Olympus
Corporate History & Strategy

The outbreak of World War I disrupted imports of optical instruments manufactured by Germany's Zeiss and Leitz to Japan. Before the war, Japan depended on European imports for most precision optical instruments including microscopes, and as the war prolonged, the need for domestic production came to be recognized across various sectors. Microscopes in particular were indispensable foundational instruments in medical and agricultural research, and equipment shortages became apparent at research institutions and testing stations nationwide, creating demand for domestically produced alternatives. This environment provided the social backdrop that supported Takeshi Yamashita's microscope domestication venture.

Takeshi Yamashita was a relative of the politician Masayoshi Matsukata. Having developed an interest in entrepreneurship while attending Tokyo Imperial University, he aspired to launch an independent business rather than seek employment at a large corporation. After graduating, he joined Tokiwa Shokai, a trading company managed by the Matsukata family, where he engaged in the sugar trade. Partly due to the wartime boom, Yamashita brought profits to Tokiwa Shokai, and owner Kojiro Matsukata offered to "give him a reward."

Yamashita leveraged this offer to seek support for the microscope domestication venture he had long envisioned. Kojiro Matsukata, Taiichi Suzuki, and others became investors, and the company's establishment took concrete form as a joint investment. Yamashita was 30 years old when he decided to start the business, and his practical experience at Tokiwa Shokai and connections with the Matsukata family formed the foundation for launching the venture.

On October 12, 1919, Takeshi Yamashita established Takachiho Seisakusho Co., Ltd. with capital of 300,000 yen. For the establishment, he recruited Wakukichi Terada, an engineer with microscope manufacturing experience, as chief engineer. Yamashita had known since his university days that Terada was engaged in microscope production, and the two had an existing relationship. Manufacturing equipment was acquired from Terada's company, "Terada Seisakusho," for 52,000 yen, securing both technology and equipment.

Terada's joining Olympus was also influenced by his own circumstances. Terada had been planning to start a clinical thermometer manufacturing factory, but when he attempted to build a factory on residential land, the Metropolitan Police refused permission, and his plan fell through. As a result, Terada brought his thermometer manufacturing concept to Olympus, enabling the company to simultaneously acquire two technological foundations at its inception: "thermometer manufacturing equipment" and "microscope development know-how."

In terms of capital policy, Olympus adopted a joint investment-based corporate management structure rather than family-controlled ownership by founder Yamashita. Even after establishment, Yamashita did not accumulate company shares, forming a dispersed shareholder structure from the pre-listing stage. This capital policy choice would later shape the separation of ownership and management in Olympus's corporate governance.

At the time of the company's establishment in 1919, Olympus launched with two divisions: the "Optics Division" and the "Instruments Division." The Instruments Division engaged in manufacturing thermometers under Terada's development leadership, while the Optics Division began R&D toward domestically producing microscopes. By March 1920, Olympus completed its first domestically produced microscope, the "Asahi," and fully commenced operations as a precision optical instrument manufacturer.

The primary customers for the "Asahi" were sericulture testing stations. Units were shipped to original silkworm breed testing stations in Gunma, Fukushima, Ibaraki, and other prefectures, where they were used for silkworm breed improvement and disease research. At the time, sericulture was one of Japan's major export industries, and demand existed for research microscopes. However, imported German products had become established as the quality standard in the market, and the evaluation of domestic products was harsh, with sales continuing to struggle.

In terms of management structure, Kensaburo Kawakami, an acquaintance of Wakukichi Terada, assumed the presidency, while Takeshi Yamashita became executive vice president. In practice, however, Yamashita made the actual management decisions, and President Kawakami's involvement in management was limited—he was president in name only. At founding, the company had approximately 80 employees, with skilled craftsmen capable of precision parts machining and lens polishing forming the organizational core. The lens production process was kept confidential, reportedly with polishing conducted in rooms accessible only to authorized personnel.

From its founding, Olympus had been engaged in both microscope and thermometer manufacturing, but thermometers were a consumer product requiring substantial advertising expenses. Additionally, Morishita Jintan invested in Terumo (then known as Akagane Kenshinki Co., Ltd.), established for the purpose of thermometer manufacturing, and intensified sales competition in the thermometer market was anticipated. Meanwhile, microscope development also required significant investment in lens R&D, and cumulative development costs over the three years since founding reached 300,000 yen—the same amount as the company's initial capital. This cost-heavy business structure was straining the company's finances.

With insufficient financial capacity to simultaneously pursue two businesses—thermometers and microscopes—Olympus was forced into a position of choosing between them. Both businesses were at stages requiring time to become profitable, and maintaining both with limited capital had become unrealistic.

In 1923, Olympus sold its thermometer business and a portion of the headquarters factory premises in Hatagaya, Shibuya Ward—the business base—to Terumo, and withdrew from the thermometer business. By simultaneously transferring liabilities in the sale, Olympus's financial position improved. This decision shifted Olympus to a structure concentrating management resources on the single business of microscopes.

However, the sale of the thermometer business resulted in management turmoil. Olympus President Kawakami resigned, leaving the company without a president, and an auditor filed a lawsuit seeking to invalidate the resolution on the business transfer. Within just a few years of founding, Olympus experienced both business restructuring and management instability simultaneously.

Following the thermometer business sale, the Hatagaya factory that Olympus had built in 1919 was divided. The former Instruments Division premises and equipment were utilized as Terumo's headquarters factory, while the former Optics Division continued as Olympus's base. This created a situation where the headquarters factories of Olympus and Terumo were adjacent within the same Hatagaya district.

This factory division later became a source of disputes over asset ownership. Differences of opinion arose between Olympus and Morishita Jintan—Terumo's major shareholder—regarding factory site boundaries and equipment ownership, leading to a lawsuit in 1928. This lawsuit was settled by reconciliation the following year in 1929, but the handling of the founding-era business sale continued to impose a management burden over an extended period.

Following Olympus's transfer of its thermometer "Instruments Division" to Terumo in 1923, Morishita Jintan—Terumo's major shareholder—was also an investor in Olympus. However, when Olympus fell into a management crisis due to the Great Kanto Earthquake that same year, Morishita Jintan refused financial support and took a stance of allowing Olympus to go bankrupt. This response pushed Olympus to the brink of survival, and relations between the two companies deteriorated to near-rupture.

Subsequently, in 1928, Morishita Jintan suddenly began claiming that assets that should have been transferred to Terumo during the 1923 Instruments Division transfer remained untransferred. Asserting its position as a creditor of Olympus, it demanded additional asset transfers and requested Olympus's withdrawal from the microscope business. Coming five years after the earthquake-era refusal of support, Olympus regarded these claims as lacking rationality.

In response to Morishita Jintan's demands, Olympus objected and decided to file a lawsuit at the Tokyo District Court in 1928. Founder Takeshi Yamashita traveled to Osaka for direct negotiations with Morishita Jintan and attempted to encourage reflection through correspondence, but negotiations failed. With no alternative, he chose judicial resolution, initiating legal proceedings to preserve the headquarters factory and microscope business.

One year after filing, in 1929, a settlement was reached between Olympus and Morishita Jintan. Morishita Jintan waived all claims against Olympus, and Olympus secured all factories and factory premises in use, machinery and instruments, and office buildings and premises, also establishing land boundaries. This avoided full factory transfer, confirmed the factory site boundaries in Hatagaya, and enabled Olympus to maintain the operational foundation for its microscope business, connecting to subsequent business development.

Throughout the prewar period, Olympus had been supplying microscopes to hospitals and maintained contact with the medical field. Through this connection, a physician from the First Department of Internal Medicine at the University of Tokyo requested Olympus to develop a "gastrocamera." The approach was unconventional: the physician boarded the Chuo Line train carrying an Olympus employee and spent several hours of the journey explaining the concept of a gastrocamera and the necessity of its development. Behind the request for medical device development from what was merely a microscope manufacturer lay the physician's assessment that optical and precision mechanical technologies could be applied to gastrocamera development.

Olympus accepted this request and began gastrocamera development, completing a prototype by 1950. In 1952, the company progressed to endoscope development, advancing the commercialization of medical devices. However, throughout the 1950s, demand for medical devices remained limited, and the growth market at the time was cameras. As a management decision, Olympus adopted a policy of concentrating resources on cameras, postponing full-scale investment in endoscopes.

Within the company, endoscope development depended on the collaborative relationship between a handful of engineers and physicians, and no company-wide strategic decision to enter the medical device market existed. As an Olympus executive later reflected, "there was no business strategy whatsoever," the medical device business was a case driven by the customer-physicians themselves.

In 1955, when the National Gastrocamera Research Society was established by physicians across the country, Olympus took on the role of its secretariat. The research society later evolved into the Japan Gastroenterological Endoscopy Society, becoming a gathering place for physicians nationwide who used endoscopes. By serving as the secretariat, Olympus created a structure for systematically maintaining connections with physicians as end users, establishing a channel for enhancing product awareness and obtaining feedback for improvements.

This physician network formation centered on the academic society became the catalyst for Olympus's market dominance in endoscopes. Through new product exhibitions and clinical reports, Olympus products became established as the standard choice among physicians. By participating in society operations from the market formation stage, a mechanism was built for simultaneously advancing product development and sales channel construction.

From 1960, Olympus began research into glass fiber spinning and undertook development of fiberscope-based endoscopes. Overcoming technical challenges in coating and bundling, the company completed a fiberscope endoscope in 1963. This technology accumulation became the source of Olympus's technological advantage in the subsequent endoscope market.

The fiberscope endoscope was a fundamentally different product from conventional gastrocameras, eliminating the photography and developing processes required by the latter and enabling real-time observation of a patient's stomach condition. This created a trend of replacing the conventional gastrocamera market with fiberscope endoscopes. Olympus exhibited prototypes at the Osaka Medical Association and the Endoscopy Society, and the prospect of medical achievements on a fundamentally different level generated enormous response among physicians in the society.

In response, from 1964 Olympus began mass production of fiberscope endoscopes at the Hachioji facility. By establishing a mass production system, the company secured price competitiveness against foreign endoscope products, while the high difficulty level of fiber-based production technology functioned as an entry barrier for competitors. Olympus established a dual technological foundation of optical technology and fiber manufacturing technology.

However, as of the 1960s, Olympus had not positioned endoscopes as its core business. Full-scale company investment began only after the establishment of the "Third Business Division" in 1969, and endoscope business development from the 1950s through the 1960s was a unique case of business development driven by collaboration between physicians and engineers outside the framework of the company-wide strategy.

Before 1961, cameras required photographers to manually calculate and set shutter speed and aperture for each shot. This technical hurdle was a factor preventing camera adoption among amateur users. While latent demand existed for easy-to-use cameras, technical constraints had prevented their realization.

To address this challenge, Olympus undertook development of an "automatic exposure determination device" that would automatically set shutter speed and aperture. Conventional cameras used shutters manufactured by Seiko or Copal, but to achieve automation, Olympus adopted a policy of developing the shutter mechanism itself in-house. "EE" was an abbreviation for "Electric Eye," reflecting the technical automation in the camera's name.

In July 1961, Olympus launched the compact camera "Olympus Pen EE." With built-in auto-exposure, the need for photographers to set shutter speed and aperture was eliminated—it was designed as a camera where simply pressing the shutter button would capture a photo. Additionally, the lenses used in the Pen series had short focal lengths, providing a wide depth of field that eliminated the need for distance adjustment. This effectively automated virtually the entire shooting process.

Simultaneously with the launch, Olympus deployed a mass marketing campaign, seriously targeting the amateur market. The camera attracted attention from domestic critics as a model that lowered the barrier to photography, and the Pen EE's reputation spread. Cumulative sales of the entire Pen series, which had been on sale since 1959, exceeded 1 million units by August 1963. This established Olympus as widely recognized domestically not only as a microscope and medical device maker but also as a camera manufacturer.

From the 1950s through the 1960s, Olympus had been advancing gastrocamera and endoscope development. However, development was led by external physicians, and Olympus's own allocation of management resources was limited. In terms of business structure, the company operated under a two-division system: the "First Business Division (microscopes, measuring instruments, medical devices)" and the "Second Business Division (cameras, etc.)," with endoscopes handled as part of the First Business Division.

When the fiberscope-based endoscope was developed in 1963, the photography and developing processes required by conventional gastrocameras became unnecessary, enabling real-time diagnosis. This technological innovation spurred growing demand for endoscopes from the medical field, but the existing business structure made it difficult to make full-scale investment decisions in endoscopes. Incorporated within the same division as microscopes and measuring instruments, independent business decisions and resource allocation for endoscopes were difficult.

In March 1969, Olympus established the Third Business Division, building a structure for full-scale investment in two areas: medical devices (endoscopes) and information equipment (fax machines). This decision positioned endoscopes as an independent business and investment target separate from microscopes and measuring instruments, with an explicit policy of developing them as the third pillar of business after microscopes and cameras.

The Third Business Division was designed not as an organization specialized in medical devices but as a structure handling new businesses in general. In addition to medical devices, the division also engaged in R&D of fax machines in the information field, adopting a policy of promoting multiple new businesses within a single division using fiber technology as a common platform. Then-President Takafuku Naito cited the medical equipment industry and the information industry as promising fields attracting global attention, indicating to the company the policy of focusing Olympus's efforts on these two areas.

In April 2002, under President Tsuyoshi Kikukawa, Olympus announced its "Basic Management Plan" as a five-year medium-term plan from FY2002 to FY2006. Setting "maximization of corporate value" as the management objective, the company established final-year numerical targets of ¥870 billion in revenue, ¥120 billion in operating income, and 16% ROE. By business segment, the plan projected ¥345 billion in revenue from the imaging business centered on cameras and ¥400 billion from the medical business anchored by endoscopes, with an explicit policy of aggressive investment in both medical and camera businesses.

In the imaging field, the company pursued global expansion through aggressive brand investment centered on marketing. Targeting young consumers in their 20s and 30s, a plan was made to expand digital camera sales with ¥20 billion in brand investment over five years. In the medical field, the strategy called for transforming the endoscope-dependent structure, setting new business creation including new fields as strategic objectives, but specifics remained limited to abstract references such as "bio."

Based on the Basic Management Plan, Olympus positioned imaging business growth as one of the pillars of its company-wide strategy. The policy was to invest management resources in brand building and product development to expand market share in the global digital camera market. The camera business had been a major business for Olympus since the 1961 Pen EE, and the company intended to expand business scale by riding the wave of digitalization.

However, in the 2000s, the competitive environment surrounding digital cameras underwent major changes. Major electronics manufacturers such as Sony and Panasonic entered the compact digital camera market one after another, and product price erosion accelerated rapidly. It became difficult for Olympus to consistently generate profits from digital cameras.

In response to the changing competitive environment, the imaging business fell into segment losses. While the Basic Management Plan had targeted ¥345 billion in imaging business revenue, achieving this target became difficult amid price competition with major electronics manufacturers, and losses became chronic on the profit side. The imaging business's poor performance became a structural problem eroding Olympus's company-wide profits.

Meanwhile, the medical business maintained a stable revenue base centered on endoscopes. Of the "dual-axis investment in imaging and medical" advocated in the Basic Management Plan, aggressive investment in imaging backfired, and as a result, Olympus's business portfolio increasingly depended on the medical business. The structure in which endoscope business profits compensated for imaging business losses became a factor directing Olympus's subsequent business reorganization.