Leica’s long journey from analog to digital

In 1925, the Leitz Company launched the first small-scale camera on the market, the brainchild of Oskar Barnack, the company’s technical director at the time. Barnack’s hobby was hiking and his passion was photography, but he was unhappy with his heavy photography equipment. By experimenting on his own with cuttings from cinematic roll film, he invented the first light-weight, compact, easy-to-use camera. Leitz management had the foresight and the entrepreneurial initiative to recognize the enormous potential of Barnack’s invention, and in short order the little Leica had replaced its clumsy glass-plate predecessors. Cameras became the flagship product line for the company, which was widely recognized for the distinctive expertise it had developed in mathematical calculations for lenses; the handling of highly sensitive lenses; lens grinding, polishing and coating; and building and manually assembling their famous cameras.  

In 1954, the Leica M debuted, a rangefinder camera equipped with an innovative bayonet mount and interchangeable lenses. The new product served as standard bearer for the company’s legendary brand, and quickly became the main source of revenue. But by the early 1960s, Japanese competitors started taking over the photography industry and Leica’s position of technical supremacy was gradually eroding. Companies like Canon, Nikon and Minolta were launching cutting-edge cameras that were easier to use, in particular single-lens reflex cameras, and entry level models offered that were more and more affordable. By the late 1970s, various electronic functionalities were introduced, such as automatic film transport and autofocus technology.  

But rather than exploring and adopting the new technical developments, Leica continued to bet on its renowned and consolidated mechanical camera legacy. In the mid-1980s, under growing financial pressure, the Leitz company (still a family firm) was bought out by Wild Heerbrugg, a Swiss instrument manufacturer. Since the core business of the new company was microscopes and measurement systems, the camera business was spun off into a separate organization. Leveraging its traditional strengths, the celebrated brand image, and an extremely loyal customer base, Leica Camera managed to maintain a small but lucrative market position. But this misleading sense of security was put to the test once again with the digital revolution, which exploded in the mid-1990s. The repercussions had the strongest impact on the low end of the camera segment, attracting new customers who never had the money or the skills to try photography before.  

Even though digital cameras were considered inferior quality products, in 1994 Leica decided to set up a unit dedicated to this emerging technology. This team quickly developed a prototype, which it proudly presented in 1996: the Leica S1 was a high-end digital scanner camera with remarkable image resolution. But the target was a niche market, so the S1 did not see immediate commercial success. Based on disappointing sales figures for this first digital product, and with the fear of damaging Leica’s reputation, intense internal opposition to digitalization led the company to abandon its innovation efforts in 1999. The decision was made to shut down the digital unit. 

In 2000 Hermès, the famous fashion house, acquired around a third of the company’s shares, becoming the major shareholder. Initially the new owners supported the policy of continuing to focus on analog, marketing Leica as a retro-chic luxury item. Beyond that, the product portfolio would be rounded out with some compact digital cameras manufactured in Japan, thanks to a strategic partnership with Panasonic. 

When in 2004 Kaufmann and Austrian Capital Management came on board, the situation had taken a turn for the worse. Seeing the need to take action, at an extraordinary shareholders meeting in mid-2005, Kaufmann and Hermès agreed to inject new capital. They also replaced the entire management team and set up a digital unit once again. Working closely with outside partners, this unit developed the Leica M8 digital and then the S2, equipping both models with brand new autofocus single-lens digital reflex technology, which finally met the standards of Leica’s reputation.  

Step by step, the company succeeded in building its digital competency and learned to couple it with its consolidated strengths (above all, the brand). The marketing strategy too was modified, positioning Leica as a producer of digital cameras made in Germany. With help and consulting from Hermès, a number of strategies were adopted to give the company a clearer market orientation and to reposition it as a global luxury brand. One example was adopting a selective distribution strategy by opening owned stylish boutiques and stores. In addition, as a response to the boom in smartphones (which were becoming the source of intense competition, especially in the low-end camera segment) and to shore up brand awareness further, Leica set up a strategic partnership with Huawei, the Chinese cell phone giant. In 2014, Leica moved its headquarters to new, state of the art facilities.  

Despite the rocky start in facing the changes and challenges of the digital revolution, the company successfully overcame initial inertia and the historic Leica brand successfully entered the digital age. This move was made possible thanks to wide-ranging organizational skills and targeted investments in several areas (technology, distribution, communication and marketing). Today Leica belongs to the club of the most prestigious German luxury brands. 

Responding to ever more rapid and radical technological change is a problem that countless organizational find themselves facing today. Since 2005, Leica’s management has skillfully conducted a technology strategy with astute innovation management, and organizational renewal.