Why do established companies have such a hard time innovating their business model, even when they can see the future coming? That’s the interesting question that Nick Bilton confronted in his interesting New York Times article: “Disruptions: Innovation Isn’t Easy, Especially Midstream.”
Bilton uses Instagram, the poplar photo sharing app that was recently purchased by Facebook, as his point of discussion. Those readers who are old enough will remember the name Instagram and the logo from the long diseased Polaroid camera company. Polaroid was a one- time innovator which produced cameras that printed out pictures on the spot. The pictures had an odd patina and over time they faded but at the time they were state of the art.
The Instagram purchased by Facebook, however, uses modern technology to allow users to make their photos look like old fashioned Polaroid images. As Bilton puts it: "Integra’s personality and style were developed in some way from old film camera companies. The application’s filters that convert pictures to look like snapshots from yesteryear were inspired by classic Brownies and Instamatics and disposable point-and-shoots."
Bilton then goes on to ask the essential question: "…why was a small start-up with only 13 employees able to build Instagram while a company like Eastman Kodak, which recently filed for bankruptcy protection, was not?"
A former CEO of Polaroid, Gary T. DiCamillo, answered the question this way: “We knew we needed to change the fan belt, but we couldn’t stop the engine,” he said. “And the reason we couldn’t stop the engine was that instant film was the core of the financial model of this company. It drove all the economics.” The same was true of Kodak and its reliance on its own cash cow: silver halide film.
It is a cyclical problem all successful companies eventually face as the technology around them changes, but they cannot change. We are in the midst of constant innovative flux as the play platform
du jour turns into last night’s leftovers. The board game industry (think Hasbro), hit hard by video games, then the Internet and now mobile platform games confronts the continuing question of how do they stay ahead of the innovative curve rather than chasing it.
It seems that our biggest players, Hasbro, Mattel, Ravensburger, etc. would be wise to incubate emerging, disruptive companies rather than purchasing traditional toy companies. Yes, the latter add profitability and revenue in the moment but the former may just insure the company’s future existence. I bet Kodak and Polaroid would agree; how about you?