How Pentax survived the shift to digital imaging and then encountered problems.

2. Christian Sandström holds a PhD from Chalmers
University of Technology, Sweden. He writes and speaks
about disruptive innovation and technological change.

3. As we know, the shift from film-based
photography to digital imaging has put
many former camera giants in some
serious trouble…

4. The explosion
30
25
20
15
10
5
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Number of film and digital cameras
sold in the United States

6. Kodak…

7. … Polaroid…

9. … Leica…

10. Konica…

11. … Agfa…

12. … Bronica…

13. Pentax has also been in trouble.

14. Losses and layoffs have become
more frequent in recent years.

15. It’s easy to blame the general recession…

16. However, recessions are always particularly
hard on companies with structural problems.

17. The interesting thing with the Pentax story is
that the problems seem to have come after
the shift to digital imaging.

18. Let’s go back in history and take a look at how
Pentax handled the shift to digital imaging
and what happened after this.

19. In 1952, Pentax introduced the first Japanese
35 mm camera. Ever since, the company has
had a strong competence base in optics,
producing lenses, binoculars and other
optical instruments.

20. The cameras
were exported to
the United States
under the name
Honeywell
Pentax. The
company grew
just like the
entire Japanese
camera industry
in the period
1950-80.

29. Analogue cameras are a mix of many
technologies: optics, precise
mechanics and some electronics.

30. Digital cameras are a mix of electronics,
optics and some precise mechanics.

31. Having a strong competence base in optics,
Pentax chose to focus on this and develop
digital cameras together with consumer
electronics companies.

32. The first digital Pentax cameras were co-
developed with Hewlett Packard, and later on
worked with Casio as well.

33. The Pentax Optio was co-developed with
Casio. Pentax provided the optics and Casio
made the electronic components. Thanks to
the modular structure of digital cameras, this
kind of collaborations worked well.

37. The corresponding Casio camera
was called Exilim.

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

39. Memory cards…

41. Image sensors…

42. LCD screens…

43. … could be developed by
companies like Sanyo.

44. Sanyo provided the big
camera firms with electronic
components, and they could
instead focus on optics,
design and development.

46. Thus, a company like Pentax could survive
the shift thanks to the modular structure and
its great skills related to optics.

47. However, the market for compact cameras
became increasingly competitive over time.

48. Products like Canon Ixus…

49. … And Nikon Coolpix
flooded the market.

50. It doesn’t matter if a market is
growing if it is also becoming
fiercely competitive.

51. And from 2003-04 and on,
sales of compact cameras
actually started to decline.

52. The reasons?

53. Mobile cameras had become good enough.

54. SLR cameras had become cheap enough.

55. Tough competition, declining
sales (and prices) of compact
cameras implied that Pentax was
in trouble, despite surviving the
shift to digital imaging.

56. In July 2005, the CEO Mr. Urano said:
"We'll shift focus to more profitable single-
lens reflex digital cameras, to offset price
declines in compact types."

57. Since the market for SLR
cameras was still growing,
Pentax shifted to this higher
segment of the camera market.

58. Once again, Pentax co-developed digital
cameras, this time with Samsung.

59. “In the digital era the pace of
innovation is so fast. We have
embarked on this joint development
to increase our speed.”
//Ko Torigoe, Pentax Senior
Executive Officer

60. This resulted in the Pentax K10.

61. But this did not really help.
Having been outperformed by
Canon, Nikon, Sony and the
others, Pentax only had 3
percent of the DSLR camera
market at this point.

62. Later on, Pentax launched the K20D,
another SLR camera aimed for higher
segments of the market.

64. The launch was a big PR event…

71. But despite
heavy
investments
in developing
SLR
cameras,
Pentax lost
market
shares.

72. Massive economies of scale
and R&D were needed to
survive in this industry and few
companies could keep it up.

74. The SLR segment was
subject to very tough
competition as well.

76. Given the competitive
climate, Pentax sought to
focus more on optics and
expand its medical
equipment and optical
component business.

77. "We want to balance our portfolio by
making the imaging systems, medical
gear and optical device businesses
each make up about a third of sales"
// Fumio Urano, CEO of Pentax

78. Due to these
difficulties,
Pentax was
now bought
by Hoya
Corporation.

79. After a lot of turmoil and the
resignation of Mr. Urano, the
merger was finally completed
in October 2007.

80. Pentax had been under increasing
pressure from its shareholders to
accept the offer.

81. In early 2008, Hoya announced
that Pentax as a company would
cease to exist and only remain
as a brand.

82. Hoya had bought Pentax in
order to enhance its
capabilities in optics.

83. Pentax had plenty of
knowledge related to
endoscopes, intraocular
lenses, surgical loupes,
biocompatible ceramics.

84. However, the camera business
kept generating losses and
things got even worse when the
recession broke out.

85. After the huge losses, Hoya
has announced that cuts will
be made, both in production
and in R&D.

86. These cuts will lead to even
less competitive products,
which in turn implies even
lower revenues.

88. Pentax has entered a vicious
circle where the problems will
generate even greater problems.
Can such a company survive in
the long term?

89. When a company in a
competitve digital market
starts to cut down on R&D, it
is usually an indication of a
collapse in the near future.

91. Who knows what will
happen… Maybe Hoya will
keep the optics and sell the
Pentax brand to Samsung or
another company that wants
to grow in the camera market.

92. So, what
lessons can be
learnt from the
Pentax story?

93. 1. Surviving a shift to digital
technology does by no
means guarantee success in
the long term. On the other
hand, such a shift usually
implies an increased
competition and a furious
technological development.

95. 2. It is possible to survive
digital revolutions by
pursuing collaborations.

96. 3. It is never sustainable to
lag behind in a digital
industry. Given the rapid
improvements, second-
movers can in the end neither
compete on price nor on
performance.

98. “A revolution is not a tea party”
// Chairman Mao

99. Sources
www.dpreview.com
International Herald Tribune
The fotolia blog
www.auspiciousdragon.net

100. Image attributions

102. Find out more:
www.christiansandstrom.org