More Troubles at Nikon

I find it a bit disingenuous that Nikon announced delays in products in conjunction with reporting impacts from the earthquake that hit Southern Japan earlier this month. The delays in products that Nikon reported weren’t due to the quake, and any future delays due to the quake are still as yet unknown. 

Let’s take that latter bit first: a number of fabs in the impacted area—including a key Sony image sensor fab—shut down after the quake, and as I write this it is still very much unknown how fast they’ll come fully back on line. Sony has indicated that there is significant damage at the Kumamoto plant that needs to be addressed before reopening it. That includes buckling on the floor that holds critical equipment.

That said, no one—other than perhaps Sony and the camera companies—knows exactly which cameras might be affected by the temporary closure of that plant. Rumors are, that among others, it makes the 24mp APS sensors. That would impact Fujifilm, Nikon, and Sony. 

But in addition to the Sony fab, there are other facilities in the area that camera makers rely on, and some of those are hidden component suppliers that are required for the sensor, ASIC, LCD, and other key part makers to produce items needed to make cameras. 

Thus, it’s quite possible that we’ll get another several month period where components aren’t readily available to the camera makers, as we did in 2011. This has potential to delay shipments of new products, and disrupt shipments of existing products.

But I wrote “disingenuous” in my opening statement. The announced delays to eight (!) Nikon products aren’t due to the quake. The DL models seem to be delayed by a problem with the new EXPEED chip they use. The KeyMission 360 is apparently delayed due to software. And the Coolpix are delayed for unspecified reasons. Oh, and the iOS version of the app necessary for SnapBridge 2.0 is also delayed due to software issues. 

I’d love to be at Nikon's year-end financial announcement conference on May 13th and be allowed to ask a few very pointed questions about what’s going on. 

Let’s back up a minute and relate what I think happened at Nikon in the last year, and how that has now led us to where we are.

The review of previous year results plus the CIPA data from the previous year and forecast year ahead are used each spring to make the big directional decisions. I believe Nikon management used that data about a year ago (+/- three months) to make a number of course-correction type decisions:

  • Snapbridge 2.0 was already in progress, but it was given higher priority and an “across the board” requirement (which somehow missed the D5 ;~).
  • Coolpix was entirely re-evaluated. A few simpler bottom models were announced but are now delayed. The middle/top models haven’t appeared yet, and there will likely be fewer of them.
  • The Nikon 1 was quietly cancelled—or at least severely cut back to bare bones survival—and the energies for 1” sensors refocused into the DL models.
  • The on again/off again mirrorless replacements for entry DSLRs were put back on again, originally targeted at Photokina 2016. 
  • The D500 was green lighted. Replacements for the D750 and D810 were green lighted, too. A new legacy-type camera (Df replacement) was green lighted for 2017. 

Here’s the problem: even simple consumer models tend to have 18-month development cycles, but 24-months is more typical. If you make big adjustments in product specs and design, you really need two years to make that happen. Nikon seems to have been trying to do that in far less time with some of their corrections. In particular, the DLs. 

Moreover, marketing gets messed up, too. If I’m right about the above, I personally would have cancelled the Nikon CES booth and launched the D5/D500 combo instead at NAB. Why? The attendee profiles more closely match the products, and these were Nikon’s first true 4K video products. Plus the extra time would loosen the critical path gatekeepers.

Of course, NAB 2016 clearly showed that Nikon is late to the 4K game. It’s not about 4K video any more, it’s now about 4K HDR. Launching 4K at a 4K HDR dominated show would have just revealed how far behind and out of touch Nikon is getting in the video realm. Still, I think NAB would have been the better launch venue, and it would have given the company more time to get those two products right and marketed correctly. Instead, we got a rushed feeling from the CES launch, plus the D500 turned out to need some more time to ramp into full production.

Delaying the D5/D500 to NAB would have had bad consequences, though. First, Nikon would have looked “quiet” for quite some time. They wouldn’t have had much of anything for CP+ in February, the home town show. 

But look at what’s happening to Nikon now: early launches and delays clearly weren’t better than remaining quiet for a long period and then launching with a bang. Nikon doesn’t seem to understand that their reputation is being shot all to hell by the publics’ perception of a continued series of problems. Adding new delays just tells everyone that Nikon hasn’t solved those issues, and this just hurts their reputation even more. 

Someone with Big Boy Pants in top Nikon management needed to step in last year and say “We’ve heard our customers, and apologize profusely to them for our recent miscues. We’re in the process of completely evaluating everything in our lineup, our QC procedures, and our manufacturing processes. Thus we won’t have any new significant product intros for a short period while we complete this task and right the ship. However when we do resume launching new products, we think you’ll find them exciting, compelling, and capable of things our competitors can’t match.” And, of course, that same Big Boy would have then had to back that up with action, especially internally.

I’m fairly sure that Nikon is now engaged in a domino sort of effect in engineering: the previously-announced products are still consuming their attention in order to correct and finish them. Thus the next batch of products gets a little less attention until the fixing process is done with the previous ones. And less attention means more likelihood of continuing issues. Lather, rinse, repeat. 

A couple of us analytical folk were talking about trends at NAB last week. For a long time the Big Two in prosumer/pro video were Panasonic and Sony. But it seems Panasonic’s problems—not all confined to the video division—allowed Canon to sneak into Panasonic’s position. Meanwhile, upstarts like Blackmagic Design and RED have strong footholds now. 

Similarly, Nikon is stumbling enough that Canon has no real worries from them on the still camera side. While Sony now has an opportunity that they could take great advantage of. Not that they will ;~). Still, Nikon is so exposed and vulnerable right now as to be almost in an existential crisis. Shrinkage and decline in the camera group at Nikon means shrinkage and decline in the company, period. Too much shrinkage and decline would put the company at great risk.

Let me point out that not a single of Nikon’s problems actually have technology or engineering issues at their core. Nikon’s engineering team remains at the top of the game (though the software side could use some shoring up). No, Nikon’s problem is one of management. It’s the decision making that starts at the top of the company and the pressure those decisions are putting on engineering and sales that is causing the real issues. 

The re-evaluation that came about a year ago that I hinted about earlier came from top management. New marching orders, basically. I have great empathy for the development teams trying to play by all the new (and old) rules that upper management is invoking. Top management is expecting the engineers to deliver more, and faster. Yet top management is also screaming for cost reductions everywhere. 

I’ve long disliked Nikon’s management structure. It’s a classic insulated-from-the-customer, self-replicating, old-boy network. Moreover, it’s a large, cumbersome group that works mostly by consensus, so it’s very slow to react to anything. 

This was obvious when Nikon’s surging camera sales suddenly made the entire company dependent upon camera sales. There was no tangible diversification effort made until too late, for instance. 

With most of the customer base outside Japan, and most of the disruption that’s bothering the camera market also coming from outside Japan, the lack of any non-Japanese in upper management or the board also seems wrong.

I guess the good news is that, despite the disingenuousness, Nikon did seem to reveal the real reasons for the delays and those were essentially admissions of internal failure (chip design, software not done). That’s a small step towards the transparency Nikon customers need to see in order to restore their faith in the company. 

Yet…the problems at Nikon clearly persist. The past several years have produced a series of issues that impact customers and let few of Nikon’s product introductions seem to come off cleanly. That’s typically indicative of a company “on the edge.”  

It’s time for Nikon to get off that edge and back on solid ground.  


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