Latest / Startup Stories with Fexingo: Conversations About Founders, Funding, and Building Companies from Zero / How Leica Defied Digital Disruption
Transcript
- Lucas: So in 2012, Kodak filed for bankruptcy. A company that once employed over 140,000 people and sold 85 percent of the world’s film, gone. Around the same time, Polaroid had already collapsed. And yet, Leica — a 120-year-old German camera maker that was arguably even more niche — not only survived the digital transition, but is now growing faster than ever. How? Luna: It’s almost the opposite of what you’d expect. Leica was analog through and through. Did they just get lucky with a wealthy customer base? Lucas: Partially, but luck is underselling it. There’s a real strategy here. And I think it says a lot about how to handle disruption when you’re a small player. Leica never tried to out-scale the Japanese giants — Canon, Nikon, Sony. They couldn’t. Instead, they doubled down on what they were: a luxury brand that happened to make cameras. Luna: Right, and speaking of strategy — we keep this show ad-free because we believe these conversations should be accessible to anyone building something. If they’ve moved your work forward or sparked an idea, you can support that choice at buy me a coffee dot com slash fexingo. No pressure, just wanted to mention it. Lucas: Exactly. And it’s listener support that keeps us independent. So, back to Leica — the key moment came in 2006, when they launched the M8, their first digital rangefinder. It was a mess. The sensor had infrared issues, black fabrics turned purple, the price was $5,000. But it proved they could make a digital camera that felt like a Leica. Luna: And they didn’t try to compete on specs. The M8 had 10 megapixels when Canon was already at 16. Lucas: Right. They competed on feel, on build quality, on the experience of using it. And that attracted a specific kind of photographer — one willing to pay a premium for the intangible. Then in 2009, they released the M9, the first full-frame digital rangefinder. That was a genuine technical first. It gave them credibility even among tech geeks. Luna: So they used one breakthrough product to reset expectations, then leaned into the luxury play. Lucas: Exactly. And they restructured the company around that. They spun off the microscope division, focused on cameras and sports optics. They kept production in Germany, kept most assembly manual, and marketed the ‘Made in Germany’ story hard. Today, a new Leica M11 costs around $9,000. And they sell more cameras now than they did in the 1990s. Luna: There’s a parallel here with how some software startups go ‘premium’ from day one. But Leica had the burden of a legacy brand. They couldn’t just rebrand overnight. Lucas: True, but they also had an advantage: their brand was already associated with quality and with historical figures like Henri Cartier-Bresson. What they did was modernise the brand without cheapening it. They opened Leica boutiques in luxury shopping districts, partnered with Apple for lens designs, even made a smartphone with a Leica camera. Each move reinforced the premium positioning. Luna: And they didn’t chase volume. In 2023, they sold about 50,000 units. Canon sells millions. But Leica’s revenue per camera is astronomical. Lucas: Which brings us to the numbers. According to their 2024 fiscal report, Leica Camera’s revenue hit 485 million euros, up 14 percent year-over-year. Operating margin around 20 percent. For a company that makes physical goods in Germany, that’s remarkable. And since 2010, they’ve roughly tripled revenue. Luna: So the strategy is working. But could it work for a startup today? Or is Leica a one-off? Lucas: I think there are lessons, but you can’t copy the playbook exactly. Leica’s moat was built over a century. What you can replicate is the discipline to say no. They didn’t dilute the brand with cheap models. They didn’t outsource production to cut costs. They protected the core experience, even when it meant slower growth. Luna: There’s a counterexample though: Hasselblad. Also Swedish, also legendary. They went digital, but struggled with licensing and eventually got bought by DJI. Lucas: Good point. Hasselblad lost its independence. Leica stayed independent until 2021 when they sold a minority stake to an investment firm, but they kept control. Part of that was smart capital management — they didn’t over-leverage. They grew organically. Luna: And they diversified carefully. They now have a cinema lens line, the Leica SL system, and the Q series for street photographers. Each new product line is still expensive, still German-made. Lucas: Exactly. And they’ve embraced digital distribution — you can buy direct from their website, they have a trade-in program, they even offer financing. But the core hasn’t changed: a mechanical rangefinder with a digital sensor inside. That’s the product that saved them. Luna: So the takeaway for a founder might be: don’t just follow the market. Define your own niche and protect it ruthlessly. Lucas: I think that’s right. The digital disruption killed companies that tried to compete on price and specs. Leica survived by being the opposite: expensive, slow, and deliberate. It’s not a strategy for everyone, but it’s a reminder that in a world of abundance, scarcity and craft have real value. Luna: And that’s a note I think a lot of hardware founders need to hear. Lucas: Absolutely. Leica didn’t out-innovate the giants. They out-positioned them.