The Collapse of Polaroid – 4 Reasons Why Polaroid Failed and What We Can Learn

Polaroid Camera and PX70 film (a business failure case study)

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Originally quite the opposite of a business failure case study, Polaroid had been an industry leader for decades, but a time came when it wasn’t the trendsetter anymore. A lack of innovation led to its demise. And this was due to a misunderstanding of how to handle failure in business.

Instant photography and Polaroid are interchangeable terms these days, yet the formerly successful company failed miserably when it faced its biggest adversary: digital photography.

For decades after World War II, Polaroid was the market leader in photography. It was so big that Polaroid became synonymous with instant photos – but even from its early beginnings, the company always focused on perfecting its technique, not so much on innovation.

This lack of vision would contribute greatly to its downfall, among other factors. It was a combination of improper conduct at the top, controversies, and failure to adapt to changing times that caused the bankruptcy of Polaroid.

Polaroid was a victim of patent violations and poor company policy, and just couldn’t adapt fast enough. The business principles that kept them successful since founding in 1937 started to fail right around the year 2000. 

…Yet the former camera giant’s failings can teach you what to avoid – what to do and what not to do when adversity hits. Here are some of the main reasons Polaroid couldn’t keep up with the times – and ultimately failed… Why they got destroyed in the age of digital cameras.

And finally, you’ll find the lessons to take from the company’s history so you can avoid the same mistakes with your business.

Failure to Capitalize on Its Own Research

You may not know this, but Polaroid’s R&D department had been involved in digital photography since the 1960s. By the 1970s, Polaroid had 15% of the camera market in the US, and the company only grew from there. It developed and filed for dozens of patents for instant imaging solutions.

Yet in 1989, almost 42% of all its R&D spending was in digital imaging. Polaroid was the top seller of digital cameras in the late 1990s. Surprisingly, the company didn’t capitalize on its own research.

There were several reasons for this… Basically, they were banking on the idea that people would always want hard-copy prints.

Why is this important for you to know?

Because that decision came from the top. Polaroid’s executives were the ones who backed those outdated technologies. More importantly, they failed to do proper market research.

Over-Reliance on One Aspect of the Business

At one point, Polaroid was making a massive 65% gross margin on instant film. It was clearly the main cog of their financial model. It set the economics of the company, and as a result, Polaroid’s executives decided not to branch out.

Even the founder, Edwin Land, did not want to invest more into electronics. Their whole focus was on instant film. This led to serious mismanagement of funds, including large investments in digital photography R&D that the company failed to capitalize on. 

Why did this happen?

The executives got too caught up in one aspect of the company’s business. They fixated on one idea that had proven fruitful for so long that they couldn’t see the next best thing around the corner.

All their research in digital photography didn’t turn into much. The executives still believed that developments in photographic chemistry were the way of the future. This was a turning point – the beginning of the company’s slide to the bottom.

The takeaway here is that taking a chance on new technology doesn’t mean abandoning existing technology. You can continue to innovate while still maintaining your cash cow… But it’s a bad move to invest in something without any real desire to capitalize on that investment. In the case of Polaroid, this was the company’s decades of digital photography research.

The Business Failure of Polavision Made the Company Risk-Averse

One of the most exciting products to come out of Polaroid was Polavision, a color home video system that took decades to develop. Unfortunately, by the time it hit the market in 1978, it wasn’t that innovative any more.

Consumers already had similar products to choose from. Polavision resulted in a loss of around $15 million (about $60 million in 2020 dollars). The loss started a new trend within the company. The executives at Polaroid started to fear releasing innovative products and taking another hit.

This is one of the main reasons the company didn’t make the shift to hardware-focused products – even when digital cameras were gaining traction fast. Fear of innovation was likely the biggest reason Polaroid failed. 

There’s also such a thing as committing to change too late, which the company was also guilty of… 

They Tried to Be Perfect (Instead of Being First)

Polavision took decades to develop and was a costly failure. The company got into digital photography very early on, yet the decision to back it only came around the time the company filed for bankruptcy protection.

The early days of digital photography were not very lucrative. Polaroid couldn’t see a way to make it as profitable as its photographic chemistry branch. Furthermore, the executives were never fully satisfied with the results of their R&D department.

Reports show that Polaroid developed fully functional digital cameras as early as 1996, but these products never saw the light of day. Digital photo resolution wasn’t very good back then, and the company did not want its name associated with such low photographic quality.

This was another turning point leading to the company’s eventual doom. The people in charge were adamant about releasing only perfect products. They didn’t want to be innovators if they couldn’t reach perfection.

As you know, Polaroid’s competitors capitalized on the growing demand for digital photography. Polaroid got left in the dust because it didn’t get there ahead of the competition.

Lessons Learned

There were two main reasons for the collapse of Polaroid – a misguided business model and fear of being innovators in their field. Polaroid could have dominated today’s market, given all of their early research into digital photography.

But the fear of failure took root in the company very early on. You can’t be too fearful of business failure if you want to stay successful. Branching out, innovating, and reading the market are critically important skills.

Do you want to learn more about scaling a business and preventing business failure? Then you’ll need to understand first how to handle failure in business and not lose your competitive edge out of fear. We can help. Sign up for free daily business coaching lessons at Learn from others’ past mistakes and study the key principles of success.

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