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The beauty of Polaroid cameras
wasthat photos could be viewed instantly.When digital imaging enabled this tobe done in a much cheaper way thecompetitive advantage of Polaroid wasdestroyed within only a few years.
Polaroid made their money by
selling cheapcameras and then charge a lot of money forthe Polaroid film. Since film is usedcontinuously this turned out to be a fantasticbusiness model with fantastic profits.
Just like Gilette makes great
money by sellingrazor blades, Polaroid made great money byselling film. The main source of profit is notthe razor or the camera, it’s the continuousconsumption of blades and film.
Polaroid was founded in 1937
by Edwin Land.The business was initially based upon syntheticpolarizers, which were used for bomb sitesduring WW2. The company later shifted toinstant photography.
The firm made improvements of
thistechnology over the decades. Polaroidexperienced a remarkable growth andsoon became a household name.Between 1948 and 1978 sales grew 23percent and profits grew 17 percent,both annually!
This remarkable success was basedupon
technological innovation. Hence,Polaroid became a technology-drivencompany which always looked for newchallenges.Edwin Land himself held over 500patents, how many CEOs have thatnowadays?
Polaroid believed firmly in innovation:‘Do
not undertake the program unless thegoal is manifestly important and itsachievement nearly impossible. Do notdo anything that anyone else can doreadily.’// Edwin Land, annual report 1980
The firm was so successful
and profitablethat Kodak just couldn’t keep awayfrom the instant photography business.Kodak made its own version, was suedby Polaroid for huge patent infrigementsand had to leave the market in 1986.
Sony launched one of the
first digitalcameras, the Mavica in 1981. The photoswere stored on a floppy disk and had aphoto quality of 0,3 Megapixel.During the 1980’s digital imaging was still inits infancy. The different ’Mavicas’ thatwere launched by other firms did not turninto any commercial successes.
Bill McCune took over as
CEOafter Land in 1975.Being firmly committed totechnology, McCune decided thatPolaroid should move into digitalimaging in the early 1980’s.
However, being a technology-driven company,
Polaroidalways regarded the shift todigital imaging as atechnological challenge, notas a market challenge. It wasassumed that once thetechnology is ready, it willbecome profitable, somehow.
So technologically speaking,Polaroid was well
prepared forthe shift to digital imaging. Iteven had a sensor of 1,9megapixel in 1989.But in terms of marketing andbusiness models, it was neverprepared.And as we know, disruptiveinnovation is mainly abusiness model challenge.
For the first time ever,
Polaroid experienced stagnatingprofits in the mid 1980’s. As a consequence, the firmbecame increasingly market-oriented in the 1990’s…
In the 90’s the engineers
werein permanent fights withsenior management over whatbusiness model to adopt fordigital imaging. Since therewas no film – managementthought that there are noprofits, and therefore digitalimaging was not attractive.
The conflicts and tensionsparalyzed the
company.Therefore, the digitalprototype originally developedin 1992 was not launched until1996. Once it was launched,the sales organization did notreally know how to sell theproduct.
Polaroid took the razor bladebusiness
model for granted, thatwas after all what had generatedsuch fantastic profits in the past!But once digital cameras were goodenough and enabled a kind of instantphotography, very few wereinterested in buying expensivePolaroid film anymore.
The bankruptcy was a disaster
foremployees, retirees andshareholders.In the months before this, Polaroidpaid in total 6,3 million USD tosenior executives.
The former CEO DiCamillo got
1,4million USD.Given that top management mustbe held responsible for thisbankruptcy, this must be regardedas a ”very competitive” salary…
Well, it’s easy to blame
management.However:“I wish I could say that things would bedifferent today if Dr. Land were stillrunning Polaroid, but my guess is thatthe days of instant photography havesimply run out”// Stephen A. Benton, who worked withEdwin Land for more than 20 years
So, we see that the
more importantdigital imaging became, the lesswas spent on it!It’s amazing to see that Polaroid wasbetter prepared for thistechnological revolution in the1980’s than in 2000.
So, we see that the
more importantdigital imaging became, the lesswas spent on it!It’s amazing to see that Polaroid wasbetter prepared for thistechnological revolution in the1980’s than in 2000.WHY?
The greatest mistake was probablyto
view digital imaging as atechnological challenge, not as abusiness model challenge.Digital imaging was not compatiblewith the razor blade business model.Developing technology without abusiness model is not so difficult,Polaroid succeeded with that….