Tuesday, April 17, 2012

RIM/Blackberry --> Drowning in a red ocean

Buzzwords and phrases: low-cost leadership, product/service differentiation, customer relationship, network effect, customer's expected level of value/willingness to pay, operational efficiency, exploiting the experience/learning curve, unbeatable supply chain, product redesign, core product platform, reliability and on-time delivery = service, customer relationships, customer advocacy, focus strategy serves a particular target very well, winner-take-all strategy, alignment b/w strategy and customers, overcrowded red oceans, uncontested market spaces = blue ocean, invent and capture new demand, offer a leap in value, streamline costs, never use competition as a benchmark, make the competition irrelevant, corporate strategy heavily influenced by military strategy, blue oceans are not about tech innovation, blue oceans build brands, blue oceans are very much about strategy and managerial action, strategy as a choice between differentiation and low costs, imitating a whole-system approach is not easy, 7 ways to fail (synergy mirage, faulty financial engineering, staying the course, pseudo-adjacencies, betting on wrong tech, rushing to consolidate, business roll-ups), 7 strategy stress points (primary customers, prioritization b/w shareholders/employees/customers, critical performance variables, strategic boundarpies, generation of creative tension, commitment to collaboration/cross-helping, managing strategic uncertainties, tenants of bad strategy (failure to face the challenge, mistaking goals for strategy, bad strategic objectives, fluff), need good strategy to make effective push, focusing on pivotal objectives, difficulty in prioritizing and choosing, kernels of good strategy (a diagnosis, a guiding policy, coherent actions)

In this week's blog post, I want to draw attention to the once-formidable Canadian company RIM (maker of BlackBerry smartphones) which now finds its market share dangerously reduced (from 37.6% in August 2010 to 19.7% in November 2011). Meanwhile, the smartphone industry is highly dynamic and competitive, and Google and Apple seem to be taking over the market.
Source: techcrunch.com/2012/01/02/chart-google-apple-smartphone-wars/

How did RIM lose so much business so quickly? The answer lies in two of this week's readings: "Types of Strategy: Which Fits Your Business?" and "Blue Ocean Strategy".

In the first article, four basic business strategies are described: low-cost leadership, product/service differentiation, customer relationship, and network effect. In late 2010/early 2011, RIM under-performed in the differentiation category and fell prey to the network effect. In the highly competitive "red ocean" of smartphones, forward-looking design is king. But according to an eweek.com August 2011 article (http://www.eweek.com/c/a/Mobile-and-Wireless/RIMs-Latest-BlackBerry-Smartphones-Will-Fail-10-Reasons-Why-167457/), the new BlackBerry smartphones "don't break any new ground". The operating system is the same as before and the old physical keyboards "smack of obsolescence". According to the HBR article, it is important for companies selling commoditized products such as phones to differentiate themselves in more ways than one. But in 2011, RIM failed to offer innovative new features and also experienced several customer service snags when the BlackBerry network crashed and the company was slow to respond.

Another reason for RIM's decline is the incredible network effect (a phenomenon in which the value of a product increases as more products are sold and the network of users increases) that has taken hold of the Google Android and Apple iOS platforms. Nowadays, IT decision makers in enterprise settings are going beyond the BlackBerry; they are "open to using the iPhone and would even try out Android-based offerings." Meanwhile, developers are flooding to the iOS and Android platforms to develop their mobile applications. Finally, on the consumer side, smartphone users are increasingly choosing the iPhone to consolidate the totality of their arsenal of Apple electronics. 

How can RIM combat this bloody, aggressive red ocean in 2012. It needs to create a blue ocean of opportunity. It needs to invent and capture new demand, offer customers a leap in value, and streamline their costs. Perhaps if RIM fully optimizes their supply chain, or creates new webcam conferencing technology, or even designs a phone for new consumers (low-income, the disabled, children), they will be able to regain market share.

What do you think RIM could do to stop its downward decline in market share? Is it too late?




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