Dear readers, do you still remember stage of 2010 World Expo in Shanghai? Crowds of people. Tourists from all over world lined up at World Expo site. Near main attractions, most of them took small digital cameras to photograph and record historical moment of this grand event of human science and technology and commercial civilization. .
At time, many people may not have known that compact digital camera industry generated highest sales volumes in history. At that moment, many may not have guessed that from now on, small digital cameras will go from bad to worse, getting worse every year, and finally come to point where they are now threatened with extinction.
Data from Japan Camera and Imaging Equipment Manufacturers Association show that a total of 120 million digital cameras were sold worldwide in 2010, of which small digital camera sales exceeded 100 million. Only about 3 million digital cameras will be , fell 97.5% in eleven years. But one thing has never changed in recent years: Japanese companies have always been at forefront of digital cameras.
In fact, since advent of digital cameras, Japan has always been a well-deserved "land of cameras". most of market share. This "monopoly" is not only reflected in sales volume: Since Casio launched world's first LCD digital camera in 1995, Japanese companies have also been at forefront of innovation in digital camera technology.
Compared to more professional cameras such as SLRs, compact digital cameras have advantages such as small size, ease of use and low price. However, when digital camera industry as a whole is in decline, decline of small digital cameras is also faster, and danger of "disappearing" is also increasing.
It's a systemic decline, like when digital cameras replaced traditional film cameras. When brutal market hammer strikes, old digital camera companies will have no room to survive.
It's easy for us to think that development and popularization of smartphones is an unbridgeable chasm for small digital cameras, but if we look at heart of problem by removing superficial veil, perhaps we can also conclude two deep - sedentary aspects about survival of business law.
Rule one: value of disruptive innovation
After reading a lot of analytical reports, I have found that most explanations for decline of Japanese digital cameras focus on fact that these companies have failed to complete "disruptive innovation" and have fallen behind in age of smartphones and mobile internet. .
Disruptive innovation is one of most common terms in courses of leading business schools. Many entrepreneurs or studentsyou seem to easily understand this term - isn't this a new breakthrough in business?
But is it really that simple? If we separate words "disruptive" and "innovative", we can indeed quickly find a bunch of problems waiting for us:
(1) What is innovation? Are there traces of innovation processes and paradigms for enterprises, or can they only be analyzed in detail for specific industries and specific companies?
(2) What is subversive? Can result be quantified? For example, what percentage of a company's annual net income is invested in research and development to be considered subversive? Does development time matter?
(3) How to choose timing for breakthrough innovation? Are you waiting while company's existing products are still in their infancy to start mockup, or are you waiting until they are mature to start mockup? If company's sales have already begun to fall, is it too late?
(4) How to set up staff? Should current managers and core R&D personnel be replaced by outsiders with new thinking and concepts? Or is it that old members of core can create great innovations themselves and "revolutionize their lives"?
(5) How much of risk is set aside financially for insurance, and can everyone bet on new business? Or do you need to spend a small amount of money to take one step at a time?
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In fact, these kinds of questions have no bottom, and they can be asked all time, because degree of change in individual questions in different industries and in different types of enterprises is incalculable. The above five questions are relatively typical questions, and Lao Xing next door lists them here to let readers know that term "disruptive innovation" is definitely not that easy to understand. We can take a clue from a recent paper by Clayton M. Christensen, founder of disruptive innovation theory.
In his view, disruption is process by which a small business with fewer resources can successfully challenge an existing leader. For smaller companies, it seems right to find market segments or customer segments that these larger players cannot satisfy. Leading companies tend to focus on their most profitable customers while ignoring some of less visible markets.
When smaller companies successfully infiltrate these divisions through cost advantages or other strategies, top companies tend to not care too much about them, leaving those companies able to keep moving up or closer to top. There is room for corporate development. Until one day, leading companies suddenly found that customers they cared about most began to flow into smaller companies, and they could not recover. It's subversive.
As an exampleLet's take semiconductors. Intel's lead in computer processors has been unshakable for decades. The company can independently develop and manufacture its own microcircuits, occupying almost all main links in microcircuit production chain, especially in revenue-generating part. For a long time, however, Intel neglected semiconductor foundry field, almost allowing TSMC and Samsung to flourish.
By early August 2022, with release of latest financial report for second quarter, Intel's total market value will be surpassed by its old competitor AMD, and its quarterly revenue will be lower than that of TSMC, causing an uproar. in shop. Although Intel had already sensed crisis before, it had invested heavily in a new chip manufacturing base in advance, hoping to develop chip manufacturing. However, without an immediate advantage, how easy is it to succeed?
As for essence of breakthrough innovation, in addition to entering a market segment that original leader ignored, there is also direct creation of a new market segment.
A typical example is digital camera industry. Until 1980s, cameras around world were mostly film cameras and people needed to buy film and go to a store to develop their photos. When Kodak technicians first invented digital camera, almost no one in industry cared about this completely "stupid" new technology.
However, Japanese digital camera companies are riding a wave of change. In an era of rapid development of personal computers and other digital products, they are betting on emerging digital camera market. Keep up with times.
Since then, this situation has happened again. In 2010, although shipments of iPhone 4 mobile phones were approaching 40 million units, image quality still cannot compete with major players in digital map market.
However, as Apple and other smartphone manufacturers continue to improve quality of new product cameras, and as photo editing software and photo-related social media flourish, smartphones have begun to completely replace small digital cameras in new use cases. The Japanese manufacturers, who did not have time to react in time, could only sigh: "This scene seems familiar."
In short, whether you are starting with a market segment or creating a new market, countless examples of disruptive innovations tell us that companies that cannot undermine themselves will sooner or later be undermined by others.
Rule Two: The Value of Moat
In addition to breakthrough innovation, development of compact digital cameras in Japan over past decade or so may also reflect importance of creating a commercial moat for businesses.
CoThe commercial moat is actually mostly based on Buffett's philosophy of value investing. Buffett likes companies with high marginal profitability, strong market control, and similar "franchise" properties. People commonly refer to such businesses as moated businesses.
In fact, moat of small Japanese companies for production of digital cameras is not small: in 2010s they occupied absolute first place in world in terms of shipments and always led market for new technologies. So why do they still suffer such catastrophic failures?
Inspired by Mr. Zhang Lei's book "Value", I think that these Japanese companies are facing "moat myth".
Myth #1: look at moats dynamically. Although Japanese digital cameras have completely occupied world market at one time, they have not kept pace with Internet era, especially with rapid development of social networks. Just imagine, if photos taken by users cannot be uploaded to their favorite social platforms in real time, why not use mobile phones?
Myth 2. Connecting across fields and rethinking ideas. For example, Fujifilm has been actively transforming smart medicine industry in recent years, and its business has expanded into a wide range of product lines such as computed tomography, magnetic resonance imaging, x-ray imaging systems, ultrasound diagnostic equipment, endoscopy, vitro diagnostic systems, and PACS. This is very much in line with his original imaging business, and is a good example of breakthrough innovation.
Myth 3. Openness and tolerance. The peer-to-peer competition between Japanese digital camera manufacturers is very fierce, and characteristics of many products are very similar, causing competition between these Japanese companies to reach a "dead end" of repeated research and development and waste of resources. . Assuming these companies can replace some of core technologies with each other, they save time and resources, and many new key ideas can be put into practice.
Finally, creation of moat is actually closely related to revolutionary innovation mentioned above. When a reputable company faces latest market changes, whether it can anticipate a crisis ahead of time, be flexible, and dare to innovate is key to staying afloat.
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