A Case Study in Disruptive Innovation: the iPhone Camera

Old Camera

Not so long ago, we saw the digital camera disruptive innovation.  They upended the film camera market in an incredibly short period of time.  The disruption was so complete that you would be hard pressed to find a roll of film today even if you wanted to buy one.  But the disruptor has now become the disrupted.  Buried behind the hoopla of Apple’s iCloud announcement yesterday was news of new iOS camera features that bring the cellphone’s disruption of the digital camera market to an inflection point.

A disruptive innovation is one that eventually overturns the status-quo product or technology on the market.  Disruption begins when a new innovation is introduced to the market.  But instead of targeting existing customers with established needs and performance criteria, it targets new users by offering ease of use, portability and affordability (stay tuned: we’ll shortly be releasing an Insight Paper explaining the rules of disruptive innovation).  New users accept the new offering en masse.  Incumbent competitors ignore it because this new market appears uncompetitive and low-margin.  But over time, the disruptor improves overall performance and steals away existing customers leaving the incumbent technology bereft of users.

This is exactly what digital cameras did to film cameras.  At first, the picture quality of digital cameras stunk, so existing camera companies and most photographers ignored them.  Instead they became popular with people who cared little for image quality but enjoyed the convenience that the digital format and LCD screens provided.  Over time though, image sensors improved and the combination of good image quality with digital convenience has allowed digital cameras to take over the market completely.

But now digital cameras are in the midst of being disrupted by cell-phone cameras.  The integration of the camera into the cell phone makes taking pictures wherever you are so much easier because you don’t have to carry a separate device.  At first, this didn’t interest camera owners, however, because the picture quality was terrible (sound familiar?).  But over time that has improved.  With innovations such as backside illuminated (BSI) image sensors, picture quality has rapidly improved even in ever-shrinking pixels.  And yesterday Apple demonstrated how the integration of multi-touch technology and wireless connectivity further disrupts the digital camera market.  With this combination of technologies, cameras on devices such as the iPhone offer good-enough image quality coupled with unparalleled ease-of-use.  You simply touch the part of the image you are interested in and the exposure and focus are set perfectly.  You can then perform simple editing on the fly and share the image in any manner of ways (iCloud Photo Stream, Facebook, Twitter, etc.).  This is a photographic experience designed for the masses and one that will quickly obsolete the need for a separate camera for most people.

I believe the digital camera market has now reached a new inflection point and we will soon see significant erosion in the market for separate digital photographic devices as more and more users use cell phones for all their photographic needs.  If digital camera manufacturers don’t want to see their market go the way of film, they better figure out a response fast.

Dan Ostrower

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Dan Ostrower