Why Canon is the Microsoft of the Camera World

Canon Microsoft

With Canon’s strong foothold — or should that be increasing stranglehold — on the mirrorless market, you can easily argue it is becoming the Microsoft of the camera world. Microsoft is ubiquitous in the world of personal computing with its software products ever-so-pervasive in business, school, and the home, from productivity to communications and entertainment. In fact, the core underlying operating system of most PCs runs Microsoft Windows (somewhere around 75%).

Founded in 1975, Microsoft hails from the Wild West era of computing as mainframes moved out of government departments and big corporations, with the introduction of small, low-cost, home devices that were programmable by enthusiasts. Its focus was on software that could run programming code on these early machines, however, its big break came in 1980 when IBM asked it to provide an operating system for its new personal computer. It didn’t make operating systems, so bought one called 86-DOS, rebranding it MS-DOS and selling a license to IBM, but retaining ownership.

While IBM had copyrighted the BIOS — that small little piece of code on your PC that interfaces between the hardware and the operating system — no such restriction applied to the operating system itself as Microsoft owned it. Once the BIOS had been reverse engineered, Microsoft was free to sell MS-DOS to the world.

And it did.

After its initial public offering, a rising share price on the back of continued successes created three billionaires and around 12,000 millionaires from its employees.

Microsoft and Canon: Similarities

What makes Microsoft stand out in the world of computing is its utter dominance in a range of sectors. For example, its 75% desktop PC market share (although that has dropped from 95% in 2009). In fact, since the days of MS-DOS and the rise of IBM-compatible PC, Microsoft has had OS figures in the high 90%.

It’s also enjoyed past dominance with Internet Explorer, Office, and Windows Server. It has also historically not been a hardware company — with the exception of the long-manufactured Microsoft Mouse — but branched out with the Xbox, as well as its Surface devices and HoloLens. And let’s not forget the Nokia acquisition and Windows Mobile mistake.

Microsoft is ubiquitous, particularly since it has re-imagined itself in the new era of subscription services (or Software-as-a-Service) and is very much cloud-focused.

Of course, it’s not computer software that defines Canon, but cameras. Founded in 1933, the business is principally focused around its optical and printing divisions, although it was originally a camera manufacturer and introduced the Kwanon, Japan’s first 35mm focal-plane shutter camera.

Canon is now a ¥3,513 billion (about $30 billion) revenue-generating behemoth with about 200,000 employees worldwide. It has expanded its business to related print and optical industries, which include medical imaging and industrial applications such as lithography. It’s also more unusual amongst camera manufacturers in that it designs and manufactures its own sensors.

However, it’s Canon’s joint successes in the camera and home printer markets that really make it stand out in the consumer sector. This is by no small measure due to its business-defining desire to constantly reinvent itself on the basis of innovation and quality. It has never been one to let its past successes hinder the way it pursues future products. This is a difficult path to tread and one that many other companies have failed at. You want to develop technologies fast enough to sell to the global market, but not so fast that they are usurped by other manufacturers.

Canon released a steady stream of camera technology such as its Serenar lenses, the Canonflex SLR, the F-1 SLR (with its accompanying FD-mount), and the AE-1 (incorporating a microprocessor), before the release of the EOS system (including the EF-mount). Where Nikon steadfastly supported the F-mount, Canon pushed lens designs to new limits. It was this relentless innovation that eventually led it to surpass Nikon as the leading camera manufacturer in the 1990s.

While we might be interested in camera innovation, it now only accounts for 19% of Canon’s net sales and printing is far and away the most important aspect of its business at 55%. That said, Canon is still a force to be reckoned with and — depending upon how you count the numbers — has around 40% of the camera market by both sales and revenue. This is a changing dynamic that is seeing it refocus away from DSLRs and integrated cameras to more profitable mirrorless models.

A 40% market share is in no way equivalent to the 75% desktop market that Microsoft has, however, this doesn’t reflect that most computing is undertaken on smartphones which makes iOS and its various derivatives globally important. And of course, smartphones also account for the vast majority of cameras sold today. In their specific markets, both Microsoft and Canon are a dominating force and no one can deny that their market share is based, at least in part, on producing quality products that people want.

Canon has successfully used technology to appeal to key markets in order to leverage success further down the market chain. For example, the release of the EF-mount made its products more favorable to working pros that built popular success and trickle-down to more consumer-focused products. This came at a time of mass-market expansion which it was able to take advantage of, dramatically increasing its business. And while Nikon came out with the first fully integrated DSLR, it was Canon that manage to capitalize on filling out its range, again with trickle-down.

There are two core markets — consumer and business/professional — for both Canon and Microsoft that have different motivations and needs, which leads to the development of different products.

For the consumer maket, Canon could be seen as a “safe bet” when buying a camera, with consumers paying a premium for something that “just works.” This consumer groupthink has been epitomized with its new mirrorless models which have ramped up from almost no sales to virtual equivalence with Sony in a matter of a few short years.

Microsoft is all too familiar with technological innovation in order to maintain its market position and income streams. While Windows may well be dominant it is no longer the main source of income, this is now being driven by its subscription services.

On the “professional” end, Canon of course goes after professional photographers and for Microsoft, it targets corporations and businesses. Enterprise sales drive income and penetration into wider consumer markets, with Windows increasingly just one platform for delivering this service. In fact, Microsoft has increasingly been venturing on to macOS, iOS, and Android in order to sell more licenses and, in a change of heart, embracing the use of open-source software (after the infamous Steve Ballmer “Linux is a cancer” quote). Microsoft, likewise, is a safe bet.

The Dark Side

Of course, Microsoft’s success hasn’t been entirely without incident, not least the Department of Justice anti-competitive behavior lawsuit related to monopolistic practices. It was the rapaciousness of Microsoft’s business dealings in order to maintain control of operating system licenses — and later other product categories — that caught the eye of the Department of Justice. The bundling of Internet Explorer was the straw that broke the camel’s back and Microsoft settled in 2004. The investigation highlighted what was internally known as “embrace, extend, and extinguish” (EEE) when it entered new product categories, something familiar to Google competitors. Many vendors and their products have fallen by the wayside — WordPerfect and SmartSuite — from the use of such tactics which were designed to compete on price, extend capabilities, then deliberately lock in users.

Canon Lenses as of 2021

There is nothing to suggest Canon behaves like this, although all camera manufacturers have tried to lock their consumers into proprietary lens mounts in order to boost lens sales, the reason why third-party manufacturers such as Sigma have reverse-engineered mount specifications. However, in a manner similar to open-source, even this is changing with groups like the L-Mount Alliance.

A Microsoft Future?

So does Canon have a similar future to Microsoft lying ahead? Microsoft’s fortunes have been tied to changing its business model and adapting to new consumer markets, while at the same time maintaining dominance in its traditional markets. This is true of Canon as it shifts its wider business into related print and imaging industries, targeting greater business-to-business transactions rather than direct-to-consumer markets.

However, its DNA is founded in cameras and here it is moving fast to build out a world-class mirrorless system that will last a generation. And it’s succeeding, which should pay dividends as profit is clearly flowing from this technologically advanced area. This strategy is emphasized as it shutters integrated camera production through the closure of its Zhuhai factory; the release of its first APS-C RF-mount camera raises questions over the future of its EOS-M line and its DSLRs more generally. Canon is adapting and taking advantage of a shifting landscape.

So if Canon is the Microsoft of the camera world, who then is the Apple equivalent?