I can’t tell the full storyright here and right now, but I will give you a glimpse of it in this presentation…
So let’s go back to the earlydays of digital imaging and look at how Hasselblad handled this threat.
In 1981, the industry was shakenwhen SONY launched their Mavica, a camera that used floppy discs instead of film.
In Japan it was referred to as ’the Mavica shock’.
At Hasselblad, people were also shocked. But how to respond?
“Even though I did not believe in theMavica concept, I was convinced thatthe photo chemical film would in thefuture be subject to seriouscompetition from electronicalphotography and would eventually besubstituted by this technology” //CEO Jerry Öster, 1991
Given the poor performance of these first products, Öster decided that Hasselblad should not develop digital cameras atthis early point but instead learn more about digital imaging by developing other applications.
These efforts resulted in the Dixel, a tele-phototransmitter which coulddigitize film and send it to other places.
A working prototype was launched during the 1984 Olympics in LA. It became an immediate successsince photographers could send their photos home much faster and meet deadlines.
The first digital backs were expensive and had a moderateperformance. The first one by Leaf had 4 Megapixels and Kodak launched one with 6 Mpixels.
But the business utility was great. Many film photos were digitized sooner or later anyway. With a digital back, one step in the production ofphotos could be removed.
Digitalimaging had other attributeswhich made it attractive.
An infinite amount ofphotos couldbe taken and then be replicated, manipulatedand sent, at avery low cost.
So thebusiness utility of a digital back which cost maybe 30 000 dollars was still big.
The performance was good enough for some applications.
”The quality of high-end digital studio cameras is good enough to replace film for most catalog and magazine needs.” MacWEEK 94-05-13
6 million pixel resolution is good enough for most applications. The perception of colour is more important than the perception of sharpness. Kodak, 1996
Now the question was howHasselblad should handle these changes…
The tele-photo products were dead and the shift to digital imaging was still far away into the future.
In the early 1990s management at Hasselblad thought that the shift would occur somewhere around 2003-05, which turned out tobe a very accurate prediction.
Jerry Öster left the positionas CEO in 1993. Before doing so, he underlined that the long term survival of the company may depend uponhow much Hasselblad invests in digital imaging.
By that time, Incentive bought Hasselblad andwithdrew the company from the stock exchange.
Incentive listened to whatÖster said and started to look for a new CEO who could bring Hasselblad into the digital era.
They found the right competence for this in Staffan Junel, who had a background at Ericssonamong other companies and was a devoted amateur photographer.
Under the leadership of Junel, digital photography was brought into the parentcompany. This division initially worked with little resourcesand sought to explore the field of digital imaging.
However, after some initial exploration, the electronic engineers thought that the company should start todevelop commercial productsdue to the rapid developmentin the area of image sensors.
Junel asked the owner for resources and Incentiveapproved this investment.
The electronic engineers thought that digital imagingcould be nursed in the segment of studio photography.
These customers took a lot of photos and were going todigitize them sooner or later, for instance for catalogue production.
Therefore they were maybe willing to trade off someimage quality in order to get the opportunity to take aninfinite amount of photos at no cost and being able to send, manipulate and replicate images.
At a small company likeHasselblad, there was little room for expensive R&D projects.
Hence, the analogue development projects werestarved of resources due to the investment in digital imaging.
At this point, Hasselblad hadessentially made incremental improvements of the same system for about 40 years.
Take a look at the productlaunches to the right. Hasselblad basically sustained the same system for many decades.
The company actually needed to develop a new analoguecamera system at this point, but postponed this decision.
As a consequence, therelationship between the analogue and digital departments became increasingly strained in these years.
Hasselblad was essentially a mechanicalcompany and thus, the electronic engineers were often regarded as odd, since their competence and ideas about the company were different.
A digital camera prototype was almost ready in 1996, when Incentive sold Hasselblad toUBS Capital, the private equity branch of UBS.
Before doing so, Incentive took the 200 MSEK of cash that Hasselblad had saved over the years in order topursue development projects.
UBS bought Hasselblad with some cash and a loan fromanother bank. This loan wasnow brought into Hasselblad.
Within a few years, Hasselblad went from being over-capitalized into being under-capitalized.
UBS intended to do a ’leveraged buyout’, i.e. obtaining a high return on investment by usingborrowed money that would be paid back once the company is be sold.
Moreover, UBSdeclared a short termscope of ownership of about 3-7 years.
This new owner wasnow going to decidewhat should be donewith the digital studio camera project.
”Our purpose is to become more market oriented. So far, we have been a technology driven company. We must develop products which are interesting for the market” // Göran Diedrichs, chairman (UBS) Source: Göteborgs-Posten, 1997-04-10
The new board became very sceptical when they got to see the prototype.
A lot can be said about this big studio camerawhich stood on a tripod and looked more like acomputer than a classic Hasselblad camera.
One thing is obvious:it was something very different from whatHasselblad had offered previously.
”It was gigantic and did not even look like a camera.”
”Those who understood the niche for digital technology saw its advantages and that the camera had a great potential.But the board related it to the analog one and therefore dismissed it.”
Here are a couple of quotes which try to explain and defend killing the digital studio camera project.
Göran Diedrichs says that Hasselblad will continue developing film based technology. ”The digital technology is still in its infancy. When it has been further developed we will of course move into it and then we need to have a strong financial position.” Source: Göteborgs-Posten, 1997-04-10
”The costly development of a digitalcamera has been sold… Thus theoptimal digital camera will have to bedeveloped by someone else. Therebythe company saves 15-18 millionSEK… that can be invested intoconventional cameras and then adaptthem to digital technology. //DI, januari 1998.
And the digital guys at Hasselblad:“If the chemical waste from film processing could be turned into beer – film would have a bright future!” (1997, found in internal documents)
By 1998, all digital competence except for two persons had been fired. The company was severely under-capitalized at this point and a technological revolution was lurking a few years ahead…
At this point it became clear to UBS that Hasselblad needed to develop a new camera system instead of making minor changes of their established products.
This project started in 1998 and Hasselblad started to collaborate with Fuji in 1999.The purpose was to develop a hybrid camera – one which uses film and is compatible with digital backs from other companies.
The project was huge, very complex and absolutely necessary for the survival of the company.Deadlines could not be met and the it took much more time than anticipated.
At the same time, digital cameras from Canon and Nikon started to take market shares from Hasselblad.3025201510 5 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Within a only a few years, Hasselblad lost the entire segment ofwedding photography to Canon and Nikon.
In many countries, Hasselblad used to beassociated with weddings in the same way as theflowers and the ring. Thischanged with the shift to digital imaging.
Revenues were now decreasing at a furious pace. Bottom line for Hasselblad (MSEK)
The new camera system,the H1 – was eventually launched in 2003.
It was four years late.A fantastic, but not digital system.100 000 SEK more expensive than Canon’s competing product.
In order to make this system fully digital, the customer had to buy adigital back from someoneelse, which cost about 100000 SEK. Thus, Hasselbladcould not deliver their own digital system at a point when everyone wanted digital cameras.
”When the H1 finally arrived it was a fantastic camera, but that did not matter, since everyone had gone digital by then.”
Therefore, the H1 did notbecome the success that had been expected.
UBS now sold Hasselbladto Shriro, whom had to pour a lot of money into this bleeding company.
In november 2004, 50 percent of the companywas fired and only about 70 people were left after all these layoffs.
It now became clear to thenew owner that a merger with a manufacturer of digital backs had to be made.
Hasselblad and Imacon, a Danish manufacturer ofdigital backs now became one company under the Hasselblad name.
In 2005, the company could finally deliver a complete digital camera system and eventually survived the shiftto digital imaging after a long and risky adventure.
Some frustration:”When I started at Hasselblad my wife thought that we should buy a digital camera, I said ’wait, Hasselblad will soon have one ready, then we’ll buy it’. 8 years later I left Hasselblad, the first thing I did was to go and buy a Canon.”
Since then, Hasselblad has made profits, but I don’tbelieve that the company has yet paid back what Shriro had to pour into Hasselblad when it was bleeding.
I think the story illustrates acouple of important lessons related to disruptive innovation and technology management.
1. The competition forresources in the early 1990s was very harmful for the company. Maybe digital development should have been more separated?
2. The success of Hasselblad Electronic Imaging illustrates the importance of finding a nursing market for the newtechnology. Here, the company could learn more and make money at the same time.
3. Just like all other companiesin the medium format segment – Hasselblad failed to develop their own digital backs. The most likely reason for this is that the firm’s competence base was primarily related tomechanics and not electronics.
4. Ownership changes and inparticular to those which have ashort investment horizon create a strategic inconsistency that may augment the difficultiesrelated to disruptive innovation.
There are many more things that can and should be said about what happened toHasselblad, but I leave it here, for now.
SourcesInternal documents from 1980-1994Annual reportsAbout 100 hours of interviews A big thank you!
Image attributionsPhotos on slides 17-23 come from www.jornmark.sePhotos on slides 50-60 have been taken by Lennart Stålfors. Thanks!
By the way, what happened to the old building where Hasselblad used to be?