I should clarify that my Apple comparison was meant more as a leica-in-the-70s versus Apple-in-the-90s analogy and as a possible alternative to the conventional wisdom that the M5 was too ugly/too radical a design for the customer base. Apple in the 90s was facing shrinking market share during the internet boom and had a bloated and unclear product line that didn't keep up with a changing market.
Obviously leica pared down to their core M4 model, got help from Minolta, and survived. I never meant to compare the two companies now, since I would say Ldica definitely has a clear product differentiation strategy --much more so than a lot of manufacturers.
But I digress; carry on.
I don't necessarily disagree with anything you say here, and certainly agree Leica has to differentiate its offerings, because it pretty clearly can't compete in also-ran products with bigger manufacturers, but even with a product differentiation strategy there are different shades and conditions, ranging from rampant innovation to ultra-conservative "classic" offerings (to a healthy mix of both), and I won't venture a guess as to what is best for Leica to do.
To try to illustrate how muddled the calculation can get all in one example market, I was at a conference once where a paper analyzing the netbook computer market (also called mini-notebook in some circles), representing an emerging market, was presented. It discussed the various computer manufacturers and how much of the netbook market they had managed to hold compared to the more established laptop market. The researcher had some very interesting analysis on the advantage of small-to-midsize manufacturers in innovating with netbooks, investing heavily in the new market and gaining early market share, because they had less to lose from cannibalizing the existing market [I'll add the analysis was presented as being applicable far beyond just netbooks, but my caution about simplifying the narrative too much stands]. Ultimately, their best strategy was to fully commit to the netbook market quickly, virtually abandoning their lower-performing laptop offerings, and gobbling up as much market share as they could and then defending that share against new entries. Meanwhile, the companies doing better with laptops had the motivation to stay in the laptop market and try to preserve it, and they had the more difficult question of deciding when (and if) to enter the netbook market, trying to time it early enough to be able to use their larger size to gain market share, but late enough that they are optimizing with their proven profits in laptops. [One might see some parallels here to camera markets, where smaller DSLR manufacturers like Olympus, Samsung, and Sony benefit from investing in the interchangeable lens mirrorless market more than the dominant DSLR players Nikon and Canon, but both Nikon and Canon eventually saw reasons to try the mirrorless market later on.]
But was the lesson from the researcher correct on netbooks? The paper was written right before the Apple iPad came out and tablets become the next big thing. The netbook market collapsed and has basically disappeared entirely, while laptops are still relatively strong (it's noteworthy that laptops got smaller post-netbooks, and "ultrabooks," the very expensive netbook alternative also appeared, so they did have influence on the other markets). The predicted future profits from major investments in netbooks didn't materialize, and netbook market share didn't translate into tablet market share. Meanwhile, Apple, as an established laptop maker that never entered the netbook market, managed to build a product that allowed them to continue with tiered non-cannibalistic selling--lots of people buy a tablet to use in parallel with their laptop. So, investing large amounts in innovating netbooks wasn't so great, but it appears doing the same in tablets was great. I think he might write a very different paper today. But how do you know which innovation is going to pay off and which hemorrhages money? Alternatively, not investing in either and focusing on core business in laptops could have been the second-best choice, worse than investing big in tablets, better than investing big in netbooks, because the laptop market still exists in stronger form today. Ultimately, a whole lot of details specific to the company and the market come into play.