For a small company with about 1000employees, theselosses are huge.
The banks havebeen after Leica for many years now.
Der Spiegel summarized it powerfully:"Leica overslept and suffers the trend to the digital photography from losses. Besides the weak dollarimpairs the business abroad, because the cameras become more expensive larva in Germany thereby."
So, the question is: WHY do so manycompanies like Leica ‘oversleep’technological shifts?
One reason is the furious pace at which digital technology is developed.(For more info, click here)
In only ten years, digitalimaging went from zero to 90 percent of the market.
It’s very easy to oversleep such a rapid shift.
The S1 was aimed for studio photography. It was connected to a computer,stood on a tripod and had an amazing image resolution.
At first sight, theS1 appears to be very expensive and strange.
But the business utility was in fact very large. It could produceprintable photos instantly and an infinite number of photos could be taken at no cost. Thealternative would have been film,going to the lab, then scan it. Allthis would take days, with the S1 it would take minutes!
A fantastic camera. But not exactly ”Leica style”.
As the financial situationworsened, Leica eventually realized that something new had to be done.
Since the ‘low-end’segment of the market had become a warzone of competition, Leica instead focused on making their R8 and R9 cameras digital.
It was announced in 2003 that a Kodak digital back would be made compatible with these cameras, incollaboration with Imacon, a Danishmanufacturer of digital backs (who later merged with Hasselblad).
Having no digitalcapabilities of its own, this was deemed to be a good strategy.
But cameras withdigital backs are very expensive and uncomfortable.
After severe delays, the Leica Digital-Modul-R was finallylaunched two years later, in 2005.
An official letter was sent to Leica users over the weekend apologizing thelast delay. The date was put forth due to softwareproblems’ (once again a skill beyond Leica’s soul).
Mario Thurnherr, managerof Leica Cameras Photo Division, said:"Our customers had to waitlonger than planned for the unique digital solution from Leica, but are now rewarded with an outstanding product."
With this bigger and heaviercamera, Leica was positioned in the same segment as Hasselblad, Mamiya, Pentax, Contax and the others. Some of those actors had alreadycaptured this small, small part of the camera market.
Hence, the Digital-Modul-R didnot stop Leica from bleeding.
In early 2005, the situation became desperate.
The company was now bought by AndreasKaufmann, a long timeLeica enthusiast with agreat personal fortune.
Kaufmann recruited anew CEO, an American named Steven K. Lee.
Mr. Lee had a background as vicepresident of Best Buy, ahuge American retailer of consumer electronics.
Could someone with this odd background saveLeica from bankruptcy?
At about the same time as Lee came to Leica, the company hadfinally launchedthe M8, the firstdigital camera in its famous M series.
The sensor was belowstandards, and the camera did not have those filters which were needed for a digitalcamera to work. Without these functions, black colour looks purple and strange colour patterns show up.
Thus, the M8 was abad camera, at a bad price, but with a good brand.
Needless to say, the Photo community laughed at it.
One photographer described the camera as “unusable,” and said he sometimes feltlike throwing it against a wall.For a company which is used to that customers are in lovewith their products, these are indeed hard words.
One of the first thingsSteven Lee had to do at his new job was to sign 4000letters, apologizing for this. Pretty tough start.
The M8 had to be redrawn from themarket, retroactively putting in the required filters.
Quite an embarrassment fora camera legend, known for its high quality products.
So, why did Kaufmann hire a strategy andbusiness developmentguy from an American retailer?
Lee in an interview: “Now we need to reach people who could and might use a Leica. I usethe example of the American ‘soccermums’ who would love to take better pictures, who are the keepers and recorders of their families’ history. It’s not the men. These are well-to- do families interested in excellent photography. They are our new potential customers.”
Who had ever associatedLeica with terms such as’American soccer-mum’?Pretty different, and ODD.
In addition to this, Leewanted to do a couple of pretty odd things:
Build Cameras on demand (likeDell with computers) Replace Leica’s network ofspecialty dealers with kiosks andinternet sales Increase the pace of digitaldevelopment New forms of collaboration Move into consumer electronics
How all this was going to be accomplished is not clear (andcertainly wasn’t to people at Leica)
In 15 months, Steven Lee had succeeded atBest Buy in producing formidable high-endPCs, which generated a 20 percent profit (normal profits were around 10 percent).
A retailer making 20 percentprofit in the fiercely competitivePC industry, building this from scratch in 15 months???
It had been accomplished through outsourcing of production and clever business modeling.
Probably Lee wanted to do something similar with Leica, and obviously he knew what he was doing.
Lee was known for being very stubborn andaggressive, not afraid of conflicts and bullying people if necessary.
Imagine the cultural and intellectual clash betweenSteven Lee and a traditional, old firm like Leica!
Lee about the first meeting: “I arrived at 10 o’clock and wewent head-to-head for nine hours straight. No meal breaks.”
The founder’s son, Ernst Leitzhad treated his employees like his own family.
And now an Americanthunders in, firing andbullying people aboutsome strange soccer- mum segment!
Lee went into Leica playinghardball, personally approving all expenses over 100 Euros.
He travelled to Asia, re-negotiating prices withsuppliers of electronic components.
He raised pricessignificantly and thus, sales fell.
The distributor network which was going to be replaced by internet sales and kiosks, started to getreally angry with Lee since they were threatened.
Lee was not exactly the guy to mess around with. It isclaimed that he started to be rude to people at Leica,calling them ’dumb farmers’.
The situation got worse when Lee fired three employees (wrongfully according to the courts) and many highly skilledtechnicians threatened to leave in sympathy.
At a small company like Leica, this kind of events can get pretty big.
Managers started to complain to Kaufmann who decided to fireSteven Lee in early 2008.
Here are some rumours andcomments on theinternet about the event:
"Über diese Entlassung können wir uns auf jeden Fall freuen." = "On that dismissal we can anyway be delighted about"
Leica is one German Company and should be comand by German people. I have one friend mine who works at Leica here in Portugal and many people not like the style and work method from Mr.Lee. So many people are happy whit this end of Mr.Lee at Leica Best,__________________ Rui Espanhol
Rumours say that Champagne bottles were opened at Leica when Lee left the company.
Lee threatened to sue Leica for wrongfully dismissing him.
"My mandate was not tobe Mr. Nice Guy“, he said.
“I was trying to revive acompany thats broken".
Lee claimed that accusationsagainst him was a smear campaign from people who underperformed and refused to change.
And, believe it or not, he had some supporters who thought that Leewas exactly what Leica needed. "He had to hear, Thats not possible, over and over again. , one said.
Kaufmann took over as CEO and Leica has nowsuccessfully launched a new(working) version of the M8.
In September 2008, Leica also launched the S2, a fantastic camera with 37,5 Megapixels and many great functions.