Technology Shifts

Technology shift is the inevitable culprit in many of these truncated market life spans. The iPod exists because of a shift toward digital recording and distribution of music. Or, in another example, Java and Linux, two technologies that didn’t even exist in 1990, have become pillars of the computing world. Giants such as IBM and Microsoft now build their strategies around either competing with or changing their products to work with Java and Linux, both of which are free.

Technology-driven market shifts affect many industries. For example, a generation ago it would have been hard to imagine that service-oriented businesses could operate call centers halfway around the world. We don’t give a moment’s thought today to the remarkable fact that the person answering the phone for a car rental company or airline might be in Barbados, Ireland, or India. Technology has had a major impact on service industries. Another great example of technology causing rapid disruption in an industry is the current state of the photo industry. For nearly 100 years, the industry had experienced relatively stable growth and a sound business model. Customers bought cameras and film, and had their film processed by large central laboratories. Over the years, the industry introduced incremental innovations, such componentized camera systems, where photographers could buy accessories over time and expand their equipment set, color film, instant cameras, one-hour labs, and so on. The major players, such as Kodak and Fuji, found their core business of selling film, photographic paper, and chemicals to be competitive but manageable.

In the 1990s, the photo industry found itself in a grave crisis driven largely by technology change and unforeseen consequences of seemingly good marketing decisions. Camera manufacturers had, in the words of one of its leading executives, “sewn the seeds of its own destruction” by introducing the point and shoot camera, which effectively killed the component-based product lines. Widespread creation of one-hour labs, originally seen as a new marketing channel for Kodak and Fuji paper products, had led to the erosion of Kodak and Fuji’s core paper and film business as most independent one-hour labs opted for a lower-cost brand of paper. In response, Kodak and Fuji went on an aggressive campaign to win back the film processing business by subsidizing one-hour labs inside major drugstore and discount chains. If you are a picturetaking person, you might recall seeing double-print film processing for $6.99 on Kodak paper while you wait at the drugstore while the mom-and-pop onehour lab down the street offered the same service for $12.99 on Mitsubishi paper. Guess who went out of business?

Before the major players could exult in their triumph, disaster struck in the form of digital photography. Digital cameras use no film, and while it is possible to order prints from a digital camera, many digital photographers have opted to share photos electronically or print them out at home using low-cost color inkjet printers that weren’t even considered within the consumer’s price range even a few years earlier. Indeed the color inkjet printer is a product category that has experienced one of the most dramatic increases in functionality and drops in retail cost of any product ever invented. To respond to the digital photography threat, the major players in the photo industry banded together to introduce a film format called Advanced Photo System or APS (marketed as Advantix by Kodak). APS, which was supposed to provide a cartridge technology for film-based photographers to scan photos into computers easily, has essentially been a flop. Then, each player has introduced a succession of digital cameras, with mixed financial results. Kodak and Fuji now find themselves competing with companies like Sony in the camera market, which has increasingly become a consumer electronics category. The photo industry crisis, which has mugged a century-old line of business in about ten years, is a great example of how contemporary companies must deal with unprecedented and challenging change in short periods of time. Basically everyone has lost money on digital cameras. The local one-hour photo lab is an institution of the past in most areas. Polaroid went into bankruptcy and only recently emerged. Kodak and Fuji, two of the world’s most respected brand names, struggle to find profitable, long-term lines of business. There are many examples of the type of rapid shift that I describe here. VCRs, DVD players, cell phones, Internet-connected PCs, and on and on. In some instances, company, and even industry life cycles follow this giddy course. Some product life cycles force a company into an incremental change in focus, while others may necessitate a complete change in direction and alliances.