Hasselblad and the Shift to Digital Imaging
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[3B2-9] man2011030011.3d 21/7/011 16:41 Page 2 Hasselblad and the Shift to Digital Imaging Christian Sandstro¨m Chalmers University of Technology Throughout the 1980s and 1990s, the high-end Swedish camera manufacturer Hasselblad struggled to integrate its product lines with emerging digital imaging technology. Hasselblad’s history illustrates how digital technology emerges in various high-end niche applications and later enters the mainstream markets and displaces incumbents. The Hasselblad case exemplifies how incumbent firms encounter difficulties when such technologies render their skills and products obsolete. In 1977, Intel’s cofounder Robert C. Noyce silver-halide photography to digital imag- called attention to the rapidly increasing ing. Several established firms have either use of digital technology in many industries. encountered severe problems or gone out Although he argued that this trend would of business completely.3 create a lot of entrepreneurial opportunities, This article describes how Hasselblad, a Noyce also suggested that established firms small Swedish manufacturer of high-end would encounter major difficulties once cameras, tried to nurture and develop digital their products were replaced by the new photography from the early 1980s onward. It technology: provides a good illustration of how digital technology emerges in various high-end Time and time again the rapid growth of the niche applications and how it later enters market has found existing companies too the mainstream markets and displaces busy expanding markets or product lines to incumbents. In doing so, this work contrib- which they were already committed to ex- utes to the literature on disruptive innova- plore some of the more speculative new mar- tion and to our understanding of how 1 kets or technologies. industries are digitized. Pointing to how mechanical calculators Technological Discontinuities and watches were forced out of the market and Digital Technology in the 1970s, Noyce argued that more such It is well documented today that established, displacements would happen in the future successful firms often get into trouble under because digital technology would provide conditions of discontinuous technological better performance at lower costs over time. change.4 Several scholars have sought to In retrospect, it is striking how accurate explain what is sometimes referred to as Noyce’s prediction turned out to be. In indus- ‘‘the incumbent’s curse’’ by looking at the try after industry, digital technology has dis- supply-side and firm capabilities.5 For in- rupted the former technology and created stance, Michael Tushman and Philip Ander- countless problems for established and son wrote about competence-enhancing and highly profitable firms. Since Noyce’s article competence-destroying technologies. They was written, products such as telephones, argued that the technologies that render the music players, television screens, movie cam- technological skills of established firms obso- eras, and gaming machines have become dig- lete tend to create major difficulties.6 Draw- ital. With few exceptions, these shifts have ing upon a case study of how Polaroid implied major difficulties for incumbent sought to handle the shift to digital imaging, firms.2 Over the last decade, the camera in- Mary Tripsas and Giovanni Gavetti pointed dustry has been subject to precisely this out that cognitive barriers among managers kind of turmoil because of the shift from prevented the firm from commercializing 2 IEEE Annals of the History of Computing Published by the IEEE Computer Society 1058-6180/11/$26.00 c 2011 IEEE [3B2-9] man2011030011.3d 21/7/011 16:41 Page 3 the new technology.3 In another article, Trip- mass market for transistor radios, and as the sas studied the typesetter industry and sound quality improved over time, this tech- argued that only a firm’s technological com- nology eventually displaced analog radios petences matter. The impact on firm-specific and established firms like RCA. complementary assets—assets that were Clearly, Christensen’s notions of sustain- not directly related to the technology but ing and disruptive technologies have shed helped the firm sustain its competitive new light on how discontinuities happen. advantage—also played a key role in a tech- However, it is still a bit unclear how this nological shift. framework fits with the nature of digital tech- In a series of articles from the mid-1990s, nology. The dynamics of digitization have Clayton Christensen shifted the focus away often been described in terms of a rapid in- from supply-side-related factors to look at crease in performance along with declining the impact a new technology has on the mar- prices. For instance, Intel’s other cofounder ket. Drawing on evidence from the disk-drive Gordon Moore predicted in 1965 that the industry, he argued that the technologies amount of transistors that could be crammed that were not initially demanded by a firm’s onto an integrated circuit would double existing customers were particularly difficult every 18-month period.9 Often referred to to handle.7 Each new generation of smaller as Moore’s law, this prediction can be thought disk drives offered lower performance in of as a description of the rapid development terms of storage capacity and therefore of digital technology. started to prosper in lower segments or in Although digital technology has often new markets. The incumbents struggled to brought some ancillary attributes to the mar- find a financial logic in entering an inferior ket, it has usually, as Moore’s law would sug- technology that grew in a small, low-end gest, started off with poor performance and a niche of the market. As the performance high price. Consequently, in many cases it improved, it eventually displaced the former has initially prospered in advanced segments disk drives and the established firms who that are not sensitive to prices, such as in mil- were misled by existing customers. Christen- itary or scientific applications.10 Therefore, it sen labeled those technologies that were is unclear in what way Christensen’s frame- cheaper, with initially lower traditional per- work, which focused on low-end applica- formance and some new attributes, as disrup- tions, is compatible with the economics tive. The technologies that kept satisfying a of digital technology. Christensen showed firm’s existing customers were referred to as how the disk-drive manufacturers were dis- sustaining. His book The Innovator’s Dilemma placed when entrants introduced smaller showed that incumbents tend to win sustain- drives, targeted low-end segments, moved ing battles whereas entrant firms are better at up in the market, and removed incumbents. introducing disruptive technologies because Thus, it is unapparent whether this pattern they are not held captive by an established is compatible with digital technology’s customer base.7 growth. By studying how and why digital Digital technology has often exhibited dis- imaging emerged in Hasselblad’s segment, ruptive characteristics. Although frequently I argue that digital technology is substan- starting off with inferior traditional perfor- tially consistent with the notion of disruptive mance while bringing new attributes to the technology, albeit in a way that differs from market, the rapid paceofdevelopmentin what has been previously suggested. digital technology makes it attractive for mainstream customers. It then displaces the Hasselblad and Early Digital Cameras former technology. For instance, Christensen Hasselblad became a dominant player in the and Michael Raynor used the transistor radio medium-format segment of the camera in- as an illustrative example of this pattern.8 dustry after WWII. This small segment of Compared to analog radios, it had a poorer the camera market used larger film than the sound quality, but it brought some new normal 24 Â 36-mm format and was aimed attributes to the market, such as a lower at professional photographers with high price and portability. Therefore, it prospered demands on image quality. One reason for among teenagers who previously could not Hasselblad’s dominance was that its cameras afford a radio. This customer segment appre- were compatible with a range of lenses man- ciated the portability and did not bother ufactured by Carl Zeiss, film magazines, and about the lower sound quality. In the other accessories used by photographers. 1950s, entrant firms such as Sony created a Hence, a photographer who used a Hasselblad July–September 2011 3 [3B2-9] man2011030011.3d 21/7/011 16:41 Page 4 Hasselblad and the Shift to Digital Imaging camera had great flexibility. But Hasselblad and the person behind the Mavica project. did not develop these products. It soon became clear to me that the technol- The company became world famous in ogy had so many drawbacks and limitations 1969 when Neil Armstrong took the first that it would not become a commercial photos on the moon with a Hasselblad cam- success.’’ era. During the 1980s, the firm had about After consulting Hasselblad’s R&D man- 500 employees and an annual turnover of ager, Lennart Sta˚lfors, O¨ ster concluded that approximately 600 million Swedish Krona several technological breakthroughs were (MSEK). The company showed relatively needed before the Mavica concept could high profitability in these years, delivering threaten analog photography. O¨ ster and annualprofitsof50to60MSEK.However, Sta˚lfors also agreed that digital imaging had the medium-format segment decreased a future and that the company ought to by approximately 40 percent from 1981 learnmoreaboutthenewtechnology.12 to 1985, mainly as small-format cameras Hasselblad’s attitude toward digital imaging improved.11 Despite this reduction, Hassel- in the early 1980s is well captured by this blad managed to sustain its revenues and comment from O¨ ster: profits in these years, mainly thanks to its strong brand. Even though I did not believe in the Mavica The camera industry had reached a ma- concept, I was convinced that the photo chemical film would in the future be subject ture phase toward the late 1970s.