Polaroid, once a household name synonymous with instant photography, has become a cautionary tale of a company that failed to adapt and innovate in the face of changing technology.
In this blog post, we will explore four reasons Polaroid ultimately collapsed and what we can learn from their failed business strategies. From their slow response to digital photography to the lack of the organization’s ability to capitalize on the nostalgia trend, we will delve into the key factors that led to the downfall of this once-great company.
The steady decline of Polaroid can be attributed to a lack of innovation and an inability to adapt to changing technology. The company’s inability to handle failure also played a role in its collapse.
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, strategic plan, and effective leadership led to its demise, exacerbated by a misunderstanding of how to handle failure in business.
With this combination of factors, from poor strategy to misaligned value disciplines, no amount of aggressive marketing tactics could save them. They simply weren’t prepared to remain a business leader, and other companies took their place to meet new customer interests.
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 industry leader among photography companies with great technology and robust business strategies. It was so big that Polaroid became synonymous with instant photos – but even from its early beginnings, the company strategy always focused on perfecting its technique, not so much on innovation or creating a plan for the future.
This lack of strategic planning would contribute greatly to its downfall, among other factors. Improper conduct among the leadership team, controversies, and failure to adapt to changing times all caused the bankruptcy of Polaroid, opening the door for other businesses to make sales in the industry they once dominated.
Polaroid was a victim of patent violations and poor company policy (a serious reputational risk), and just couldn’t adapt their strategies 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 the digital camera.
And finally, you’ll find the lessons to take from the company’s history so you can avoid the same mistakes with your business strategy.
1. Poor Strategic Planning: Failure to Capitalize on Its Own Research
Don’t make the same mistake as Polaroid: remember the importance of doing market research the right way. Knowing your target audience and understanding how technology changes their needs can be the difference between winning and losing in business. Business models that include consumer focus groups, agility, and regular strategic planning are much more capable of operational excellence.
You may not know this, but Polaroid’s research and development 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. The organization developed and filed for dozens of patents for instant imaging solutions.
Yet in 1989, almost 42% of all its research and development 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 to stay ahead of the industry.
There were several reasons for this… Basically, they were banking on the status quo idea that people would always want hard-copy prints, and didn’t have their eyes on the future. Ignoring their own research caused the organization to fail.
Why is this important for you to know?
Because that corporate strategy decision came from the top. Polaroid’s higher ups were the ones who backed those outdated technologies. More importantly, they failed to do proper market research and understand their customers, stunting the possibility for ever increasing financial returns.
2. Over-Reliance on One Aspect of the Business
“Innovation takes birth in sync with the evolution of customer’s expectations and demands or vice versa,” says Ketan Kapoor, co-founder of Mercer-Mettle. “Either way, organizations around the world have to continually innovate themselves and keep up with the people’s wants. The failure to do so or being indifferent to your customer’s need will make your competitors win. And then suddenly, customers become indifferent to you – a high-risk gamble to play at.“
At one point, Polaroid was making a massive 65% gross margin on instant film. It was clearly a major source of revenue and 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 and create new products.
Even the founder of the organization, Edwin Land, did not want to invest more into electronics. Their whole focus was on instant film (despite the evolving wants of their customers).
This led to serious mismanagement of funds, including large investments in digital photography research and development that the company failed to capitalize on – or profit from.
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, even as customer interest was creating increasing pressure to move toward digital media. This failure in the strategic planning process 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 or current business strategies. You can continue to innovate while still maintaining your cash cow strategy…
But investing resources in something without any real desire to capitalize on that investment is a bad strategic plan.
In the case of Polaroid, this was the company’s decades of digital photography research.
3. The Failed Business Strategies of Polavision Made the Company Risk-Averse
The collapse of Polaroid serves as a reminder of the importance of innovation for businesses. Without the ability to adapt and evolve, even the most successful companies can fail if they aren’t open to exploring a new strategy.
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 other quality 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, further diminishing their ability to maintain a sustainable competitive advantage.
This is one of the main reasons the company didn’t make the strategy shift to hardware-focused products – even when the digital camera was gaining traction fast. Fear of innovation – and thereby not adopting strategic initiatives – was likely the biggest reason Polaroid failed.
There’s also such a thing as committing to new business models too late, which the company was also guilty of…
4. They Tried to Be Perfect (Instead of Being First)
Polaroid’s slow response to digital photography highlights the importance of speed as a competitive advantage in the business world. Being quick to spot and capitalize on new trends and technologies can mean the difference between profit and losses.
Polavision took decades to develop and was a costly failure. The company got into digital photography very early on, yet the decision to support it only came around the time the company filed for bankruptcy protection.
The early days of digital photography sales were not very lucrative. Polaroid couldn’t see a way to make it as profitable as its photographic chemistry branch. Furthermore, the leadership team was 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 feared disappointing customers, not wanting 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 create perfection.
As you know, Polaroid’s competitors capitalized on the growing demand for digital photography. Through a series of failed business strategies, Polaroid got left in the dust because it didn’t get there ahead of the competition.
While other companies aimed their focus on new core competencies, allowing their strategic plans to evolve, and developing technologies to support emerging trends, Polaroid experienced unprecedented failure rates because of their stagnant business strategy.
Change can be messy, and Polaroid’s focus on perfection let other businesses pass them by.
Conclusion: Lessons Learned From The Business Strategy Failure of Polaroid
Great companies don’t repeat history, they learn from it. The collapse of Polaroid serves as a valuable case study in the importance of understanding target audience, market trends, and the key principles of success in business.
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 with the right focus areas, 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, innovative development, and reading the market are critically important skills. You can create strategic plans, but the culture and mindset of the employees – from the top down – is an essential piece of what makes the best, most innovative companies thrive.
Don’t fall victim to the shortsighted perfectionism that destroyed Polaroid (and plenty of other companies) or let worry get in the way of your strategic planning.
Do you want to learn more about scaling a business and preventing business failure? Then you’ll need to understand first how to handle strategic planning and not lose your competitive edge out of fear.
Don’t fall behind in today’s fast-paced business world. Stay ahead of the curve and make data-driven decisions with executive coaching from Predictable Profits. Our team of experts will help you develop the leadership skills needed to ensure your business’s success.
Be part of our ever-growing community of seven- and eight-figure business owners:
- Check us out on the Predictable Profits YouTube channel.
- Connect with us on Linkedin.
- Join other entrepreneurs (like yourself) on our Facebook page.
- And if you haven’t already, sign up for our daily business coaching video series (by entering your email address below).
