Hasselblad – from the Moon to Surviving Digital Imaging

It is not an exaggeration to say that Hasselblad is a camera legend. The brand reached an iconic status after the camera was used to take the first photos of man on the moon.

(Photo taken at the Nasa space center in Huntsville, Alabama)

The single lens reflex camera launched in 1952 was a landmark event in the history of photography. The 1000F provided a unique combination of photo quality, portability and compatibility.

The Hasselblad cameras soon became cult products and received global recognition.

In Gothenburg, Sweden, Victor Hasselblad built his company and expanded the business in the 1950-70s.

Headquartered in central Gothenburg near the opera, Hasselblad became a source of pride for the city.

A statue of Victor has been placed in the city centre in order to honour his accomplishments.

In 2003, the company moved to a new building in the city centre…

Flyttade in här 2003 Photos: www.jornmark.se

Two years later, the building is empty!

Invigt av hans majestät

Titanic sails on…

Två år senare…

… är byggnaden tom!

What happened?

This happened. Number of film and digital cameras sold in the United States (guess which one is digital!)

Bottom line for Hasselblad (MSEK) And this followed…

Hasselblad went from 400 to 70 employees within a few years and faced bankruptcy due to the shift to digital imaging.

HOW? WHY? WHAT CAN WE LEARN?

These questions compelled me to write a PhD and find out what actually happened to Hasselblad.

I have been reading a lot…

I have been digging…

And I have talked to a lot of people.

I can’t tell the full story right here and right now, but I will give you a glimpse of it in this presentation…

So let’s go back to the early days of digital imaging and look at how Hasselblad handled this threat.

In 1981, the industry was shaken when SONY launched their Mavica, a camera that used floppy discs instead of film.

In Japan it was referred to as ’the Mavica shock’.

At Hasselblad, people were also shocked. But how to respond?

“Even though I did not believe in the Mavica concept, I was convinced that the photo chemical film would in the future be subject to serious competition from electronical photography and would eventually be substituted by this technology” //CEO Jerry Öster, 1991

Given the poor performance of these first products, Öster decided that Hasselblad should not develop digital cameras at this early point but instead learn more about digital imaging by developing other applications.

These efforts resulted in the Dixel, a tele-photo transmitter which could digitize film and send it to other places.

A working prototype was launched during the 1984 Olympics in LA. It became an immediate success since photographers could send their photos home much faster and meet deadlines.

The Dixel looked like this.

Based upon this success, the subsidiary Hasselblad Electronic Imaging was founded.

This business grew rapidly in the 1980s. More products related to the handling of digital images were launched.

Only three years after the launch of this subsidiary, it had reached break even.

In 1989, 25 percent of Hasselblad’s profit came from Electronic Imaging.

Thus, the company not only obtained new knowledge about digital imaging, but also made good money out of doing so.

This sounds promising…

However, after a few more years of great profits Nikon entered this industry and outperformed Hasselblad.

Thus, Hasselblad Electronic Imaging reached a dead end in 1992-93.

At the same time, some considerable improvements were made in digital photography.

Some of the first digital imaging technology came from Leaf Systems.

In the early 1990s they produced digital backs, which could be attached to Hasselblad cameras instead of film.

It looked like this.

Yes, big and bulky.

The first digital backs were expensive and had a moderate performance. The first one by Leaf had 4 Megapixels and Kodak launched one with 6 Mpixels.

But the business utility was great. Many film photos were digitized sooner or later anyway. With a digital back, one step in the production of photos could be removed.

Digital imaging had other attributes which made it attractive.

An infinite amount of photos could be taken and then be replicated, manipulated and sent, at a very low cost.

So the business utility of a digital back which cost maybe 30 000 dollars was still big.

The performance was good enough for some applications.

”The quality of high-end digital studio cameras is good enough to replace film for most catalog and magazine needs.” MacWEEK 94-05-13

6 million pixel resolution is good enough for most applications. The perception of colour is more important than the perception of sharpness. Kodak, 1996

Now the question was how Hasselblad should handle these changes…

The tele-photo products were dead and the shift to digital imaging was still far away into the future.

In the early 1990s management at Hasselblad thought that the shift would occur somewhere around 2003-05, which turned out to be a very accurate prediction.

Jerry Öster left the position as CEO in 1993. Before doing so, he underlined that the long term survival of the company may depend upon how much Hasselblad invests in digital imaging.

By that time, Incentive bought Hasselblad and withdrew the company from the stock exchange.

Incentive listened to what Öster said and started to look for a new CEO who could bring Hasselblad into the digital era.

They found the right competence for this in Staffan Junel, who had a background at Ericsson among other companies and was a devoted amateur photographer.

Under the leadership of Junel, digital photography was brought into the parent company. This division initially worked with little resources and sought to explore the field of digital imaging.

However, after some initial exploration, the electronic engineers thought that the company should start to develop commercial products due to the rapid development in the area of image sensors.

Junel asked the owner for resources and Incentive approved this investment.

The electronic engineers thought that digital imaging could be nursed in the segment of studio photography.

These customers took a lot of photos and were going to digitize them sooner or later, for instance for catalogue production.

Therefore they were maybe willing to trade off some image quality in order to get the opportunity to take an infinite amount of photos at no cost and being able to send, manipulate and replicate images.

This work started in 1994.

At a small company like Hasselblad, there was little room for expensive R&D projects.

Hence, the analogue development projects were starved of resources due to the investment in digital imaging.

At this point, Hasselblad had essentially made incremental improvements of the same system for about 40 years.

Take a look at the product launches to the right. Hasselblad basically sustained the same system for many decades.

The company actually needed to develop a new analogue camera system at this point, but postponed this decision.

As a consequence, the relationship between the analogue and digital departments became increasingly strained in these years.

Hasselblad was essentially a mechanical company and thus, the electronic engineers were often regarded as odd, since their competence and ideas about the company were different.

A digital camera prototype was almost ready in 1996, when Incentive sold Hasselblad to UBS Capital, the private equity branch of UBS.

Before doing so, Incentive took the 200 MSEK of cash that Hasselblad had saved over the years in order to pursue development projects.

UBS bought Hasselblad with some cash and a loan from another bank. This loan was now brought into Hasselblad.

Within a few years, Hasselblad went from being over-capitalized into being under-capitalized.

UBS intended to do a ’leveraged buyout’, i.e. obtaining a high return on investment by using borrowed money that would be paid back once the company is be sold.

Moreover, UBS declared a short term scope of ownership of about 3-7 years.

This new owner was now going to decide what should be done with the digital studio camera project.

”Our purpose is to become more market oriented. So far, we have been a technology driven company. We must develop products which are interesting for the market” // Göran Diedrichs, chairman (UBS) Source: Göteborgs-Posten, 1997-04-10

The new board became very sceptical when they got to see the prototype.

A lot can be said about this big studio camera which stood on a tripod and looked more like a computer than a classic Hasselblad camera.

One thing is obvious: it was something very different from what Hasselblad had offered previously.

Here are two comments about it:

”It was gigantic and did not even look like a camera.”

”Those who understood the niche for digital technology saw its advantages and that the camera had a great potential. But the board related it to the analog one and therefore dismissed it.”

Here are a couple of quotes which try to explain and defend killing the digital studio camera project.

Göran Diedrichs says that Hasselblad will continue developing film based technology. ”The digital technology is still in its infancy. When it has been further developed we will of course move into it and then we need to have a strong financial position.” Source: Göteborgs-Posten, 1997-04-10

”The costly development of a digital camera has been sold… Thus the optimal digital camera will have to be developed by someone else. Thereby the company saves 15-18 million SEK… that can be invested into conventional cameras and then adapt them to digital technology. //DI, januari 1998.

And the digital guys at Hasselblad: “If the chemical waste from film processing could be turned into beer – film would have a bright future!” (1997, found in internal documents)

By 1998, all digital competence except for two persons had been fired. The company was severely under-capitalized at this point and a technological revolution was lurking a few years ahead…

At this point it became clear to UBS that Hasselblad needed to develop a new camera system instead of making minor changes of their established products.

This project started in 1998 and Hasselblad started to collaborate with Fuji in 1999. The purpose was to develop a hybrid camera – one which uses film and is compatible with digital backs from other companies.

The project was huge, very complex and absolutely necessary for the survival of the company. Deadlines could not be met and the it took much more time than anticipated.

At the same time, digital cameras from Canon and Nikon started to take market shares from Hasselblad.

Within a only a few years, Hasselblad lost the entire segment of wedding photography to Canon and Nikon.

In many countries, Hasselblad used to be associated with weddings in the same way as the flowers and the ring. This changed with the shift to digital imaging.

Bottom line for Hasselblad (MSEK) Revenues were now decreasing at a furious pace.

The new camera system, the H1 – was eventually launched in 2003.

It was four years late. A fantastic, but not digital system. 100 000 SEK more expensive than Canon’s competing product.

In order to make this system fully digital, the customer had to buy a digital back from someone else, which cost about 100 000 SEK. Thus, Hasselblad could not deliver their own digital system at a point when everyone wanted digital cameras.

”When the H1 finally arrived it was a fantastic camera, but that did not matter, since everyone had gone digital by then.”

Therefore, the H1 did not become the success that had been expected.

UBS now sold Hasselblad to Shriro, whom had to pour a lot of money into this bleeding company.

In november 2004, 50 percent of the company was fired and only about 70 people were left after all these layoffs.

It now became clear to the new owner that a merger with a manufacturer of digital backs had to be made.

Hasselblad and Imacon, a Danish manufacturer of digital backs now became one company under the Hasselblad name.

In 2005, the company could finally deliver a complete digital camera system and eventually survived the shift to digital imaging after a long and risky adventure.

Some frustration: ”When I started at Hasselblad my wife thought that we should buy a digital camera, I said ’wait, Hasselblad will soon have one ready, then we’ll buy it’. 8 years later I left Hasselblad, the first thing I did was to go and buy a Canon.”

Since then, Hasselblad has made profits, but I don’t believe that the company has yet paid back what Shriro had to pour into Hasselblad when it was bleeding.

I think the story illustrates a couple of important lessons related to disruptive innovation and technology management.

1. The competition for resources in the early 1990s was very harmful for the company. Maybe digital development should have been more separated?

2. The success of Hasselblad Electronic Imaging illustrates the importance of finding a nursing market for the new technology. Here, the company could learn more and make money at the same time.

3. Just like all other companies in the medium format segment – Hasselblad failed to develop their own digital backs. The most likely reason for this is that the firm’s competence base was primarily related to mechanics and not electronics.

4. Ownership changes and in particular to those which have a short investment horizon create a strategic inconsistency that may augment the difficulties related to disruptive innovation.

There are many more things that can and should be said about what happened to Hasselblad, but I leave it here, for now.

Sources Internal documents from 1980-1994 Annual reports About 100 hours of interviews A big thank you!

Image attributions Photos on slides 17-23 come from www.jornmark.se Photos on slides 50-60 have been taken by Lennart Stålfors. Thanks!

By the way, what happened to the old building where Hasselblad used to be?

Luxury apartments nowadays.

And the ’new’ building that was abandonded?

The national Swedish Television and Radio are now using the building.

Read more about Hasselblad Electronic Imaging here.

Christian Sandström is a PhD student at Chalmers University of Technology in Gothenburg, Sweden. He writes and speaks about disruptive innovation and technological change. www.christiansandstrom.org christian.sandstrom@chalmers.se