Technology and innovation in the smart phone industry have developed at an extremely fast pace. Shifting consumer preference towards iPhone and Android devices (even in the business user segment) is causing RIM to lose market share at an exponential rate
Research in Motion [RIMM: $60.81], known for its private data security and e-mail addicts, may be on the verge of disappearing. Drawing this conclusion may seem strange in light of its recent stock price increases, its 27 percent market share, and the pending release of its iPad competitor, the Playbook. However, RIM’s demise isn’t apparent on the surface. Its misaligned long-term strategy is what will ultimately bring RIM to its knees.
Technology and innovation in the smart phone industry have developed at an extremely fast pace. This has caused consumers to upgrade their devices on an annual basis if not sooner. As these devices increasingly become an extension of the life of today’s consumers, supplying innovative, advanced devices is more important than ever. This shifting consumer preference towards iPhone and Android devices (even in the business user segment) is causing RIM to lose market share at an exponential rate.
Rather than adapt to these changes and protect its smartphone market share, RIM has decided to dedicate its resources towards entering the emerging tablet market currently dominated by the Apple iPad. This new “Playbook” has everything current iPad users are craving, such as Flash capabilities, a USB port, compatibility with Microsoft Office tools, higher speed CPU, and front and rear facing cameras. While the temptation to enter this market with these features is enormous, the near horizon vista shows a bloody competitive battlefield. Well established technology companies with deep pockets such as Cisco, Samsung, Dell, HTC and HP, all have similar devices ready to launch by June 2011. RIM may take advantage of the initial open space, but they will soon be inundated with heavy competition.
This short-sighted strategy is distracting RIM from what they have done best—smartphones. Blackberry devices are being attacked on all fronts. In the regular consumer segment, preferences are quickly shifting towards iPhone and Android interface systems. Overall, the smartphone segment is growing by approximately 30 percent annually, yet RIM’s market share dropped from 35 percent to 27.5 percent in that same segment. This equates to a 23 percent drop in their own customer base. Yet, rather than innovate and fight to maintain market share, they focus their efforts outside their own expertise and extend into the realm of tablets. This is a short-term, unsustainable strategy that has the potential to cause long-term problems for RIM.
In the business user segment, RIM corporate clientele are being courted by both iPhone and Android operating systems. Their hope is to lure corporations into new contracts through their highly sought after devices combined with a third party “Good” data network connection. The trade-off between data security and advanced smartphone devices is one that many RIM clients are seriously considering. A declining market share in this segment would only accelerate the exponential decline that RIM is already experiencing.
Apple CEO Steve Jobs was recently quoted as saying, “We’ve now passed RIM, and I don’t see them catching up to us in the near future. They must move beyond their area of strength and comfort into the unfamiliar territory of trying to become a software platform company.” Retorting this statement, RIM CEO Jim Balsillie stated, “…the implication being that RIM practically invented the smartphone category and is not going anywhere.”
However, having invented the smartphone category does not necessarily correlate with being a leader in the industry. Balsillie is holding onto this lifeline like Phil Knight held onto the claim that Nike did not have to associate themselves with their suppliers’ actions in 1990’s. Even ten years later, Nike has yet to recover their previous market share. Lesson: when consumers speak, listen.
Why is it that the renowned Blackberry is losing its foothold so quickly? A lack of innovation and adaption appear to be the diagnosis to the symptom of market share loss. RIM has constantly been behind the innovation curve in recent years, and in more areas than one. The obvious surface issue is the lack of adaptation to the quickly growing consumer preference into touch interface smartphones and the myriad of applications, or “apps”, that go with them.
Since the introduction of the iPhone in 2007, there has yet to be a Blackberry device that has been able to compete in terms of operating systems or touch screen interface. However, where RIM failed to respond, the market did. The Android operating system (created by Google) opened up the market for any technology producer to create an applicable touch screen phone for the market. Subsequently, players such as HTC, Samsung, and Motorola, and have been able to effectively penetrate the smartphone market and compete against Apple. In the meantime, Blackberry is still on the sidelines…with their playbook in hand.
To add to this, RIM’s operating system is constantly criticized as not user friendly and difficult to integrate into third party technologies. Compared to competitors in the industry, this has been a challenge for gaining market share in the consumer market for RIM. The anticipated release of their new operating system in the Playbook will eventually end up in the blackberry phones, but a date is yet to be released. This puts RIM further behind the industry in innovation. Their hardware has been no more innovative or adaptive to new consumer preferences. With only one fully dedicated touch screen phone on the market (Storm), RIM is not delivering and their declining market share is an explicit demonstration of this.
[This article has been reproduced with permission from Knowledge Network, the online thought leadership platform for Thunderbird School of Global Management https://thunderbird.asu.edu/knowledge-network/]