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Addressing Market Shifts or Why RIM is not down and out just yet

by Saeed Khan

If you’ve read anything about Blackberry maker Research in Motion (RIM) lately, it’s likely that the news has not been good.

Whether it was the underwhelming response to their Playbook tablet, the abruptly ended BBC interview by Co-CEO Mike Lazaridis, or the recent drops in RIM’s stock price, negative news seems to have a death grip on the company.

People are looking at the growth of iOS (Apple) and Android based phones, with RIM dropping to a distant 3rd in market share.

But in all of this doom and gloom, it’s too early to count RIM out,  and there are real lessons to learn about dealing with shifting markets and new competition against established players.

First, let me say that while I’m a big fan of RIM for a number of reasons, I don’t have any financial stake in RIM.  Second, I don’t have any “inside” information that I’m sharing. This post is an outside-in view of RIM, trying to look past all the noise in the news channels, and analyse the situation from a Product Manager’s viewpoint.

The market has changed

I remember when the first colour Blackberry’s were introduced. Wow. Nice screens and they got rid of the thumbwheel and replaced it with the trackball, which later became a small trackpad.  Those seemed like big changes for RIM.  But to state the obvious, Apple completely upended the game with smart phones, and for a while, RIM seems to have been caught snoozing.

RIM’s initial forays into more “iPhone”-like touchscreen phones were the Storm and the Torch. Neither met with major success. They were simply me-too products when compared to the iPhone, and poor ones at that.

But RIM is not simply a handset company. RIM provides infrastructure to both carriers and enterprises. For carriers, RIM provides billing services, secure and efficient email and data transmission, and device management services. For enterprises, RIM provides the Blackberry Enterprise Server (BES) for provisioning and managing the devices.

These are clear differentiators when compared to the iPhone or Android devices. They are why both carriers and enterprise IT favour the RIM devices. And these are the likely reasons why RIM did not react more quickly to the threat of consumer-oriented touch-based smart phones like the iPhone.

Battleships turn slowly

But RIM is changing, and while it may not be clear to all, the Playbook tablet is key to RIM’s transformation.

Sure, people are complaining about the Playbook, the lack of apps and email integration etc. But RIM is not in the tablet business. They’ll definitely sell their share of tablets, though nowhere close to what Apple with sell.

The reason that the Playbook is important is because it, and more specifically the QNX operating system it runs will be the foundation of the next generation of Blackberrys. This fact was announced last fall, though it seems little attention has been paid to it by the broader press.

In short, the Playbook is the lab, before the new Blackberry factory gets into gear. This is a critical point to keep in mind.  For established companies like RIM, change will rarely happen rapidly, given the technology, systems, processes, contracts and other business issues to deal with.

But then, are RIM’s customers demanding change overnight? How fast can RIM’s customers, mostly enterprises, consume any change? And at what cost? Would they trade off speed of delivery vs. stability, security and management? And if so, why?

These are some of the important question to ask when addressing significant market shifts.  And once you have the answers, a strategy can be put into place to manage the change.

The road ahead

There are still many challenges ahead for RIM.

  • They definitely need to get their new QNX based Blackberrys out soon, ideally in 2011 and NOT 2012.
  • They need to create, educate and grow a thriving 3rd party development community.
  • They need to acquire (or seriously partner with) mobile application or cloud service companies to provide differentiated capabilities for enterprise and business users
  • They need to provide incentives to existing customers who move to the new QNX Blackberrys vs. losing them to iPhone/Android handsets.
  • They need to show the market and investors that they are still an innovative company that can deliver rock solid products.

While the market will give Apple slack for things like AntennaGate, or taking a very long time to ship a white iPhone, it’s unlikely the same grace will be given to RIM. Let’s face it, Jim Balsillie is no Steve Jobs.

So, even though the market for smart phones has shifted, and forced RIM into a defensive position, it’s clear they have a plan and are executing on it. Given the storms RIM has weathered in the past, if history is any indicator, RIM will make the shift from old to new platform, despite the doom and gloom predicted by many pundits. It may never be as sexy as Apple, but then who is? But in the end, there is nothing wrong with a profitable, $20 Billion dollar company. 🙂

Saeed

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0 comments
  1. Geoff Anderson

    Well, I have a blackberry for work, it is an older 8310 Curve, and it is a steaming pile of garbage. At this point, it is relegated pretty much to overseas use(where work pays for the charges) and my personal iPhone is my daily user, connected via ActiveSync.

    A month ago, we had a product management summit (my company is literally across the parking lot from RIM in Waterloo, ON), and the product managers were sporting iPhones over blackberries 4:1 by my, unscientific, count. Considering it became an option for us in July 2010, that is a pretty quick dislocation of a trenchant Blackberry culture.

    Your analysis above is fine, but I would have to say that RIM is losing their growth engine, new users. Corporations, long their bedrock is being eroded at an alarming rate.

    I wouldn’t bet a dime of my own money on RIM successfully pulling them out of their tailspin.

    1. Saeed

      Geoff

      First of all, didn’t know you were in Waterloo. I’m in Toronto. Small world.

      Second, what specifically is it about the iPhone that you like above the BB?

      Browsing experience? Specific apps? Better phone? i.e. what makes the BB a “steaming pile”?

      Saeed

      1. Geoffrey Anderson

        Well, my blackberry is slow. It is an Edge device, and they mated a slow processor with it. It is very non-responsive (i.e. it can take 45 seconds to begin to scroll my email). It crashes HARD at least once a week, requiring a battery removal reboot, and it takes a minimum of 15 minutes to come back to life and be usable. It seems to not work with any standard headsets (wired) other than the one it came with (which is pathetic). It has almost no application memory left (after the standard apps and OS, the onboard storage free is 4.5M, so it really can’t play in the app world. (and for some reason, I can’t get applications to install on the 8G microSD card I have in it.

        The iPhone is the complete opposite. Of course, the BB I have is what was state of the art when the iPhone was released (2007), so I shouldn’t be too surprised. But when it is time to replace, it is safe to say that I will not be selecting a BB.

        1. Saeed

          Ouch…aside from the Edge service, which is what common to (virtually) all BBs, I’ve never had any of the problems you mention. i.e. crashing, non-responsiveness, headset issues etc. And I’ve had a number of BBs since 2007, which is when I first started using them regularly.

          If my BB were like yours, I’d absolutely agree with you.

  2. Jason Dea

    To borrow a term that’s been on this blog numerous times. I think RIM needs to “nail it” before they “scale it”, or rather nail it again. A blackberry was a revolutionary product allowing users to finally bring a small piece of their office on the go with them everywhere. An iPhone is “cool and fun”, two things a blackberry never was and never will be. IMO RIM needs to recapture this leadership and focus on the enterprise and leave the consumer toy market to the other guys.

    1. Geoffrey Anderson

      Good point, but they reached near saturation in the Enterprise market, and growth had stalled. Now they have chased the consumer space (and are successful with the BBM service in certain markets), but are losing sight of the corporate space.

      Lots of iPhones and Android phones are going into enterprises. My IT guy tells me that he is happy that the BES is getting less used, as it is non-trivial to keep humming (not hard, but MS makes activesync so painless).

    2. Saeed

      Jason

      Great point. They need to “Nail it and Scale it” again!

      On a more general note, heterogeneity in the market place is a good thing. It exists in many markets and most have room for 2-3 leading players, ahead of a long line of also rans. I see RIM as one of those 2-3 leaders. Android, iPhone and RIM. I don’t put much hope for MS and Nokia to be honest, but that’s a different discussion.

      RIM is a much deeper company than the handset makers, and is definitely not another Motorola, — i.e. one hit wonder with the RAZR etc. Let’s see where things are 6-12 months from now. Either way, RIM will be a definite candidate for a business school case study.

      1. Jason Dea

        I agree 100%. The smartphone market by most accounts is a big one… and growing. No shame in being number 2.

        IMO what they did and have always done best is build devices that are tremendously good for intensive messaging geared towards business focused users. Not devices built for Angry Birds. The direction they are going with the Playbook and their acquisition of Tungle.me seems to indicate a renewed focus on enterprise.

  3. Paul Philp

    Saeed,

    I think your analysis is accurate. However, it reminds me of the old saying “Other than that Mrs. Lincoln, how did you enjoy the play?”. The basis for competition has shifted from the device + email/calendar integration to software platform + ecosystem. From all accounts, the Playbook device is a fine table. The software and ecosystem are what is weak – too weak to compete. At this point, RIM is look at the wrong side of some very strong network effects in the ecosystem development. It will be very hard for them to convince developers to support a 3rd of 4th (Win Phone 7) platform. IBM had many competitive advantages but they couldn’t get developers to switch to OS/2.

    RIM is the new DEC.

    Paul

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