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Leica Cameras in deep TROUBLE
Christian Sandström holds a PhD from Chalmers University of Technology, Sweden. He writes and speaks about disruptive innovation and technological change.
It’s not an exaggeration to say that Leica is a
camera legend.
The German camera manufacturer
pioneered the 35-millimeter film format.
This is what took photography out of the studios and into
our everyday life.
Leica took photography
from this
And this
To this
And this.
Small, easy
handling and great photos.
Many of the 20th century's most famous photos were
taken by a Leica.
Great photographers such as Henri Cartier-Bresson, Alfred Eisenstaedt, Robert
Capa used the camera.
"With a Leica camera you can do anything"
//Henri Cartier-Bresson, perhaps the greatest photo
journalist in history.
“A big warm kiss, like a shot from a revolver, and like the psychoanalyst’s couch.”
//Henri Cartier-Bresson, describing the Leica camera.
This image of the Vietnam war was captured with a Leica.
Photos of
Marilyn Monroe
The Queen of England has
owned a Leica M3
since 1958. Her Majesty likes it so much that
she was once posing with it on a stamp.
Photos of Picasso (well, not this one maybe)
Images of the Maoist Revolution
Stanley Kubrik used it.
This iconic photo was
taken with a Leica.
The infamous nazi propagandist Leni Riefenstahl used
Leica.
The camera
costs thousands of dollars.
It has been loved and used over
all the world since the 1920s.
German craftsmanship
at its best.
It is a camera legend.
A cult product.
But the 21th century has so far been covered by dark clouds.
Since 2005, two CEOs have been
fired.
In recent years,
Leica has suffered from great losses,
being close to bankruptcy.
2004-2005: - 20 million Euro
Up until today, this trend has
continued.
For a small company with
about 1000 employees, these losses are huge.
The banks have been 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 dollar
impairs the business abroad, because the cameras become more expensive
larva in Germany thereby."
So, the question is: WHY do so many
companies 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, digital imaging went from zero to 90 percent of the market.
It’s very easy to oversleep such a rapid shift.
But let’s move back to the Leica story now…
The truth is that Leica had plenty of problems even before the digital
revolution.
In 1930-1960, Leica was very popular
and profitable.
But with the rise of Single-lens reflex (SLR) cameras in the 1950s,
Leica encountered problems.
The rise of the Japanese camera industry put the
company into further trouble.
Leica fans were happy that the company never
entered the broader market segments.
The company instead focused on further
developing its legendary M and R series of cameras.
Ever since, Leica has had financial problems.
Being popular is
not the same as
being profitable.
Over the decades, Leica essentially sustained their
famous camera system.
So, the company was
essentially built around competence in sustaining
and developing a technology which was
about precise mechanics.
Leica’s soul was mechanic and optic.
Not Digital.
And of
course, some marketing and
sales activities, also
related to mechanical products.
However, the company recognized the threat from
digital imaging, and therefore went into it in the mid 1990s.
These efforts resulted in the Leica S1, launched in 1997.
It looked like this:
Not exactly what a Leica normally looks like.
Pretty hard to bring in your jacket and pull up
for a photo…
The S1 was never intended to be a ‘normal’ Leica.
In 1997, it was sold for 15 370 EURO. It
had a sensor of 5140 x 5140 pixels
44 cm x 44 cm Weight: 3,6 kg.
The best version had 75 Megapixels!
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, the S1 appears to be very expensive
and strange.
But the business utility was in fact very large. It could produce
printable photos instantly and an infinite number of photos could
be taken at no cost. The alternative would have been film, going to the lab, then scan it. All this would take days, with the S1
it would take minutes!
A fantastic camera. But not exactly ”Leica style”.
In the end only 146 of them were made.
After an ownership change, it was decided
to kill this camera!
Nearly all ’digital’ engineers and marketing people now had to
leave the company.
The new CEO had previously been at a furniture company
which had been saved by positioning it as ’traditional’.
Now the same medicine was going to be used on Leica.
The digital capabilities are cut off in the midst of the digital
camera evolution!
Life must have been very tough for a digital
engineer at Leica.
Sales
Manufacturing The Mechanical engineers
Purchasing
- Everyone must have been against you.
All their routines and competences would have to change in order to succeed
with digital imaging.
Forgive me for speculating, but I suppose most of these
actors cheered silently when the S1 was killed.
At an old, traditional company with a strong brand
and history in mechanical engineering, electronics
must have been regarded as an odd, foreign element.
Organizations are very good at
eliminating foreign elements. And Leica was no exception.
In a disruptive shift
The Core competence
Becomes
A Core Incompetence
Leica’s soul was mechanic and optic.
Not Digital.
Digital was odd.
Having laid off virtually all
digital knowledge,
Leica instead focused further on its strategy of rebadging
Fujifilm digital cameras.
The Digilux 4.3. is identical to a Fujifilm camera, except for the
brand.
Re-branding a non-premium product and charging a
premium price, while Canon and Nikon
came up with smaller and
better cameras all the time.
The success of this
strategy was very modest.
As the financial situation
worsened, 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, in
collaboration with Imacon, a Danish manufacturer of digital backs (who
later merged with Hasselblad).
Having no digital capabilities of its
own, this was deemed to be a good strategy.
But cameras with
digital backs are very expensive and uncomfortable.
After severe delays, the Leica Digital-Modul-R was finally
launched two years later, in 2005.
An official letter was sent to Leica users over the
weekend apologizing the last delay. The date was put
forth due to 'software problems’ (once again a skill
beyond Leica’s soul).
Mario Thurnherr, manager of Leica Camera's Photo
Division, said:
"Our customers had to wait longer than planned for the
unique digital solution from Leica, but are now
rewarded with an outstanding product."
With this bigger and heavier camera, Leica was positioned in
the same segment as Hasselblad, Mamiya, Pentax,
Contax and the others. Some of those actors had already
captured this small, small part of the camera market.
Hence, the Digital-Modul-R did not stop Leica from bleeding.
In early 2005, the situation became desperate.
The company was now bought by Andreas
Kaufmann, a long time Leica enthusiast with a great personal fortune.
Kaufmann recruited a new CEO, an American named Steven K. Lee.
Mr. Lee had a background as vice
president of Best Buy, a huge American retailer
of consumer electronics.
Could someone with this odd background save
Leica from bankruptcy?
At about the same time as Lee came to
Leica, the company had
finally launched the M8, the first digital camera in
its famous M series.
The M8 cost about 5000 USD.
But the high price was not the only problem.
The sensor was below standards, and the camera did
not have those filters which were needed for a digital
camera to work. Without these functions, black colour looks
purple and strange colour patterns show up.
Thus, the M8 was a bad 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 felt
like throwing it against a wall. For a company which is used to that customers are in love with their products, these are
indeed hard words.
One of the first things Steven Lee had to do at his new job was to sign 4000
letters, apologizing for this. Pretty tough start.
The M8 had to be redrawn from the
market, retroactively putting in the
required filters.
Quite an embarrassment for a camera legend, known for
its high quality products.
So, why did Kaufmann hire a strategy and
business development guy from an American
retailer?
Lee in an interview: “Now we need to reach people who could and might use a Leica. I use
the example of the American ‘soccer mums’ 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 associated Leica with terms such as ’American soccer-mum’? Pretty different, and ODD.
In addition to this, Lee
wanted to do a couple of pretty odd things:
Build Cameras on demand (like Dell with computers) Replace Leica’s network of specialty dealers with kiosks and internet sales Increase the pace of digital development New forms of collaboration Move into consumer electronics
How all this was going to be
accomplished is not clear (and certainly wasn’t to people at Leica)
In 15 months, Steven Lee had succeeded at Best Buy in producing formidable high-end
PCs, which generated a 20 percent profit
(normal profits were around 10 percent).
A retailer making 20 percent profit in the fiercely competitive PC 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 and aggressive, not afraid of
conflicts and bullying people if necessary.
Imagine the cultural and intellectual clash between
Steven Lee and a traditional, old firm like Leica!
Lee about the first meeting: “I arrived at 10 o’clock and we
went head-to-head for nine hours straight. No meal breaks.”
The founder’s son, Ernst Leitz had treated his employees like
his own family.
And now an American thunders in, firing and bullying people about some strange soccer-
mum segment!
Lee went into Leica playing hardball, personally approving all expenses over 100 Euros.
He travelled to Asia, re-negotiating prices with suppliers of electronic
components.
He raised prices significantly and thus, sales fell.
The distributor network which was going to be
replaced by internet sales and kiosks, started to get
really angry with Lee since they were threatened.
Lee was not exactly the guy to mess around with. It is
claimed 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 skilled
technicians 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 fire Steven Lee in early 2008.
Here are some rumours and
comments on the internet 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 to
be Mr. Nice Guy“, he said.
“I was trying to revive a company that's broken".
Lee claimed that accusations against 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 Lee
was exactly what Leica needed. "He had to hear, 'That's not possible,' over and over again.'' , one said.
Kaufmann took over as CEO and Leica has now
successfully 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.
It’s priced at 15-20 000 USD.
Whether the S2 and the new M8 will turn things around for Leica or not
remains to be seen.
However, the camera industry is subject to
fierce competition.
Canon, Nikon and the other big Japanese dragons are constantly launching new,
cheaper and better products.
Having a legendary brand is of course an asset, but Leica is less well known to the new generation of photograpers.
We’ll see what happens.
Leica’s soul was and is mechanic and optic.
Not Digital.
Throughout the last
decades, this has become very clear for the company.
We’ll never know whether the S1 camera and the digital developers
that were laid off would have put the company in a better situation.
And we’ll never know whether Steven Lee and his ‘soccer-mum’ concept would have turned Leica
into a growth company.
But ONE thing is clear.
Both the S1 and Steven Lee were odd, foreign elements in an old organization,
with old values.
Leica was and is in desperate need of
change, but the organization
effectively repelled these foreign
elements.
“It was difficult to do what we
wanted as the old management still strongly believed in analogue.”
// Gero Furchheim, spokesman of Leica
This quote is from October
2006!
At this point about 90
percent of the market is digital.
And old management
still believed in analogue imaging!
It makes you wonder…
How many layoffs, delays, apologies
and how big losses are needed before those managers
CHANGE?
Chairman Mao once said that a revolution is not a dinner
party. At Leica, people are painfully aware of this.
http://online.wsj.com/article/SB122152103387739231.html
Disruptive change is not a sweet thing for established companies.
So, the question we looked at here was:
WHY do so many companies like Leica
‘oversleep’ technological shifts?
I think the answer would be this:
Competence becomes
incompetence.
Sources The British Journal of Photography
The Leica website Amateur Photographer
Times Wikipedia
Digital Photography Review Several internet forums
Thanks!
