner and Lee-Kelley, 2012).
Also, two types of ambidextrous organizations, the cannibalistic type and the complementary
type, have been proposed, and it

has been shown how these two types of ambidextrous

organizations effectively explain the corporate transformation process of Fujifilm (Shibata et al.,2019). The ambidextrous concept has proven to be useful for understanding transformation
processes.
This paper aims to contribute to these existing studies by shedding light on the role ofpersistency during exploration.

2.2 Nature of exploration
Studies of the relationship between organizational competency and exploration of closely

6related areas revealed that companies form structured internal organizational routines to increase
efficiency (Cyert and March, 1963; Nelson and Winter, 1982; Cohen and Levinthal, 1990; Singhand Fleming, 2010; Benner and Tushman,2002; Rothaermel and Deeds, 2004)) and end up
focusing on activities associated with closely related areas, limiting their exploration to certain
areas.
The explorations of successful companies have a path dependency naturally biased toward
closely related technologies and knowledge already accumulated (Helfat, 1994; Stuart andPodolny, 1996). Consequently, products released by companies that build on past achievements
tend to be more similar to their existing products than products released by start-up companies(Martin and Mitchell, 1998; Benner and Tushman,2002).
Companies foster innovation by technically exploring new areas that differ from those of theircore technologies. Exploration activities in closely related areas are considered advantageous tostrengthen and refine a company’s accumulated core technologies and competencies. However,companies may become attached to their accumulated competencies, despite change in theexternal environment demanding new technologies. Thus, core technologies may inhibit flexible
responses to change and ultimately bring about rigidity. Companies in this situation are said tohave fallen into “competency rigidity” or a “competency trap” (Leonard-Barton, 1992; Levitt andMarch, 1988). Therefore, companies must broaden their exploration activity beyond closely
related technologies. However, this involves costs and uncertainties. Uncertainties in activities
involving technological innovations are driven by the exploration activity itself (Fleming, 2001).
To describe uncertainties caused by exploration activities, several frameworks have been
proposed. One involves exploration depth and exploration scope (Katila and Ahuja, 2002). Depthrefers to the frequency at which accumulated knowledge is used, and scope reflects the degree towhich new knowledge is sought. Excessively wide or deep explorations are counterproductive to7

product development, whereas explorations with a certain degree of both scope and depth are themost effective for product development (Katila and Ahuja, 2002).
Previous studies have attempted to classify exploration scope, depending on whether an
exploration crosses certain technological and organizational boundaries (Rosenkopf and Nerkar,
2001). Crossing a technological boundary to integrate technologies in different technical areasand crossing an organizational boundary to cooperate with different organizations requiredifferent skills, know-how, and knowledge. Therefore, analyses of exploration activity should
distinguish between explorations of technology and organization, and by using a two-dimensional
matrix exploration activity can be classified into four types (Rosenkopf and Nerkar, 2001). For
example, exploration beyond both technological and organizational boundaries and explorationof technologies within an organization in a technical area different from its core technologies
constitute different types of exploration demanding different skills and know-how.

2.3 Research gap
There have been many studies concerning ambidextrous organization and the nature of
exploration. However, these existing studies do not fully explain why companies still fail with
exploration. For example, as our in-depth case study describes later in this report, both Kodak andFujifilm embarked in the same direction of exploration toward digital cameras and medical care.
They both explored identical technological and business areas. However, their fates differed.
Existing studies on ambidextrous organization and exploration do not fully explain why theycause different fates. There is a gap to be bridged between existing academic literature and theactual business phenomenon. This means the necessity of pursuing another dimension to explain
their different fates. We argue that it must be persistency in exploration by ambidextrous
organizations which has been overlooked and not fully investigated in existing literature. Actually,

8

Kodak and Fujifilm showed contrasting persistency of exploration. The research gap this study
aims to bridge is whether or not exploration persistency matters to ambidextrous organizations,and thereby this study provides an alternative explanation to the fates of Kodak and Fujifilm.
Also, this study can be positioned in the intersection of research on innovation persistency
and ambidextrous organization.
The topic of persistence in innovative activities has been discussed in previous studies. Any
firm that consistently obtained patents in a certain field of technology was regarded as persistent(Malerba and Orsenigo, 1999; Suzuki and Kodama, 2004). Previous studies suggested to maintaininnovative activities, persistence rather than R&D expenditure is important (Cefis and Orsenigo,
2001; Suzuki and Kodama, 2004). Also, previous studies have discussed effects of persistencesuch as ‘knowledge accumulation’ (Malerba and Orsenigo, 1999; Suzuki and Kodama, 2004).
Thus, persistency matters for innovative activities in general.
On the other hand, there is broad academic consensus that innovation activities consist of two
different elements, exploration and exploitation (March, 1991, 1996, 2006). An ambidextrous
organization employs exploration and exploitation in parallel, and there must be two types of
persistency, exploration persistency and exploitation persistency. Existing studies on persistency
have not investigated exploration persistency from the specific aspect of persistency. Therefore,
this study focused on exploration persistency within the context of ambidextrous organizations,which can be positioned in the intersection of these research areas.

2.4

Exploration persistency and Exploitation effect within ambidextrous

organization
Here, we define exploration persistency as maintaining an original exploration area anddirection, regarded as the degree of pursuing and insisting on the same direction with a definite

9

goal within the ambidextrous organization. Similarly, we define exploitation persistency as
maintaining the current technology and business domain.
In the case of exploitation, inertia arises by focusing on improving and upgrading current corebusinesses, and bias toward exploitation can occur easily (McCarthy and Gordon, 2011; Gibson
and Birkinshaw, 2004). In this sense, by exploitation persistency, maintaining the current
technology and business is natural. Persistency becomes more important when a company
explores new technology or seeks new business, because exploring new areas demands costs
rarely retrieved in the short term, compared with exploitation.
In particular, we argue that ambidextrous organizations experience the exploitation effect,
which is a unique force working in ambidextrous organizations that impedes exploration. In an
ambidextrous organization, exploitation of core business can bring short term results while
exploration requires long term endurance (McCarthy and Gordon, 2011; Gibson and Birkinshaw,
2004). In theory, this asymmetry between exploration and exploitation tends to induce a transfer
of management resources from exploration to exploitation, as a result hindering exploration. Thus,
existence of exploitation activity itself has a tendency to weaken the degree of exploration
persistency within an ambidextrous organization, which is referred to as the exploitation effect inthis study. The strength of an exploitation effect will increase the difficulty of decision making
about exploration persistency.
Therefore, exploration persistency needs to be managed carefully within an ambidextrous
organization. This study proposes that managing exploration persistency matters for anambidextrous organization, and illustrates the validity and usefulness of exploration persistency
through a case study of Fujifilm and Kodak.

3. Method and Data
10

This study has exploratory aspects, including extracting details about the organizations
involved in corporate transformation, gathering data regarding processes associated with these
activities, and analyzing these data. The method included case study analysis using patent data.
This research methodology gathers and analyzes abundant data, while introducing a newtheoretical framework (Eisenhardt, 1989).
We analyzed the direction of exploration by using patent data (Dutta and Weiss, 1997;
Henderson and Cockburn, 1994; Rosenkopf and Nerkar, 2001). Patents contain information about
the inventor, the company to which the patent is assigned, and technological antecedents of theinvention, all accessible in computerized form. Every patent is assigned to a technical class, which
we used to identify the technical areas being explored by the company.
We analyzed patent data as follows.
Most existing studies of technological diversity or technological concentration bycompanies employ an index based on the weighted sum of shares of each technologicalcategory. The pioneering papers in this field (Traijtenberg et. al.,1997 and Hall et. al., 2001) use
Herfindahl index of the concentration of USPTO patent classes. This index is basically similar
to Shannon index or Simpson index which is calculated from the ‘variety’ and ‘balance’ of
given categories. However, Stirling, 2007 pointed out that “variety and balance cannot becharacterized without first considering disparity”. Disparity refers to the manner and degree inwhich the elements may be distinguished (Runnegar, 1987). It seems that Traijtenberg et. al.
had made an implicit assumption that the “classes” in the USPTO patent classification system
are distinguishable and the inner product between them equal to zero. But the problem with IPC
system which we can use for this study from this point of view is somewhat overlapping top“sections”. The “sections” in IPC system are defined like this:Section A: Human Necessities

11Section B: Performing Operations
Section C: Chemistry
Section D: Textiles
Many industrial technologies can be classified into multiple sections. For example,
pharmaceutical technologies are typically classified into section A and section C. In order toaddress this problem, we converted IPC codes into relevant industrial classes following
Schmoch, 2008 in the first step. Then, in the second step, we calculated Herfindahl index basedon distribution among the classes to obtain a diversity index for each firm by year.

Patent data was drawn from European Patent Office Worldwide Patent Statistical Database(PATSTAT) 2017 spring edition. Our sample comprises patent applications by Fujifilm (including
Fuji Photo Film) and Kodak from 1982 to 2012. We extracted 172,646 patent applications by
Fujifilm and 60,033 by Kodak. Most of these patents have multiple International PatentClassification (IPC) subclass (4-digit) codes (1.97 codes per patent on average). We used IPCTechnology Concordance Table (January 2015 edition) published by World Intellectual Property
Organization (WIPO) in order to integrate IPC subclass codes into 35 broad technology fields
defined by WIPO. Also, Herfindahl–Hirschman Index(HHI), a commonly accepted measure ofconcentration, was calculated by squaring the share of each technology field and then summing
the resulting numbers.
In addition, our analysis of Fujifilm included semi-structured interviews with executives,internal information provided by Fujifilm, data prepared by Fujifilm for the public, and publicly
available materials including books and magazines written by third parties. The analysis of Kodak
included publicly available materials, books, magazines, and academic papers.
Because, the aim of this study is to propose a new theoretical aspect and framework, it has an

12

exploratory nature. Therefore, qualitative analyses including interviews can effectively
complement quantitative patent data analysis, thereby enrich in-depth case analysis throughgathering data widely from multiple resources.
The semi-structured interviews involved two Fujifilm executive directors and five directors ofrelated departments, conducted July 17, 2015, January 29, 2016, and July 14, 2016. Before theinterviews, we developed a profile of the company using public sources. The interview goal wasto understand Fujifilm’s corporate transformation process as a whole from film company to digital
camera and health care company in terms of strategy and organization. The main topics of semistructured interviews were how to deal with emergence of digital cameras and how to develop
new technologies and business through exploration.
To obtain a comprehensive picture of the company, we also spoke with staff in related
functional areas. Each interview lasted over 1-hour, with some individuals interviewed multiple
times. Interviews were recorded, and transcribed by a professional service. When clarification
was necessary, interviews were followed-up by email. The report, prepared based on informationfrom the interviews and written sources, was reviewed by Fujifilm to ensure validity.

13

Table 1. Cumulative numbers of Fujifilm patent applications intechnical areas ranked 1 to 13 (1982 to 2012)
Technical
area
OpticsAudio-visual

Cumulative
Accumulated
Rank
Share
numbershare
109326
1
30.4%
30.4%
47790

2

13.3%

43.7%

36806

3

10.2%

53.9%

19099

4

5.3%

59.2%

17007
15800

5
6

4.7%
4.4%

63.9%
68.3%

14465

7

4.0%

72.3%

13453

8

3.7%

76.1%

Surface tech

12356

9

3.4%

79.5%

Medical tech

10837

10

3.0%

82.5%

Measurement

9826

11

2.7%

85.3%

Organic chem

8973

12

2.5%

87.8%

Elec_mach

8678

13

2.4%

90.2%

TextilemachinesBasicmaterials
Computer
SemiconMacromolecularOthermachines

Technical areas ranked
1 to 5 represent thecore areas of Fujifilm.
About 2/3 of patentapplications during
this period were intechnical areas 1 to 5.

Technical areas ranked 6 to
13 represent peripheraltechnical areas of Fujifilm.

The cumulative number of patent applications by Fujifilm between 1982 and 2012 in technical14

areas ranked 1 to 13 accounted for over 90% of all their applications during this period (Table 1).
About two-thirds were in technical areas 1 to 5, which we regarded as core technical areas ofFujifilm. We regarded areas 6 to 13 as peripheral technical areas. Similarly, we counted Kodak’spatent applications and identified their core and peripheral technical areas (Table 2). Because thecumulative number does not represent the ranking of applications at any specific time, we
determined the changes over time in ratios of patent applications in the top five fields of Kodak
and Fujifilm (Figures 1 and 2). Both companies applied for patents in the same top five technicalfields: optics, audio-visual, textile machines, basic materials, and computers. Also, their ratios
followed similar patterns.

Fig. 1. Kodak’s patent application ratio trends in its top five fields
KODAK
100%
90%
80%
70%
60%
50%
40%

Textile machines
Basic materials
OpticsComputer
Audio-visual

30%
20%
10%
0%

15

Fig. 2. Fujifilm’s patent application ratio trends in its top five fields
FUJIFILM
100%
90%
80%
70%
60%

Textile machines
Basic materials
OpticsComputer
Audio-visual

50%
40%
30%
20%
10%
0%

4.

Exploration Persistency of Fujifilm and Kodak
A previous study suggested the usefulness of dividing Fujifilm’s corporate transformation

process from 1970s to 2010s into two phases of exploration, the first involving digital camera
exploration and the second involving systematic and aggressive exploration for diversification
into nondigital camera business (Shibata et al., 2019). The present study adopts the same method
for this period.

The first phase, ending around 2000, was a period when core technologies

incorporated into digicams were explored and commercialized. During this period, the main areasof exploration were evident and inevitable, and companies pursued the pressing issue ofdigitalization. During the second, when it became clear that the digicam business could not makeup for the loss of photographic film business, survival of the companies required further
exploration for diversification. Because new business areas were unclear, their choice of areas of
exploration became strategically important.

4.1 First phase: Exploration and commercialization of digicams

16

In the late 1970s and 1980s, signs of the advent of digital technology appeared. In 1975, Steve
Sasson of Kodak invented the first digicam (Lucas and Goh, 2009). Because the number of pixels
was only about 10,000, the image quality was poor, so the cameras did not replace film cameras.
By 1993, Kodak had invested $5 billion in digital technology R&D (Lucas and Goh, 2009).
In 1977, Fujifilm started a digicam project at its Central Research Institute and established amicroelectronics laboratory in 1981 which developed a charged coupled device (CCD), a
semiconductor that captures images in digicams. Kodak showed similar trends.
The progress of technological exploration can be traced by reviewing patent applications.
The trends of applications for semiconductor patents by Fujifilm and Kodak (Figure 3) show theyboth started engaging in exploration of this field around 1985. Between 1989 and 1993, Kodak
applied for more patents than Fujifilm, a sign that Kodak proactively engaged in exploration ofdigital technology. After a relatively stable period, the number of patent applications by Fujifilm
rapidly increased, beginning around 1997.

17

Fig. 3. Semiconductor-related patent application trends for Fujifilm
and Kodak

Data from the EPO Worldwide Patent Statistical Database. The number of annual patent applications
related to semiconductors (IPC:H01L) was aggregated based on WIPO’s IPC and Technology
Concordance Table.

The advent of a growing digicam market in 1995 was Casio’s one-million pixel QV-10 model.
Such image quality could replace film cameras. In 2000, Fujifilm’s digicam (Fine Pix4700Z) with
its Super CCD Honeycomb, accounted for 23% of the global and 28% of the domestic market
share. The Super CCD Honeycomb enabled the camera to capture 60% more light per square inch.
By 2000, the two companies dominated the worldwide digicam market (Figure 4). In April 2001,
Kodak launched its digicam EasyShare, which could upload images to a computer at the click of
a button, and which had a longer battery life than its competitors’ digital cameras. Within two
years, Kodak dominated the American digicam market (Christensen, 2006).

18

Fig. 4. Global market share trends for digital cameras
Global Market Share for Digital Cameras
100%
90%

Fujifilm

80%

Canon

70%

Olympus
Matsushita Electric

60%

Casio

50%

Nikon
40%

Kodak

30%

Sony

20%
10%

Others

0%

2000

2001

2002

2003

2004

2005

Source: Gavetti, Tripsas, Aoshima 2010)

Both companies engaged in technology exploration. However, their exploration trajectory
differed markedly. While Fujifilm persisted in exploring digicam technology for about 20 years,theCEO of Kodak, George Fisher formerly of Motorola, returned Kodak to photographic filmwith investments in emerging markets in 1993. In 2000, however, Fisher was replaced by DanielCarp, who accelerated Kodak’s development of digicams.

4.2 Second phase; Exploration in the post-digicam era
Many companies across industries entered the digicam market, making it competitive. Canon
entered in 1999, followed by Matsushita Electric. Under such competition, Fujifilm’s market
share decreased to 10% by 2004. Kodak suffered similarly. To compensate for the downturn inthe film market, exploration of new businesses was deemed urgent by both companies. Decisions
about which technological and business areas to explore resulted in different outcomes for
Fujifilm and Kodak.

19

Although Fujifilm and Kodak initially followed the same exploration strategy, they tookdifferent trajectories. Kodak strayed from their initial direction during the second stage, while
Fujifilm persisted. All three indicators, patents of peripheral technologies, the Herfindahl–
Hirschman Index (HHI), and patents of medical- care related products revealed contrasting
persistency between the companies as follows:

Patent applications for peripheral technologies
Exploration persistency is defined as maintaining the original exploration area and direction
and is regarded as the degree of pursuing and insisting on the same direction with a definite goal.
Exploration beyond core technologies can be assessed by proxy through patent applications forperipheral technologies. Accordingly, the long-term direction of patent applications for peripheraltechnologies indicates the degree of persistency of exploration.

Fig. 5. Kodak patent application trends, positions 6–13
KODAK 6-13
600
500
400
Semicon300

Measurement
Medical tech

200

Organic chem
100

MacromolecularSurface tech

1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

0

Handling
Other machines

From the EPO Worldwide Patent Statistical Database.
The number of annual patent applications in top fields 6 to 13 containing many Kodak applications fromamong 35 technical classes, aggregated based on WIPO’s IPC and Technology Concordance Table.

Both companies shared similar patent application patterns in their five top-ranked fields.
However, (cumulative) patent applications from 1983 to 2012 in technical fields ranked 6–13

20

showed different trends for Kodak (Figure 5) and Fujifilm (Figure 6). Fields 6–13 represent
exploration beyond the boundaries of core technologies.

The number of patent applications by Kodak showed two peaks. The first and higher, around1989 and 1990, included applications in organic chemistry, macromolecules, and measurement
methods, whereas the second, between 2002 and 2004, involved semiconductors and surface
technology. The technical fields of these two peaks differed, indicating Kodak’s lack ofpersistency in technical exploration.
In contrast, patent applications by Fujifilm showed an upward trend in almost all technicalfields, beginning in 1998. Since then, Fujifilm has consistently explored these technological fields,
including its core and peripheral technologies. Whereas Kodak’s exploration lost direction,
Fujifilm’s technology exploration beyond core technologies showed long-term consistency.

Herfindahl–Hirschman Index (HHI)
Second, the trends in diversification and concentration for explorations by both companies can

21be assessed using HHI, which measures the distribution of patent applications. A higher HHI
indicates a higher concentration level, whereas a lower HHI indicates greater diversity. Figure 8
shows the HHI trends for the top 13 technical fields of the companies. The technologicalendeavors of Fujifilm remained concentrated throughout the 1980s, peaking in 1991 and 1992,
but showed greater diversification of technological development from 1990. The progress ofdiversification slowed around 2009, becoming steady in recent years. In comparison, Kodak
started diversifying its technological endeavors in the early 1980s but showed increased
concentration in the early 1990s. During the first half of the 2000s, Kodak showed greater
diversification of technology development but again began increased concentration in 2005.

Fig.7 Trends in HHI indices for Fujifilm and Kodak
HHI: Herfindahl-Hirschman Index
HHI of 13 Fields
0.4

0.3

0.2

0.1

0

Kodak

Fuji

From the 1980s to the 1990s, Fujifilm showed concentrated technological development in the
optical field, catching up with Kodak. Beginning in the 1990s, Fujifilm showed consistenttechnological exploration and promoted diversification of its businesses. In contrast, beginning in
the 1980s, Kodak prepared for the advent of digital technology by investing in technological22

exploration of pharmaceutical products and medical care equipment. In the early 1990s, Kodak
started to concentrate its technological development. During the second half of the 1990s, when
digicams started to threaten photographic film, Kodak started technological exploration in avariety of fields. In 2005, however, Kodak started concentrating its technological resources on theinkjet and printer businesses. These transformations demonstrate the contrast between thestrategies employed by Fujifilm and Kodak.

Medical Care Products
Both companies started to explore similar medical careareas at roughly the same time. A

statement by Fujifilm CEO Shigetaka Komori confirms this: “Naturally, Kodak had also foreseen
the arrival of the digital era and was cautious about it. With regards to diversification, they took
steps similar to Fujifilm when they set out to develop pharmaceuticals.” 1
Fujifilm is currently investing resources in the medical care field and transforming into a “total
healthcare company”. Therefore, comparing the histories of technical exploration by Kodak andFujifilm in this field is useful to understand the difference in degree of persistency between Kodak
and Fujifilm.
The present study assessed the technical exploration of both companies in the medical care field,
focusing on two sub-fields: medical equipment and pharmaceutical products. We examined when
Fujifilm began its exploration in the field, and how Kodak explored this area.

Figure 8 shows trends in the number of patent applications for medical care equipment by bothcompanies. These patents ranked tenth and thirteenth among the cumulative number of patent

1

Shigetaka Komori, “Spirit of Management.”

23

applications for Fujifilm and Kodak, respectively. Figure 8 shows Fujifilm has explored in thisfield for a long time. 2 Beginning in 2002, Fujifilm increased its number of patent applications
and exploration of this technology. Kodak started exploring this field several years after Fujifilm.
Between 1990 and 1995, both companies filed similar numbers of patent applications in this field,
but the number filed by Kodak markedly decreased thereafter.

Fig. 8. Trends in patent applications related to medical-careequipment
1800
1600
1400

From this period, Fujifilm increased
its number of patent applications

1200
1000
800
600
400
200

1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

0

Fuji Medical techkodak Medical tech

From the EPO Worldwide Patent Statistical Database. Aggregated based on WIPO’s IPC andTechnology Concordance Table.

The same trends were found in the number of patents filed for pharmaceutical products. As
Figure 9 shows, Kodak began exploring pharmaceutical technology earlier than Fujifilm, filing
patent applications in 1986. In 1996, Kodak ceased this exploration, and decreased its number ofpatent applications. In contrast, Fujifilm started filing increased numbers of patent applications
little later than Kodak, around 1990. Beginning in 2002, the number of applications surged, after2

Fujifilm started to develop FCR (Fuji Computed Radiography), its digital X-ray image diagnostic

system, in 1974 and released it in 1983. This was an alternative to the traditional analog method
using X-ray film.

24

a stable application period of over 10 years.
In short, their subsequent development trajectories were completely different. While Fujifilm
increased its medical care exploration in the 2000s shifting its business focus to this field, Kodak
withdrew from it. Fujifilm has been persistent regarding both medical care equipment andpharmaceutical products for over 30 years. In contrast, Kodak persisted in both medical careequipment and pharmaceutical products for about 17 years, half that of Fujifilm.
Their merger and acquisition strategies reflected their respective exploration strategies. In
1988, Kodak purchased pharmaceutical company Sterling Drug for 5.1 billion dollars but sold it
in 1994. In 2007, it sold its medical care equipment business and withdrew from the medical carefield. Meanwhile, Fujifilm purchased Toyama Chemical in 2008 making it a consolidated
subsidiary. This was followed by its 2012 acquisition of SonoSite, a large American manufacturerof portable ultrasound devices. Through these ventures, Fujifilm injected management resources
into its medical care business.

Fig. 9. Trends in patent applications related to pharmaceuticalproducts
300

250

Fujifilm increased its number ofpatent applications

200

150

Kodak was faster and moreproactive than Fujifilm.

100

50

0

Fuji Pharmaceuticals

Kodak Pharmaceuticals

From the EPO Worldwide Patent Statistical Database. Aggregated based on WIPO’s IPC andTechnology Concordance Table.

25

We conclude that all three indicators, patents of peripheral technologies, HHI index, andpatents of medical-care products, revealed contrasting persistency between Fujifilm and Kodak
in second phase.
Finally, Table 3 summarizes our findings regarding the exploration persistency of
Fujifilm and Kodak. In terms of degree of persistency in exploration, Fujifilm’s
persistency was high while Kodak’s was low both in first phase and second phase.

Table 3. Exploration persistency of Fujifilm and Kodak
Fujifilm

Kodak

Exploration of digicams

High level persistency as below
Fujifilm persisted in exploring
digicam related technology forabout 20 years.

Low level persistency as below
Georg Fisher returned Kodak to
traditional film business in 1993.
In 2000, Fisher was replaced by
Daniel Carp, who accelerated
digicam development again.

Exploration in the post-degicam
Degree of persistency(All of 3 indicators showed
contrasting persistency
between Fujifilm and Kodak)

High level persistency as below.
・Patent of peripheraltechnologies showed aconsistent upward trend.
・HHI index showed consistent
diversification.
・Medical-care related products
persisted for more than 30
years

Low level persistency as below.
・Patents of peripheraltechnologies showed two peaks.
・HHI index showed aninconsistent trend,
diversification andconcentration.
・Medical-care related products
persisted for just about 17years.

5. Discussion, implications and conclusion
5.1 Effectiveness of aspect of exploration persistency
Prior studies have not shed light on the role of exploration persistency in an ambidextrous
organization. This study theoretically proposes the importance of exploration persistency to26ambidextrous organizations to bridge the research gap. The case study of Fujifilm and Kodak
revealed they had different levels of exploration persistency for new technology and new business,
as follows.
The core technologies of Fujifilm and Kodak were almost identical, and both faced the same
market environment, especially regarding digital technology. Had both companies assessed theircore technologies and looked for new areas to apply them, they may have explored identicaltechnological and business areas. Between the 1980s and 1990s, both companies were exploring
the same areas, including medical care equipment and pharmaceutical products. Nevertheless,
Fujifilm and Kodak developed different exploration trajectories. Fujifilm maintained its directionof exploration with persistence while Kodak changed its direction lacking persistence. The casestudy illustrates the effectiveness and usefulness of incorporating the aspect of
exploration persistency.
Furthermore, it can be inferred theoretically that two factors, exploitation effect andknowledge accumulation effect, will influence the degree of exploration persistency
within an ambidextrous organization as follows.

The concept of ambidextrous organization allows exploration and exploitation activities to coexist
within an organization. Exploitation refines and develops a company’s existing knowledge, knowhow accumulated in its current core business, exploitation persistency reflects the naturaldevelopment of today’s core technologies and businesses.
When exploring new technologies and new business, firms must maintain their direction if it
seems right and promising. If they realize they are headed in the wrong direction, they mustchange their direction of exploration. Otherwise, persistency does more harm than good.
Therefore, persistency is required until a company realizes it is headed in the wrong direction,and it requires difficult decision making, compared with exploitation.

27

This asymmetry between exploration and exploitation within ambidextrous organizations willcause an exploitation effect which tends to induce a transfer of management resources from
exploration to exploitation, ultimately weakening the degree of exploration persistency.
Kodak’s case illustrates the force of the exploitation effect. As the case shows, Kodak oftenchanged the direction of their exploration. Did Kodak realize they were headed in a wrong
direction? It is difficult to attribute their direction changes to Kodak believing they were headedin the wrong direction. Even in the first phase of their exploration into digicams, Kodak changed
their direction and returned to the photographic film business, despite it being obvious andinevitable that the digicam was an emerging technology for the near future. Kodak’s exploration
for digicams must have been influenced by their exploitation of the traditional photographic film
business. Their exploitation of film business must have induced a transfer of management
resources from exploration of digicams to exploitation of film business, because film businesscould bring short term results. Kodak’s change of direction of exploration was most likely causedby the exploitation effect.
In contrast, accumulation of knowledge about new technologies and business by anorganization tends to strengthen its persistency of exploration, as existing literature shows theknowledge accumulation effect is a source of persistency (Malerba and Orsenigo,1999; Suzuki
and Kodama, 2004).Through the exploration process within an organization as discussed below,
organizational knowledge can be accumulated.
Exploration is an experimental or trial-and-error process leading to the acquisition ofknowledge and learning (March, 1991). To acquire knowledge from exploration, it is necessary
to define the exploration area or boundaries, regardless of the technology or market. Therefore, acompany must determine the scope of the area to be explored, because it defines the direction of
the exploration activity (Katila and Ahuja, 2002). It is necessary to determine which of multiple

28

directions warrant further exploration. Thus, companies first explore broadly to find a range ofoptions and subsequently narrow down the scope of their exploration (Katila and Ahuja, 2002;
Fleming and Singh, 2010). Through this exploration process, knowledge about a new area will be
accumulated within companies.
Thus, we discuss two factors that influence exploration persistency, an exploitation negative
effect and a knowledge accumulation positive effect. The balance between these two factors in an
ambidextrous organization will ultimately determine its degree of exploration persistency within
an ambidextrous concept.

5.2 Managerial implication: Organizational initiative process and CEO initiative process
Based on above discussion, we can develop implication for managing exploration persistency
in company. We classify the exploration process into two types, organizational initiative and CEO
initiative for developing managerial implication.
With organizational initiative exploration processes, the exploration area is narrowed byorganizational discussion and organizational-level agreement.
In this type, top management determine the destination, and middle managers choose the routeand steer the ship by facilitating team-level interactions among employees (Nonaka, 1988;
Nonaka and Takeuchi, 1995). In this process, both top and front-line managers are engaged in
discussions to set the direction of exploration. Once the wide area of exploration is determined,
subsequent explorations must follow within that scope. Knowledge in the exploration direction
will be accumulated through discussion in the organization, and the selected exploration area will
be shared and agreed among members of the organization.
Fujifilm adopted this exploration process(Shibata, Kodama, Suzuki, 2018). Actually, Fujifilm
started with wide exploration, then narrowed down to a specific exploration, enabling Fujifilm to29

organizationally define the area of exploration through accumulated knowledge.
This type of exploration process provides high level persistency in the exploration direction,
because this exploration process tend to accumulate organizational knowledge and knowledge
accumulation effect exceed exploitation effect. Accordingly, this type is also resistant to changeof CEO. In fact, Fujifilm did not change direction even when the CEO changed from Onishi to
Komori in 2003. Our case study using patent showed that Fujifilm persistently explored the same
technical areas including semiconductors and medical care-related technology throughout theperiod of our investigation from 1982 until 2012.

With CEO initiative exploration processes, the exploration process will be conductedunder the initiative of the CEO. The exploration area is determined without front-line
managers and in the absence of organization-wide discussion. Therefore, knowledge
gained from this exploration process cannot be accumulated and shared within theorganization.
There is a high probability that the area of exploration may change when top
management is changed, because judgments about exploration area by CEOs are
influenced by their cognitive capabilities which may, in turn, influence the success or
failure of a business (Rosenbloom, 2000; Helfat and Peteraf, 2015).
It seems Kodak adopted CEO initiative exploration process. In fact, Antonio Perez
likely shifted Kodak to the inkjet printer business due to his experience. As vicepresident of HP, Perez managed its inkjet printer business. He increased the number ofprinters sold worldwide from 17- to 100-million and increased sales to over 10 billion
dollars, which paved his way to Kodak CEO. Kodak’s shift to the inkjet printer business
was likely due to its new CEO’s successful experiences.

30

Also, George Fisher recruited from Motorola CEO returned to the traditional
photographic film business, which was influenced by exploitation effect seeking shortterm results. Thus, in case of Kodak, it seems that exploration area have changed
whenever CEO have changed, which is sharp contrast with case of Fujifilm.
This type of CEO initiative exploration process tend to accumulate less organizational
knowledge, and therefore easily influenced by exploitation effect seeking short –term
results. These will cause low level persistency in exploration, and actually our case study
using patent data show the frequent change of technical exploration area of Kodak.

5.3 Conclusion
It is widely believed that Kodak’s fate was caused by its failure to properly deal withthe emergence of the digital camera market.

However, this study provides analternative explanation. This study revealed Kodak and Fujifilm had different levels of
persistency in exploration for new technology and new business. The difference between
Kodak and Fujifilm was not their timing of exploring new business but their degree of
exploration persistency.

Kodak was not late in starting to explore new businesses. The

timing of Kodak’s explorations in medical care equipment and pharmaceutical products
were similar to those of Fujifilm. However, Kodak did not maintain a consistentpersistent direction and withdrew from medical care equipment and pharmaceuticalproducts. It turned out that exploration persistency matters to an ambidextrous
organization.
In the existing literature on ambidextrous organizations, four success factors havebeen proposed; namely 1) a clear strategic intent that justifies the needs for exploitationand exploration, 2) senior management commitment and support, 3) an ambidextrous

31

architecture that deals with careful design of the organizational interface, and 4)
common identity such as vision, values, and culture (O’Reilly and Tushman, 2016). In
addition to these four factors, this study proposes the aspect of exploration persistency
as another critical factor and adds to existing findings on ambidextrous organizations.
In conclusion, this study extends previous findings and contributes to advancing theambidextrous framework by incorporating the aspect of exploration persistency. Also,
this study argued that the negative exploitation effect and positive knowledge
accumulation effect will influence the degree of exploration persistency within an
ambidextrous organization. In particular, the exploitation effect is a unique force
working in ambidextrous organizations. Therefore, for success of an ambidextrous
organization, carefully managing exploration persistency is required
A limitation of this study is that it is based on a single case study. Analyses ofadditional cases may further enhance the relevance and effectiveness of the proposed
aspect.
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Table 1. Cumulative numbers of Fujifilm patent applications intechnical areas ranked 1 to 13 (1982 to 2012)
Technical
area
OpticsCumulative
Accumulated
Rank
Share
numbershare
109326
1
30.4%
30.4%

Audio-visual

47790

2

13.3%

43.7%

36806

3

10.2%

53.9%

19099

4

5.3%

59.2%

17007
15800

5
6

4.7%
4.4%

63.9%
68.3%

14465

7

4.0%

72.3%

13453

8

3.7%

76.1%

Surface tech

12356

9

3.4%

79.5%

Medical tech

10837

10

3.0%

82.5%

Measurement

9826

11

2.7%

85.3%

Organic chem

8973

12

2.5%

87.8%

Elec_mach

8678

13

2.4%

90.2%

TextilemachinesBasicmaterials
Computer
SemiconMacromolecularOthermachines

Technical areas ranked
1 to 5 represent thecore areas of Fujifilm.
About 2/3 of patentapplications during
this period were intechnical areas 1 to 5.

Technical areas ranked 6 to
13 represent peripheraltechnical areas of Fujifilm.

Table 2. Cumulative numbers of Kodak patent applications intechnical areas ranked 1 to 13 (1982 to 2012)
Technical
area
OpticsTextilemachines

Cumulative
rank
number36203

1

Accumulated
Share
31.2%
31.2%

14226

2

12.3%

43.4%

Audio-visual

13419

3

11.6%

55.0%

ComputerBasicmaterials
Macromolecul
ar

7883

4

6.8%

61.8%

4727

5

4.1%

65.9%

4264

6

3.7%

69.5%

Organic chem

4123

7

3.6%

73.1%

Semicon

3910

8

3.4%

76.4%

Measurement

3837

9

3.3%

79.7%

Handling

3110

10

2.7%

82.4%

Elec_mach

2984

11

2.6%

85.0%

Surface tech

2935

12

2.5%

87.5%

Chemical eng

2405

13

2.1%

89.6%

share

Technical areas ranked
1 to 5 represent thecore areas of Kodak.
About 2/3 of patentapplications during
this period were intechnical areas 1 to 5.

Technical areas ranked 6 to
13 represent peripheraltechnical areas of Kodak.

39

Table 3. Exploration persistency of Fujifilm and Kodak
Fujifilm

Kodak

Exploration of digicams

High level persistency as below
Fujifilm persisted in exploring
digicam related technology forabout 20 years.

Low level persistency as below
Georg Fisher returned Kodak to
traditional film business in 1993.
In 2000, Fisher was replaced by
Daniel Carp, who accelerated
digicam development again.

Exploration in the post-degicam
Degree of persistency(All of 3 indicators showed
contrasting persistency
between Fujifilm and Kodak)

High level persistency as below.
・Patent of peripheraltechnologies showed aconsistent upward trend.
・HHI index showed consistent
diversification.
・Medical-care related products
persisted for more than 30
years

Low level persistency as below.
・Patents of peripheraltechnologies showed two peaks.
・HHI index showed aninconsistent trend,
diversification andconcentration.
・Medical-care related products
persisted for just about 17years.

40

41

Fig. 1. Kodak’s patent application ratio trends in its top five fields
KODAK
100%
90%
80%
70%
60%

Textile machines
Basic materials
OpticsComputer
Audio-visual

50%
40%
30%
20%
10%
0%

Fig. 2. Fujifilm’s patent application ratio trends in its top five fields
FUJIFILM
100%
90%
80%
70%
60%
50%
40%

Textile machines
Basic materials
OpticsComputer
Audio-visual

30%
20%
10%
0%

42

Fig. 3. Semiconductor-related patent application trends for Fujifilm
and Kodak

Data from the EPO Worldwide Patent Statistical Database. The number of annual patent applications
related to semiconductors (IPC:H01L) was aggregated based on WIPO’s IPC and Technology
Concordance Table.

Fig. 4. Global market share trends for digital cameras
Global Market Share for Digital Cameras
100%
90%

Fujifilm

80%

Canon

70%

Olympus
Matsushita Electric

60%

Casio

50%

Nikon
40%

Kodak

30%

Sony

20%
10%

Others

0%

2000

2001

2002

2003

2004

2005

Source: Gavetti, Tripsas, Aoshima 2010)43

Fig. 5. Kodak patent application trends, positions 6–13
KODAK 6-13
600
500
400
Semicon300

Measurement
Medical tech

200

Organic chem
100

MacromolecularSurface tech

1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

0

Handling
Other machines

From the EPO Worldwide Patent Statistical Database.
The number of annual patent applications in top fields 6 to 13 containing many Kodak applications fromamong 35 technical classes, aggregated based on WIPO’s IPC and Technology Concordance Table.

44Fig.7 Trends in HHI indices for Fujifilm and Kodak
HHI: Herfindahl-Hirschman Index
HHI of 13 Fields
0.4

0.3

0.2

0.1

0

Kodak

Fuji

Fig. 8. Trends in patent applications related to medical-careequipment
1800
1600
1400
1200

From this period, Fujifilm increased
its number of patent applications

1000
800
600
400
200

1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

0

Fuji Medical techkodak Medical tech

From the EPO Worldwide Patent Statistical Database. Aggregated based on WIPO’s IPC andTechnology Concordance Table.

45

Fig. 9. Trends in patent applications related to pharmaceuticalproducts
300

250

Fujifilm increased its number ofpatent applications

200

150

Kodak was faster and moreproactive than Fujifilm.

100

50

0

Fuji Pharmaceuticals

Kodak Pharmaceuticals

From the EPO Worldwide Patent Statistical Database. Aggregated based on WIPO’s IPC andTechnology Concordance Table.

46