Thom Hogan: What is the future for Olympus?

Our latest article about the (bad) financial results from Olympus caused a very long discussion. Thom Hogan commented the results and I wanted to highlight his arguments.

Key points of the Olympus article:
– The imaging division is continually loosing money while the whole company is doing good (see medical division). Thom: “The problem in imaging is progressive: they’ve lost more money in each successive quarter during the past year. This, too, is not a good sign without anything in sight that would reverse that trend. Neither the [shoplink 18844]E-PL2[/shoplink] nor XZ-1 are going to change that overall trend. I’ll get to the problem in a moment.”
– Overseas digital imaging are down in the rest of the world (-30% in the US and Europe) but not so the japanese sales (only -1%)
– The new Olympsu chief will be a non japanese person which comes form the medical division.

Thom Hogan explains why Olympus is doing that bad:
Can’t say that any of this is unexpected. Olympus continues to lose market share in compact camera sales, and they don’t seem to be able to handle the sales price reductions as well as Nikon, Canon or Sony. They don’t market those cameras well, at all, and certainly nowhere near as well as NikonUSA is marketing Coolpix (with weekly Instant Savings advertisements in virtually all US markets). Couple this with mis-guessing the yen/dollar relationship and things get tough. Meanwhile, Olympus has basically continued the “we don’t really know what we’re doing” trend that started way back after the [shoplink 14878]OM-4[/shoplink] in the film world. Olympus gets on these “this is the new standard” kick and produces something that doesn’t completely stick, then abandons it instead of fixing it. We went from “small SLR” to “ZSLR” to “4/3″ to “m4/3.” Where’s the continuity of direction? After putting a lot of energy into developing some great 4/3 lenses we now have only one 4/3 body being sold that uses them, and we’ve been told that might be the last 4/3 body. Great, so what did that do to 4/3 lens sales? Zonk. Meanwhile, it’s unclear where Olympus is going with m4/3. So far we seem to be back-pedaling to catering to the lowest end (E-P2 -> E-PL1 -> E-PL2, plus the lenses are catering more mass market, too). Meanwhile, the bluetooth widget is nowhere to be found, let alone apps on smartphones to take advantage of it. I see randomness in Olympus camera offerings, and have for quite some time. That’s not to say they can’t make a good camera–they do–but the potential customer doesn’t get a clear picture of where Olympus is or where they are headed. That’s a marketing problem.

To me the issue is that they seem to be pursuing random ideas trying to find the one that resonates and sticks. This, too, is a marketing failure. If you really knew your customer and related to them correctly, you’d know what would work in the marketplace. To me, this is one of the big failures of ALL the camera companies, but the smaller you are the more vulnerable you are to it, especially when you change course like Olympus has.

The whole E-P1/E-P2, E-PL1/E-PL2 thing was a big mistake in almost every respect. First we have the similar names, which has already been discussed. Next we have the “we’re iterating every six months (but not really)” factor. Unless Olympus is getting better manufacturing margins out all this iteration, they are pointless. An E-PL2 is not really all that different from the [shoplink 16885]E-P1[/shoplink]. We’ve got engineers moving buttons, changing shapes, altering minor components, but the user is getting the same performance while being confused over where Oly is headed. Panasonic at least managed to move a bar with the [shoplink 16254]GH2[/shoplink] (though they made the same mistake with the [shoplink 17361]GF2[/shoplink] as Oly is making with their 1/2 iterations).

But I’m going to be much more critical here: in the now 20 months we’ve had m4/3 bodies from Olympus, we’ve gotten four iterations of the same thing. This does not look like progress on a clear direction. It looks like “trying to figure out how to make it more cheaply.” That Panasonic is now doing the same thing is not a hugely reassuring thought. What we haven’t seen yet is PARALLEL development pushing m4/3 forward. Okay, I’ll stand slightly corrected, the GH2 does push forward from the [shoplink 14826]GH1[/shoplink] in a number of clear ways. But Olympus isn’t there yet. The longer the time between the four look-alikes and something significantly new, the bigger the problem for Olympus.

Oh, one more thing. Olympus seems to think (along with Panny) that one of their key customers is the so-called Camera Girl (young Japanese woman). If so, they’ve failed to deliver (so far) the one thing that customer would want, which is no-brainer workflow to social sharing of images. The bluetooth module may be targeted at that, but it’s not here yet and I’m not convinced that they got the “no-brainer” part right, either.

The risks:
…”The other businesses are reasonably healthy, so the risk is that you let an unhealthy division pull down the entire company. Smart leaders don’t let that happen. The fix the problem, spin it out, or shut it down.”

“Olympus is not going broke. Losing money in a division is not the same thing as going broke. However, Olympus’ financial position as a full company is not such that they’ll be able to sustain continued loses in the imaging division. The alternatives are pretty clear: (1) fix it, (2) sell it, or (3) close it. It being the imaging division. Given that Olympus is mostly a medical and instrument company these days, they won’t spend a lot of time on (1). If things don’t turn in the next year, they’ll have to look at (2) and (3).”

What they need to do:
“Olympus needs to prune lines, establish clear customer goals, build products that actually solve those customer’s needs, communicate what they’re doing better, and do it all faster. Sounds simple enough to me.”

Prediction:
“Panasonic will at some time in the future buy what’s left of the Olympus imaging division. For Panasonic, it would give them more engineering and better sales relationships in the US and Europe with camera dealers. They’d also get more lens designs to add to the lineup and tweak. But that’s about all they’d get, so it won’t be a large transaction.”

Dear readers feel free to add your comment. Please try to rationalize your arguments. No fanboy comments please.

P.S.: I vote for Thom Hogan becoming the new Olympus CEO! :)

Useful links: The popular [shoplink 14878]OM-4 at eBay[/shoplink]. Thom Hogan’s website bythom.com.

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