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Arpita
Bahadur
Gaurav
Kumar
Manish Gupta
Pavan Kumar
Ranjini Ballal
Disruptive Innovation and the Bankruptcy of
Polaroid:
In 2001, Polaroid declared bankruptcy. The disruptive shift from analog to
digital photography put this industrial giant out of business. The beauty of
Polaroid cameras was that photos could be viewed instantly. When digital
imaging enabled this to be done in a much cheaper way the competitive
advantage of Polaroid was destroyed within only a few years.
Polaroid made their money by selling cheap cameras and then charge a lot of
money for the Polaroid film. Since film is used continuously this turned out to
be a fantastic business model with fantastic profits. Just like Gillette makes
great money by selling razor blades, Polaroid made great money by selling
film. The main source of profit is not the razor or the camera; it’s the
continuous consumption of blades and film.
The firm made improvements to this technology over the decades. Polaroid
experienced a remarkable growth and soon became a
householdname.Between1948 and 1978 sales grew 23 percent and profits
grew 17 percent, both annually. This remarkable success was based upon
technological innovation. Hence, Polaroid became a technology-driven
company which always looked for new challenges. Edwin Land himself held
over 500 patents.
Polaroid believed firmly in innovation: ‘Do not undertake the program unless
the goal is manifestly important and its achievement nearly impossible. Do
not do anything that anyone else can do readily.’
The firm was so successful and profitable that Kodak just couldn’t keep away
from the instant photography business. Kodak made its own version, was
sued by Polaroid for huge patent infringements and had to leave the market
in 1986.
Sony launched the first digital camera, the Mavicain 1981. The photos were
stored on a floppy disk and had a photo quality of 0.3 Megapixel. During the
1980’s digital imaging was still in its infancy. The different ’Mavicas’ that
were launched by other firms did not turn into any commercial successes.
In 1986 Polaroid invested 30 million USD in a new unit called”The
Microelectronics Laboratory”. In 1989, more than 40 percent of Polaroid’s
R&D budget was spent on exploring various digital imaging technologies.
So technologically speaking, Polaroid was well prepared for the shift to digital
imaging. It even had a sensor of 1.9 megapixels in 1989. Butin terms of
marketing and business models, it was never prepared. And as we know,
disruptive innovation is mainly a business model challenge.
Polaroid’s mistakes:
Mistake1: Poor Promotional/Ad Campaigns