So Why did Olympus Fail?

In ten years of operation, nine years of losses seems like a failure to me, so what really happened at Olympus that is leading to them now divesting the Imaging group?

As with a lot of the camera companies, Olympus got very vested in compact cameras in the late 90's and early 00's. At one point, Olympus had the third leading market share in digital cameras due to an onslaught of models, many of which were quite good for the time. Those Olympus compacts were certainly successful and profitable at that point.

In 2003, the Olympus E-1 introduced us to the 4/3 DSLR, which had been hinted at for two years. I got a lot of grief from others for writing at the time that Olympus had brought a knife to a gun fight (i.e. a small sensor to a larger sensor battle). I predicted that wouldn't work. The E-1 was DSLR sized, for sure, weighing in at 26 ounces (735g), but the viewfinder was a bit like looking down a tunnel, and the Kodak-based sensor wasn't exactly up to snuff either (at ISO 800, it was down a stop-and-a-half in dynamic range to the Nikon D100, which was 35g lighter).

There was a lot to like about the E-1 itself. It had one of the more complete and user-friendly control abilities of the time, and was solidly built. But it also required that you buy into a new mount. Body price was US$2200, a bit higher than the D100, which had come out a year earlier.

The E-3 in 2007 was probably the high point of the 4/3 DSLRs, but against a Nikon D300 it was still down almost a stop-and-a-half at ISO 800 (and worse at ISO 200). It was easy for me to predict the demise of 4/3 DSLRs—again taking a lot of heat on the Internet for that—as the contradiction between high-end build and lower-end image quality was jarring, and ultimately fatal. If anything, the market was asking for the opposite: lower-end build and higher-end image quality.

m4/3 appeared in 2010 with the E-P1. Against the now-bigger Nikon DSLR—a D7000 would be current for that period—Olympus was now at 12mp compared to 16mp, and down only a stop at ISO 800. The reason why I picked up an E-P1 had to do with size, particularly for a competent mid-range focal zoom camera as opposed to a compact camera with a smaller sensor. 

On safari, with big lenses on my two Nikon DSLRs, I needed something small and highly competent to serve the 24-70mm focal range. The E-P1 fit that bill better than anything else at the time. But again, Olympus was asking people to buy into a new mount, and pricing was a bit on the high side for what you got. 

Olympus' long-term reputation in the photo industry was as a purveyor of small, highly competent cameras. Note that one of their most recent introductions, the E-M1X, is not small, and it's not really any more competent than the smaller E-M1 Mark II/III at most things. Somewhere between the E-P1 and the E-M1X things got murky in Olympus engineering.

While Olympus has had a long history of ground-breaking technologies, including an industry-leading sensor-based IS system, their m4/3 cameras have consistently stayed geeky while not addressing their weaknesses or fully playing to their strengths. Couple that with asking for more money than for what consumers perceived to be equal or better cameras, m4/3 just never really got past its initial launch success. 

Indeed, sales plateaued and then dropped: 590k, 510k, 500k, 510k, 550k, 450k, 420k, 340k units sold during the last eight fiscal years. In terms of interchangeable lens camera market share, Olympus has tended to be in the low single digit percentages (currently ~3%). It's just darned tough to make a profit when you're the small player, no matter what the overall market is doing.

As Ries and Trout once put it, the top two players in a market generally take all of the profits. Maybe the third position is worth having. But fourth or worse? Not viable. Ries and Trout's formula for breaking out of that was to "start a new market (niche)". And that's what the original m4/3 alliance tried to do: small, capable, mirrorless cameras. 

What I've always liked about m4/3 is the lenses. I can't really complain about anything Olympus and Panasonic have done in the lens realm. Together they built out a full set with multiple choices very rapidly, and many of those lenses are gems. The lenses, while often overbuilt on the Olympus side, still tend towards small and capable, so good news there.

Where I started to have problems is with the m4/3 cameras. The GH4/5/5s and E-M1X are a bit of jumping the shark. Those larger Panasonic bodies sold mostly because of their video capabilities (smallest, most competent 4K video cameras), which isn't exactly mass market. Olympus kept making the same camera in different ways: 1, 10, 5, X, with that latter completely missing the small mark. Moreover, Olympus missed a turn or two along the way. Why we don't have a Tough camera with the m4/3 sensor plus a pocket compact camera akin to the once seminal XA, but with the m4/3 sensor, I have no idea why. 

The reason why these are missed opportunities has to do with parts commitment. At 500k sensor use a year, Olympus eventually found themselves trapped: they don't have the volume to move to new sensor tech (BSI and fuller on-sensor phase detect would be two useful things; note that the current Olympus on-sensor phase detect is minimal compared to the Canon/Nikon/Sony approaches). Olympus simply can't pay back the necessary R&D costs at low sensor volume, and so we slowly stagnated. Worse still, I suspect that Olympus overcommitted to volume on sensors—every year it seemed that they were suggesting that they'd break 600k units, then failing to do so—and then found themselves having to keep making products with the current ones. Even if Tough/XA cameras only sold another 200k units, that might have broken the sensor predicament. (But to be fair, the Tough may also been plagued by a small sensor commitment that Olympus couldn't manage to sell to.)

Olympus—despite having pretty much invented the all-in-one camera—also seems to have missed the fact that a compact camera with a really long lens was the only viable compact market left other than large sensor. Say what you will about the Nikon Coolpix P900 and it's later brethren, but it sells. 

No doubt that the convenience of smartphones for photography that was triggered by the iPhone in 2007 has made it tough for the camera companies to find their footing. If they were doing what any tech company should be doing and evaluating where the technology leads the product use five to ten years out, then Olympus must have mostly ignored what they saw. If they weren't doing that type of forward-thinking, then they were caught out by their lack of diligence. 

Thing is, the Japanese camera companies are almost all backwards looking. Nikon, especially, values legacy features over everything else (you can still use lenses made in 1970 that function fully on the latest Nikon Z cameras, for instance). 

It's fine to keep legacy in mind, but you have to push it forward into new technologies as they're enabled. Digital cameras create files with bits in them. People today are accustomed to sharing files with bits in them over the Internet, first and foremost. Cameras aren't doing that well; it's an add-on construct that hasn't been given much attention.

The whole situation with dedicated cameras is much like what we saw with Hi-Fi equipment when first CDs, and later mp3 files became the norm. It's not that Hi-Fi died. The market did contract considerably, and the remaining players today actually embrace such technologies as Apple AirPlay, Amazon Alexa, bluetooth streaming, and much, much more. That the Japanese camera companies can't see what the Japanese Hi-Fi companies had to do to continue is a bit mind-boggling. 

I've said it for a long time: you must embrace your customers. You need to know what problems they have, how they're solving them, and figure out better ways for them to do that. Ways that fit better into the customer's world. 

If Olympus had a real failing, it was a stubbornness to just continue to do things they way they wanted to do things. The overly complex menu system that buries unique features is just one area where you can see that at work. The thinking that 6.5 stops of IS is going to sell more systems than 5 stops of IS is another. The lack of embrace with social networking is yet another. 

That stubbornness, coupled with the engine (image sensor) getting dated, the needless and incorrect model proliferation, and an increasing price/performance issue, are what killed Olympus in the long run. 

I'm sad at the outcome. I don't think it had to be this way, but I've come to accept that it did. For the moment, an E-M1 Mark III still has a few bright points about it that make it unique in the market, but unfortunately those aren't enough to save a storied camera maker. 

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