Carl Zeiss and Free-Form Production Can We See Clearly Yet

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REV: MARCH 30, 2015
WILLY SHIH
Carl Zeiss and Free-form Production: Can We See

Clearly Yet?
The trigger for the rapid expansion of free-form production is that the two primary free-form equipment
manufacturers, Schneider and Satisloh, are now offering equipment at effectively the same cost as a traditional
generating and polishing cell, so there is no reason that a lab buying equipment, either for expansion or to
replace old equipment, wouldn’t just buy a free-form cell as their initial purchase. The equipment vendors have
nearly tripled their production capacity in the last 18 months to keep up with this burgeoning demand.
— Karen Roberts, Head of Customer Lab Enablement Business Sector
Carl Zeiss Vision Care Business Group
As director of new business at Carl Zeiss Vision International, a business unit of Oberkochen,
Germany-based Carl Zeiss AG, Karen Roberts worked with a global team that coordinated the
commercial activities for packaging and selling new “free-form” manufacturing technology for
spectacle (corrective) lenses. Free-form was a production process that used computer technology to
simplify the manufacture of these lenses, and it was changing the competitive dynamics in the global
prescription corrective lens market.
Corrective lenses were mounted in frames and worn as eyeglasses in front of the eye. They
compensated for a number of visual deficiencies, including myopia (nearsightedness), hyperopia
(farsightedness), astigmatism (blurred vision because of an irregular shape of the cornea or lens), and
presbyopia (loss of focus resulting from aging of the lens). An aging population meant that one of the
fastest growing and most profitable parts of the market was for progressive addition lenses
(“progressives”) that could address combinations of all of these deficiencies.
The traditional spectacle lens market was vertically integrated, and there were many operational
benefits of large-scale production. Carl Zeiss’s traditional vision care business was split between
finished and semifinished lenses. Simple finished products such as single-vision lenses were
delivered directly to the eye care professionals (ECPs) for edging and fitting to the frame. More
complex lenses, such as progressives, were supplied as semifinished lenses with the progressive
geometry on the front surface. These were then processed by a laboratory to create the finished
prescription lenses that were in turn supplied to the market.
________________________________________________________________________________________________________________
Professor Willy Shih prepared the original versions of this case, “Carl Zeiss and Free-Form Production: Can We See Clearly Yet?” (A) and (B),
HBS Nos. 612-001 and 613-038. This version was prepared by the same author. It was reviewed and approved before publication by a company
designate. Funding for the development of this case was provided by Harvard Business School, and not by the company. Professor Shih was a
consultant to Carl Zeiss AG as part of a custom HBS Executive Education program. HBS cases are developed solely as the basis for class
discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
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This document is authorized for use only in Prof. Nilam Kaushik's PGP- Technology and Innovation Strategy , 2023 (NK) at Indian Institute of Management - Bangalore from Dec 2023 to Mar
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614-007 Carl Zeiss and Free-form Production: Can We See Clearly Yet?
Low-cost free-form production equipment drove a reconfiguration of the value network for
progressive lenses. New firms entered the market, delivering only a part of the overall value chain.
Even though Carl Zeiss had developed the first progressive lenses and held key patents on their
design, the company increasingly recognized that in the future it might provide only selected
technology and enabling components. Its customers might source components or materials from
others and add their own value further down the chain. In this changing market environment, Carl
Zeiss Vision Care employed a dual-pronged strategy: one branch focused on servicing and
maintaining the traditional vertically integrated prescription RX business, and the other focused on
the wholesale progressives business, where the new paradigm was playing out. In this wholesale
segment, Carl Zeiss increasingly packaged and sold technical solutions to its traditional customers.
The components of those solutions included enabling customers to make their own progressive
lenses in-house by transferring free-form manufacturing know-how and lens-design-cutting files on
an order-by-order basis. The reseller paid a “click fee” for each transaction and could also pay for the
right to use the Carl Zeiss brand on the lens. Carl Zeiss did not capture the full revenue stream
available from the vertically integrated RX business, but with the shifting competitive landscape,
Roberts was optimistic that her unit could increase its market participation in large, developed
markets like the United States.
Emerging markets like China posed a different challenge. “In the Chinese domestic market, many
companies are making and selling free-form lenses that are incredibly cheap, and sometimes of
questionable product quality,” Roberts acknowledged. “The question is, if and how should we
participate in that type of market?” In her view, many market participants appeared to produce
lenses that reflected the capability of the cheaper equipment platforms and limited free-form process
know-how. Carl Zeiss could work with some of these small firms to upgrade their knowledge and
overall free-form production capabilities. Roberts explained:
As we help them improve their free-form lens production and develop the capability to
make more sophisticated lens options, more of these participants are keen to work with us
across a wider range of technologies and products and continue to enhance their competence.
There is understandably a lot of nervousness in our organization, however, that as you teach
your customers to become more competent manufacturers and suppliers of sophisticated
products, you make competitors of them. I wish we could see clearly what to do!
Vision Correction with Corrective Lenses

Founded in 1846 in Jena, Germany, Carl Zeiss had a long history in vision care, going back to the
first aspheric spectacle lenses in 1912, the first antireflective (AR) coating in 1935, the first electronic
system for determining the optimum positioning of spectacle lenses in front of the patient’s eyes
during wear, and the first individualized progressive lens, the Gradal® Individual in 2000. The
modern Carl Zeiss Vision Care organization resulted from a merger of its vision care business with
Scientific Optical Laboratories of Australia (SOLA) International Holdings Inc. in March 2005. This
merger included the American Optical business, which had been acquired by SOLA International Inc.
in 1996. American Optical was founded in 1833 in Southbridge, Massachusetts, as the first American
manufacturer of silver-framed eyeglasses. It began manufacturing spectacle lenses in 1883.a
a “American Optical Manufacturing of Southbridge, Massachusetts,” AO News 1968, no. 5, http://www.antiquespectacles.

com/american_optical/american_optical.htm.
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Carl Zeiss and Free-form Production: Can We See Clearly Yet? 614-007
Light entering the human eye is refracted as it passes through the cornea and a lens, which
together project light on the photoreceptor cells that make up the retina. With normal vision, this lens
system casts a clear image on the retina. If the individual is nearsighted, the image is formed slightly
in front of the retina (see Exhibit 1). Corrective lenses can be worn in front of the face to correct this
condition. In order to see objects at different distances, the eye is able to change the curvature of its
lens, and therefore its power of refraction. Unfortunately, as people get older, this flexibility
decreases because the lens gets stiffer, a condition known as presbyopia. Someone who had normal
vision while they were younger might require a pair of reading glasses for working at near distances
as they grow older. Someone who had already worn glasses might require one set of corrective lenses
for far distances and a different set with a higher refractive power for nearby. Some people need
more complex corrective lenses, glasses that are called “multifocals”—bifocals, trifocals, or
progressive lenses.
Benjamin Franklin was credited with the invention of bifocals, lenses that have two distinctive
refractive powers in separate zones that are fused together.b Trifocals have three distinct zones.
Bifocals and trifocals can take a fair amount of adaptation for users, and many people do not like the
visible lines separating the zones. Progressive lenses offer distance, intermediate, and near vision
without the lines separating different zones. There is no sudden image jump from one region to
another—rather, the zones for each of the distance areas are separated by “afocal” transition regions
where the image is distorted (see Exhibit 2 for a drawing of a typical progressive lens). Unlike
bifocals and trifocals where the zones are pretty much in standard locations, progressives come in a
range of designs that might have “harder” or “softer” abruptness of image degradation in the non-
usable afocal areas. The differences in design can influence how readily a person adjusts to a new pair
of glasses. The lens choice is generally a decision made by the dispensing optician or ECP.
Aging populations correlated with substantial growth in progressive lens demand. Progressives
had been available for more than 40 years, and Carl Zeiss estimated in 2012 that they made up 26% of
the U.S. market by volume (up from 3% in 2008), and 30% of the European market. Current
population projections suggested that this category would continue to grow and dominate demand
in the next five years. The somewhat prolonged adoption curve for progressives was driven
by adaptation challenges among long-term bifocal wearers in markets such as the U.S., something
that was gradually overcome by dispensing emerging presbyopes with progressives at the outset,
and the complexity associated with manufacture and inventory management of the high number of
SKUs.
Purchasing Corrective Lenses

The process of providing corrective lenses began with the generation of a prescription. An ECP
usually performed a two-part process. In the first step, he objectively estimated the refractive errors
in the eye using an autorefractor. An autorefractor measured the refractive power of the entire eye,
which was a function of the shape of the cornea, the power of the lens, and the optical length of the
eye. This instrument measured the degree of correction needed to provide normal vision.
Autorefractors were manufactured by many ophthalmic equipment companies, including Carl Zeiss.
The second step was refinement through a subjective process that used trial lenses, employing a
refractor head or a trial frame such as a Zeiss phoropter (see Exhibit 3). ECPs considered this second
step to be the “gold standard” for measurement. The end result of the process was a prescription that
b Charles E. Letocha, MD, “The Invention and Early Manufacture of Bifocals,” Survey of Ophthalmology 35, no. 3 (November
1990): 226–235.
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specified the shape of corrective lenses, either in the form of glasses or contact lenses (see Exhibit 4).
The balance of the discussion will look at the delivery flow for glasses.
For glasses, consumers typically took their prescriptions to dispensing optometrist. This might be
a small retailer, or a large chain like LensCrafters. Specific choices and preferences varied by country.
The dispensing optometrist offered a selection of frames, which were generally branded. After
selecting a frame, the consumer’s fitting parameters and/or facial profile was measured so that the
frame was correctly fitted. The lens was edged and fit into the frame of choice in the retail
environment using “stock” lenses, or prescription lenses were made in a lab and the lenses cut,
edged, and fit into the frame.
Historically, wholesale labs aggregated demand from multiple outlets to achieve economies of
scale. Carl Zeiss had a large wholesale lab in Aalen, Germany, that served all of the country and parts
of Western Europe. The wholesale labs made significant investments in lens-production equipment
made by firms like Satisloh and Schneider, and they consumed materials like lens blanks and
grinding and polishing materials from Carl Zeiss, other lens casters, and a wide range of specialty
suppliers. The traditional value network for glasses is shown in Exhibit 5.
Although many of the tools and techniques employed had been relatively unchanged over the last
century, there was still a surprising pace of innovation. A new class of instrument known as an
aberrometer held the promise of providing a better correction to consumers under varying light
conditions, resulting in higher visual acuity, especially in specific situations such as low light,
nighttime driving, or computer work. Instruments like the Zeiss i.Profiler (see Exhibit 6) employed
sophisticated mathematical processing to provide a more precise prescription that offered improved
night vision, color perception, and contrast sensitivity. Aberrometers also offered the promise of
customization with automation, especially when paired with a fast turnaround production system.
Carl Zeiss also offered its i.Scription, a tailored, personalized lens prescription unique to an
individual’s eye.
Corrective Lens Manufacture

Traditional single-vision corrective lenses were designed using spherical and toroidal surfaces of
revolution, so they could be ground and polished using rigid lapping tools. c Production started with
“blanks” made from materials with various refractive indexes. Blanks were cast in custom molds to
provide a starting point for an individual prescription. Higher refractive indices were helpful in
producing lighter and thinner lenses, but they also tended to have a lower Abbe number—a measure
of how the refractive index varied with wavelength and therefore how much distortion of colors the
user would see. The typical manufacturing process for traditional lenses was quite complex because
the wide variability of prescriptions drove combinatorial complexity. A typical lens manufacturer
had hundreds of different blanks on hand using different base curves and different materials,
representing a range of starting points. This created a huge inventory burden, which favored large-
scale centralized production to maximize efficiencies. Bifocals and trifocals required even more
starting surfaces to cover all the possible addition powers, making manufacturing even more
complex.
c Lapping is a process of grinding and polishing a surface by rubbing it with an abrasive. The abrasive can be another hard
surface such as silicon carbide, diamond, or jeweler’s rouge, or it can be a soft material like pitch that is “charged” with an
abrasive.
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Progressive lenses had been around for over 40 years, with significant market adoption in the
previous 15 years. Progressives, like other multifocal lens types, represented a challenge in SKU
complexity and cost of manufacture. In the conventional process for manufacturing progressives,
semifinished blanks in a wide range of precast, front-surface “progressive base curves” were
manufactured and placed into inventory. When a prescription order was received, one of these
blanks would be pulled out of inventory and the prescription spheric and toric corrections would be
ground into the back side (see Exhibit 7 for the production flow).
In 1996 Carl Zeiss invented an approach for making progressives that substantially simplified the
manufacturing process.d In this “free-form” process, a blank was selected from a small inventory of
simple, spherical single-vision lenses. A computer program then calculated the design geometry of
the back surface. This combined both the complex progressive geometry and the prescription into
one shape. The calculation generated a tool path for a single-point cutter mounted on a computerized
numerical control CNC tool to carve out the progressive shape. It produced the complete design
unique to a specific patient on the back surface. Exhibit 8 compares the front and back surfaces.
Exhibit 9 compares the two processes. Major benefits included a vast reduction in the number of
different blanks that had to be carried in inventory (see Exhibit 10) and faster throughput time.
After grinding and polishing, both traditional and free-form lenses required coating to protect the
surface from scratching. This was usually done by a dipping or spinning process using special
lacquers. Antireflective (AR) coating was often applied next, and this process employed a vacuum-
evaporative or sputtering-deposition process.
The free-form process enabled the production of complex lens designs on a per-job basis, enabling
a local prescription laboratory to deliver progressive lenses designed and produced in real time for
each specific wearer’s individual needs. Meanwhile, lens grinding and polishing systems had
capitalized on the rapidly declining cost of computing power and developments in high-speed
motors and damping systems, and had gotten much less expensive. AR coating still benefited from
scale, since low-cost AR coating machines had only recently emerged and the one-piece process flow
had not stabilized yet. Though free-form production potentially lowered many barriers to market
entry like scale and capital costs, there was still the need for expertise to set up, run, and debug early
free-form equipment. It had to compete with a very mature conventional production method that
was far down the learning curve.
Carl Zeiss brought its first free-form offering to market in 2000. It elicited a strong competitive
response as the potential to change the basis of competition in the eye-care value network unleashed
a new round of innovations. In May 2007 Carl Zeiss filed suit against Signet Armorlite, Inc., charging
it with infringing its key free-form patent.e This suit would continue for the next five years.
Essilor and Market Consolidation

Essilor was the market-share leader in the industry. The Paris-based multinational was formed
from the 1972 merger of two companies that dominated the French eyewear market at the time: Essel
and Silor. Essel had created its Varilux® brand of progressive lenses in 1959. The merged company
concentrated its activities in progressive lenses made of plastic, and in the 1970s began to turn its
d This invention was described in U.S. Patent No. 6,089,713, “Spectacle lens with spherical front side and multifocal back side
and process for its production,” filed on January 16, 1998, and granted July 18, 2000.
e The case was Carl Zeiss Vision International GmbH et al. v. Signet Armorlite Inc., case no. 3:07-CV-00894 (U.S. District Court for
the Southern District of California, filed May 16, 2007), and concerned U.S. Patent No. 6,089,713.
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activities toward international expansion. It established lens-manufacturing facilities in the U.S. and
Ireland, marketing its output through local distributors or Essilor subsidiaries, often acquiring
distributors (particularly in Germany) along the way.
With intensifying competition in the mid-1970s, Essilor decided to focus on market share and
broaden its distribution base. In Europe it continued to acquire or merge distributors, and in Asia it
expanded its coverage to Burma (Myanmar), Indonesia, Japan, Malaysia, Singapore, Taiwan, and
Vietnam. In the U.S. it embarked on a rationalization strategy of merging subsidiaries into a single
unit—Essilor of America. To increase cost competitiveness, Essilor focused on increasing mass
production facilities outside of France, opening new plants in Mexico, Puerto Rico, Brazil, and
Thailand. This was followed by new production facilities in India and China. Inside France the
company invested in automation to attain competitive manufacturing costs. An Essilor investor
presentation highlighted the company’s distributed manufacturing strategy of serving the European
market from India and Thailand, the U.S. from China and Mexico, Latin America from China, and
Oceania from Thailand.f
Essilor also started investing in ophthalmic instruments and prescription lab equipment,
eventually acquiring Satisloh, the manufacturer of lens-production equipment. Karen Roberts
commented:
Essilor purchased the biggest equipment supplier in the industry, Satisloh. They not only
had a relationship with the Essilor labs but were also the primary supplier to many of the
remaining independent labs in several major markets globally. Satisloh was also one of the two
primary free-form equipment providers. So now Essilor not only dominates distribution in the
professional channel through their own lab network, along with being a major supplier to the
chain retail business, they also own the biggest lab equipment and consumables vendor in the
industry; two of the larger lab management software vendors in the U.S. market, Optifacts and
VisionStar, which are used by Wal-Mart and Luxottica, respectively, and account for
approximately 25% of the U.S. prescription lab (RX) transactions; and a major stake in
VisionWeb, the portal by which approximately 30% of ECPs place their RX orders on the
prescription labs. This web of related businesses results in many traditional and free-form
product transactions being dependent on getting access to Essilor-controlled services to be
fully implemented in the market. This also gives Essilor visibility to many competitive
transactions (volume, design, RX, and customer demand) being ordered through VisionWeb,
being routed through their lab management systems, and manufactured on the Satisloh
equipment. This is a powerful and limiting influence for open market access.
For example, free-form technology provides a new way of making and delivering complex
products to the market. To realize the full potential of these disruptive technologies, companies
need to navigate around Essilor’s multiple touch points in the market . . . they have so many
assets that they can use in an advantageous way in this new paradigm.
By 2006, Essilor was operating in more than 100 countries and had sold 215 million eyeglass
lenses. It had a 50% global market share of progressive lenses. In April 2010, Essilor acquired Signet
Armorlite and with it the Carl Zeiss patent infringement suit, which was still being fought in federal
court in San Diego, California.
f Essilor 2010 Investor Presentation, Paris, March 2, 2011, http://www.essilor.com/IMG/pdf/Essilor_SLIDES_2010_RESULTS.

pdf.
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Free-form Production Technology and Horizontal Specialization

Historically, the Vision Care progressive lens business of Carl Zeiss received prescriptions,
produced the lenses from either progressive semifinished lens blanks or via free-form lens
production, and then delivered the finished prescription lenses to doctors. “Selling value-added
prescription lenses directly from our prescription laboratories or selling value-added semifinished
lenses in boxes to our customers to process in their labs is what we did,” explained Karen Roberts as
she described the traditional model to a colleague. The arrival of low-cost free-form CNC machines to
cut and polish lenses enabled the production of uniquely customized lenses for individual wearers.
These inexpensive free-form machines also enabled very different business models. Because so
much of the design expertise was now embodied in the algorithms and software that controlled the
CNC grinding and polishing machines, the linkage to the supply of a wide variety of semifinished
progressive lens blanks was broken. Any design could be cut using a relatively small number of
blanks, because more of the progressive customization could be cut into the back surface of the lens.
Now each prescription was converted into a job-specific calculation. This yielded a design/cutting
file, which was transmitted to the lab. The growth of the technology also drove standardization of
data interfaces for the management of lenses and prescription orders.
Free-form gave rise to new competitors as firms focused on increasingly narrow horizontal slices
of the value chain. They did this because they could focus on core competencies, things they did best,
and they would not have to develop the broad scope needed for a vertical offering. (See Exhibit 11
for a contrast of the vertical and horizontal models). Companies like Indizen Optical Technologies
(IOT) exemplified the new model. Begun as a joint venture between the optics department at the
Complutense University of Madrid and the software company Indizen Technologies, the company
billed itself as the “independent free-form lens design company,” providing a new alternative for
independent RX labs.1 IOT supplied only its branded Futura® ophthalmic lens design software that
enabled labs to turn a prescription into progressive lenses. It accepted prescription information from
popular lab management systems, used its own proprietary eye-lens model and calculation platform,
and then generated a file that a lab management system could forward to a free-form grinding
machine.
Horizontal specialization led to more competition and pressure on pricing. It also drove a rapidly
evolving market. Roberts explained, “IOT is an example of a company that doesn’t have the legacy of
an asset-intensive traditional manufacturing base, nor the need to distribute physical products to
market; they can literally enter the market with cheap designs and a reliable service model, and be
very fast and flexible.” He continued: “Literally, they have a viable business delivering just one
component into the market, and they’re doing quite a nice job of driving market share and getting
penetration in every market.”
One layer of the value chain served as a gateway that controlled access to customers in the new
business model: Laboratory Management Software (LMS) vendors. Essilor owned three of the larger
LMS vendors in the U.S. market—two of these, Optifacts and VisionStar, accounted for a large slice of
the market. Essilor also owned the Omics LMS, as well as a major stake in VisionWeb, the portal
through which approximately 30% of ECPs placed their RX orders on the prescription labs. Eyefinity,
an example of an independent portal competing with VisionWeb, counted Essilor, Carl Zeiss, Signet
Armorlite (owned by Essilor), and Transitions Optical (49% owned by Essilor) in its network of
alliances (see Exhibit 12).
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A New Business Unit and a New Business Model

Free-form technology brought dramatic changes to the traditional wholesale business. Carl Zeiss
Vision Care went from selling semifinished lens blanks with revenues ranging from $20–$75 a pair, to
selling simple semifinished lenses (often called “pucks”) to resellers who used their free-form
machines to cut the progressive and prescription geometry on the pucks in their own labs. The
resellers captured much of the value-add in their own labs, and the pucks became a commodity.
Many resellers started out wanting to buy the least expensive pucks and looked for inexpensive lens
design packages. “That’s the point where we were faced with losing half of our business, where the
margins were high, or finding a way to participate in this new paradigm,” explained Roberts. “Since
we invented the technology relating to highly customized free-form progressives and the processes
by which they were made, it was vitally important that we take that technology to the market.”
Several events helped kick-start a new direction for Carl Zeiss Vision Care. In November 2011, the
company carved out a dedicated “Customer Lab Enablement” business unit to address the horizontal
market challenge. Its initial mission was to work as an internal business and technical expert
consulting team to support the regional commercial entities with customer-specific free-form and
other technology-enablement initiatives. The team supported the commercial teams with market
profiling and identifying target customers in their respective markets, and then provided the tools
and training to implement a new “pay-per-click” model. Roberts, who was appointed group head,
explained:
The board made a clear and conscious decision to cut us loose and created a dedicated
business unit that had the flexibility to adapt and rapidly respond to this new business
paradigm. We are still required to operate within a certain framework, but all in all we've been
able to get an enormous amount of traction doing things that didn’t fit the traditional business
model and behaviors. Because this new business is underpinned by delivering packaged
technology and IT solutions, we basically just needed a handful of people that were technically
competent and some new business tools to deliver customized services and solutions.
The second key event took place in August 2012. Carl Zeiss won its patent infringement suit
against Signet Armorlite, who was now part of Essilor. Significantly, the jury found that Signet
Armorlite had willfully infringed the patent, and the judge granted Carl Zeiss treble damages plus
attorneys’ fees. More importantly, it motivated Carl Zeiss to license its free-form patents. Hoya Vision
Care quickly took a license, and Essilor finally settled and took a royalty-bearing license to the patent
as well. The royalty-bearing patent license was validation of the importance of the patent to Essilor
and the optical industry.2 For Roberts the Essilor settlement agreement gave an additional
“encouragement tool” for prospective customers considering the pay-per-click model: it would come
with an embedded license.
The Customer Lab Enablement team developed a menu of offerings. The entry-level design
package was inexpensive and provided minimal materials and services. Carl Zeiss simply set up an
interface between the lab and the web server to download cutting files on a job-by-job basis. The lab
could even run a self-validation with Carl Zeiss audit support. Once validated, the lab could start
production and pay per transaction or “click.” Roberts commented:
This is an entry-level transaction and acts as a placeholder locking in the relationship with
the customer rather than having them go to one of our competitors. It is literally a self-serve
option. We include this option since we have limited resources and this provides a smart way to
extend our market reach to ensure we don’t get locked out of key customers in the short term.
This approach is only meaningful since we require our businesses to have a supporting strategy
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for going in and working with those customers to nurture and grow the relationship over time.
We can add real value helping them become more capable in the future, and that's where we
should be able to derive additional income.
At the other extreme, the Customer Lab Enablement unit sold a custom design service that
provided the customer with custom-made designs and individually tailored RX lenses. “We're really
targeting customers at different levels and helping them find ways to differentiate their business in a
crowded marketplace by not limiting the offering to a one-solution-fits-all approach,” explained
Roberts. Competing with many horizontal specialists meant establishing differentiation. Roberts
continued:
One of our points of differentiation is that we have all this expertise in our own labs; we
have been designing progressive lenses for 40 years. We know about lenses and lab processes
and what you need to do to drive superior quality and results. We talk to the customer about
“quality” in terms of both cosmetic quality and maintaining the integrity of the lens design.
When a customer opts to use a Carl Zeiss solution, what they cut on that free-form surface and
ship to their customer is of superior quality. We can help ensure that by going into the
customer’s lab and installing a Carl Zeiss process and providing on-site training. We also
ensure they have a quality and measurement system in place and support them with ongoing
audits.
In addition, each time they transact with our web service to request a cutting file for the job,
we don’t just simply download a “points file” describing the geometry of the surface to be cut
like many of our competitors; we also download macros containing machine parameters. This
ensures that when you make lenses in a certain material or of a certain geometry, we drive the
free-form generators and polishers with the same tuned process parameters we would run in
our own labs. These changing process parameters ensure better conformance with the target
designs and better surface quality. These enhanced services allow us to charge a premium on
our click transactions.
Roberts’s team targeted customers who valued consistency and top quality. These were also likely
to be the ones who valued putting the Zeiss brand on their finished products.
The Customer Lab Enablement team monitored its success using various metrics. At the top of the
list was the total number of customers that were “free-form enabled” and transacting regularly with
the web server, the geographic diversity of the enabled customers, the total click transactions per
month, and the associated margins for each segment of the business. They tracked new business as
well as conversions of prior traditional business. They also tracked emerging market revenues as an
indicator of penetration in rapidly emerging markets.
Tackling Emerging Markets

Latin America and Asia were key focus areas for the Customer Lab Enablement team because of
the rapid growth in opportunity in those markets. The team had a two-pronged strategy, offering
inexpensive prepackaged systems with a one-time fee model while simultaneously targeting the high
end via one or two preferred partners. The select partners received extensive training and support to
ensure that they were enabled to act as if they were an extension of the Carl Zeiss lab network. This
model worked effectively in markets like Colombia, for example, where Carl Zeiss partnered with a
family business with a strong presence in the local market. The Customer Lab Enablement team was
working to replicate this model in other Latin American countries including Peru and Venezuela.
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Asian markets, especially China, represented a more difficult challenge. A large number of firms
competed there, ranging from low-quality commodity manufacturers to large global competitors like
Essilor who had made numerous acquisitions and had a strong retail presence. Many Chinese
competitors used cheaper pucks and/or less sophisticated equipment and software, ultimately
producing lenses of lesser quality. The opportunity for Carl Zeiss was for customers to recognize and
value the difference in quality of Zeiss lens designs, both at the level of the RX lab and ECP (a
business-to-business sale) as well as for the end consumer (a business-to-business-to-consumer sale).
Roberts had mixed feelings about the Chinese market. She felt that the Customer Lab Enablement
team, in close collaboration with the local Carl Zeiss commercial team, had to make some careful
choices about which partners to invest in:
You have to start by educating the ECPs in these markets for them to be receptive to what
the Zeiss brand stands for and can deliver . . . We build relationships, and in some of those
there are opportunities to become equity partners for the future. I don't think you take an
indiscriminate mass market approach; you need to be thoughtful in your selection of partners.
One of the things we are learning is that we may need to secure a little foothold in customers,
big and small, by using our entry-level solutions and also exploring the installation of turnkey
systems. The idea is to implement quickly and have a conversion strategy to grow each
foothold into a richer business as the market becomes more responsive to customized products
and demands the higher quality. But you have to monitor and understand who that customer
is . . . what is motivating them, where their business is targeted, and see if there is an
opportunity for us to participate in that future. If over time you get more familiar with their
business model and/or the characters running the business, and it's not a comfortable fit, we
don't have to go back in to nurture that relationship. Our return is small for the turnkey and
entry-level implementation—a one-time fee—but if we don’t take that there are 30 other
companies willing to do it.
10
2024.
Exhibit 1 Correcting Vision with Glasses
Source: Company brochure, © 2011 Carl Zeiss AG, used with permission.
11
2024.
Exhibit 2 Progressive Lens for the Correction of Presbyopia
Wide, Clear
Distance Vision
Optimal Corridor
Length
Near Vision
Intermediate
Source: Adapted from company presentation, © 2011 Carl Zeiss AG, used with permission.
12
2024.
Exhibit 3 Zeiss Phoropter
Source: Company photo, © 2011 Carl Zeiss AG, used with permission.
13
2024.
Exhibit 4 A Typical Prescription
Source: Company presentation, © 2011 Carl Zeiss AG, used with permission.
Exhibit 5 Traditional Vision Care Value Network
Industry Value Chain
Raw Materials Chemical Companies and Glass Manufacturers

Supplier (PPG Industries, Transitions, Corning, Schott, Tokuyama, Mitsubishi, etc)
Product Flow and Distribution
Lens Other Casters and Lens Designers

Casters Lens Manufacturers (Vision Ease, Shamir, Signet Armorlite, etc)
With Labs
(Essilor, CZV, Hoya, Rodenstock,
Independent Labs
Rx Finishers etc)
(Non Manufacturer
and Coaters Retail Chains With Labs
Owned)
(Luxottica, Wal*Mart,
HAL Group and
Independent Retailers w/out Labs (Chains, ECP) HMO for USA only)
Retailers
(numerous)
End Customers Consumers
Dispensing and Contact Lens Eye Science

Related Frames Diagnosis Manufacturing and Exploration and
Equipment Distribution Other
14
2024.
614-007 -15-
Source Company photos, © 2011 Carl Zeiss AG, used with permission.
Zeiss i.Profiler Automated Aberrometer
Exhibit 6
2024.
614-007 -16-
Exhibit 7 Conventional Progressive Lens Production
Mass Production Process

Slump polished
1 Design lens 2 Calculations and 3 Cut ceramic 4 spherical mould on
data in computer forming surface forming surface
Customized RX lab
Mold assembly Cast semi-finished Select correct front Generate rough sphere
5 6 progressive lens (front)
7 surface (inventory)
8 or toric prescription
surface on back side
with progressive
base curve; add
2024.
power for
prescription
9 Fine rough surface 10 Polish surface 11 Edge lens 12 Spectacle lens
Exhibit 8 Free-form Lens Configuration
Front Surface Back Surface
Simple sphere surface made at Complex surface containing both

factory is selected by base curve the progressive and the prescription
only powers is made at the laboratory
17
2024.
Exhibit 9 Comparison: Front Surface vs. Rear Surface
Large inventory of
Progressive front Cutting of simple Edged to frame
molded lenses with
surfaces designed sphere or toric shape using frame
front surface
for generic on back surface and patient data
progressive designs
conditions of use
in various add
Base Curves
powers, base
curves and L/R
Add Powers
Total design
Small inventory of Edged to frame
Single point unique to patient
spherical semi- shape using frame
cutting formed on back
finished lenses and patient data
surface
Computerized
calculation of back
surface design
using entire
prescription, frame
Base Curves and patient data
Source: Adapted from company presentation, © 2011 Carl Zeiss AG, used with permission.
18
2024.
Exhibit 10 Minimum Stock to Service One RX Order: Conventional vs. Free-form Processes
720 Different Conventional Front Surface

Progressive Lenses
5 Semi-finished
spherical front
surface lenses
of different radii
19
2024.
Exhibit 11 Horizontal Specialization in Free-form Production
Vertically Integrated Model
Processed Lenses ECP

Design Owner
[Design, Brand] Retail
Horizontal Specialization Model
Carl Zeiss RX Labs

ECP
Essilor Design (Click Fee) (Independent or
IOT, Others Retail
Retail)
Design
Software
Carl Zeiss
Essilor
IOT, Others Blanks
Coating
Carl Zeiss Recipes
Essilor
Others including Chinese
suppliers Chemicals
Free Form
Lab Cutting Brand License
Carl Zeiss Management Machine
Essilor
Others
Software
Multiple Suppliers
Carl Zeiss (Zeiss, American

Optifacts (Essilor) Satisloh (Essilor)
Optical, Sola)
VisionStar (Essilor Schneider
Essilor (Signet, Armorlite,
VisionWeb (Essilor) OptiPro
Kodak, others)
Others Coburn
Others
Source: Prepared by casewriter.
20
2024.
614-007 -21-
Exhibit 12 Eyefinity Lab Management Partners
Spectacle Lens Frame Partners Contact Lens System Partners Practice Management Integration
Partners Partners
CC Systems Lab Management
Essilor Marchon Eyewear ABB/CON-CISE Eyefinity OfficeMate/ExamWRITER
Software, Labzilla
Carl Zeiss Vision Altair Diversified AcuityLogic
Digital Vision, Inc., VISION
Signet Armorlite The Charmant Group Ophthalmics Inc. and Abeo Solutions Crystal Practice Management
Optifacts, Inc., Optifacts
Transitions Optical The Kenmark Group Mid-South Premier AltaPoint Data Systems, LLC AltaPoint Vision
Optivision, Inc., Optivision LMS
L'Amy America Ophthalmics California Medical Systems Practice Expert EHR and
VisionStar, VisionStar LMS
Maui Jim Optical Distributor PM
MODO Group Clarkson Eyecare Grow CMS
Oakley Compulink Eyecare Advantage
REM Eyewear Crowell Systems Medformix
Rudy Project Cyclops Vision Corporation Cyclops Eyecare Records
The Safilo Group Diversified Ophthalmics Practice Maximus
Silver Dollar Optical EyecodeRight Online RevolutionEHR
2024.
Smith Optics EyeManagement, Inc. Eye Care OS
Tura EMRlogic EMRlogic/OD Professional™
Viva International Group First Insight® MaximEyes
Zeal Optics HealthLine Systems Eyecom3
Insight Software Solutions My Vision Express
KeyMedical Software KeyMedical Software
Liquid Software Designs LiquidVision
Medflow EMR and opthalmicsuite™
Professional Practice Systems OPTO
Universal Software Solutions/VersaSuite Optical
VersaSuite
Williams Group Practice Director
Source: Compiled by casewriter from Eyefinity, Inc. website, https://secureb.eyefinity.com/welcome/home.eyefinity?page=SpecPartners&ons=partner&ens=10010, accessed September 6, 2012.
Exhibit 13 Finished Single-Vision and RX Progressive Addition Lenses Distribution Chain
Consumer Single Vision Lenses ------------ Rx Progressive Addition Lenses (PAL) ------------
Product
Retail
Point of Sale + ECP
Retailer
ECP
Rx Lab owned by Independent Rx Lab owned by

Distribution Distribution Rx Lab retailer
mass manufacturer
Carl Zeiss Carl Zeiss

Mass
Essilor Essilor
Manufacturer
Hoya Hoya
Others Others
Wholesale
Channel
Source: Prepared by casewriter.
22
2024.
Endnotes
1 See Indizen Optical Technologies website, http://www.iot.es/, accessed September 6, 2012.

“Essilor Group enters a Settlement and Cross License Agreement with Carl Zeiss Vision Care,”
2
Essilor news release, September 3, 2012.
23
2024.

Carl Zeiss and Free-Form Production Can We See Clearly Yet

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9 -6 1 4 -0 0 7

REV: MARCH 30, 2015

Carl Zeiss and Free-form Production: Can We See

Vision Correction with Corrective Lenses

a “American Optical Manufacturing of Southbridge, Massachusetts,” AO News 1968, no. 5, http://www.antiquespectacles.

Purchasing Corrective Lenses

Corrective Lens Manufacture

Essilor and Market Consolidation

f Essilor 2010 Investor Presentation, Paris, March 2, 2011, http://www.essilor.com/IMG/pdf/Essilor_SLIDES_2010_RESULTS.

Free-form Production Technology and Horizontal Specialization

A New Business Unit and a New Business Model

Tackling Emerging Markets

Exhibit 1 Correcting Vision with Glasses

Exhibit 2 Progressive Lens for the Correction of Presbyopia

Exhibit 3 Zeiss Phoropter

Exhibit 4 A Typical Prescription

Exhibit 5 Traditional Vision Care Value Network

Industry Value Chain

Raw Materials Chemical Companies and Glass Manufacturers

Lens Other Casters and Lens Designers

End Customers Consumers

Dispensing and Contact Lens Eye Science

Exhibit 7 Conventional Progressive Lens Production

Mass Production Process

9 Fine rough surface 10 Polish surface 11 Edge lens 12 Spectacle lens

Exhibit 8 Free-form Lens Configuration

Front Surface Back Surface

Simple sphere surface made at Complex surface containing both

Exhibit 9 Comparison: Front Surface vs. Rear Surface

720 Different Conventional Front Surface

Exhibit 11 Horizontal Specialization in Free-form Production

Vertically Integrated Model

Processed Lenses ECP

Horizontal Specialization Model

Carl Zeiss RX Labs

Carl Zeiss (Zeiss, American

Source: Prepared by casewriter.

Exhibit 12 Eyefinity Lab Management Partners

Exhibit 13 Finished Single-Vision and RX Progressive Addition Lenses Distribution Chain

Rx Lab owned by Independent Rx Lab owned by

Carl Zeiss Carl Zeiss

Source: Prepared by casewriter.

1 See Indizen Optical Technologies website, http://www.iot.es/, accessed September 6, 2012.

Essilor news release, September 3, 2012.

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