Research in Motion is the most recent example of how hubris comes before the fall amid the harsh realities of a competitive marketplace. Once upon a time (or, to be more exact, in late 2008), RIM was at the top of the world. It had won the enterprise world with its outstanding mobile email implementation and was making inroads into the consumer market. Carrier demand for its BlackBerry devices was exploding.
It seemed as if RIM was on a steady course. Its market share was growing as it continued to innovate and perfect its product, competing harder than its traditional rivals Microsoft and Palm.
And then the iPhone happened. In June 2007, the iPhone was released with good, but not blockbuster sales. The $400 price tag for the first generation iPhone muted demand. This all changed a year later, when Apple dropped the price of the mainstream iPhone to $199 because of subsidies from AT&T and the introduction of apps.
AT&T was suddenly going to market with a magic weapon, the iPhone 3G, and all the other carriers fought back with feature phones, the equivalent of the weapons of mere mortals. If you remember those days, AT&T was decimating the other operators and it was not a pretty sight anywhere but in Atlanta. Carrier executives were longing for a competitive answer, just as RIM was positioning the BlackBerry as a competitive weapon against the iPhone.
To be fair, the BlackBerry sort of looks like an iPhone. It had email, and a Web browser. Every carrier but AT&T tried to sell a BlackBerry to any prospective customer who was interested in something like the iPhone. As a result, BlackBerry sales exploded and RIM’s leadership thought this validated its strategy of marketing BlackBerries to consumers.
The problem is that RIM mistook the good fortune of being a barely adequate iPhone alternative for a grand validation of their business plan. As long as there was no real competitor other than the iPhone in sight, it was all working out. And then Google’s Android took the stage.
And that’s when RIM’s problems really started to materialize.
For a year, Google was in a quasi-public beta at T-Mobile with its G1 devices. It sold well, but not anywhere near what the iPhone did. Only when Verizon, which until then had been a mainstay of RIM’s business in the United States, threw its support behind Google’s Android platform did Android sales grow significantly. Quickly behind Verizon were Sprint and T-Mobile and all three carriers were rounding out a robust Android product portfolio that was growing to be the number one mobile device operating system in the United States.
But where was RIM?
The tragedy in these events is that almost four years later, RIM still believes that its enterprise-centric devices are attractive to consumers, rather than recognizing that the reason they sold so many to consumers was that they were force-fed to those consumers by operators desperate to have an answer to the iPhone. Even after a management change, the company still does not seem to understand the severity of the situation it is in and how much it is off course.
While it increased its overall phone shipments worldwide, and in the most competitive smartphone market in the world, the United States, sales are continuing to fall precipitously. RIM’s current device line up is simply not competitive anymore. At the same time, Microsoft together with its allies Nokia and HTC are launching very competitive devices with an appealing operating system. Their goal is to become the third operating system in the U.S. and thereby in the world.
In an interesting twist, both Nokia and RIM, the national champions of each of their small nations, are at a similar crossroads. What they do next will decide the fate of the two companies, but that’s about where the similarity ends. The decisions the two companies made about their future leadership couldn’t have been more different. Nokia made a dramatic break with its past by selecting an outsider to deliver it from its troubles, while RIM chose an insider who stands for continuity.
Nokia and its OS provider, Microsoft, are painfully aware that this is the time to deliver and they are putting all their efforts behind this endeavor. RIM’s new CEO thinks that better execution and marketing will do the trick. If Nokia and Microsoft succeed, RIM is dead. If they fail, Nokia will die. There is simply no room for four operating systems. But what really separates the two is that Nokia has nine months to sell a series of devices that are very strong and differentiated before RIM brings its new BlackBerry 10 devices to market. Nokia knows that the survival of the company is at stake, while RIM seems to be in denial about the state of affairs.
The future does not seem to be bright for RIM… by the time its first BB10 device comes out, it will likely be competing with the iPhone 5, Windows Phone 8, and the next generation Android after Ice Cream Sandwich. These choices likely will be two to three generations ahead of where RIM is now.
There is an important lesson for the entire mobile industry in the sage of Nokia and RIM. The industry moves so fast and is so competitive that even a company with leading technology and huge market share can’t rest on its laurels. If it does, in as little as two to three years it will find itself an outlier with few options and a dim future.