About seven weeks ago, when RIM’s stock was $53.83 (28/04/11), they announced their reduced revenues objectives for the quarter resulting in a 14% drop in their stock price from one day to the other. Last Thursday the news announced that RIM did not hit those reduced targets of revenues dropping their stock price again 21% (from $34.78 on 16/06/11 to $27.24 on 17/06/11). The cumulative lost only from April to today is more than 49%!
I have been thinking about this the whole weekend. How a company like RIM, with a product like the Blackberry did just lost the momentum like this? Did not the Palm story serve as example of what can happens if there is no continuous innovation?
My first almost-Smartphone was a Treo 680. I was travelling in the US for work and I bought it in the Atlanta airport spending in an impulse a considerable percentage of my monthly salary. I just got totally in love with it. It was the first phone which I could connect to the computer and use for actually useful things: Manage my agenda, manage my contacts, use a great to-do list and download useful applications! I used to get everyday to the office and connect my phone in its cool dock, synchronise it and just have all that important information wherever I go. The best part? There were tons and tons of developers’ sites where I could find applications for anything I could need.
Sounds familiar? I know, but it was 2006. There was no iPhone, no Blackberry (no at least for the normal people, only my Associated Director had a company’s one with an American number) and no Android for sure. This entire new world was just a super smart business model that just happened without much planning from anybody. It just became manifest spontaneously, started working well and actually became the base idea of the ecosystems we know today.
If only Palm had seen it… Palm was the king of the mobile devices and had everything to become the master of the Smartphones! It had the hardware, the mobile expertise, a passionate developers’ community and the customers ready to try anything from that brand because we knew we needed something, but we needed them to propose ideas of what that could be.
But they fell asleep… Palm did not invest enough in innovation for hardware or design, and never updated the operating system properly. Competition saw the big market change and arrived to take their piece with their best proposal, which was great. Palm tried to catch up with the Pam Pre, but it was too late. Most of their value customers (including me), had already moved to Blackberry or iPhone. By January 2009, when the Pre was presented, Android was already up and running and the iTunes store had 15’000 very high quality applications with 500M downloads. Palm never got recovered from this, and in April 2010, HP announced Palm’s acquisition for only $1.2B.
They had it, they owned it… and they let it go. Just like that.
RIM (1998 – still going!)
Now… What about Blackberry? The first Blackberry I saw was the pearl, and it was launched in 2006 as well. It became a big player first in the business world because its security standard and the email everywhere (without synchronising with a wire to the computer!). Then the physical keyboard and the super useful BBmessenger made it popular to all kind of customers of any age, changing their customer base drastically and growing revenues. I found out that my university started to borrow Blackberries to the students during the time of their undergrad studies… I can imagine how many of these students became addicted to the connectivity and bought their own device just after graduation. Only that university has 12K students, reapplying that was brilliant!
There are only two ways of competing for market share: Price or differentiation. This market is about Smartphones, which are very personal and intimate devices which we consider as part of our personality. Besides there are Smartphones for many different acquisition powers, for the value customers (higher margins) price is a negotiable thing, but differentiation is what will drive the choice of purchase (and engagement!). We are willing to sacrifice other things in order to get the mobile we want. Therefore, for a big player in a market like this, competitors like this and a speed like this, to have one or two differentiators and just harvest revenues for ever is a not a sustainable option.
However RIM kind of thought it could be. They continued the formula trusting in their email, keyboard and closed chat system. It worked great for a while! When I got my first Android, I kept the Blackberry only to be connected to the chat and write long emails from there. My youngest brother and his friends were dying for an iPhone, but chose to stay with Blackberry because of the same reasons. However, slowly we got used to the capacitive keyboard, Whatsapp became the most popular multi-platform chat, there are 14B Apps available for iPhone and 3B for Android this year, the experience surfing the Internet net is much more comfortable with a big capacitive screen and the design of the iPhone and all the Android Phones is just too good.
Blackberry figured it out a bit late when few chances of recovering are still available. As far as I see, they will have to either get another brilliant differentiator idea, or return to the “business” niche market where they are strong and can protect with all their strengths.
As part of the efforts RIM have started, they redesigned their Storm model and re-called it Torch, which is a bit late to the party but is much better than previous models, and could have a chance for a decent piece of the cake against iPhone and Android. The design of the Torch is good, but what about the main differentiators? The BBmessenger, email and keyboard differentiators are becoming less important every day; the extreme security is not a choice factor for a normal user and the few available Apps for BB is a growing disadvantage (only 3M Apps). The Playbook is out now, and is trying to become part of the Smartphone experience, but that is another thing that Palm tried years ago and did not work. Maybe we were just not ready for it at that time, but there is the chance it is not such a good idea (maybe a good topic for another post).
RIM is waking up and they have to choose carefully their next steps. However I really hope they can recover and give a new turn to the market, which is what crisis are good for. It would be a shame to lose one of the big players in the Smartphones competitive landscape, because those players mean options for us (the customers) and motivators for all the other players to keep creating breath taking products and experiences for us.