Writing a paper on Leica's entry in the digital market

[sf]

Writing it for one of the classes that I am taking for my MBA : "Managing Organizational Change"

I am looking for authoritative information on Leica's history, primarily its recent history and company information that would give me insight into its motivations to enter the digital market, and its position in that market. Perhaps even its hopes for future positioning.

Basically, just anything useful about Leica (as the company exists now - not Leitz), anything about its ventures with Panasonic, the Digital M, Digilux's, etc.

I am also thinking about perhaps writing on Nikon because it has made the conversion full-force to digital, and there appears to be more information on it.

The paper is about changing corporate culture, strategies, etc., so Nikon might be the best in terms of finding material, but Leica may be more interesting because of their philosophies on the importance of both.

 

[ch1]

Whew, now this is opening up a can of worms.

Nikon (or Canon etc.) clearly recognized the "paradigm shift" to digital imaging whereas Leica did not seem to (or, perhaps, want to).

Partly this stems from Leica's "niche market, luxury goods" craftsman traditionalist approach to the market. Whereas the Japanese companies have always been "innovative" and more mass production-oriented.

One of Leica's "handicaps" in "doing digital" is that the digital industry is based on constant change and disposability. Conversely, Leica's corporate philosophy has been to create "timeless" products.

It's just about impossible to "square" these two conflicting "cultures".

That said, Leica has developed a (ridicuously expensive) digital back for its "film" SLR. Is that innovative or reactive? Nikon would never have done so - since "existing product preservation" was not the direction to which the digital industry was moving toward. Better to sell generation after gerneation of "new and improved" digital bodies. Pick a half dozen "price points" and constantly upgrade at each one.

Really don't want to go any further on this topic - way too "hot".

Good luck with your essay.

 

[sf]

Whew, now this is opening up a can of worms.

Really don't want to go any further on this topic - way too "hot".

Good luck with your essay.

I agree - very hot - but I am really just researching right now, looking for legitimate sources of information.

I HAVE CHANGED MY MIND - quotes from RFF users, especially NIKON users, would be much appreciated. I have decided to write on Nikon, because they are undergoing hte heaviest actual change.

Thanks for your input.

 

[ch1]

There is a review of Leica's "R" digital back in the Feb. '06 Pop Photo.

That may give you some ideas on some "research avenues" to pursue.

 

[bmattock]

Whew, now this is opening up a can of worms.

Nikon (or Canon etc.) clearly recognized the "paradigm shift" to digital imaging whereas Leica did not seem to (or, perhaps, want to).

Partly this stems from Leica's "niche market, luxury goods" craftsman traditionalist approach to the market. Whereas the Japanese companies have always been "innovative" and more mass production-oriented.

One of Leica's "handicaps" in "doing digital" is that the digital industry is based on constant change and disposability. Conversely, Leica's corporate philosophy has been to create "timeless" products.

It's just about impossible to "square" these two conflicting "cultures".

That said, Leica has developed a (ridicuously expensive) digital back for its "film" SLR. Is that innovative or reactive? Nikon would never have done so - since "existing product preservation" was not the direction to which the digital industry was moving toward. Better to sell generation after gerneation of "new and improved" digital bodies. Pick a half dozen "price points" and constantly upgrade at each one.

Really don't want to go any further on this topic - way too "hot".

Good luck with your essay.

You know what? I agree with you 100%. Leica is caught in the crossfire. Their loyal fanbase demands that they produce a digital M - and won't buy it when they do. The Modul-R is a drug on the market and will be withdrawn in less than a year, a huge moneypit. For all the reasons you noted, Leica is not and should not be a digital company. Of course, they're doomed for that, too.

Best Regards,

Bill Mattocks

 

[bmattock]

I agree - very hot - but I am really just researching right now, looking for legitimate sources of information.

I HAVE CHANGED MY MIND - quotes from RFF users, especially NIKON users, would be much appreciated. I have decided to write on Nikon, because they are undergoing hte heaviest actual change.

Thanks for your input.

You'll find more information and a much more lively story writing on Kodak's massive changes. Nikon makes cameras - Kodak makes cameras, film, paper, chemistry, etc. Kodak pioneered digital photo technology and then let it rot in the fields while others stole a march on them. They very nearly did not survive the transition - and they may not yet. But they have finally seen the iceberg and are turning that wheel as fast as they can. The final chapter is not yet written for them.

Nikon, on the other hand, has been hip to change and has not suffered unduly due to stupid management decisions. They see a path, they're moving towards it, they'll make it.

As well - consider that it is impossible to get next to Nikon execs for your quotes and interviews. Kodak is approachable, even chatty.

Best Regards,

Bill Mattocks

 

[bobofish]

Shutterflower,
I for one think that Leica would be a much more informative case study than Nikon; for all intents and purposes, Nikon has been "doing it right" with regards to the paradigm shift that Copake_Ham mentioned....although they've made mistakes, so has everybody else, and Nikon has been making money just about as well as anybody else. That they've shifted totally to digital to me is a little bit of a murky water in these troubled camera times, and...well anyway, it's just not as interesting for me as a case study. It would also require a hell of a lot more research, partly because Nikon is a big big company with a lot of products.

Leica on the other hand has had an interesting time of it. They've had a combination of poor management, and not enough thoughts on how to secure money for development; that's the long and short of it for me, since no matter how forward thinking they were, they simply don't have the cash to develop products like Nikon or Canon do. It's a symptom of not reacting quickly enough 40 years ago, and going from a market leader to a niche brand almost overnight when the Nikon F came out.

In other words, their digital dillemnas stem from 40 years of development stagnation and poor brand alliances. Their alliance with Minolta could have been a very profitable one, and one of great benefit to both companies...Leica's Cache with Minolta's autofocus tech, for example.

A few years ago I actually thought that Leica was on top of the digital thing, when they came out with their S1 or whatever it was called...do a Google search on it, it was a very interesting camera designed largely for copy work, and was used to some great success in museums.

If you've read anything about the Met Museum's attempts to digitize that old belgian textile (can't think of the name) the Leica camera was integral to that. There was a lot of drama and some high technology involved; the textile was found to "breath" while it was being digitised, and no matter what, the museum couldn't figure out how to put the pieces of the digital copy together, so that all the threads and designs would line up. A couple of famous Ukrainian mathematicians were brought in to create a very advanced computer algorithm to predict the shifting patterns of the textile as it reacted to heat and humidity, as well as the thread's tendency to relax as they sat on the floor, after having been hung for several centuries. Leica was somewhat involved in that process as well...there are a couple of New York Times articles on it, as well as I think some things on PBS's Nova, etc.

The S1 was actually a very innovative camera for its day, and then Leica dropped the ball.

So many of their problems with the shift are not just years old, but decades old. For example they have to licence their own name...that must eat into the profits from their deal with Panasonic.

It would be a case study in how NOT to manage a smallish company, with a lot of chances to find an alternate route. I recall that you had some revolutionary ideas for Leica...perhaps you could include those in the paper.

I agree that Nikon may not be the first company to give you good interviews, etc... They're not necessarily an unfriendly company, like Canon, but they don't seem to be that particularly forthright with things.


Another possibility would be to do your paper on German lens/camera companies in general. It seems that most of them are lost in the lurch, and the old world ideas that they seem to embody are going to the wayside. I suppose Schneider could be an exception, because they have their line of fairly successful digital lenses, and apparently they're working with Kodak now.

Anyways, good luck. Whatever did happen with the Leica suggestions?

 

[yarinkel]

Shutterflower,
You may find http://www.imx.nl/start.html of some interest for your research.

 

[VinceC]

I agree Leica is the more interesting case study. Any MBA paper worth its ink ought to also look at past history of either Leica or Nikon, because both are extremely important in the overall building of the brand. (The no-brainer here would be a 'compare and contrast' between the two companies).

Nikon: Originally Nippon Kogaku, they've weathered numerous changes. They transformed from weapons-optics maker to consumer optics (and camera) maker after World War II. Their quality made strong headway into the professional photojournalism market as they continued to innovate camera and lens designs. In 1959, they launched a historic SLR (the Nikon F), dominated the pro market and had the agility to quickly drop a world-class rangefinder line in favor of the new SLR trend. Since the F, Nikon has not been so much innovative as reliable. They would refine innovations introduced by others until they had the quality and reliabilty to warrant the Nikon brand name. They have not been cutting edge in the transition to digital, but they've not been afraid to experiment in the consumer and prosumer markets. Canon since the early 1950s has widely outsold Nikon, and today Canon has perhaps its largest share ever of the pro market. Nikon, however, is more concerned about backwards compatability. A Nkon lens from the early 1960s can, with a $25 modification, fit today's top of the line pro digital SLRs (this can also be accomplished for free with a file, though it's not as cosmetically pleasing).

Leica: With optical roots back into the 1800s, Leica actually created the 35mm revolution, which was the "digiital revolution" of its era. They created tiny consumer cameras with large depth of field capable of numerous exposures and easily carried anywhere. Their impact on the photographic world of the 1920s, 1930s and 1940s was identlical to the impact of digital today -- a costly killer ap that was so flexible and innovated and easy to use that nearly everybody wanted one. Like Nikon, they were buoyed in the post-World War II era by sales to U.S. service members. Unlike competitor Zeiss, faced with the onslaught of Japanese quality and innovation in the early 1950s, they substantially redesigned their camera line, creating the M3 and significantlyl improving optics. Unlike Nikon, they did not capitalize on the switch a few years later to SLR. Having refined the rangefinder to arguable perfection, they spent the 1960s trying to convince the rest of the world of the inherent flaws in SLRs, they built one that didn't exactly win over the marketplace. Eventually, they transitioned from the wold's leading producer of consumer miniature cameras to being a high-end brand of excellence. They kept improving their lenses and created a marketing mystique that these were the best non-cinema lenses money could buy and were in themselves worth putting up with the shortcomings of rangefinder photography. As long as 35mm film remained dominant, there was always a small but significant portion of professionals and advanced amateurs (and big spenders in search of perceived excellence and snob appeal) to keep them in business. Initially, they thought they could weather the switch to digital just as they had weathered the switch to SLR, using this champaigne-instead-of-box-wine approach. But the marketplace took a different direction. Those searching for excellence-regardless-of-cost were buying an ever-growing assortment of top-end digital SLRs. Meanwhile, high-quality prosumer point-and-shoots often (but impefectly) fit another important Leica niche -- the unobtrusive, nearly silent camera. It's significant that there are some combat photographers in Iraq today using high-end digital point-and-shoots -- these folks wouldv'e been shooting Leica a generation ago.

An imporant element here is that photojournalists have driven the top-end of the camera industry since the 1920s-1930s, (arguably earlier) because enough of them have expense accounts that cost becomes secondary to image quality and they're free to pick the best tool for the job. Also, until recently, a working photojournalist's sign of serious professional success was a personal Leica around his or her neck to complement the two company-issue SLRs with short and long zooms. But with the dominance of digital in today photojournalism environment, other more specialized gadgets such as the X-Pan or a favored point-and-shoot have replaced the Leica as the third carry-all camera. With isolated exceptions that prove the rule, photojournalists today are seldom opting for Leica because of the system's imcompatibility with fast image turnaround.

Interestingly, the classic Leica "look" is very much in style. Photo awards and advertizing are filled with available-light black-and-white work that is synonomous with Leica. However, with PhotoShop and inherently high-speed digital sensors, this look can be easily replicated using SLRs and even decent-quality point-and-shoots.

Totally my two-cents worth ...

 

[bobofish]

And a good 2 cents they were! Totally worth the money. 😉

 

[ch1]

I agree - very hot - but I am really just researching right now, looking for legitimate sources of information.

I HAVE CHANGED MY MIND - quotes from RFF users, especially NIKON users, would be much appreciated. I have decided to write on Nikon, because they are undergoing hte heaviest actual change.

Thanks for your input.

This is an interesting decision and I think you made the better choice.

The reality is that Nikon is not necessarily going to be a survivor in the digital "wars".

Yesterday, CNN picked up the Nikon press release that they were scaling back film camera production to just the F6 and FM10. In that article was a more interesting tidbit for you to pursue.

Apparently Nikon ranks FIFTH in total digital body sales behind Canon and another "traditional "Japanese camera maker (whose name escapes me right now) but also Sony and Panasonic.

The last two are not, of course, ordinarily thought of as "still" camera producers - yet they have used their size to get market share (espescially via EVF technology).

With these facts, Nikon's announcement that they are going to focus on their "successful" digital line may be a bit of marketing bravado.

For very different reasons than Leica, Nikon too is at a serious crossroads.

It has never been as successful as other "big" Japanese players in the commoditized side of the business. Rather, it has heretofore built a strong brand name and user loyalty based on "quality". But digital technology is a great leveller - disponsability makes the idea of being know for building "solid camera bodies denoting quality" obsolete.

Read b/w the lines of Nikon's press release both about film cameras and the earlier one announcing the D-200.

Then consider that Nikon was originally an optics company that was "encouraged" to get into camera production by the occupying US forces in late-1940's Japan. Unlike Canon, this company did not start as a camera producer nor did it follow Canon into copying imaging etc.

This company may actually be migrating back to its "roots". It could well decide to abandon digital bodies altogether if they remain so commoditized.

Who knows? But I would encourage you to think critically of Nikon and its strategic positioning.

I'm a big fan of Nikon - heck amongst many other bodies, I just picked up my third F3 on eBay. And that's part of Nikon's problem. That camera was built to last forever (i.e. kind of like Leica's approach) yet now the digital world requires such rapid innovation that disposability is a driving factor to keeping production costs down.

I've rambled too long - good luck with your paper.

 

[VinceC]

>>Then consider that Nikon was originally an optics company that was "encouraged" to get into camera production by the occupying US forces in late-1940's Japan. Unlike Canon, this company did not start as a camera producer nor did it follow Canon into copying imaging etc.<<

There is some difference of opinion as to the role of the Allies in Nikon's decision to pursue cameras. There's a vocal group of German-philes who insist the United States gave Nikon the Zeiss lens patents and gently nurtured it to world dominance. My own sense is to place more faith in news reports of the time and accept that Nikon leaders were able to arrive this no-brainer all by themselves. With all due respect, I've spent a couple decades involved with the United States military overseas, and it is not populated with shrewd businessmen. And the German camera companies also benefited from postwar contracts with the U.S. Army and post exchanges.

Japan is a volcanic archipelago, giving it superb raw materials for a very ancient glass-making tradition. Nikon made lenses for the Canon prototypes in the early and mid-1930s. With Japan being a seafaring nation, Nippon Kogaku developed superlative anti-salt-water coatings during World War II that proved useful in their postwar lenses, and very early Nikon literature discusses the quaility of its coatings as being a significant formula for its success. These coatings weren't nurtured by the United States.

I consider Nikon's business decision in the late 1940s to be very reasonable and fully in line with the remarkable innovation of Japanese camera makers and even Japan's entire postwar business culture. With all their cities bombed to rubble (two of them nuked by these not-so-benign occupiers) and their economy in shambles, the folks at Nikon looked around for a way to earn cold-hard cash, which meant U.S. dollars. Who had dollars? Americans. And there were many tens of thousands of these Americans in uniform in the country at any given time, rotating through every two years or so. They were well paid (wealthy by immediate postwar standards) and they loved new technological gadgets. They were far from home and so very often bought cameras to take pictures of their new surroundings. (This is still true -- I recently saw an Army unit's official recommended packing list for things to bring to Iraq -- the unit encouraged its troops to bring a digital camera and/or movie camera and laptop computer). So deciding to sell cameras and lenses to Americans made a whole lot of sense -- and since many of these GIs had Leicas, it made sense to cater to them as well. As to the quality, there was a lot of cultural pride as well as business motives at stake for building lenses and cameras that ranked among the world's very best.

Finally, Nikon has never been a big company. Total sales of all rangefinder cameras in the entire decade of the 1950s was something like 125,000-to-150,000 units, give or take (there are exact numbers somewhat that I don't feel like looking up). Only about 22,000 Nikon SPs were made compared to hundreds of thousands of Leica Ms.

I agree Nikon is at a serious crossroads in the digital world. I don't follow their business model or fortunes very closely, but I'm not aware they're in any danger of going out of business. They still own a big chunk of the professional market (that alone is tens of thousands of editorial publications worldwide, each one with some kind of photo staff ... practically every town in the world has a newspaper that uses photographs ... the ill-health of the news industry is another story, but it still exists for the time being). Nikon has always been lower-volume but upscale compared to Canon and other Japanese brands. I can recall Nikon advertising from a couple of decades ago gloating that their focus was on cameras and lenses, not photocopiers -- so the diverse product lines can cut both ways.

I'm not longer in the news photography profession, but in my travelings as a suburban parent, I'm surrounded by other suburban American middle-class parents who are absolutely proud of their Nikon D-70 SLRs ... they'd had other digital cameras, but the Nikon meant they'd finally gotten a "real" camera. I typically use very high-quality professional-level rangefinders from the 1950s (still working fine half a century later) to take pictures of my kids and their teammates at soccer games. But it was the father with the Nikon DSLR whose camera and larger zoom were spotted by league officials, who asked him to take the photos for the league website. In Middle America, Nikon means dependable quality on par with Toyota or Lexus.

That's where brand-awareness is so important. Leica is so lofty as to be unattainable. A soccer mom knows she can afford a Nikon and believes it will be one of the best cameras money can buy. That's what brand-building is all about.

 

[ch1]

Vince,

My comment was simply to place context to understanding possible Nikon responses to a rapidly-evolving marketplace.

Shutterflower is writing a marketing essay, not a historical one.

Regards,
George

 

[VinceC]

>>Vince,
My comment was simply to place context to understanding possible Nikon responses to a rapidly-evolving marketplace.
Shutterflower is writing a marketing essay, not a historical one.
Regards,
George<<

George,
It sounds like we both share a strong respect for Nikon's products. I just like to place the company's background in context whenever this "encouraged by allies" theory gets raised. Otherwise it becomes accepted Internet truth that Nikon got its start by cloning German cameras, and the truth is much more complex and fascinating.

I do think a big part of marketing is brand-building and brand-awareness. In that context, the history of the product (in this case, Nikon's name recognition) is important. Sony and Panasonic have leveraged their name recognition with consumers to branch into the camera market. I would guess that there's an expectation/perception that you'd get a more cost-effective product from Panasonic but that it might not last as long or be as well-made as a Nikon or Canon. On the other hand, the less durable nature of digital makes the Nikon names less important to many consumers.

 

[ch1]

>>Vince,
My comment was simply to place context to understanding possible Nikon responses to a rapidly-evolving marketplace.
Shutterflower is writing a marketing essay, not a historical one.
Regards,
George<<

George,
It sounds like we both share a strong respect for Nikon's products. I just like to place the company's background in context whenever this "encouraged by allies" theory gets raised. Otherwise it becomes accepted Internet truth that Nikon got its start by cloning German cameras, and the truth is much more complex and fascinating.

I do think a big part of marketing is brand-building and brand-awareness. In that context, the history of the product (in this case, Nikon's name recognition) is important. Sony and Panasonic have leveraged their name recognition with consumers to branch into the camera market. I would guess that there's an expectation/perception that you'd get a more cost-effective product from Panasonic but that it might not last as long or be as well-made as a Nikon or Canon. On the other hand, the less durable nature of digital makes the Nikon names less important to many consumers.

Vince,

I too hope that Nikon continues to "thrive". Like you I have a high regard for the company (and a heck of a lot of Nikon gear!).

I don't follow the overall camera industry generally, and I usually take everything I read in Pop Photo with many grains of salt, but they seem to feel that EVF's are going to give the prosumer-level DSLRs are real run for the money. Certainly Sony and Panasonic have the marketing clout to try and make that happen.

With this perspective in mind, the Nikon PR that reiterates their "commitment" to DSLRs takes on a different complexion. That commitment may only wind up being at the D-200 level and higher (e.g. "serious" amateur and professional users).

I do, however, agree that to many of the soccer moms (and dads) the Nikon name has a certain "cache". But so does the name Sony. And to a marketplace already familiar with LCD screens on digicams the EVF will have a certain attraction.

Guess we'll see over the next year or so.

Regards,
George

 

[VinceC]

There's a related discussion over on the Nikon Historical Society forum. Someone posted an interesting link to Nikon's latest semi-annual report ... interesting info on the company's total big-picture sales and earnings (camera make up about a third). It's a .pdf file so, if you have dial-up, beware of size:
Nikon annual report (english)

 

[ch1]

There's a related discussion over on the Nikon Historical Society forum. Someone posted an interesting link to Nikon's latest semi-annual report ... interesting info on the company's total big-picture sales and earnings (camera make up about a third). It's a .pdf file so, if you have dial-up, beware of size:
Nikon annual report (english)

Downloading and printing it now. Use wireless here - about same as DSL.

A very quick scan through doesn't leave me very comfortable. Project DSLR sales units seem "puny" but I don't know the scope of the entire market.

I'll look closer, but I wonder if they aren't "betting the house" on DSLRs?