As we know, the digital
revolution has swept through
the camera industry over the
last decade.

It has popularized
photography in a way that we
could never have imagined.

Many camera
manufacturers have
suffered greatly in
this shift…

Hasselblad was in deep trouble.

Konica left the industry after
trying to survive through a
merger with Minolta.

Polaroid is also resting in peace.

And so was Leica.

Agfa went bankrupt in 2005.

Kodak have huge problems.

Contax died.

Bronica died.

When film died, Ilford died.

However, some
companies have
prospered from the
shift to digital imaging.

So far, Canon is one of
the companies that not
only survived, but also
increased their
dominance with the
shift to digital imaging.

According to the
American market
researcher IDC, Canon
sold 12.6 million digital
cameras in 2004 and
had a market share of
17 percent.

By taking a
look at how
Canon handled
the shift, we
can learn a lot
about how
technological
revolutions can
be managed.

Let’s go back to the early days of digital
imaging and look at how Canon turned this
threat into an opportunity.

The road to the realm of digital imaging has
been long and bumpy, even for Canon.

In 1981, the industry was shaken
when SONY launched their Mavica, a
camera that used floppy discs
instead of film.

In Japan it was referred to as ’the
Mavica shock’. This event put
digital imaging on the roadmap.

Many companies invested
in and launched their own
’Mavicas’ during the 1980s.

Canon formed a task force
to develop a colour Mavica
in 1981. It was launched in
1986. Fujifilm came up with
something similar in 1988.

Canon’s RC-701 which was
launched in 1986 cost 3000
dollars. Needless to say, at
such a price point it did not
reach any massmarkets.

None of the Mavica
style cameras lead to
any great success.

The Mavica was simply not the
way forward to digital imaging.

But Canon had learnt a lot
about digital imaging by
entering at this point.

A lot of internal development had been done
and with this competence, it became much
easier to follow the advances in the field.

Since the required competence was
different, Canon recruited engineers and
managers from electronic companies.

They wanted to do things in-house since
it was important to obtain knowledge
and renew the resource base.

Digital imaging was developed in a separate
organization that was not subject to the daily
internal competition for resources.

However, Canon was not the leading company
in digital imaging in the early 1990s.

At this point, some of the first
applications of digital imaging
started to prosper.

Leaf and Kodak among others
developed digital backs that
could be attached to medium
format cameras.

One of the first digital
cameras was a
Kodak/Nikon product,
launched in 1991.

These backs could be attached to
Hasselblad cameras instead of film.

It looked like this.

Yes, big and bulky.

Canon never entered this segment. It was
probably too far away from its core segments.

In 1994, Apple launched
the QuickTake camera.

It looked like a pair of
binoculars, could store
32 photos and was the
first camera that could be
connected to a PC.

The price? 800 dollars.

Thus, while Canon had
entered and explored digital
imaging at an early point, the
company was not very active
in the early 1990s…

It seems that Canon started to invest
heavily at exactly the right point…

In 1995 Casio launched the QV10.

This is a landmark event in the
history of digital imaging.

It had an image quality
of 0,25 Megapixels and
required 4 AA batteries.

Not the greatest gadget
mankind has invented.

But the concept of
having a LCD screen and
this design turned out to
be very attractive.

Canon now realized that
this was the way forward
to digital imaging and
started to invest heavily.

Lagging behind both
Casio and Sony, it was
time to catch up.

Canon established a ’Digital
Imaging Business Centre’ and
allocated more resources to it.

The Japanese firms worked
jointly in an industry
association to solve critical
technical issues.

Moreover, they made sure
that the structure was
modular, so that each
individual component could
be improved separately.

Instead of fighting battles about standards,
each company could instead focus on the
product and reducing R&D costs. This created
a healthy competition - each one
differentiated within the defined settings.

The modular, standardized structure
also implied that consumer electronics
companies could work
on each component.

Memory cards…

Image sensors…

LCD screens…

From 1996 and on, Canon kept launching
better and cheaper compact cameras all
the time under the ‘Powershot’ brand.

Each
component
was now
subject to
rapid
improvement.

Once the cameras were good
enough and cheap enough…

… The digital avalanche
came into motion…
30
25
20
15
10
5
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

And Canon was now well positioned
to benefit from this huge growth.

Back in 2001-02, virtually all my
friends got a compact digital camera
as a christmas gift. Everyone started
to take, send and share photos now.

At this point, Canon spent a lot of money on
marketing, and given that everyone knew the
brand, I guess it had a great impact in the
christmas rush…

Canon now got rid of all analogue
development and grew their
digital camera business rapidly.

As the performance of digital
cameras became better and better, it
was now time to launch more
advanced models as well.

The Canon 1D was one of the first true
alternative for professional photographers
who wanted digital cameras. It was mortal to
many of the old camera firms…

Portrait and wedding photography used to be
synonymous with Hasselblad, Contax,
Bronica and Mamiya.

All this changed within only a few
years in 2000-2004.

Hasselblad was in deep trouble.

Digital SLR
cameras from
Canon and
Nikon were
cheaper,
lighter and
easier to use
than a medium
format camera
with a digital
back.

Most firms in the medium format
segment were now collapsing as
consequence of what Canon and
Nikon had launched.

As the sensors, optics and
signal processing became
better and cheaper, Canon
now started to focus more
on a completely new
segment – the ’prosumers’.

Prosumers can
be regarded as
advanced
amateurs with a
great interest in
photography
that demand
more than a
point and shoot
camera.

Canon has
been very
dominant in
this segment
which has
grown
rapidly over
the last
years.

People who did
not even own a
camera in the
1990s had
become
advanced hobby
photographers.

Photography
has been
popularized in
a way that no
one could
have
imagined.

SLR Cameras grew at a stunning
rate of 150 percent in 2004,
mainly since those targeted
people who did not have a ’semi-
high-end’ camera before.

By 2005, Canon had become
the market leader after six
years of record profits and a
fantastic growth.

Unlike all those companies
that collapsed in the shift to
digital imaging, Canon
mastered the shift and
emerged as the champion of
digital imaging.

Why?

1. Canon entered early and
explored digital imaging. While
this did not generate any profits,
it was absolutely necessary in
order to follow the developments
and be able to enter later on.

2. Timing – entering too early is
dangerous since you might bet on
the wrong horse. Canon invested
heavily after the landmark camera
from Casio. This turned out to be a
perfect timing.

3. Canon recruited people from
electronic companies in order to
renew the competence base.

4. The company separated much
of its digital development,
thereby giving it freedom and
preventing that the initiative
would be starved of resources.

5. Canon kept searching for and
created new market segments.
Compact cameras were often sold to
people who had not owned a camera
before and later on the company
created the prosumer segment. The
marketing investments seem to have
been an important reason why
people chose Canon.

Image attributions

Christian Sandström is a
PhD student at Chalmers
University of Technology in
Gothenburg, Sweden. He
writes and speaks about
disruptive innovation and
technological change.
www.christiansandstrom.org
christian.sandstrom@chalmers.se