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Disruptive Innovation and the Leica history


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What happened to Leica in the shift from analogue to digital imaging.

Published in: Business, Art & Photos
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  • The way I see it, Leica need to move in to the sort of area that Cosina Voigtlander are operating - cameras around the $1000 mark.

    A line of cheap m-mount rangefinders built using outsourced production in both film and digital versions, would do wonders for the company. Especially the digital version, because currently, the M8 *is* the entry-level for digital rangefinders.
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  • Hi,
    You are quite right that other companies were into this format as well. I guess the point I wanted to make was that Leica was the company that succeeded with the 35 mm format and came to define it for a long time.

    I didn't know about the engineer at Kodak, that's a great story. The slideshow explains how Leica in fact was into digital imaging at an early point, but still encountered problems.
    Regarding Kodak, well, a lot can be said, take a look at the other slideshows here about Kodak and think about their story, which is indeed an interesting one...

    Best, Christian
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Disruptive Innovation and the Leica history

  1. 1. Leica Cameras in deep TROUBLE
  2. 2. Christian Sandström holds a PhD from ChalmersUniversity of Technology, Sweden. He writes and speaks about disruptive innovation and technological change.
  3. 3. It’s not an exaggeration to say that Leica is a camera legend.
  4. 4. The German camera manufacturer pioneered the 35-millimeter film format.
  5. 5. This is what took photography out ofthe studios and into our everyday life.
  6. 6. Leica tookphotography from this
  7. 7. And this
  8. 8. To this
  9. 9. And this.
  10. 10. Small, easyhandlingand great photos.
  11. 11. Many of the 20th centurysmost famous photos were taken by a Leica.
  12. 12. Great photographers suchas Henri Cartier-Bresson,Alfred Eisenstaedt, Robert Capa used the camera.
  13. 13. "With a Leica camera you can do anything" //Henri Cartier-Bresson, perhaps the greatest photo journalist in history.
  14. 14. “A big warm kiss, like a shot from a revolver, and like the psychoanalyst’s couch.” //Henri Cartier-Bresson, describing the Leica camera.
  15. 15. This image of the Vietnam war was captured with a Leica.
  16. 16. Photos ofMarilynMonroe
  17. 17. The Queen ofEngland has owned a Leica M3 since 1958. Her Majesty likes it so much thatshe was onceposing with it on a stamp.
  18. 18. Photos of Picasso(well, not this one maybe)
  19. 19. Images of theMaoist Revolution
  20. 20. Stanley Kubrik used it.
  21. 21. This iconic photo wastaken with a Leica.
  22. 22. The infamous nazipropagandist Leni Riefenstahl used Leica.
  23. 23. The camera coststhousands of dollars.
  24. 24. It has been loved and used over all theworld since the 1920s.
  25. 25. Germancraftsmanship at its best.
  26. 26. It is acameralegend.
  27. 27. A cultproduct.
  28. 28. But the 21th century has so farbeen covered by dark clouds.
  29. 29. Since 2005, twoCEOs have been fired.
  30. 30. In recent years, Leica has suffered from great losses, being close to bankruptcy.
  31. 31. 2004-2005:- 20 million Euro
  32. 32. Up until today,this trend has continued.
  33. 33. For a small company with about 1000employees, theselosses are huge.
  34. 34. The banks havebeen after Leica for many years now.
  35. 35. 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."
  36. 36. So, the question is: WHY do so manycompanies like Leica ‘oversleep’technological shifts?
  37. 37. One reason is the furious pace at which digital technology is developed.(For more info, click here)
  38. 38. In only ten years, digitalimaging went from zero to 90 percent of the market.
  39. 39. It’s very easy to oversleep such a rapid shift.
  40. 40. But let’s move back tothe Leica story now…
  41. 41. The truth is that Leicahad plenty of problemseven before the digital revolution.
  42. 42. In 1930-1960, Leica was very popular and profitable.
  43. 43. But with the rise ofSingle-lens reflex (SLR) cameras in the 1950s, Leica encountered problems.
  44. 44. The rise of the Japanese camera industry put thecompany into further trouble.
  45. 45. Leica fans were happythat the company never entered the broader market segments.
  46. 46. The company instead focused on furtherdeveloping its legendary M and R series of cameras.
  47. 47. Ever since, Leica hashad financial problems.
  48. 48. Beingpopular is not the same as beingprofitable.
  49. 49. Over the decades, Leicaessentially sustained their famous camera system.
  50. 50. So, thecompany was essentially built around competencein sustaining anddeveloping a technology which wasabout precise mechanics.
  51. 51. Leica’s soul wasmechanic and optic.
  52. 52. Not Digital.
  53. 53. And ofcourse, somemarketing and salesactivities, also related to mechanical products.
  54. 54. However, the company recognized the threat fromdigital imaging, and thereforewent into it in the mid 1990s.
  55. 55. These efforts resulted in theLeica S1, launched in 1997.
  56. 56. It looked like this:
  57. 57. Not exactly what a Leica normally looks like.
  58. 58. Pretty hard to bring inyour jacket and pull up for a photo…
  59. 59. The S1 was never intended to be a ‘normal’ Leica.
  60. 60. In 1997, it was soldfor 15 370 EURO. It had a sensor of 5140 x 5140 pixels 44 cm x 44 cm Weight: 3,6 kg.
  61. 61. The best versionhad 75 Megapixels!
  62. 62. The S1 was aimed for studio photography. It was connected to a computer,stood on a tripod and had an amazing image resolution.
  63. 63. At first sight, theS1 appears to be very expensive and strange.
  64. 64. 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!
  65. 65. A fantastic camera. But not exactly ”Leica style”.
  66. 66. In the end only 146 of them were made.
  67. 67. After an ownershipchange, it was decided to kill this camera!
  68. 68. Nearly all ’digital’ engineers and marketing people now had to leave the company.
  69. 69. The new CEO had previously been at a furniture company which had been saved by positioning it as ’traditional’.
  70. 70. Now the samemedicine was goingto be used on Leica.
  71. 71. The digital capabilities are cut off in the midst of the digital camera evolution!
  72. 72. Life must have beenvery tough for a digital engineer at Leica.
  73. 73. Sales ManufacturingThe Mechanical engineers Purchasing- Everyone must have been against you.
  74. 74. All their routines andcompetences would have tochange in order to succeed with digital imaging.
  75. 75. Forgive me for speculating,but I suppose most of these actors cheered silently when the S1 was killed.
  76. 76. At an old, traditionalcompany with a strong brand and history in mechanical engineering, electronicsmust have been regarded as an odd, foreign element.
  77. 77. Organizations are very good at eliminating foreignelements. And Leica was no exception.
  78. 78. In a disruptive shift
  79. 79. The Core competence
  80. 80. Becomes
  81. 81. A Core Incompetence
  82. 82. Leica’s soul wasmechanic and optic.
  83. 83. Not Digital.
  84. 84. Digital was odd.
  85. 85. Having laid off virtually all digital knowledge, Leica insteadfocused further on its strategy of rebadging Fujifilm digital cameras.
  86. 86. The Digilux identical to aFujifilm camera, except for the brand.
  87. 87. Re-branding a non-premium product and charging apremium price, while Canon and Nikon came up with smaller andbetter cameras all the time.
  88. 88. The success of thisstrategy wasvery modest.
  89. 89. As the financial situationworsened, Leica eventually realized that something new had to be done.
  90. 90. 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.
  91. 91. 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).
  92. 92. Having no digitalcapabilities of its own, this was deemed to be a good strategy.
  93. 93. But cameras withdigital backs are very expensive and uncomfortable.
  94. 94. After severe delays, the Leica Digital-Modul-R was finallylaunched two years later, in 2005.
  95. 95. 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).
  96. 96. 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."
  97. 97. 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.
  98. 98. Hence, the Digital-Modul-R didnot stop Leica from bleeding.
  99. 99. In early 2005, the situation became desperate.
  100. 100. The company was now bought by AndreasKaufmann, a long timeLeica enthusiast with agreat personal fortune.
  101. 101. Kaufmann recruited anew CEO, an American named Steven K. Lee.
  102. 102. Mr. Lee had a background as vicepresident of Best Buy, ahuge American retailer of consumer electronics.
  103. 103. Could someone with this odd background saveLeica from bankruptcy?
  104. 104. At about the same time as Lee came to Leica, the company hadfinally launchedthe M8, the firstdigital camera in its famous M series.
  105. 105. The M8 cost about 5000 USD.
  106. 106. But the high price wasnot the only problem.
  107. 107. 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.
  108. 108. Thus, the M8 was abad camera, at a bad price, but with a good brand.
  109. 109. Needless to say, the Photo community laughed at it.
  110. 110. 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.
  111. 111. One of the first thingsSteven Lee had to do at his new job was to sign 4000letters, apologizing for this. Pretty tough start.
  112. 112. The M8 had to be redrawn from themarket, retroactively putting in the required filters.
  113. 113. Quite an embarrassment fora camera legend, known for its high quality products.
  114. 114. So, why did Kaufmann hire a strategy andbusiness developmentguy from an American retailer?
  115. 115. 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.”
  116. 116. Who had ever associatedLeica with terms such as’American soccer-mum’?Pretty different, and ODD.
  117. 117. In addition to this, Leewanted to do a couple of pretty odd things:
  118. 118. 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
  119. 119. How all this was going to be accomplished is not clear (andcertainly wasn’t to people at Leica)
  120. 120. 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).
  121. 121. A retailer making 20 percentprofit in the fiercely competitivePC industry, building this from scratch in 15 months???
  122. 122. It had been accomplished through outsourcing of production and clever business modeling.
  123. 123. Probably Lee wanted to do something similar with Leica, and obviously he knew what he was doing.
  124. 124. Lee was known for being very stubborn andaggressive, not afraid of conflicts and bullying people if necessary.
  125. 125. Imagine the cultural and intellectual clash betweenSteven Lee and a traditional, old firm like Leica!
  126. 126. Lee about the first meeting: “I arrived at 10 o’clock and wewent head-to-head for nine hours straight. No meal breaks.”
  127. 127. The founder’s son, Ernst Leitzhad treated his employees like his own family.
  128. 128. And now an Americanthunders in, firing andbullying people aboutsome strange soccer- mum segment!
  129. 129. Lee went into Leica playinghardball, personally approving all expenses over 100 Euros.
  130. 130. He travelled to Asia, re-negotiating prices withsuppliers of electronic components.
  131. 131. He raised pricessignificantly and thus, sales fell.
  132. 132. The distributor network which was going to be replaced by internet sales and kiosks, started to getreally angry with Lee since they were threatened.
  133. 133. 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’.
  134. 134. The situation got worse when Lee fired three employees (wrongfully according to the courts) and many highly skilledtechnicians threatened to leave in sympathy.
  135. 135. At a small company like Leica, this kind of events can get pretty big.
  136. 136. Managers started to complain to Kaufmann who decided to fireSteven Lee in early 2008.
  137. 137. Here are some rumours andcomments on theinternet about the event:
  138. 138. "Über diese Entlassung können wir uns auf jeden Fall freuen." = "On that dismissal we can anyway be delighted about"
  139. 139. 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
  140. 140. Rumours say that Champagne bottles were opened at Leica when Lee left the company.
  141. 141. Lee threatened to sue Leica for wrongfully dismissing him.
  142. 142. "My mandate was not tobe Mr. Nice Guy“, he said.
  143. 143. “I was trying to revive acompany thats broken".
  144. 144. Lee claimed that accusationsagainst him was a smear campaign from people who underperformed and refused to change.
  145. 145. 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.
  146. 146. Kaufmann took over as CEO and Leica has nowsuccessfully launched a new(working) version of the M8.
  147. 147. In September 2008, Leica also launched the S2, a fantastic camera with 37,5 Megapixels and many great functions.
  148. 148. It’s priced at 15-20 000 USD.
  149. 149. Whether the S2 and thenew M8 will turn thingsaround for Leica or not remains to be seen.
  150. 150. However, the cameraindustry is subject to fierce competition.
  151. 151. Canon, Nikon and the other big Japanese dragons are constantly launching new,cheaper and better products.
  152. 152. Having a legendary brand isof course an asset, but Leicais less well known to the new generation of photograpers.
  153. 153. We’ll see what happens.
  154. 154. Leica’s soul was andis mechanic and optic.
  155. 155. Not Digital.
  156. 156. Throughout the lastdecades, this has becomevery clear forthe company.
  157. 157. We’ll never know whether the S1 camera and the digital developersthat were laid off would have put the company in a better situation.
  158. 158. And we’ll never know whetherSteven Lee and his ‘soccer-mum’concept would have turned Leica into a growth company.
  159. 159. But ONEthing is clear.
  160. 160. Both the S1 andSteven Lee were odd, foreign elements in an old organization, with old values.
  161. 161. Leica was and is indesperate need of change, but the organizationeffectively repelled these foreign elements.
  162. 162. “It was difficult to do what we wanted as the old management still strongly believed in analogue.” // Gero Furchheim, spokesman of Leica
  163. 163. This quote isfrom October 2006!
  164. 164. At this point about 90 percent of themarket is digital.
  165. 165. And old managementstill believed in analogue imaging!
  166. 166. It makes you wonder…
  167. 167. How many layoffs, delays, apologiesand how big losses are needed before those managers CHANGE?
  168. 168. Chairman Maoonce said thata revolution is not a dinner party. AtLeica, people are painfullyaware of this.
  169. 169. Disruptive change is not a sweet thing for established companies. 7739231.html
  170. 170. So, the question we looked at here was: WHY do so manycompanies like Leica ‘oversleep’technological shifts?
  171. 171. I think the answer would be this:
  172. 172. Competence becomesincompetence.
  173. 173. SourcesThe British Journal of Photography The Leica website Amateur Photographer Times Wikipedia Digital Photography Review Several internet forums Thanks!
  174. 174. Image attributions Thanks!
  175. 175. Find out