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Digital Transformation – Disruptions II

The growth of digital cameras and their downfall as result of the shift to the smartphones. Source: CITA

The second disruption that swept the photographic world was again the result of technology evolution although it was sprinkled with cultural aspects, fuelled by flanking value chains, making this an interesting disruption to analyse.

As shown in the graphic produced by the Camera and Imaging Product Association the market of digital cameras (both compact and reflex, with the compact ones taking the lion share) took over the one of analogue cameras in just 5 years (1999 to 2004) with a market in 2005 that was double (in terms of units, not of $) of the peak reached by analogue (film roll) cameras in 1998.

The quickness in change is amazing and it is a direct consequence of the Digital Transformation: the lowering of cost as result of the shift from atoms to bits. In this case the zero cost of operation of a digital camera, with an infinite film roll and the disappearance of the need to “develop” the film. The printing of a digital image was a decision of the end user, most were and are happy of keeping their picture in a digital form and looking at them on a screen at zero cost.

The success of digital cameras was such that it pushed smartphones companies to embed them in their product (actually cell phones started to embed a low performance digital camera before the appearance of the smartphone but it was the latter that eventually disrupted the market).

The

Here you can appreciate the full scale of imbalance between smartphone and compact cameras … No wonder the latter was doomed. Source: CITA

problem with embedding a camera in a phone is that … it does not fit! Think about a compact camera and push it in a phone… Too bulky.  So you have to look for a compromise, you decrease the size of the image sensor but you have to accept lower resolution, and you reduce the size of the lens but you have to accept lower quality (lower luminosity and higher noise).

Of course, as technology evolves, some of these constraints are overcome although some of them, based on physical limitation cannot be overcome (but you can trick them as I will point out later on).

In just 5 more years, by 2009, the number of smartphones sold yearly embedding a digital camera was level with the number of compact cameras. Their image quality was not au pair with the one delivered by a compact camera but people always had their smartphone with them and they got used to take pictures with their smartphone everywhere.

Let’s consider image quality: yes, in 2010 a compact digital camera would deliver a better quality than a smartphone but was that a deciding factor for people to buy a compact camera? Actually less and less, also because most of the people couldn’t tell the difference (which is the case if you were not printing the photo but were content to look at it on a screen, like a television or the smartphone screen).
Another factor kicked in: the rise of social networks and the sharing of photos. At that point the image quality was limited (in general) by the screen resolution (very few would take a picture from a social network and print it out, they were intended for fruition on the screen). Smartphone are much more convenient than a compact camera to post photos on a social network since they are always connected to the web.

The embedding of connectivity in compact camera was too little and came to late!

However, the deciding factor was volume: look at the second graph showing the volume in units of smartphones (orange) vs compact cameras (blue) and digital reflex (green). The difference is not just huge, it is a rapidly growing (last year considered in the graph is 2016, now the gap is even bigger). People with a smartphone had no need for a compact camera and as more and more people got a smartphone less and less people bought a compact camera. By 2015 the game was clearly over. The market for compact cameras is now basically zero and companies that benefitted from the first wave of the Digital Transformation in photography saw their business dying out. From the point of view of the consumer the Digital  Transformation has delivered the same services (better actually) at a lower cost (basically for free). Of course it was not just the increased capability of smartphones that make the difference, it was the concurrent decrease of price in mobile internet access that make the sharing of photos basically free. The Telecom Operators were cut out from the benefit of the digital transformation in this area, actually they had to pay (in terms of network investment) for it.

The volume of digital reflex has remained roughly stable since those cameras attracted a different market and till 2016 reflex digital cameras were no match for smartphone cameras (however, as I will point out in the next post the situation is going to change).

Another deciding factor, as previously mentioned, was the uptake of social media that started to make large use of digital photos. Instagram (I just take Instagram as an example, you can use Snapchat, Twitter, Pinterest, Tumblr,… ) started in 2010 and by 2015 has grown to 400 M users (it was acquired by Facebook in 2012). In June 2018 it exceeded 1 billion users active in a month worldwide. Every day some 100 million photos are uploaded and over 40 billions are shared. These numbers are mindboggling and there, in a nutshell, is what Digital Transformation is all about: killing cost and making possible to do (new) things because they become affordable.

And it is not over yet. More to come.

About Roberto Saracco

Roberto Saracco fell in love with technology and its implications long time ago. His background is in math and computer science. Until April 2017 he led the EIT Digital Italian Node and then was head of the Industrial Doctoral School of EIT Digital up to September 2018. Previously, up to December 2011 he was the Director of the Telecom Italia Future Centre in Venice, looking at the interplay of technology evolution, economics and society. At the turn of the century he led a World Bank-Infodev project to stimulate entrepreneurship in Latin America. He is a senior member of IEEE where he leads the New Initiative Committee and co-chairs the Digital Reality Initiative. He is a member of the IEEE in 2050 Ad Hoc Committee. He teaches a Master course on Technology Forecasting and Market impact at the University of Trento. He has published over 100 papers in journals and magazines and 14 books.