A lot of flights within Europe are longer than 60 minutes and there is a market for a premium product- BA still seems to do quite well with Club Europe for example.

The Lufthansa "business" class product is astoundingly bad and got worse with NEK. Couple this with astronomical pricing and of course no one buys it. You don't need a marketing expert to explain that the product is positioned incorrectly. Lastly- look at the number of OPs on this very forum who have attempted to change their shorthaul business class flights by one hour and have been asked to pay 1000 EUR and it is quite evident what is wrong with the program.

Lufthansa behaves in a transactional way. Customers respond accordingly.