Disruptive Innovation and Cameras

In today's Business section of the Globe and Mail, there is a graph of unit camera sales over time. It is a great illustration of Clayton Christensen's concept of disruptive innovation. Disruptive innovation has two qualities: It involves the introduction of a product, service or business model that provides a significant increase in value as perceived by the customer (i.e. what they get for what they pay), and it appeals primarily to unserved and underserved customers. Being aware and responding appropriately to the threats of disruptive innovations, especially in this information/internet age is critical to your business survival and ongoing growth. 

The graph in the Globe was adapted from an article by Michael Zhang. It shows the exponential growth of cameras that started in 1999 as a result of the availability of digital technology (despite the fact that digital cameras were invented 24 years earlier by Kodak but that's another story). By 2003 digital cameras were outselling film cameras. I remember a time when every family had PHD (push here dummy) pocket digital cameras. Parents, kids and travellers were the initial unserved customers. You didn't need a $500+ camera and understand the f-stop/depth of field trade-off. You also didn't have to worry about how many pictures you took as photography no longer involved the cost/picture model of film.

---

Then ... along came smartphones with built-in cameras in 2004 and the iPhone in 2007, and look at the incredible exponential growth! This growth has been significantly higher and now literally everyone has a camera. In 2014, an incredible 1.2 billion smartphones were sold and the worldwide market penetration is over 25%. ​​Looking at another graph of global smartphone unit sales, the exponential growth between 2007 and 2018E is more apparent. Over the next 5 years, a compounded annual growth rate (CAGR) of 16% is forecast.

The combination of digital photography with the ability to share them instantly in an integrated manner through Facebook, Instagram, Snapchat or your favourite online tool meant that pictures were no longer stored and then forgotten on hard drives. Again, this significantly added (social and in many cases business) value at a significantly lower marginal cost (as the camera is integrated into the rest of the smartphone) and appeals to an even broader range people.  

Of course, as a result of these two major disruptions in camera technology i.e. digital and then smartphone/internet, sales of film cameras and digital cameras have declined significantly from their peaks. I myself have carousels of slides and albums of prints as well as a high-end digital camera but have no intention of going back. On a recent  2 week trip to England and Wales, I only carried my iPhone and took 600 pictures sharing some with friends and family on the way.

The implications of disruptive innovations for established businesses is important. The collapse of Kodak which failed to understand the implications of the digital technology they themselves invented, and that of Blacks Photography which tried but couldn't find a means to provide value for smartphone users are examples. Contrast this with 81 year old Fujifilm that diversified into imaging, information and document solutions and has remained healthy.  

Companies and their employees need to continually monitor market and competitive trends as well as think about unserved potential customers. More importantly, firms need to implement processes to discuss the potential impact and timing of new innovations and develop strategies to respond appropriately. This may involve scenario planning, wargaming, experimentation, collaboration, in-licensing, or taking a hybrid approach (the topic of a previous blog) to name a few.  

---