I noticed an unassuming little lifestyle story in Friday's Wall Street Journal. Eric Felten's tale of Polaroid's struggles in the age of digital photography was couched as a warm and fuzzy story, but it actually portrays the gritty operation of Joseph Schumpeter's theory of creative destruction.
It's worth reading the article, if you subscribe to the Journal. Basically, an Austrian, Florian Kaps, saw evidence of a continuing market for instant camera demand. He located, bought and then resold old Polaroid film stock. Kaps offered to buy what remained of Polaroid's equipment and rights from the current owners.
Instead of a reply, he was invited to the closure of Polaroid's last remaining facility, in Holland.
In a very 'It's A Wonderful Life' sort of twist, the machinery hadn't yet been destroyed, and the factory, due to the recession, wasn't going to be rehabbed right away. Kaps raised money from friends and family, got the facility and machinery, plus, with a team of fellow engineers, managed to develop (no pun intended) a reasonable facsimile of the chemical formulation to make new/old instant film.
He now markets Polaroid instant film from his website, TheImpossibleProject.com, and, according to the Felten, will add color film to his black and white stock this summer.
To me, the most interesting facet of this story is how perfectly Schumpeterian it is. Polaroid's entire business essentially went to zero value, based on older assumptions and processes. But there was some latent demand for the products and supplies.
It took literally near-total destruction of Polaroid's business assets before a new player could afford to buy the remaining assets and begin producing film for the existing base of cameras on an economic basis.
In a way, it's inspirational. So long as there is some demand left for products or services, it's possible for another investor to buy remaining assets at market-clearing prices, then, with that lower cost base, continue to meet demand economically.
Markets are wonderful mechanisms. They allow prices to rise, or fall, to levels which facilitate continued operation of businesses, where economically feasible. Or kill them, when it's not.
Sometimes, when you swear a business is or ought to be dead, market forces still allow them to continue, albeit at a tiny fraction of their prior size. But they still meet customer needs and earn revenue and, apparently, even a little profit.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment