Polaroid: Instant Photography King No More

Polaroid went from being one of the most successful companies in the photography industry to filing for bankruptcy in 2011. How could things go so wrong for such a successful company that was able to ward off competition in the instant photography space for years?

It certainly was not their inability to innovate! The company was built on innovation, which allowed them to secure many patents giving them a huge competitive advantage against competitors and new entrants. They even recognized the trend of digital imaging and invested significantly in R&D to come out with their own digital camera.

Then what happened? Short-term focus on profits is what happened. Polaroid had a very profitable business model—they sold cameras and made their profits on the continuous consumer consumption of film. This model is well known to consumers—purchasing ink replacements for printers, razor blades for razors and many others. Polaroid was able to ride on this wave of profits for several decades and got accustomed to high margins.

When digital photography hit the scene, Polaroid executives were turned off by the significant hit to margins they would be taking. Despite having the technology, Polaroid had no strategy for marketing the product and no intention of abandoning their cash cow of a business model.

This short-term outlook allowed them to stay afloat, but not for long. As the technology of digital photography improved and drove costs to consumers down, Polaroid ultimately lost its competitive advantage. Why would customers continue to buy film, when they could view photos instantly at a much cheaper cost? While this question seems obvious and something that the company should have seen, situations exactly like this often leave large corporations failing because of disruptive innovation.

The saddest part about the Polaroid story is that they did see this coming. They invested in R&D and had digital camera products in the market. However, Polaroid was hesitant to shift away from film and in order to keep their sales numbers up, they shifted their R&D research investment towards market-oriented research to make sure they were giving the consumers what they wanted. While this is important for a company to do, you can’t become solely reliant on such feedback. A successful company should know exactly what customers want and drive forward innovation to give the consumer something even better that they didn’t expect or know they wanted—simplifying the use of the product or making it cheaper are two common ways to achieve this.

By mainly focusing on what consumers said they wanted, Polaroid ended up promoting character branded Polaroid, shifting towards a younger demographic, while their core demographic slipped away to digital camera competitors.

When thinking about ways companies can avoid a similar fate, one solution could be decoupling strategy and innovation. Polaroid made this mistake by sacrificing innovation, specifically the R&D budget, for their strategy of maintaining sales and profits by focusing on marketing high margin products. If Polaroid had kept these two tracks separate and continued to invest in both, we might have seen them continue to innovate in the digital photography space and come out a big winner instead of a big loser.

After filing for bankruptcy and switching ownership several times, they are trying to make a comeback with Polaroid Instant Mobile Printers and it will be interesting to see if this company that was a “huge loser” can make a comeback.

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Student comments on Polaroid: Instant Photography King No More

  1. Love the Polaroid example! The issue you call out here is very applicable to a lot of disruption stories over the years. It’s tough to tell your board that you’re going to go compete with that scrappy new competitor that’s making 5% margins when your whole company is used to printing money at 30% margins. Even if you’re convinced of your vision, what if your employees only half-heartedly go after it?

    Your decoupling suggestion is interesting but I’m skeptical that when times get tough and investment capital is scarce, the cash cow will get all the funding.

    As an alternative, what about M&A? Let that scrappy player develop the technology and gleefully overpay for it when it’s just about at scale and the technology is proven. Maybe the first disruptor won’t sell but surely one of them will. This seems like a far more plausible approach versus trying to disrupt your own established company based on a bet.

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