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A Corporate Connotation

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This is sort of a metaphor. Like all metaphors it doesn’t fit quite perfectly. Like all metaphors, it does fit to some degree.

“Fortune passes everywhere.” Frank Herbert

Once upon a time there was an industry largely dominated by two companies. Their domination, over some 30 years, was so nearly complete that they became understandably a bit arrogant. After all, their products were the biggest, the best, and by far the most popular.

They made tiny differentiations to create lots of slightly different models. They took care to make sure the largest, highest profit models contained features that less profitable models did not have, even when these features cost little or nothing to add to the product. They created a culture of  built-in obsolescence and rapid replacement. On average, people replaced their product with a newer version every two years, which was wonderful for profits.

When there was little to actually differentiate their products from others, they used Fanboy marketing to create a feeling that special features had special status, even though all of their products did basically the same thing. Advertisements no longer presented facts regarding performance, as they once had. Now they used celebrity endorsements, or mood-and-attitude advertising, which claimed  happy, successful people used their products. And insinuated those people were more successful because of it.

Some signs that their dominance was ending began to show. Other companies began making smaller and less expensive products that performed the same basic function. The big companies found these amusing at first, but when the smaller, less expensive products began to take market share during a recession they took notice and began to make such products themselves.

However, they wanted to be absolutely certain their smaller products didn’t take market share from their bigger products and carefully engineered them to avoid ‘big product’ features.

Not surprisingly, the smaller companies continued to take market share. “That’s a low margin business,” the larger companies then said, “we make our money on the biggest, full-featured products.” The bigger companies forgot, though, that younger people were the ones buying those less expensive products, and younger people soon become older people with more money. And a new brand loyalty.

They also didn’t seem to notice that while those little products were low profit for them, the other companies seemed to be making them profitably.

Soon the smaller companies were building products with a feature set that was every bit as good as the big companies. The big companies found they could maintain market share, although they had to give discounts and reduce margin to do so. After a while, even discounts did no more than let them maintain their production levels, while other companies began taking market share.

As profit margins dropped, the big companies took actions. They tried to monopolize repair service and make it a profit center to regain the margins they lost by selling their major products at a breakeven point. Since cost cutting had reduced quality assurance, creating more repairs, this seemed like a great idea, at least in the short term. Plus, handling all repairs meant they could limit critiques of their declining quality control.

The smaller companies took note and began marketing their greater reliability and offering clearly superior customer support and warranties. Soon, even fans of the big companies realized they’d be treated better and have fewer problems buying elsewhere. The small companies, whose products had once been considered inexpensive but poorly made, soon were considered to be of higher quality and trouble free.

Even as the big companies became dependent on discounts and rebates to move their products, the smaller companies raised prices and margins. People were more than willing to pay them, since their quality control, customer service and warranties were better and their features seemed at least equal. Now it was the smaller companies that were profitable and the big companies that were losing money.

As time passed, the big companies, while still big, were not considered leaders in technology or quality anymore. They depended largely on consumer inertia; that their Fanboys would remain their Fanboys, buy their product and tell others how great it was. Whether it was or not.

Eventually, though, the inevitable happened. The big companies declared bankruptcy (at least one of them did – as Colin pointed out in the comments), asked for bailouts, and had to reinvent themselves in a different way.

The two companies I speak of are, of course, General Motors and Ford.

 

Roger Cicala

Lensrentals.com

December 2012

37 Responses to “A Corporate Connotation”

wies said:

Great ! :)

Colin said:

Roger Love everything you write about camera stuff. I live in Michigan so “Buy American” has been crammed down my throat, but I still buy what car I want to. I am all about bashing companies that make bad decisions but I feel the need to correct you that Ford did not declare bankruptcy. I believe you are referring to Chrysler though.

Bob said:

Roger, this is pure genius. Had me right to the end. Well done.

Edward said:

thus the Cadillac Cimarron er EOS-M

Michael Durham said:

Classic disruptive innovation. One would think that with the writing on the walls of history, Canon and Nikon would begin to change their approach to the biz. They appear to be getting more insular instead.

Adarsha said:

Awesome read Roger.. Lets hope history will not repeat itself in a different industry. And those anonymous companies would learn their lessons in time.

LensRentals Employee

Roger Cicala said:

Pertinent point, Colin. Ford did have good cash reserves.

Roger

Lizbeth said:

What Adarsha said, but history will repeat for the most part since those who will likely to become corporate decision-makers during the times of change are the ones who worked their way up the corporate ladder during the company’s heyday; groomed to run the company in a well-insulated environment and made to believe their superiority, they will be the last to sense the change.

I belong to the generation with a new brand loyalty, but even some of those brands that I have embraced have slipped to the wayside or in the process of losing (think Dell, Sony, Toyota…).

I_love_my_800E said:

“They tried to monopolize repair service and make it a profit center to regain the margins they lost by selling their major products at a breakeven point.” – You are reminding me of some company stopped selling parts to independent service centers ;) .

Sadly, the said company still make the very best products, bad QA aside. And all their lenses with a gold ring are still selling for far higher than the break even point, even though any kind of major repair would cost 1/4 to 1/3 of the lens nowadays.

LensRentals Employee

Roger Cicala said:

800E – the automakers got taken to a large degree by ‘right to repair’ laws. Doesn’t seem that’s going to affect electronics (camera makers aren’t the only ones doing it).

Seth Meyers said:

Read this and think Apple and Microsoft. Creepily accurate, huh?

Ben said:

Utterly Brilliant Roger!

John said:

I look forward to the Toyotas and Hondas of the camera world to take over one day. I have a DSLR and mirrorless and would switch completely to mirrorless, but right now good mirrorless lenses are overpriced. The Japanese auto makers won by offering higher value for similar or lower prices and I don’t see that happening with mirrorless yet. Maybe when Apple (or Samsung wholeheartedly) jumps into the game, things will get interesting.

JoeC said:

How is this creepily accurate for Microsoft and Apple? Both companies have remained profitable (except for the most recent quarter for MS), neither received bailouts, nor are they being challenged by upstarts (I guess you could think of Android that way, but that’s only in the mobile space, and I’m not sure that Google’s making much money off of it, though I could be wrong).

PBJames said:

Yep, Nikon and Canon definitely need to open their eyes, get with the times, and stop abusing their existing loyal customers. I know I have no interest in spending a dime with Nikon’s repair department. I will change systems before giving in to their new scheme. No product, no matter how good, is worth dealing with terrible customer service while being overcharged for said service to boot! Customers having to spend weeks without their equipment, pay for shipping both ways, and pay $150 or more for a tech to “install” a port cover, screw, or battery door? Insane.

jra said:

Reminds me, in the military the saying goes, generals are always fighting the previous war. It may take a long time for the lesson to sink in, sometimes it never does.

Paying attention to reality, what customers are actually willing to buy, is the key to sucess. Yet remarkably, so often it seems to be the hardest thing to do.

We humans are a curious species.

David Hamments said:

Excellent article as always Roger! I always enjoy reading your perspective on the industry….. FYI, and I hope I’m not being too picky here, but your 4th to last paragraph, last sentence reads “Now it was the smaller companies that were profitable and the big companies that were loosing money.” I believe the correct word is losing, not loosing.

Cheers!
D. Hamments

Pyrat said:

Sadly, this appears to be more “corporate nature” than anything. As I read this I was relating to Xerox and Kodak and their former oligopoly of the large high volume copier business – which went the same way Kodak and Fuji’s oligopoly film business went, which went the same way GM and Ford went, which…..

Vaibhav said:

Roger,

A further clarification on Colin’s comments. In 2006, GM was sitting on $25B cash after rounds of restructuring and labor negotiations when Ford was mortgaging everything right up to Bill Ford’s underwear. In 2008, when economy nosediving hurt every industry, GM’s cashflow stopped, lenders became extinct and bailout was the only option. Does not exonerate GM, but Ford was nothing good either, just time on its side to save Alan Mullaly’s rear. And yes Ford did also get $6B in “Govt loans” for tooling and restructuring and development of environmentally friendly vehicles during that time.

Nevertheless, an excellent article to be an eye opener for C and N. None of their current products are invigorating value and emotional confidence in customers.

Jack said:

Too much success breeds arrogance. It looks to me that Nikon in Japan, in particular, is following GM & Chrysler blueprint for success : -( Refusing to admit the problem, refusing to sell parts and service which is a bad joke. Nikon execs must know the Wall St. mantra “Too big to fail” and believe it.
At least Canon support and quality are still acceptable although they were left in the silicon dust with the sensor technology.

Unfortunately, the product quality has gone down in general.
I just tested E-5 and many lenses, all made in China, and getting a good lens is a lottery.

The next candidate in the USA is Apple for certain.
BTW, you can’t get the Mac OS update on the DVD or memory stick. You have to go to their store to d/load it. This is Apple’s perception of the customer support – mainly incompetent staff at the phone somewhere in India.

Great reading as usual. Thanks.

LensRentals Employee

Roger Cicala said:

thank you David. Fixed it :-)

V. Long said:

Roger,

Such a beautifully written piece. I have been an admirer for sometimes. But still, it should be remembered that Canon and Nikon with Sigma, Sony and Tamron are all Japanese companies. They are all sharing a root, a culture, they are likely sharing the same mode of organization and innovation (just-in-time inventory, for example). So I don’t see the dramatic taking over in digital imaging space as in the case of Japanese car makers taking over American ones.

It seems to me, they are all like brothers and at a certain point in history, some litter ones are growing up meanwhile some older one are slacking given the past victories. The litter have made credible threats, and after sometimes the older ones will have to wake up, and even imitating what their brothers are doing. They can do that because after all they are family and sharing the root.
In the end, the field will be more competitive and balanced but the family hierarchy will likely be unchanged. Big brothers are always big brothers :)

Tony said:

All throughout this year the DSLR giants been reminding me of all the innovation and sound quality improvement that occurred in vinyl records and turntables when CDs had been on the market for about a year. It was the golden age of analog record technology. But it was not the golden age of their business results.

Scary.

Nqina Dlamini said:

Had me till the last paragraph. Great read.

Dr Croubie said:

Ah, but I can’t sell my Ford Falcon, because the seats and tyres and steering wheel won’t fit on any other brand of car (although a lot of other branded seats fit in my Falcon, I’ve got some classic 60s accessories and some stuff made for larger trucks that all sit perfectly well on my Falcon).

It’s too bad that no other brand can make a smaller, more efficient car that will take my Ford wheels with an axle-adapter (there’s something about the brakes are electronic, so if I want to be able to brake I’ll have to set the brakes up on my Falcon, take the wheels off, then attach it to a smaller car).

I’m interested in that new Ford Festiva, it can take the same tyres as my Falcon, but they have to bolt onto the axle with this huge hunk of metal wider than the car itself, then the tyres stick out past the side of the chassis and the car is totally unbalanced and horrible to handle (not to mention it’s just ugly and a crappy slow car with a smaller windscreen), I may as well keep driving my Falcon.
I’d be interested in the Festiva in a few years, once the windscreen’s big enough and they make the body bigger and easier to handle (but still faster and more efficient).
(or maybe in a few years I’ll just sell everything with the Ford name on it and move to a Nissan Leaf. They’re expensive for what they are now, but they’re definitely the future, once everyone wakes up to it and starts competing).

Until that happens, my money’s going on classic cars, lots of accessories from the 60s and 70s, I’ve got some square-looking East German trucks and Soviet Tanks (I wish I could afford those nice Swedish trucks), and a big but more rectangular-looking Japanese mini-truck.
but my favourite of all, I’ve just got a small zippy Japanese mini. It took its name from a classic German car brand, and it can share parts with some other small German/Canadian mini cars. No windscreen so you can’t even see where you’re pointing, but man it’s fun to drive around the Streets…

Raimo K said:

Leitz and Zeiss… Kodak and Fuji,
The whole British car (and motorcycle) industry…

Arturo V Ramos said:

….will be waiting for your comparison/s between a D4 fps and your TB15 nps (nail per second ) – take care.

Kevin Morrison said:

Ummm… read Hitchhikers guide to the galaxy recently? Your prose is looking very Douglas Adams like.

chris nichols said:

I appreciate that it might take some courage for a lens rental company to taking an “all-in-fun” indirect jab at, uh, the 2 big automakers. As an enthusiast who sold all his canon equipment to own the two best M4/3′s cameras and lenses, I really experienced what it was like to move away from, uh, General Motors.

btw, LensRentals has been instrumental in me getting to try out those cameras and lenses to make decisions to buy or not.

Esa Tuunanen said:

Michael Durham said:
“One would think that with the writing on the walls of history, Canon and Nikon would begin to change their approach to the biz. They appear to be getting more insular instead.”

That’s why for years they’ve been mobilizing any brainwashed they can to keep telling that Four Thirds sensor is too small for serious photography and recently to repeat the gospel of Fully Fallacious “FF” being the only way to better photos…
While that format stuck only because it was the smallest film era format giving good enough noise and resolution performance for most uses and wasn’t even result of any research but was adapted from existing film used by movie industry.

When you look at how Canon and Nikon made “digital” DSLR systems they simply took film SLR, removed film roll and slapped digital sensor in place.
Semiconductor manufacturing of the time just would have made legacy 35mm/135 sensor extremely expensive (and will always stay as expensive) so they took failed film era format of APS-C which had tried to give smaller system.

That’s how innovative “digital age” systems are dominating system cameras.
Heck, even Henry Ford didn’t do 1:1 carbon copy of horse wagon when revolutionizing personal transportation but looked what features fit with new technology…
Whose advances further moved car farther from horse wagon’s design.

But now it’s time to get some sleep before more technical philosophizing.

Daniel said:

Briliant!

simon said:

wooow not beeing american I don’t know much about the american automobile industry and I was thinking “how is this a metaphor when you are with no doubt talking about nikon and canon” even the monopolized repair thing fits perfectly. luckily for nikon they still have great performing cameras and canon seems to at least improve everything but the sensors.

Vic said:

The disruptive technology is the camera phone. Apple, Panasonic, Samsung, HTC, Motorola, Sony, and Nokia are all in the camera business now.

Steve Buckley said:

I’m late to the party
Roger…but thanks…..now, turn your writers eye towards Adobe…and while your looking at it, help me find the sleeping Photoshop Elements Giant
Have a wonderful Christmas.
Steve B.

Chuck Runick said:

You forgot Chrysler. They filed bankruptcy under Lee Iacocca back many years ago. They also reinvented themselves. They are still in business today.

David said:

Great article that makes you look into all elements of consumerism.
I agree with what Jack said above. But like to add my thoughts
Nikon and Canon will most likely be replaced by Sony and Panasonic. Both Sony and Panasonic are the current Video giants, and the shift for video in Cameras my solidify their presences. We will see if the video world gets shaken up with Go pro and Red (although looking bad) or anyone else.
Olympus might just merge with Sony or Panasonic as looks to be the case.

For operation systems, I find my self really wanting a Laptop that’s running Android instead of the bad looking Win8. I have always hated Mac OS. Really Win 8 is like Android in that you need to reference everything with a live (hotmail) account. I also work with Linux (fedora) but Android I think has future promise.

For editors I see Adobe being hit with current Capture One and DXO. Also I think the up and coming Topaz will have a huge hit, once they work out their Raw developer. They seemed to fix Adobe faults with plugins, I think they have chance to take over if the freeware Gimp, Raw therapee and UFRaw don’t do it first.

Those are some of my thoughts, but you can also see it my job with microscopes. Zeiss and Leica are kings, Nikon is failing, Olympus is coming back with SIM and the small really small guys are moving in with very cheap all in one solutions.

Patrick said:

@Jack:
Actually, Apple doesn’t care if you interact with their crappy customer service in India… The reason they want you to go into the store to download the update is so they can put you in a perfect position for them to sell you more overpriced technology!

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