When Sir Laurence Olivier appeared in American television commercials advertising the wonders of the SX-70 camera, it seemed that the Polaroid Corporation was invincible. Although technical problems with the camera had recently caused the company's market capitalization to fall, Polaroid was a strong organization that had weathered many storms.
Founded in 1937 by scientist Edwin Land and dominated by his magnetic personality, Polaroid had been one of America's original high-tech success stories. Like RCA and Hewlett Packard, Polaroid had built its initial business during the interwar period, had prospered as a defense contractor during World War II, and then had found new success as an innovator in the post-war boom years. In 1948, Polaroid invented its signature technology, instant photography, and it continued to refine that technology throughout the 1950s and 60s. Land was hailed as a genius, and investors bid up the value of his company.
By the 1960s and 70s, Polaroid's cameras had become both a popular gadget for artistic self-expression in the consumer market and an essential tool in the business market for such purposes as driver's licenses, crime reports, and real estate advertising. The company held a monopoly in the instant photography market and held about 20 percent of the overall market for film and 15 percent of the U.S. market for cameras. At its peak in 1978, it employed 21,000 people, including some of the country's top scientists, and it was respected for its generous employee and community policies. During the early SX-70 years, it seemed that the company's future would be as bright as its past.
In fact, however, Polaroid was in decline. In 1974, Polaroid hit a major stumbling block when problems with the SX-70 led to unexpected expenses and declining profits. The U.S. economy went into recession, investors lost confidence, and Polaroid's market capitalization fell.
From the mid 70s until the early 90s, Polaroid's fortunes waxed and waned. In 1975, Land stepped down as CEO, and under the new leadership of William J. McCune and I. MacAllister Booth, the company began to diversify its research and development. At the same time, however, it began facing competition from the conventional camera market and from a new Kodak instant camera. In addition, it appeared that the days of silver halide photography were numbered, and that the traditional camera, film, and developing system would eventually go electronic. Polaroid invested heavily in electronic imaging, but it seemed uncertain how to monetize its innovations. In 1988 the company was further burdened by a takeover attempt, but in 1991 it was awarded almost one billion dollars in a patent infringement suit against Kodak, and it enjoyed renewed success as its cameras became popular in eastern Europe.
In 1995 Polaroid brought in as its new CEO Gary DiCamillo, an outsider who had engineered a successful turnaround at Black and Decker. DiCamillo laid off staff in an attempt to bring costs in line with revenues. He worked to strengthen the company's core instant photography business by promising incremental innovation rather than once-a-decade breakthroughs. At the same time, he continued to guide the company into the development of digital imaging devices.
In the late 1990s Polaroid was a leading seller of digital cameras, and its instant cameras had found new markets among teenaged customers. As late as spring 2001, it seemed that the company might be able to make a comeback. In October 2001, however, Polaroid filed for bankruptcy, and in 2002 the company was sold to a private equity firm for $265 million. Over the next few years, its assets were liquidated, its employees were laid off, and it became a small concern manufacturing instant cameras and film for an ever-decreasing market.
Analysts agreed that Polaroid's downfall came from an inability to manage the transition from conventional to digital photography. But the exact nature of this failure remained unclear. Why was the company slow to diversify its business? Was the vertically integrated manufacturing system too expensive? Was the key problem the company's razor-and-blade business model? Was the company out of touch with its customers? What role was played by the debt taken on in 1988 to fight the takeover attempt? Most importantly, was the company's downfall inevitable, or was there something that its leaders could have done to prevent it?
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Richard N. Foster, Andrea R. Nagy, and Alexandra Barton-Sweeney, “ Polaroid,” Yale SOM Case 08-037, December 9, 2008
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