The Canadian business magazine Canadian Business was kind enough to ask me to write an article arguing that BlackBerry-maker Research in Motion is screwed. It was easy to do–because I think they are. Here’s the article.I’ll never forget the first time I saw a BlackBerry. It was a near-religious experience for me. It was back in 1999, and I was a Wall Street tech-stock analyst, and I was on a 747 flying from Denver to San Francisco.
The colleague I was travelling with, a big-time investment banker, pulled a strange-looking gadget off his belt and handed it to me. The device had a scroll wheel. And a keyboard. I could hold the device with both hands and scroll and type with my thumbs, as though it was a video game. The device made soothing chirping noises that, I soon learned, alerted the owner every time a new e-mail arrived—which happened automatically, magically, via “push.”
I’d never seen anything like the BlackBerry. After a few minutes of fiddling with my colleague’s, I was hooked. The following week, I got my own, and I instantly became addicted to it. Thus began a 10-year love affair with successive generations of BlackBerrys, which were rarely more than two feet away from me for 24 hours a day.
And I was hardly alone.
By creating the BlackBerry, Research In Motion revolutionised mobile productivity. For nearly a decade, the company easily fended off the competition by providing the best personal-information gadget on the market. It silenced its critics. It reduced Palm, a previous leader in mobile gadgets, to a pile of rubble. And it made its shareholders rich.
But now, Research In Motion’s amazing run appears to be over. The company has lost its lead in the smartphone market, and its market share is falling rapidly. And many long-time addicts like me have switched to iPhones or Android phones.
Research In Motion fans, including Research In Motion management, argue that the company’s swoon is just temporary, that it will soon be back on top. They’re almost certainly wrong. In fact, unless Research In Motion does something radical, the company’s future is more likely to resemble Nokia’s—or, worse, Palm’s.
There are three main reasons RIM’s fortunes have turned south.
First and foremost, RIM’s products are no longer the best on the market. Although some diehard business users still cling to their BlackBerrys—and insist that the devices are better for e-mail and calendar management than anything else out there—these folks are increasingly a minority. The rest of smartphone users prefer the broader capabilities of iPhones and Android phones, especially apps and web browsing. Even on Wall Street, RIM’s initial stronghold, many bankers are either making the switch or carrying their BlackBerry plus something else, just so they don’t miss out on all the iPhones and Android phones have to offer.Second, the smartphone market has become a “platform” game. As Microsoft’s Windows demonstrated in the PC era, technology markets in which third-party companies build programs or applications to run on top of a particular operating system or other product—”platform markets”—tend to standardize around one or two market leaders. Thanks to the explosion of “apps” available for iPhones and Android phones, the smartphone market is increasingly becoming a platform market. Research In Motion has fewer developers building apps for BlackBerry than Apple and Google do for their platforms, and this lack of apps makes the products less useful for consumers. RIM has tried to encourage developers in recent years, but it still lags badly as an app-development platform.
Third, one of the biggest selling points for BlackBerrys has always been their security and integration with corporate computing systems, most notably Microsoft’s Exchange. Increasingly, however, companies are allowing employees to use whichever devices they prefer. And many employees are choosing iPhones and Android phones. In addition, many companies are officially equipping employees with iPhones and iPads, something that was nearly unheard of only a few years ago. In short, other smartphones, once dismissed as consumer toys, are now being adopted by enterprises, and that’s bad news for RIM.
Not helping matters is an ongoing loss of credibility of RIM’s management team, especially co-CEO Jim Balsillie. Several times over the past few years, RIM’s management has promised that the company’s next generation of products would be mind-blowing—Balsillie said the Torch, for example, would be a “quantum leap” over the iPhone—only to have the reality disappoint. You can’t over-promise and under-deliver too many times before observers begin to dismiss you as incompetent or delusional. And RIM has exacerbated the impression that its management is out of touch by maintaining an arrogant, dismissive tone toward competitors. A recent ad campaign for RIM’s late and widely panned PlayBook, a competitor for Apple’s iPad tablet, announced the product’s arrival by asserting that “Amateur Hour [was] over.”
Is there anything that could turn RIM’s fortunes around?
Yes. If RIM actually could deliver a product that was a “quantum leap” over the latest iPhone or Android phone, consumers would respond accordingly. The one benefit about competing in the smartphone market is that consumers tend to upgrade their phones every year or two, and they tend to be seduced by the latest, greatest phone on the market.
The farther RIM falls behind iPhone and Android as an app platform, however, the more unlikely this Hail Mary escape becomes. Switching smartphone platforms will increasingly mean jettisoning third-party apps that consumers have come to know and love. Also, Apple and RIM’s other smartphone competitors won’t be sitting still: as they’ve demonstrated in recent years, they’re quite capable of competing with RIM, and if RIM does build a BlackBerry that represents a “quantum leap,” Apple and the Android manufacturers won’t be far behind.
The most likely scenario for RIM is that it becomes Nokia, a company that once dominated the mobile phone market but lost several steps and is now scrambling to stay relevant. A worse scenario would be that RIM becomes the next Palm, a one-time leader that falls on its face and is eventually sold for scrap to a larger technology player.
See Also: DAN FROMMER: RIM is the New Palm