What happened to the legendary company Hasselblad in the shift to digital photography.

1. Hasselblad – from the Moon
to Surviving Digital Imaging

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

3. 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.

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

9. 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.

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

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

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

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

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

32. Flyttade in här 2003
Photos: www.jornmark.se

33. Two years later, the
building is empty!

34. Invigt av hans majestät

35. Titanic sails on…

36. Två år senare…

38. … är byggnaden tom!

39. What happened?

40. This happened.
30
25
20
15
10
5
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Number of film and digital cameras sold in the
United States (guess which one is digital!)

41. And this followed…
Bottom line for Hasselblad (MSEK)

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

44. HOW?
WHY?
WHAT CAN WE
LEARN?

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

49. I have been reading a lot…

51. I have been digging…

53. And I have talked to
a lot of people.

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

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

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

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

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

59. “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

60. 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.

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

63. 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.

64. The Dixel looked like this.

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

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

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

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

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

76. This sounds promising…

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

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

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

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

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

83. It looked like this.

84. Yes, big and bulky.

85. 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.

86. 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.

87. Digital
imaging had
other
attributes
which made
it attractive.

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

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

90. The performance was good enough
for some applications.

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

92. 6 million pixel resolution is
good enough for most
applications. The
perception of colour is
more important than the
perception of sharpness.
Kodak, 1996

93. Now the question was how
Hasselblad should handle
these changes…

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

95. 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.

96. 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.

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

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

99. 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.

100. 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.

101. 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.

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

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

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

105. 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.

106. This work started in 1994.

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

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

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

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

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

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

114. 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.

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

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

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

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

120. 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.

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

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

123. ”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

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

125. 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.

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

127. Here are two comments
about it:

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

129. ”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.”

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

131. 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

132. ”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.

133. 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)

134. 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…

135. 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.

136. 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.

137. 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.

138. At the same time, digital
cameras from Canon and Nikon
started to take market shares
from Hasselblad.
30
25
20
15
10
5
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

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

141. 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.

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

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

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

145. 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.

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

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

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

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

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

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

152. 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.

154. 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.”

155. 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.

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

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

158. 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.

159. 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.

160. 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.

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

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

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

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

168. Luxury apartments nowadays.

170. And the ’new’ building
that was abandonded?

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

175. Read more about Hasselblad Electronic Imaging here:
http://www.slideshare.net/Christiansandstrom/hasselblad-
electronic-imaging

177. Find out more:
www.christiansandstrom.org