Polavision – Polaroid’s disruptive innovation failure

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Polavision

The Polaroid Corporation was founded in 1937 by Edwin Land. While its early products focused on everything from eyewear to gunsight filters, the company was most famous for its innovative instant film cameras that hit the market in 1948. During the next three decades, Polaroid became one of the most successful technology companies in the post-war era. Sales grew at an annual rate of 23%; profits grew at 17% and its market capitalization exceeded $1 billion.



The problem with Polaroid’s strategy (as with most technology-based companies) was that they began to regard their business as a series of technology challenges and not market challenges. They assumed that once their technological innovations were ready, the market would follow with the result of ever-increasing profits. And while the strategy worked for the better part of their existence, it all came it a screeching halt with one large technology bet that went sour.

Polavision was to be Polaroid’s biggest technological breakthrough – an instant movie system similar to Polaroid’s instant camera. Polavision included a camera, film, and a special movie viewer that was used to both develop the firm and subsequently view the movie. While the system used a new type of color additive process which allowed for instant developing, its shortcomings were significant – the movies only lasted 2 1/2 minutes; there was no sound; and the extremely slow firm speed required very bright lights when taking the movie. The project had been in the R&D pipeline for over a decade and was championed personally by Edwin Land. Others within Polaroid weren’t so confident with the outcome. Polaroid’s president Bill McCune was probably the most skeptical; he felt that Polaroid was making too big a technology bet on a new product that lacked any type of market research. After many delays, Polavision hit the market in 1977–the same time that video-based systems were being introduced by competitors.

The results were stunning but expected. Polavision bombed in the marketplace. With its high cost and poor film quality, Polavision could not even compete in the market against existing Super 8 cameras and projectors, whose days were already becoming numbered due to the emergence of the new video-based systems hitting the market. Polaroid had to write-off all the R&D costs along with most of the manufactured product at an immense cost to the company.

Former Polaroid freelancer Paul Giambarba remarked about the new Polavision system:



“I tried using the product but it was obviously a turkey compared to anything I was using that Kodak offered [..] Instant movie film was an engineering achievement but it’s precisely what separated Polaroid techies from Polaroid pragmatists. There just weren’t enough customers out there on whom to work the magic.”

The Polavision failure was the first straw in the eventual demise of the Polaroid Corporation. The same poor management that allowed Polavision to hit the market without proper market research later allowed Polaroid to completely misread the impact of digital imaging on their highly profitable instant film business.

On October 11, 2001, Polaroid filed for Chapter 11 bankruptcy protection. Almost all the company’s assets (including the Polaroid name itself) were sold to a subsidiary of Bank One. A new company was formed which operated under the name “Polaroid Corporation”. Polaroid cameras were discontinued in 2007. A second bankruptcy was filed in 2008 and production of Polaroid instant-firm ceased in 2009.



Here’s the takeaway: Polaroid’s demise was caused by an almost non-existent market strategy and a mistaken belief that disruptive innovation success is the result of overcoming technology challenges and not business model challenges.

1 COMMENT

  1. Not only was Polavision the beginning of Polaroid’s failure but it was also chiefly responsible for the demise of the widely respected Austrian movie equipment maker Eumig who were subcontracted by Polaroid to make the Polavision camera and players.

    Already under pressure from Japanese competitors, Eumig’s management team were persuaded by Polaroid to commit the bulk of their manufacturing effort to the Polaroid product. With a massive inventory of unsold Polavision systems, Polaroid cancelled all further orders with Eumig. With no further Polavision order and only a very small range of Eumig branded products Eumig’s revenue stream collapsed.

    With their finances in poor shape, Eumig were forced to stop developing an innovative portable video recording system (LVD) which ironically might have saved them.

    As a consequence, in 1978 Eumig posted massive losses resulting in over 1000 employees being laid off and the closure of its primary manufacturing facilities. The company never recovered from this blow and was finally wound up in 1981.

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