BBMM103 Management Principles: Case Study
Polaroid - Disruptive Innovation!
*The following case study has been written drawing heavily on the information both from the Boston.com Staff website and the official Polaroid website.
Figure 1: Dr Ed Land with the SX 70 1972 (Boston.com Staff 2012)
Polaroid was founded in 1937 by Dr. Edwin Land, a scientist who managed the company for more than four decades. “Dr. Land,’’ as most people referred to him, left Harvard College before graduation to start inventing in a Cambridge garage. In 40 years, Land built up a company that did about $1.4 billion of business all over the world in 1979.
He stuck to his guns, never diversified into other businesses, never sold out to another company, and never borrowed money on a long-term basis.
Land was in charge of Polaroid, CEO for 43 years during its transition from a small research and marketing firm into one of the most successful high-tech companies ever. Unfortunately for Land, he was not the type to back down on his ideas. Polaroid in its ‘hey day’ was the equivalent of “Apple” of its times in the 1960s and ‘70s. The company’s profits started declining in the 1980s which eventually led to Polaroid’s bankruptcy in the 2000s.
The company, got its start by grafting polarizer technology onto every product imaginable, including 3-D movies and glare-reducing goggles for dogs. As a 22-year-old Harvard dropout in New York, he sneaked into Columbia University labs to invent the artificial polarizer, which splits light waves into separate beams.
During World War II, Polaroid designed and manufactured numerous products for the armed services including an infrared night viewing device polarizing and coloured filters for rangefinders and periscopes.
Polaroid’s first camera was put on sale at Jordan Marsh in downtown Boston just before Christmas 1948 sold for $89.95.
By 1956, Polaroid is distributing its products to more than 45 countries worldwide.
Figure 2: The Model 95 Land camera (1948) (Boston.com Staff 2012)
Instant Photography – Disruptive Technology (Innovation)
In 1943, Land was asked by his three-year-old daughter why she could not see the picture he had just taken of her. Her request led to the Polaroid Land Camera in 1948. This was also the moment that Land conceived the idea of an ‘instant camera’.
Kodak workers came up with a camera that employed a sticky, peel-away film that the user pulled out of the camera with a string. Then Polaroid started marketing the SX-70 in 1972, which dispensed with the peel-away and automatically ejected the picture from the camera. This camera was produced by Polaroid from 1972 to 1981 (wiki).
This type of camera and film was a disruptive technology (Innovation) that subsequently altered the film and camera industry. This created a new market and value network for Polaroid. It replaced the market for developed film cameras for the ‘average Joe’, who now could see a picture taken instantly. Developed film cameras became the domain of professionals and hobbyists.
Kodak, a rival of Polaroid copied the concept and in 1976 introduced the Kodamatic which used a similar film and camera technology to that of Polaroid.
Polaroid’s invention of instant photography created a new business line that didn’t just sell cameras. It charged about $1 for each sheet of coated paper that developed into a photograph before people’s eyes. The film sales produced huge profit margins with no competitor to do anything about it.
Figure 3: SX 70 camera (1972) (Michael Zang 2011)
Kodak documents showed officials calling Polaroid’s SX-70 camera a “masterpiece of engineering.’’ Kodak dumped its $94 million investment in a peel-apart instant product in 1972 when it recognized this was “essentially an obsolete product,’’ soon to be replaced by the newer SX-70 technology. Kodak rushed to copy Polaroid, using 30,000 film units and 70 SX-70 cameras.
Polaroid announced they were suing the rival film company. Polaroid was fighting back against the inroads of an industrial giant seven times its size. Land claimed that Kodak had stolen its patented inventions to make the new cameras.
When Kodak first introduced its new cameras in 1976 and Polaroid sued, the instant photography business was about to take off. In the two years that followed – and in large part because of Kodak’s added advertising – total sales of instant cameras climbed from 7.4 million cameras in 1976 to 10.3 million in 1977 and 14.3 million in 1978.
In 1977, Polaroid released the ‘One Step” camera. This was an affordable, fixed-focus camera which became the best-selling camera, instant or developed, in America at the time. In 1977, the company celebrated the 30th anniversary of instant photography with a $100,000 party. More than six million Polaroid cameras were sold that year.
The Decline of Polaroid in the 1980s
In 1981, Land resigned as chairman of the board. He had been the head of the company for more than 40 years. The introduction of Polavision, a colour motion-picture system that made 2½-minute films in self-developing cassettes, designed to usher in era of home videos did not sell well, and eventually lead to the company writing of $89M and Land’s resignation.
Polaroid sought to innovate in the declining market for instant pictures and create newer products despite Land’s absence.
Polaroid, poured much of the profits from the instant photography business into high-resolution imaging and electronic imaging systems — used in everything from computerized X-rays to tamperproof automobile licenses.
The 1980s were not kind to Polaroid, which was trying to reinvent itself by shifting away from a dependence on consumer photography, a market in steady decline. Polaroid was forced to make wholesale changes, including firing thousands of workers and closing local factories.
The Rise of New Technologies in the 1990s
One-hour colour film processing, single-use cameras from competitors, videotape camcorders, and digital cameras — drastically changed the world of photography. Not only were there more choices for capturing images, but the total cost for each picture had dropped substantially.
Edwin Land died in 1991. He ordered his notes and correspondence be destroyed after he retired in 1981. What was left perished in a fire that consumed his home years later.
“The purpose of inventing instant photography was essentially aesthetic,’’ Land said in 1947, announcing the process’s invention.
Polaroid laid-off thousands of workers and closed more manufacturing plants. The company shifted into disposable cameras for its instant photos. But this was years after other filmmakers, Kodak and Fujifilm, were already in the market.
Cost pressures lead the company to indefinitely shelve plans to create a combination camera that produced instant photos and 35-millimeter negatives and another combination camera that yielded instant photos along with digitally stored images.
To keep costs down, the company made virtually all new instant camera and film products in China and other low-wage countries — a move that prompted Polaroid to close more Massachusetts production facilities. In another streamlining move, the company left its long-time corporate home in Kendall Square for a Polaroid-owned building on Memorial Drive that had been mothballed.
Polaroid released a tiny portable printer in 2001. The company envisioned a way for advertisers such as restaurants and retailers to reach mobile phone users with printouts. That would give Polaroid an additional revenue stream from the new product, along with sales of the device, and refills of printout media.
Polaroid filed for bankruptcy in October 2001.
The company announced a plan that gave the top 45 executives bonuses just for staying at their jobs. Meanwhile, other employees were restricted from selling their stock before leaving their jobs.
The employee stock ownership plan was crucial in fending off a hostile company takeover. But as Polaroid’s fortunes waned in the late 1990s, the ESOP became a source of frustration. Employees couldn’t sell their shares until they left the company. As Polaroid’s stock sank, employees saw a big piece of their life savings evaporate. Meanwhile, executives who owned shares outside the plan were free to sell.
A group of Minnesota-based investors bought Polaroid’s assets, including the photo collection. Then they declared bankruptcy. The creditors were granted permission to auction off the valuable artefacts in Polaroid’s archives.
Polaroid announced that the company would stop producing instant film in 2008. The era of the offhand whirr-whirr-whirr of Polaroids – push, click, eject; push, click, eject – was over.
After Polaroid announced that it would stop producing analog instant film, a group of former employees bought a Polaroid film factory in the Netherlands. The company was called The Impossible Project. The team had to create new colour dyes from scratch. But today, instant photo enthusiasts can order select films online or at a handful of specialty stores.
Analog photographs shifted to digital, but for those who miss the thick, tactile, slightly unreal feeling of a Polaroid, the folks at The Impossible Project are designing a machine that converts digital photos to a physical copy.
A successful “Kickstarter campaign” was launched recently to capitalize on the growing market for customers tired of staring at their photos on a screen.
Perhaps Polaroid still has a role in the future of photography.
Polaroid, Available from https://www.polaroid.com/history, (February 2019)
Boston.com Staff 2012, History of Polaroid and Edward Land, Available from https://www.boston.com/uncategorized/noprimarytagmatch/2012/10/03/history-of-polaroid-and-edwin-land, (February 2019)
Michael Zang 2011, Available from https://petapixel.com/2011/06/16/the-story-behind-the-polaroid-sx-70/, (February 2019)
Discussion Questions (minimum 100 words per question)
1. What is meant by the terms internal and external forces for change? Which forces do you think are causes of change at Polaroid?
2. As a manager, how would you deal with resistance to change when you suspect employee fears of job loss are well founded?
3. How might businesses use the Internet to identify customer needs through open innovation? What do you see as the major advantages and disadvantages of the open innovation approach?
4. What is the main corporate culture at Polaroid? Explain.
5. What type of management approach did Polaroid have? Consider the lecture on the Evolution of Management.
6. Where does Dr. Edward Land’s leadership fall on the Blake Mouton Leadership Grid? Explain.
7. What are the driving and restraining forces of a change you would like to make in your life? Do you believe understanding force-field analysis can help you more effectively implement a significant change in your own behaviour?
8. Write one goal Polaroid could have implemented using the SMART principle when the companies’ profits were declining.
9. Does Polaroid have a future? Discuss. (hint: research companies that have reinvented themselves)
10. Which of the three competitive strategies – differentiation, cost leadership, or focus – best explains Polaroid strategy?