disruptive innovation and the camera industry

What’s this?

A warzone?

Well, kind of. It is whatremains from Kodak’s

building 65 in Rochester (NY).

It was demolished…

Many Kodak buildings havebeen blown into pieces…

The explosion

0

5

10

15

20

25

30

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Number of film and digital cameras sold in the United States (guess which one is digital!)

Not anymore.

Many large and profitable companies

in the camera industryhave died or suffered.

How and whydid this

happen?

Let’s go back in history and take a look…

The camera industryremained stable

during most of the 20th century.

An infrastructure emergedwith global standards…

Film could be boughteverywhere…

… and be used with any of the established camera brands…

Most companies had a stableposition in the global camera family

The professionals and photo loversoften used Leica…

…Hasselblad..

Contax…

Mamiya…

Amateursmainly

used Kodak…

Fuji…

AGFA…

Canon…

Nikon…

Olympus…

Polaroid had their own niche in instant photography.

The camera industry used to be a kind of happy and stable family

And No one was happier thanthe film manufacturers…

Photos required film…

So for each ’CLICK!’…

Agfa, Ilford, Kodak, Konica…

… Fuji…

… and Polaroid…

… made a good profit.

Just like Gilette made great money by sellingrazor blades, these firms made great moneyby selling film. The main source of profit is not the razor or the camera, it was the continuous consumption of blades and film.

So, the more photos you took, the more money they made.

No wonderfilm could be

boughteverywhere

A fantasticbusiness

model.

With fantasticprofits.

So, the competence base in the camera industry was built upon

precise mechanics…

… And chemistry.

In 1981, the industry was shaken when SONY launched their Mavica, a

camera that used floppy discsinstead of film.

Many companies feared that this technology would eventually

substitute analogue photography.

In Japan it was referred to as ’the Mavica shock’. Theyfeared that something like

this would happen.

Therefore, manycompanies invested in and

launched their own’Mavicas’ during the 1980s.

Canon formed a task forceto develop a colour Mavicain 1981. It was launched in 1986. Fujifilm came up with something similar in 1988.

But none of them leadto any great success.

The Mavica was simply not the way forward to digital imaging.

Though some threatscould be identified, the

camera industryremained stable

through the 1980s.

Some of the first digital

imagingtechnology came from

Leaf Systems.

In the early 1990s theyproduced digital backs, which

could be attached to Hasselblad cameras instead of film.

It looked like this.

Yes, big and bulky.

But the business utilitywas great. Many film photos were digitized

sooner or later anyway. With a digital back, one

step in the production of photos could be removed.

The first digital backs wereexpensive and had a moderate

performance. The first one by Leaf had 4 Megapixels and Kodaklaunched one with 6 Mpixels.

The performance was good enoughfor some applications.

Press and Studio photographersloved it and NASA was very

interested in the Kodak sensor.

The followingquotes illustrate the

dawn of digital imaging.

”The quality of high-end digital studio cameras is good enough to replace film for most catalog and magazine needs.”

MacWEEK 94-05-13

6 million pixel resolution is good enough for most applications. The perception of colour is more important than the perception of sharpness.

Kodak, 1996

Notice how bothsources use the term

’good enough’.

Digital imaging had

otherattributes

which madeit attractive.

An infiniteamount of

photos couldbe taken and

then be replicated,

manipulatedand sent, at a very low cost.

So the business utility

of a digital back whichcost maybe

30 000 dollars was still big.

And the image

quality wasGood

Enough.

A couple of attempts at smaller, simpler digital

cameras were alsomade in those years.

One of the first digital cameras was a

Kodak/Nikon product, launched in 1991.

Kodak had developed a digital back, which was

built in to a Nikon camera.

Kodak A sensor with 1,3 Megapixel, an internal

harddrive of 200 megabyteat a cost of 13 000 USD

(about 21 000 USD today!)

It was marketed to photojournalists, hoping they’dbe willing to pay for being

able to view images instantly , take a lot of

photos and removing the long process of turning film into a digital format.

In 1994, Apple launchedthe QuickTake camera.

It looked like a pair of binoculars, could store 32 photos and was the

first camera that could be connected to a PC.

The price? 800 dollars.

Eventually, the dominant design

emerged.

In 1995 Casio launched the QV10.

It had an image qualityof 0,25 Megapixels and required 4 AA batteries.

Not the greatest gadgetmankind has invented.

But the concept of having a LCD screen and this design turned out to

be very attractive.

Now the big Japanesedragons like Canon, Nikon and Olympus

invested a lot in developing this concept.

The Japanese firms worked jointly in an industry

association to solve critical technical issues.

Though firms like Kodakknew this would

cannibalize on their film business they still went in.

They thought that the shift was inevitable.

Around 2000, the digital cameras werecheap enough and

good enough.

An avalanche of growth in digital imaging now occurred.

0

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10

15

20

25

30

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Products like Canon Ixus…

… And Nikon Coolpix nowflooded the market.

Film sales now decreased rapidly.

Those who had a razorbladebusiness model makingmoney on selling film nowfaced shrinking revenues.

Kodak had to fire thousandsand thousands of employees.

Many buildings in Rochester, NY, wereblown into pieces.

In Munich, Germany, AgfaPhoto was

demolished.

Konica left the industry after trying to survive through a

merger with Minolta.

Polaroid is also resting in peace.

But film manufacturers werenot the only ones in trouble.

The Nikon D1 from 1999 was the first true alternative for photographers

who wanted digital cameras. It was mortal to many of the old

camera firms…

With the rise of digital imaging, the competence base shifted from

precise mechanics to electronics.

Many old camera companies hadlittle experience in electronics.

The competence base of those firms now became

obsolete within a few years.

Hasselblad was in deep trouble.

And so was Leica.

The Agfa camerascould not make it.

Kodak’s compact cameras were not really competitive either.

As large consumer electronics companies entered the industry, competition became even fiercer.

Massive economies of scaleand R&D were needed to

survive in this industry and fewcompanies could keep it up.

To make things even worse, mobile cameras started to disrupt the

compact cameras.

The reason:Mobile cameras had reached a point

where they were good enough.

Summing it up:

Digital imaging destroyed the film market and all those companies who tried to keep making money on film.

At one time there must have been dozens of companies making

buggy whips. And I bet the last one around

made the best buggy whips you ever saw.

How’d you like being a stockholder in that

company?// Danny Devito, Other

people’s money

Those who owned stocks in Kodak or Polaroid are

painfully aware of the relevance of this quote.

In addition to this, digital imagingturned the camera industry into a

chaotic warzone of fiercecompetition and rapid development.

Many old companies with a competence in precise mechanics

failed to renew their skills and couldnot keep up with the pace of

development.

During the shift, somecompanies claimed that

digital imaging couldnever produce as good

photos as film.

Technically they may havebeen right about this.

But that did not matter, because digital imaging was

good enough, and had so many other advantages.

Image attributions

Christian Sandströmwww.christiansandstrom.org