Polaroid, Apple’s spiritual successor

I just finished 2 books on the history of Polaroid 🌈*. A remarkable tech company with enormous success in consumer and industrial applications for decades. It’s also remarkable just how much Apple was influenced by Polaroid.

A brief history

As a child Edwin Land found a copy of the 1911 edition of Physical Optics, a textbook by the physicist Robert W. Wood. He obsessed over its contents, lingering on one chapter in particular: the polarization of light.

In 1928, Ed Land was 19 when he invented the first thin-sheet polarizer. He cofounded Land-Wheelwright Labs with a friend in 1932 after dropping out of Harvard. Their first products were polarized versions of headlights, sunglasses, etc.

They grew slowly with mostly small industrial contracts for 6 years, then reincorporated as Polaroid Corporation. During the war sales grew an order of magnitude, 80% of which went to the military for products like polarized goggles.

In 1943 Land came up with the idea for a film camera that can process right away instead of in a lab. R&D started immediately, but it wasn’t until 1948 their first camera, the Model 95, was released. It went on to sell 900k units in 5 years.

The 95 was a classic disruptive innovation: worse quality than traditional film cams, dismissed as not “real” photography, but appealing to a new market of customers. And profitable: camera for $90, film packages with 60% gross margins.

With all the new cash flow, they could plow it back into R&D. To Land, they had “. . . created an environment where a man was expected to sit and think for two years.”

Polaroid’s growth lasted decades longer, peaking in the ’80s right when, ironically, they won an historic years-long lawsuit against Kodak for patent infringement.

Apple, the spiritual successor

Poloroid-Apple.jpg

Back to the Apple comparison. The similarities are clear: from values, to marketing, to org structure, to product launches and demos.

Just like Jobs, Land was at the top of every invisible organizational chart. An anonymous former colleague: “Don’t kid yourself, Polaroid is a one-man company.”

When faced with scientific illiteracy or lack of imagination, Land resorted to a restrained bit of showbiz. As it turned out, he was strikingly good at explaining his work to people, and powerfully persuasive.

Ed Land was one of Jobs’ childhood heroes. Jobs met with him later and connected when when Land said his products have always existed, they were just invisible: waiting to be discovered. Apple exemplified Land’s motto “Don’t do anything that someone else can do.

Polaroid’s downfall started long before the digital apocalypse with their sidelining of Land in the ’80s. His final mistake was giving little thought to his own succession and the future of the company in the new generation. When they all but kicked Land out, Jobs met with and scolded management, saying Polaroid would turn into “a vanilla corporation”.

And it did. Jobs would take this lesson to heart many years later with his own succession plan.

Snapshot

Evan Spiegel is also heavily influenced by Land and Polaroid. But alas, Snap is not a camera company—they’re a communication company. And I think they’d do better in the future remembering that.

Inspiration, not imitation.

snap.jpg
Polaroid Variable Day Glasses; Snap Glasses.

I’ll finish with a Land quote from 1970: “We are still a long way from the… camera that would be, oh, like the telephone: something that you use all day long … a camera that you would use as often as your pencil or your eyeglasses.”

 


* “Instant: The Story of Polaroid” by Christopher Bonanos (2012).
Land’s Polaroid: A company and the man who invented it” by Peter Wensberg (1987)

The Progression of Innovation

It’s good for any investor or business person to know where their company fits when it comes to the progression of innovation. Even if a certain company or product isn’t new, at some point in time the business it’s in was. Throughout history, innovations (whether they be technological inventions or innovations in business model) came about that performed a certain “job” better than the status quo. Most of these innovations didn’t arrive spontaneously — they were built upon or evolved from their predecessors.

The following is a simplified chart/timeline of innovations in the computer industry:

Consumers purchase computer systems, with new innovations or shifts in one component (processors or operating systems) driving innovation in computer design and vice versa. Other components like storage and display also drove innovation but were less important in this context. Most of the above innovations are technical, with the exception of the commodity PC makers (Dell, Compaq, etc.) which were an innovation in business model.

After money was transferred from consumers to computer makers, it went primarily to chip makers and OS developers. Because suppliers like Intel and Microsoft had strong competitive advantages, they had strong bargaining power, and therefore received and kept most of the value.

Retail Industry

The progression of innovation doesn’t just apply to industries as technical and complex as computers. Below is another timeline (dates are approximate) of the progression of the retail industry: Continue reading “The Progression of Innovation”

Underestimating the Groupon Model

As widely reported, Groupon filed their first S-1 today in preparation for an IPO. They’re raising $750 million on top of the $160 million they have already raised from angel & venture capital investors so far. The likely valuation range will be $20-25 billion (or possibly more after what happened with the LinkedIn IPO).

The hefty valuation, along with the youth of the company (2.5 years) and the reported operating loss may lead observers and the media to cry “bubble.” While I think that $25 billion is a very rich valuation and wouldn’t pay that amount if it went public today, I think people in general underestimate the potential of Groupon’s business model. In other words, they were probably right to turn down Google’s offer of $6 billion (even if they don’t cash out during the offering).

Before going into Groupon’s business model and competitive advantages, here’s a quick run down of some of their customer statistics from the S-1:

In the above equation, those 5 metrics are multiplied to arrive at Groupon’s net revenue amount (the amount Groupon gets to keep after giving merchants their cut). So in the first quarter they made $270 million before expenses.

First the market, then the moat

Before Groupon and all the other deal sites began, local businesses had many lackluster options for advertising their product. They could send coupons in the mail; pay for ads in a local newspaper; pay for outdoor advertising; or pay for online advertising via Google, local news sites, etc. Most of these options (Google less so) are what Seth Godin calls interruption marketing. They are made to interrupt what you are normally trying to do. And because of that, people usually don’t like them, and they have a very low hit-rate in acquiring customers. Continue reading “Underestimating the Groupon Model”