Hans Greimel, an Associated Press reporter, recently wrote a great article initially titled "A Farewell to Film" recapping the last 10 years in the photographic industry.
The article gives a perfect description of disruptive technology and its impact on the existing market. A disruptive technology, if you’re not familiar with the term, is a technology that is radically different from existing technology. At the outset, a disruptive technology is often more expensive and less efficient than the incumbent technology, retains some traits that are superior to the existing technology, and does not appeal to the existing market.
Digital photography is a perfect example.
The first step is the introduction of a technology that works in a completely different manner from the existing standard, and does not come
close to meeting the demands of the most profitable customers. In this
case, professional photographers and families. Digital simply did not
have the resolution or quality required by professionals who spend tens
of thousands of dollars a year on photographic equipment. For low-end
consumers, there was no convenient way to send pictures of kids to
grandparents without computers, and setting up a web site to share with
those who didn’t have Internet connections required specialized
knowledge (remember, were talking about 1996 and 1997 when HTML was a
big deal).
Initially, digital technology was appealing to two very small
markets: first, newspapers who care about extremely fast development
turnaround but not about resolution (halftone images in a newspaper
have an effective 85 dpi resolution). In other words, digital photography’s superior trait was that it did not require film or film developing. The second group was tech geeks/early adopters who did have
the ability to post and share digital images and loved cool gadgets.
The growth in the market, however, occurred in that second area: as the Internet revolution made it easier and easier to print images and share online, and as more people became connected to the Internet, whether it was through computers or digital frames like those provided by Ceiva, the convenience of digital photography provided a robust market.
But as the market for low-end cameras grew, some of the traditional camera companies under estimated the appeal of the market because their best customers–professional photographers–were telling them that digital just didn’t have the resolution they needed. All this while, the resolution of this digital cameras was getting better and better. By the time pros stopped talking about resolution, and started complaining about things like the physical size of CMOS chips, contrast, noise, etc., it was too late.