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

1. Leica Cameras in
deep TROUBLE

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

4. It’s not an exaggeration
to say that Leica is a
camera legend.

5. The German camera
manufacturer
pioneered the 35-
millimeter film format.

6. This is what took
photography out of
the studios and into
our everyday life.

7. Leica took
photography
from this

8. And this

9. To this

10. And this.

11. Small,
easy
handling
and great
photos.

12. Many of the 20th century's
most famous photos were
taken by a Leica.

13. Great photographers such
as Henri Cartier-Bresson,
Alfred Eisenstaedt, Robert
Capa used the camera.

14. "With a Leica camera you can
do anything"
//Henri Cartier-Bresson,
perhaps the greatest photo
journalist in history.

15. “A big warm kiss, like a shot from
a revolver, and like the
psychoanalyst’s couch.”
//Henri Cartier-Bresson,
describing the Leica camera.

20. This image of the Vietnam war
was captured with a Leica.

21. Photos
of
Marilyn
Monroe

22. 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.

24. Photos of Picasso
(well, not this one maybe)

26. Images of the
Maoist Revolution

28. Stanley Kubrik used it.

29. This iconic
photo was
taken with a
Leica.

31. The infamous nazi
propagandist Leni
Riefenstahl used
Leica.

32. The camera
costs
thousands
of dollars.

33. It has been
loved and
used over
all the
world since
the 1920s.

34. German
craftsmanship
at its best.

35. It is a
camera
legend.

37. A cult
product.

42. But the 21th century has so far
been covered by dark clouds.

43. Since 2005, two
CEOs have been
fired.

44. In recent years,
Leica has
suffered from
great losses,
being close to
bankruptcy.

45. 2004-2005:
- 20 million Euro

46. Up until today,
this trend has
continued.

47. For a small
company with
about 1000
employees, these
losses are huge.

48. The banks have
been after Leica for
many years now.

49. 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."

50. So, the question is:
WHY do so many
companies like Leica
‘oversleep’
technological shifts?

51. One reason is the furious
pace at which digital
technology is developed.
(For more info, click here)

52. In only ten years, digital
imaging went from zero to
90 percent of the market.

53. It’s very easy to oversleep
such a rapid shift.

55. But let’s move back to
the Leica story now…

58. The truth is that Leica
had plenty of problems
even before the digital
revolution.

59. In 1930-1960, Leica
was very popular
and profitable.

60. But with the rise of
Single-lens reflex (SLR)
cameras in the 1950s,
Leica encountered
problems.

61. The rise of the Japanese
camera industry put the
company into further trouble.

62. Leica fans were happy
that the company never
entered the broader
market segments.

63. The company instead
focused on further
developing its legendary M
and R series of cameras.

64. Ever since, Leica has
had financial problems.

66. Being
popular is
not the
same as
being
profitable.

67. Over the decades, Leica
essentially sustained their
famous camera system.

69. So, the
company was
essentially
built around
competence
in sustaining
and
developing a
technology
which was
about precise
mechanics.

71. Leica’s soul was
mechanic and optic.

72. Not Digital.

73. And of
course, some
marketing and
sales
activities, also
related to
mechanical
products.

77. However, the company
recognized the threat from
digital imaging, and therefore
went into it in the mid 1990s.

78. These efforts resulted in the
Leica S1, launched in 1997.

79. It looked like this:

82. Not exactly what a Leica
normally looks like.

83. Pretty hard to bring in
your jacket and pull up
for a photo…

84. The S1 was never intended
to be a ‘normal’ Leica.

85. 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.

86. The best version
had 75 Megapixels!

87. The S1 was aimed for studio
photography. It was
connected to a computer,
stood on a tripod and had an
amazing image resolution.

88. At first sight, the
S1 appears to be
very expensive
and strange.

89. 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!

90. A fantastic camera.
But not exactly
”Leica style”.

91. In the end only 146 of
them were made.

92. After an ownership
change, it was decided
to kill this camera!

93. Nearly all ’digital’ engineers and
marketing people now had to
leave the company.

94. The new CEO had previously
been at a furniture company
which had been saved by
positioning it as ’traditional’.

95. Now the same
medicine was going
to be used on Leica.

96. The digital capabilities are cut off
in the midst of the digital
camera evolution!

97. Life must have been
very tough for a digital
engineer at Leica.

98. Sales
Manufacturing
The Mechanical engineers
Purchasing
- Everyone must have been
against you.

99. All their routines and
competences would have to
change in order to succeed
with digital imaging.

100. Forgive me for speculating,
but I suppose most of these
actors cheered silently
when the S1 was killed.

101. At an old, traditional
company with a strong brand
and history in mechanical
engineering, electronics
must have been regarded as
an odd, foreign element.

102. Organizations are
very good at
eliminating foreign
elements. And Leica
was no exception.

104. In a disruptive shift

105. The Core competence

106. Becomes

107. A Core Incompetence

108. Leica’s soul was
mechanic and optic.

109. Not Digital.

110. Digital was odd.

111. Having laid off
virtually all
digital
knowledge,
Leica instead
focused further
on its strategy
of rebadging
Fujifilm digital
cameras.

112. The Digilux 4.3.
is identical to a
Fujifilm camera,
except for the
brand.

113. 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.

114. The success
of this
strategy was
very modest.

116. As the financial situation
worsened, Leica eventually
realized that something
new had to be done.

117. 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.

118. 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).

119. Having no digital
capabilities of its
own, this was
deemed to be a
good strategy.

121. But cameras with
digital backs are very
expensive and
uncomfortable.

122. After severe delays, the Leica
Digital-Modul-R was finally
launched two years later, in 2005.

123. 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).

124. 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."

125. 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.

126. Hence, the Digital-Modul-R did
not stop Leica from bleeding.

127. In early 2005, the situation
became desperate.

128. The company was now
bought by Andreas
Kaufmann, a long time
Leica enthusiast with a
great personal fortune.

129. Kaufmann recruited a
new CEO, an American
named Steven K. Lee.

132. Mr. Lee had a
background as vice
president of Best Buy, a
huge American retailer
of consumer
electronics.

133. Could someone with this
odd background save
Leica from bankruptcy?

134. 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.

135. The M8 cost about 5000 USD.

140. But the high price was
not the only problem.

141. 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.

142. Thus, the M8 was a
bad camera, at a bad
price, but with a
good brand.

143. Needless to say,
the Photo
community
laughed at it.

144. 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.

145. 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.

146. The M8 had to be
redrawn from the
market, retroactively
putting in the
required filters.

147. Quite an embarrassment for
a camera legend, known for
its high quality products.

148. So, why did Kaufmann
hire a strategy and
business development
guy from an American
retailer?

149. 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.”

150. Who had ever associated
Leica with terms such as
’American soccer-mum’?
Pretty different, and ODD.

151. In addition to this, Lee
wanted to do a couple of
pretty odd things:

152. 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

153. How all this was going to be
accomplished is not clear (and
certainly wasn’t to people at Leica)

154. 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).

155. A retailer making 20 percent
profit in the fiercely competitive
PC industry, building this from
scratch in 15 months???

156. It had been accomplished
through outsourcing of
production and clever
business modeling.

157. Probably Lee wanted to do
something similar with
Leica, and obviously he
knew what he was doing.

158. Lee was known for being
very stubborn and
aggressive, not afraid of
conflicts and bullying
people if necessary.

159. Imagine the cultural and
intellectual clash between
Steven Lee and a traditional,
old firm like Leica!

160. Lee about the first meeting:
“I arrived at 10 o’clock and we
went head-to-head for nine hours
straight. No meal breaks.”

161. The founder’s son, Ernst Leitz
had treated his employees like
his own family.

162. And now an American
thunders in, firing and
bullying people about
some strange soccer-
mum segment!

163. Lee went into Leica playing
hardball, personally approving
all expenses over 100 Euros.

164. He travelled to Asia, re-
negotiating prices with
suppliers of electronic
components.

165. He raised prices
significantly and
thus, sales fell.

166. 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.

167. 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’.

168. The situation got worse
when Lee fired three
employees (wrongfully
according to the courts)
and many highly skilled
technicians threatened to
leave in sympathy.

169. At a small company like Leica, this
kind of events can get pretty big.

170. Managers started to
complain to Kaufmann
who decided to fire
Steven Lee in early 2008.

172. Here are some
rumours and
comments on the
internet about the
event:

173. "Über diese Entlassung können wir uns auf
jeden Fall freuen."
=
"On that dismissal we can anyway be
delighted about"

174. 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

175. Rumours say that Champagne
bottles were opened at Leica
when Lee left the company.

176. Lee threatened to sue Leica for
wrongfully dismissing him.

177. "My mandate was not to
be Mr. Nice Guy“, he said.

178. “I was trying to revive a
company that's broken".

179. Lee claimed that accusations
against him was a smear campaign
from people who underperformed
and refused to change.

180. 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.

181. Kaufmann took over as CEO
and Leica has now
successfully launched a new
(working) version of the M8.

183. In September 2008, Leica
also launched the S2, a
fantastic camera with
37,5 Megapixels and
many great functions.

184. It’s priced at 15-20 000 USD.

185. Whether the S2 and the
new M8 will turn things
around for Leica or not
remains to be seen.

186. However, the camera
industry is subject to
fierce competition.

187. Canon, Nikon and the other
big Japanese dragons are
constantly launching new,
cheaper and better products.

188. Having a legendary brand is
of course an asset, but Leica
is less well known to the new
generation of photograpers.

189. We’ll see what happens.

192. Leica’s soul was and
is mechanic and optic.

193. Not Digital.

194. Throughout
the last
decades, this
has become
very clear for
the company.

195. 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.

196. And we’ll never know whether
Steven Lee and his ‘soccer-mum’
concept would have turned Leica
into a growth company.

197. But ONE
thing is clear.

198. Both the S1 and
Steven Lee were odd,
foreign elements in
an old organization,
with old values.

199. Leica was and is in
desperate need of
change, but the
organization
effectively repelled
these foreign
elements.

200. “It was difficult to do what we
wanted as the old
management still strongly
believed in analogue.”
// Gero Furchheim,
spokesman of Leica

201. This quote is
from October
2006!

202. At this point
about 90
percent of the
market is digital.

203. And old
management
still believed in
analogue
imaging!

204. It makes you
wonder…

205. How many layoffs,
delays, apologies
and how big losses
are needed before
those managers
CHANGE?

206. Chairman Mao
once said that
a revolution is
not a dinner
party. At
Leica, people
are painfully
aware of this.

208. Disruptive change is not a sweet thing
for established companies.
http://online.wsj.com/article/SB12215210338
7739231.html

209. So, the question we
looked at here was:
WHY do so many
companies like Leica
‘oversleep’
technological shifts?

210. I think the answer
would be this:

212. Competence
becomes
incompetence.

215. Sources
The British Journal of Photography
The Leica website
Amateur Photographer
Times
Wikipedia
Digital Photography Review
Several internet forums
Thanks!

216. Image attributions
Thanks!

218. Find out more:
www.christiansandstrom.org