Where It All Went Wrong: Nikon's Strategic Failures

Nikon was the darling of the camera industry. At the leading edge of technological development, they introduced the F mount to great acclaim, alongside some top-notch glass. Pros flocked to their system, and the amateurs followed. So, where did it go wrong?

Nikon has a century-long pedigree, having been founded in 1917 from the merger of three optical companies, and began manufacturing their first lenses in the 1920s. During World War 2, Nikon employed over 2,000 staff across 30 factories producing a range of optical equipment for the military. It was in this period that their reputation as a high-quality camera and lens manufacturer became known more widely, with the catalyst for expansion beyond Japanese shores being the 1950 Korean War: photographer David Douglas Duncan famously discovered and promoted Nikkor lenses. The introduction of the F Series range of SLR cameras (replacing their rangefinder lineup) catapulted them to global stardom. An overnight success, F Series cameras were known for their high quality, making them both reliable and durable. By offering an extensive lens range, Nikon capitalized on this success, then added to and developed it by offering viewfinders, motor drives, light metering, lens indexing, strobe flashguns, electronic shutter control, and matrix metering, to name a few. Nikon breezed through the 1960s and 1970s riding high on the back of a great system, as other manufacturers scrambled to catch up and release their own products.

As I've commented on before, lens mounts are the cornerstone of a camera system. The quality of the lens lineups is one of the biggest draws for professional photographers, and the mount is the linchpin in determining the boundaries of what can be (optically) achieved. Nikon set the bar pretty high with the F mount, but by the 1980s, the focus had returned improving lenses as a way of improving the camera system. The F3AF, introduced in 1983, was Nikon's first autofocus camera and perhaps is the marker in the sand for where their market domination began to unravel. With that in mind, here are what I consider to be Nikon's five strategic failings.

1. Keeping the F Mount

Nikon wasn't the first manufacturer to use a bayonet mount or introduce an SLR. However, it was the combination of design elements of the whole system that made it successful. Being an optical company, they were unusual in releasing a full lineup of lenses with the new system. Pros flocked to the F, and once they had invested in the lenses, there was a huge disincentive to switch to another brand. And therein lies the problem for Nikon. How do you innovate your lenses while maintaining backward compatibility?

This wasn't much of a problem through to the late 1970s with Nikon's non-AI lenses (just don't mount them on a modern Nikon, although they work great with a lens adaptor). In 1977, the AI (Auto-Indexing specification was released), which indicates the lens' maximum aperture. These changes were indicative of the introduction of electronics into camera design that had been spearheaded by Pentax and Minolta — Nikon was playing catchup as autofocus loomed in view. While the 1983 F3AF was their first AF camera (using in-lens focus motors and TTL contrast detection), full AF didn't come to the F mount until 1986 with the AF lens range, which used an in-camera motor and a mechanical screwdriver linkage to focus. AF-S arrive in 1998 with in-lens ultrasonic motors and AF-P in 2015 using a stepper motor.

It's pertinent to remember that Nikon and Pentax were the only manufacturers not to introduce a new mount for AF in the 1980s. Canon brought in the EF mount in 1987, which removed all mechanical linkages, used in-lens motors, and incorporated the largest throat diameter of any SLR of the time; however, it broke compatibility with the previous FD mount. Pros gradually switched to Canon as the functional advantage was clearly preferable to the backward compatibility. Nikon's aging F mount significantly hampered its efforts to produce a competitive and compelling lens lineup. That's not to say it doesn't make high-quality lenses — it does — but the technical limitations of the mount put it at a disadvantage that has cost its customers.

2. Late Introduction of Full Frame Digital

I'll say it upfront: the D1 was brilliant in that it ushered in the DSLR to the mainstream. While it wasn't the first digital camera or digital SLR, it was the first that could replace a film camera. Nikon hit its groove big time. With a 2.7 MP APS-C CCD sensor that could shoot at 4.5 frames per second and accept the full range of F mount lenses, it had everything going for it. Nikon was pushing hard on the sensor technology inside its cameras and moved from CCDs to its own proprietary LB CAST with the D2H in 2003. Yet by the same point, Canon was already producing the full frame CMOS-based EOS-1Ds. It would take until 2007 for Nikon to follow that lead, releasing the highly regarded D3, D700, and D300 lineups. They were a potent triumvirate, but Nikon had already surrendered its lead. Was its investment in LBCAST to blame here? Was it able to produce sensors in sufficient quantity, at an appropriate price, for the market? It's hard to know, but the winning strategy was full frame CMOS.

3. The 1 System

The 2010s arrived with Micro Four Thirds mirrorless from Olympus and Panasonic, apparently blindsiding the industry. Manufacturers rushed out their own systems in the bonfire of lens mounts. Canon and Nikon played coy — DSLRs were technically superior, so mirrorless was seen as an adjunct for the amateur, and their systems reflected this. Nikon brought out the 1 System in 2011, opting for a small CX sensor (2.7x crop factor). However, they also innovated with a competitive mount (17 mm flange distance and 39.5 mm throat diameter), fast AF, and their first line of stepper motor lenses. It was certainly a good system, but they misjudged the market. Smartphones took over as the consumer camera of choice, Micro Four Thirds captured a significant slice of the burgeoning video sector, and Sony made a push for full frame mirrorless. Nikon (and Canon) were left floundering in a wild west of rapidly changing markets. Nikon realized its mistake after investing a significant amount of time and money, finally killing the system off in 2018. More importantly, Nikon surrendered six years of active development time to Sony, allowing them to claim the number two spot in interchangeable lens camera sales in 2018. Sony subsequently became the number one seller of full frame cameras in Japan in 2019.

4. Late Pivot to the Z System

By the end of 2012, the camera industry was riding high — sales had peaked at 120 million units per year, and the advent of mirrorless cameras provided a rich backdrop to the sector. Sony led the mainstream pivot to full frame mirrorless in 2012, then 2013 dawned, and camera sales collapsed, dropping back to 60 million units and then on into freefall. Was this just a blip? Would mirrorless prove to be a flop? By 2015, both Canon and Nikon would have known they were in trouble and a rapid pivot of strategy would be required. Sony was pulling in professional photographers and grabbing and increasing part of the ILC market. It took until the end of 2018 before their response, in the form of the Z system, arrived. It was good — in fact, very good — offering a svelte body, IBIS, and a market-leading lens mount. Launching with the Z 6 and Z 7, Nikon offered normal and high-resolution models that were competitive with Sony. Sony still had the edge, not to mention six years in which to build up its lens offerings. The Z System is pitching to consumers in a market that is very different from 2011 when it launched the 1 System. There is no real thirst amongst consumers for compact cameras — interest lies in mid-range ILCs and professional specification cameras, a market where margins can be higher. Launching a new system on the back of high sales takes the pressure off the financials and, ultimately, the bottom line. Trying to do the same thing when your camera division has sales in freefall and is running at a deficit is much harder.

5. Lack of Business Diversification

Capitalism thrives on companies selling goods and services before reinvesting profits in new ventures. Invent a great product, sell the heck out of it before your competitors catch up, then move on and sell something better. Sounds easy! The problems start mounting up when you spend more money than you receive in sales income. As I noted when discussing Nikon's medium-term strategy, cutting costs is critical, and these can relate to R&D, production, and sales. The problem with cutting R&D is that this is the bread and butter of your product roadmap; in order to produce a better product (and so increase sales income), you need to design and build it. In a growing market (as seen in the 2000s), this doesn't really matter, because you end up selling more regardless. In a contracting market, it's critical.

As manufacturers grow in size, they can expand production in four ways. Firstly, increase the volume of their core product (make more cameras). Secondly, move horizontally with similar products. Thirdly, move vertically into related products and industries. Fourthly, do something largely different. Many companies start with the first, then move to the second and third. For example, if you make cameras, you might move into lens production, sensor fabrication, and software products. Precision manufacturing of optical products might take you into surveying, medical imaging, and automated car navigation. Finally, "do a Musk" and just stay high tech. The serial Silicon Valley entrepreneur started with PayPal and has since set up SpaceX, Tesla, and SolarCity. The benefit of this last approach is that you can cross-subsidize and are not reliant upon one primary income stream.

What does this have to do with Nikon? As a company, it isn't nearly as diversified as other manufacturers. Just look at its main competitors to see: Sony and Canon both have significantly more employees and generate greater revenue from a wider range of sources. In 2015, Nikon's Imaging Division made up 68% of its income. Nikon has been highly focused on the camera sector to the extent that other manufacturers haven't, and this has made it vulnerable as income has fallen. It understands this weakness and is attempting to diversify.

Summary

Nikon is a camera company through and through, and while large ($5.5 billion turnover and 25,000 employees), its success has been largely predicated on the performance of its Imaging Division. The camera sector is in an unusual position — having had rising sales for over 40 years, existing management teams will not be used to seeing a contracting market that is falling back to the same levels as the 1980s. Nikon's current position is a result of all five of these strategic failures. It's adherence to the F mount allowed Canon to steal a march with the EF mount in the 1980s. Nikon managed to pivot more quickly to digital, but rapidly gave up that advantage by failing to release a full frame model. The 1 System was an expensive dalliance with a mirrorless that cost it time and money before it finally left the market in 2018. However, its reliance on the Imaging Division is stressing a business that has limited capacity to take financial shocks. The Z system is a world-leading product, but is it too late?

Lead image courtesy of MediaModifier via Pixabay, used under Creative Commons. Body image courtesy of NASA via Wikipedia, in the Public Domain.

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Forrest M.'s picture

As a hobbyist, I have been a Nikon user for for over 20 years. I am loyal to them, simply because I love their F-mount lenses. I can still shoot with them and get fantastic results, even with used lenses picked up for peanuts. My first Nikon was a beat-up old FM, which I was delighted to replace with an FM3a when they were new, and later a used F3HP. When digital took over, I was floored that Nikon never created a manual-style full frame body the way Leica did so seamlessly. What were they thinking? Finally in 2013, the Df came out, and boy did it miss the mark. I own one and love it because the images it creates are wonderful. That sensor is a dream, but the body design is an awkward brute compared to the FM3 and F3 of the past. Meanwhile, Fujifilm was cornering the market with their brilliantly designed cameras with full analog controls, albeit with cropped sensors. Why didn't Nikon make a digital F3 truly optimized for AI manual lenses? The F3 was in production for over 20 years for good reason! Leica has created an entire market out of catering to those who prefer manual focus and analog controls. At a significantly lower price point, and with access to all that heritage glass, Nikon could have absolutely dominated the market for full frame manual shooters.

stuartcarver's picture

I can’t believe people are still slagging off the Z system when everyone who is using it loves it... so much negativity in photography world it’s pathetic, too many keyboard warriors running their mouths about equipment they have never used.

paul aparycki's picture

While not their biggest problem, what certainly contributes to them falling out of favour is their utter contempt for their customers.

Nikon has a long history of "superiority" attitude that shows up all too often and frequently to their pro customers . . . who they need as a marketing adjunct.

Their arrogance and f you mentality is a bit much. The recent closing of many service centres and the termination of support for independent service centres says simply, "f you, give us your money and go to hell". That is NOT a professional camera line, sorry.

The same blind arrogance allowed Fuji and to a lesser degree, Ilford, to take away much of the film market from Kodak.

I am a Nikon user, a working professional. Have been for forty-odd years. I use Nikon, Mamiya, Leica, Sinar, Rodenstock, and Profoto gear on a regular basis. The only company that treats me, and others like a bucket of shit, is Nikon. At one point, about twenty something years ago, I ventured into the Canon domain. I should have stayed there, They were always ready to help in any way they could. Nikon rarely helps anyone . . . except themselves.

While I, and others like me make up a very small segment of the market, when consumers look to what a "professional" is using . . . they more and more see Canon . . . for good reason. That is advertising that money doesn't buy, even though Nikon does try to flog a very FEW big names who use (are paid to use) their product.

They are sinking, and I could care less.

Good riddance.

the dikiz's picture

How did this article forget to mention their action cam. We all knew they arrived way too late, and could not do anything vs Insta360, GoPro, DJI

Jeff R's picture

Their new Z mount is pretty awesome, they learned from their mistakes with that one 👍

https://photographylife.com/nikon-z-vs-nikon-f

Tim Gallo's picture

" Pros gradually switched to Canon as the functional advantage was clearly preferable to the backward compatibility"
what pros? lol On the contrary I am pretty sure a lot of them welcomed the change - nikon was pushing this change for pros. I can speak for japan only, but as a result its still struggling to make an image of cameras for everybody... nikon equals pro for many. And amateurs are feeling more comfortable taking Canon in hand than Nikon.

If anything writers sentence applies to amateurs.

"technical limitations of the mount put it at a disadvantage that has cost its customers"
nope. just no lol. no proof of that, just pixel peeping of fan boys.

2. Late Introduction of Full Frame Digital
Whatever they did late, they did something great - cause all it lead to one of the best dslrs on the market till this day, there re-use of sony sensors is also some kind of magic that probably could be achieved through those years of struggle.

But I agree with other parts of article.
The problem is, and its still exist to this day, since I had to encounter it personally on some level, Nikon is ruled by people from previous generations of successful businessmen that has no idea what photography market is about in modern age. I mean Mitsubishi group. The Nikon people are actually pretty cool and modern, but they are stopped by the decisions made above...

I am pretty sure Nikon will be fine in future years, Mitsubishi known to be stubborn in hard times. I hope that this difficult times will help them realize that they need to take new direction and change things, but from what I am hearing from some of the people working on new Z-series its not going to be an easy ride even for them....

Bill Peppas's picture

Where it all went wrong with this article and Fstoppers in general.... that'd be a very interesting article with lots of flaws.

Brian Allan's picture

I've had one Nikon DSLR. After three trips to a service center in six months, never again. I moved to Canon and in 2013 moved to Sony full frame; very happy with Sony's product line.

I suspect Nikon will never really fully recover from their current financial problems and will ultimately be bought for their lens technology. They do make great lenses!

J. H.'s picture

I got more than half a dozen Nikon (D)SLRs and about 20 or more lenses since 1985 (with a break for about 10 years) and just one has been to the Nikon Service Center (a D800E with a loose grip rubber) which I got back after a week.
When I was in my 20s, two of my friends got Canon's EOS 650 which drained the (expensive) battery in only a few weeks. They never got it properly fixed.

Conclusion: Such stories don't tell us anything. Generalizations do not help at all.

Rafael Hoyos Weht's picture

I still shoot with a D80, D200 and a D2x. I have them for over 10 years or more and they work like a charm. I have a lot of fun with them. Maybe that was the problem. Making good quality products that last.

Timothy Roper's picture

Nikon's biggest problem in the digital era has been their lack of professional video products. Sony, Panasonic, Canon, etc, all had and still have a serious dedication to video, which has served them very well now that people want both stills and video in one camera. The Z series is supposed to be very good at video, but it's a little late and doesn't really establish an ecosystem anyway. I personally don't care much about how well my DSLR/mirrorless does with video. But the people driving the market sure do.

Heratch Ekmekjian's picture

For what it's worth...in 2006 I met a NYTimes photo editor who asked me how I liked my Canon DSLR. He then told me the Times swapped out all their Nikons for Canon because they were unhappy with the service from Nikon. I've never had any experience with Nikon service in the digital age so I'm not sure what difference that may have made to the company's situation.

Jim Doughty's picture

Since I'm a low-level prosumer-ish hobbyist who isn't replacing his D7000 anytime soon, all I wanna know is: Does this mean prices will fall for good used F-mount glass? (Though I should be careful what I wish for... prices got *really* low for lenses that fit my old Minolta X-700...)

Jess Aggeboe's picture

There is not much wrong with Nikon's Z system, but they just arrived late for the party and then they lack a camera like the Sony A9 in their Z system plus cameras with space for two cards and a proper battery grip.
Nikon just needs to get future users to discover their Z system, and they are well off with big price reductions even if it costs big on profits, but it will pay off in the long run.
In the future, Nikon also should spend almost all the money on innovation (mirrorless) and very slowly cut away everything that has to do with DSLR without frightening their DSLR uses, because many of them still believe that DSLR has a future together with mirrorless, so they have to realize it slowly so they don't get scared away!

Deleted Account's picture

I'm not sure if you're right about Nikon but you know nothing about people.

Frank Davis's picture

Has it all gone wrong? Yes, Nikon has had its issues and they are reflected in the financials. I would certainly not bet billions of R&D dollars on where the photo industry might be in five years nor would I have made that bet five years ago. Many companies have made wrong decisions and come back stronger than ever; many have gone by the wayside. It's not that long-ago Apple was left for dead. Nikon still has a strong product line even if it hasn't been in favor of late. Canon had a brilliant marketing strategy when it came to prominence. It gave its cameras to well-known professionals in return for their endorsements and then heavily marketed those endorsements. It made its products white to differentiate them, and yes, Canon had an excellent product, or the professionals would not have lent their name. That was a different time and a different market, but such a campaign can still make a difference. As to my opinion of what might be the future... obviously, products will continue to develop technically. I'd like to see a more open platform, such things as Nikon branded adapters for other lens mounts, an app store for developers to offer in camera software for specific types of shooting, things along these lines of thought.

Tord Eriksson's picture

Hopefully, Nikon finds a way to survive, if not as such a big company as it is now.

Worrying is that neither Tamron nor Sigma seems to be interested in launching lenses for the Z bodies, which can end in disaster.

I was part of the early Sony MILC users, and gave up quite quickly, as the menu system was crap and the only lens that was really good was a Zeiss design (the only Zeiss for a long time in E Mount format).

I began my DSLR days with Pentax, and I am now entrenched in Nikon, starting with the darling Nikon 1 system. The lenses are crap (mechanically), but the cameras, the AF, and the user interface are superb.

So I live well using F Mount lenses and Nikon 1 cameras. For BIF I eventually got a couple of DX, and for landscape and portraits I use my old FX!

Deleted Account's picture

I submit the D5, the D850 ans the D500. Arguably, including their ecosystem, the very best photographer's cameras in their respective category. I also submit the Z lineup and it's quick progression which, in one more generation, will lay claim to same.But personal preferences vary. This in not a pissing contest -there are many other fine cameras out there that belong in the same club. I'm sorry but you don't build the D5, the D850 or the D500 by being out of touch with photographers, even though it might mean you're slightly out of touch with the marketers. Everything else i will leave for the bizgeeks, specgeeks and brandgeeks. All this is just bizjizz.

Rey cisneros's picture

Every day nikon does not come out with a z7s or z8 is a nother day they lose consumers