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« The 'Cliff Theory' ie How Handset Makers Die, why in Mobile Phones do Companies Collapse so Rapidly (Siemens, Motorola, Palm, Nokia, Blackberry and Windows Mobile) | Main | Largest Mobile Social Networks Today by Size of User Base »

April 02, 2012

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cycnus

Tomi,

Just a quick reply
In your article about user number (not this one), you said RIM/BB have 100 million+ user, but according to RIM, they only have 77 million user
source: http://www.thestar.com/business/article/1153788--blackberry-maker-rim-retrenching-after-more-bad-news

Tomi T Ahonen

Hi cygnus

I know. That 77 million number is the count of the official subscriber base for Blackberry's service. There are more handsets in the wild than the subscriber number. My number is the total Blackberry handsets in use whether they have signed up to the Blackberry service or not.

Tomi Ahonen :-)

cycnus

Ok got it...
So there were around 30 million BB user who didn't sign up for service and use BB for dumb phone :) LOL.

ChrisD

Interesting article again, Tomi!

I think RIM really needs to capitalize on the enterprise market, by moving beyond their own system. That way, they will not sell more phones, but at least they stay in business ... ;-)

They could bring out BBM and Exchange client (mail & calendar) for other platforms - Android and iOS (and maybe WP7 if they ever sell in noticeable numbers). These would integrate with existing BB infrastructure, and they could charge for those apps. That would keep them their clients, while moving towards more service, less phones.

It sounds a bit like a suicide move, but since they are declining in phones, what else can they do?

cycnus

@ChrisD,

I was wondering if the Android and iphone user really want BBM on their phone. I believe What's App is a better platform compared to BBM archaic design.

@Tomi

Do you think by shrinking, RIM/BB would survive? or they just prolong the Cliff?

Louis

@Tomi: Because you only look at market share and aren't interested in ASP or the action in the leading markets, you're probably the only one who thought RIM had stabilized things. If you look at Michael Mace's Fall a 2010 post on RIM, it is very prescient: in terms of diagnosing the problem and predicting the future: http://mobileopportunity.blogspot.de/2010/10/whats-really-wrong-with-blackberry-and.html

Sander van der Wal

@Louis

In deed it does. It was a very interesting read. And the theory applied by Mace could well be applied to Nokia too. Should be an interesting exercise.

Tomifan

Tomi, I will be arguing with you a lot more when Nokia announces their figures for Q4, but meanwhile let's just say: well put.
RIM themselves said they fail to appeal consumer segment and will focus on business. But Smartphone segment grows exactly in consumer. And theprivacy fail in India. If there is light at end of tunnel, it's high-speed train.
The ecosystem for RIM is even less popular than Bada and doesn't show growth like WP7. Frankly, any programmer investing on BB version was sleeping when basics of profitable investments were taught.
Eagerly waiting to see who would buy the sinking ship and why?

Tomifan

Sorry, Q1. Should not type without full concentration.

Michael

There is a lot of talk about RIM being purchased for the patents it holds. However, with the two big payouts it had to make to license patents it was infringing on, I wonder just how much the patent portfolio is really worth.

Their best strategy (in terms of shareholder value) might be to sell the portfolio, remit their $2B in cash back to their shareholders and then sell the company.

cycnus

@Michael,

I'm 100% agree with you.
I also think that RIM have no chance to survive at all.
Their archaic infrastructure have been proven not good.

Now the question would be,
What would happened to all BB user all over the world if RIM do what you said.
Suddenly, their phone were not able to BBM/email because RIM is gone.

Gregg Borodaty

Hi Tomi. I'd like to add that RIM is doomed for another reason. The smartphone OS fight is moving into the next battle - integration into the living room. To participate in this battle, an OS will need to have a phone, tablet and TV strategy. The three operating systems that will participate in this battle are

Apple with iOS for iPhone, iPad and Apple TV
Google with Android for phone, tablet and Google TV
Microsoft with Windows 8 for phone, tablet and Xbox
(As an aside, Sony could be a contender because of their Playstation dominance, but the lack of a unifying OS puts them at the mercy of Android).

Since RIM lacks a television strategy, they are destined to become a niche player in the enterprise, which is why they are making the right strategic decision at this stage of the fight.

Earendil Star

I think the fashion factor quoted in some comments to the Cliff Theory post should not be disregarded.

Reality is, iPhone rules because it is highly fashionable. Looks are nice, price is high (a plus for an "elite" object), OS is simple.
If you have it, you're cool. If you don't, well, tough luck.
Just as in haute couture, it's the name that counts. A better quality chinese equivalent of a top fashion brand such as Hermès would stand no chance.
Almost the same goes for Apple and the iPhone.

This used to be true for BB as well. I remember a number of years ago when having a BB was really cool.
It all started in the corporate world: if you had a BB, you were someone. If you did not have one, you were out.
This trickled also to the consumer world, with cool design such as the Pearl. That iconic white globe glowing was captivating.

Then the iPhone came out, and that was the beginning of the end. Reason? The iPhone became the new status symbol.
Yes, when the first iPhone came out, it was completeley revolutionary: all screen, multitouch, gyro, cool apps
(but often useless, even if I liked them: the Star Wars lightsabre, the chainsaw, etc.).
But more than that, Apple was the real master in marketing: store queues, cool looks, army of fanbois, word of mouth.

Slowly SMSs would start showing "sent from my iPhone" instead of "sent from my Blackberry".
This time the tide came from consumers and went to the corporate world.
And it's bringing with it iPads and iMacs and shortly, possibly, also iTVs.

This will last until the next disruptions comes out. Maybe from Apple. Maybe from somebody else, now that SJ is gone.

Some are saying BB was behind and even archaic.
I agree that BB was not delivering and lacking in execution. The top brass was fired for this.
Too late with QNX. Too late with an appealing PlayBook (with proper apps and price).
And what is worse, presenting something not disruptive enough: just playing catch up to Apple.
Yet, the real trouble, is that it fell from grace with its customer base. It was no longer regarded as a status symbol.

Furthermore, I believe BB's major strength and technological advantage over competition, was also a factor that in the end played negatively.
Security. Theoretically, all corporation should value security. In fact, it came out that few really do.
Furthermore, many illiberal countries started boycotting the BB. Starting from Saudi Arabia and other Arab states, and counting.
This was a big blow to BB:

Meanwhile, the other BB advantage, messaging, was made less appealing by specialized apps, like Whatsapp.

Now, BB is looking to salvage what remains of its heyday.
Probably, it will fail. Possibly, it will be sold.
Yet, at least, it tried to fight back.
In any case, it will have died an honorable death.
And someone will pay for its remains.

Contrast this to Nokia: it did not have this privilege. The attack of the parasites was too sudden and immediate.
It is now being eaten from the inside. Only the outer shell will remain, its iconic blue Nokia brand.
Its inside being devoured by soft microbes that, ironically, would have died without it.

Nokia's destiny: to become a lean, captive OEM. For a stronger MS: now with more patents, maps, carrier relations, mobile know how, brand.
And what is fascinating, MS managed all this without paying a single cent.

Good night and good luck.

vladkr

Next episode, Nokia and WP (again, I know), but news from North America are quite bad

Earendil Star

Kudos to Louis for the interesting read. Very instructive.

TCB

@Earendil, great post, but in short... The Youth market, especially the ubiquity among lower income teens is making Blackberry into the myspace of mobile phone brands. 6 years ago it was a status symbol among the corporate elite, now its brand is badly wounded and massively downmarketed.

Focusing on the lower priced phone market segment was a critical mistake, since all the profits in the industry are in the premium phone lines, first and foremost iPhone and then the Samsung Galaxy series.

Thats why we wont see a cheaper iPhone, unless things go desperate for Apple. It gives them no advantage.

Baron95

So Tomi, what is the difference between RIM's Q4/2011 (you said RIM looked good, in your anti-Elop tirades, citing that quarter as proof) to be followed by the Q1/2012 collapse, and Nokia's Q4/2010 (you cite as proof that all was on the upswing) to Q1/2011 decline (you, and only you attributed to Elop).

Isn't RIM, as I have been saying all along, proof that any company can dress up one quarter, if they are willing to accept the following quarter to be really bad. Pulling revenues in and stuffing the channel are time proven strategies to make one quarter look good.

There is no Elop effect. Unless you count a board and CEO that were (finally) willing to accept that inevitable. That Nokia was staring at a cliff (burning oil platform) metaphor, and action was needed. Nokia switch to a possible US-West Coast platform. RIM, finally acknowledging that (unlike what the new CEO said a few weeks back - no change needed) drastic change is needed - including partnering, acquisitions, etc.

You see there is no difference. Nokia and RIM and the DoCoMo OEMs using non American OSes were/are all doomed, unless they switch.

Kudos to Elop for putting it out in the open and burning the bridge back. Shame on RIM for flip-floping (keeping Basile around till now).

Please contrast and explain yourself out of this one. Too much of a coincidence, hey? Look at Fujitsu - same thing. Look at NEC. Same thing. Insist on your native non-US platform and you will go over the cliff - simple as that.

Not popular notion here, I realize, but accurate nonetheless.

Baron95

I agree with Lee, except that I think it is slightly more likely that RIM will go with Android, simply because they have done some compatibility layer between Android apps and QNX already.

If it were me, the strategy would be. Move RIM to Android. Release BBM as a $10 app on Google Play, but make it per-instaled free on BB. Change company name to Blackberry. All devices become named simply Blackberry 4.0, BB 8.0, BB10.0 based simply on screen size, plus a sufix "S" for faster processor, K for hard keyboard, etc. Fire 90% of the SW developers (except those on Android porting). Sell the RIM service to Google as a cloud service.

Hunker down and hope that you can release killer devices before cash runs out. If it all fails, sell out to NEC or Fujitsu of ZTE etc.

Louis

@Sander: Thinking in Mace's terms a little bit is interesting here's why.

1. The descriptive part

We can interpret "strong growth in the Indonesian youth segment" as "gobbling up late adopters". For Nokia, all the signs were there in early 2010 that sales would "go vertical" (as Jean-Louis Gasee puts it http://www.mondaynote.com/2012/02/12/lumia-800-nokia’s-comeback/): a disappearance from the trend-setting markets; lowering ASP; no models competitive with the iPhone concept; Android and iPhone ramping up outside the US.

The non-conspiracy theory story goes like this: Within Nokia, there were people who *had* been thinking about what to do in the post-iPhone world, but their projects failed for some combination of technical and political reasons. Elop arrives, sees the very grim picture, and makes what he sees as the best of the two realistic choices by going with Microsoft.

If we want to be charitable to Elop, we can even speculate that the internal numbers are so awful, that the Burning Platforms memo is a kind of pre-emptive distraction to change the discussion. I have no idea if it is true or not, but I wouldn't rule it out. Notice that RIM tried to stay the course, and blew up. The DoCoMo Symbian forks too.

So, in some sense, this way of thinking says there shouldn't be an Elop effect.

2. What Mace says to do

Here, we find a big divergence. Mace tells RIM to basically build on its core audience, as opposed to doing something dramatic. The question, I think, is whether switching to WP7 would "make the herd stampede" or not. Tomi's oeuvre is basically a long argument for "yes".

I am not so sure. There's no obvious way in which WP7 phones from Nokia aren't consistent with being consumer-oriented smartphones in the mid-price range, or discordant with the brand.

Anyway, it will be interesting to see it play out.

3. The "right thing"

This would have been for Nokia to declare Android to have secretly been a Maemo/Harmattan/Meego/Moblin/Tizen all along in 2008 and just do an Amazon-like fork. But this is only because we know what happened next. The nature of disruption is that this sort of thing is not predictable.

Louis

@Lee I agree with all of this. WP seems like a good fit for RIM, which has a lot of expertise with Microsoft's server platforms and "BBM for Windows" might be a compelling iMessage alternative. Also, people here seem too stuck on specific iPhone features, as opposed to the importance of the smoothly-working multi-touch concept.

dr zorg

@Louis

That's a great article there, wonder how I had missed it. Especially this part:

"How to avoid the cliff

To keep a platform viable, you need to focus on two tasks: Keep the customer base loyal, and add adjacent product categories."

Thinking of Nokia now (RIM is already past that stage), they have totally failed to see the signs and Elop's actions have eliminated any loyalty advantages that Nokia had ever had. I have no hope for them now.

dr zorg

@Louis

God forbid they partner up with Microsoft. Take a look at what this has done to Nokia, that's enough to scare any self-respecting company shitless.

dr zorg

@Louis

1. "The non-conspiracy theory story goes like this: Within Nokia, there were people who *had* been thinking about what to do in the post-iPhone world, but their projects failed for some combination of technical and political reasons. Elop arrives, sees the very grim picture, and makes what he sees as the best of the two realistic choices by going with Microsoft."

Elop did not make the decision to go with Microsoft, it was made months before him. He was made CEO simply in order to execute this decision.

2. The only problem is that in order to keep the herd from stampeding you need to introduce the new product (WP in this case) softly and gradually. NOT replacing the existing product lines - because the way BB OS (or Symbian or Maemo) handles is vastly different from WP. Not only that, the difference in features and in the "ecosystem" priorities are also different. So in effect, one needs to by all means AVOID saying "WP ONLY" as Elop did. By all means the present users' and developers' fears should be allayed and they should be led to confidence in that their current products and services will remain fully viable and compatible with the new strategy.

3. Nature of disruption can be unpredictable but you can surely minimise the effects if you play smart. Declaring WP as their "only strategy" and saying that "plan B is to make plan A work" effectively killed off any hope of success for the disruption - disrupting Nokia itself in the process. Perhaps (and to me quite evident) it was the "plan A" all along.

kevin

@dr_zorg:
- Mace's article was excellent. It provided me great confidence in my earlier summer 2010 assessment to stay away from RIM and Nokia, when I was still trying to find other mobile industry investments. Too bad he didn't also look into Nokia.

- As I've written many times here, one of Apple's goals is to keep its customer base satisfied and thus, loyal, especially given the 18-24 month customer replacement cycles. Apple seems to ensure that its products can receive 2 OS upgrades, while most Android vendors claimed that last year's product can't even handle the next Android upgrade. There was a great article by Glenn Fleischman on how Apple walks a fine line, making the 2-year upgrade a no-brainer for everyone, but the 1-year upgrade appealing mostly to early adopters. See http://tidbits.com/article/12856

- I also believe as you do that the Nokia Board already made the decision to switch OS, but that's not what most of the posters here think.

- Although you solve the customer problem by a soft, gradual transition, you also have to solve the developer problem. If Nokia had planned all along to kill Symbian within a year or two, but held off telling their Symbian developers until the very end, it would've led to major trust issues with developers. Ideally, a company can provide a bridge from one to the next (like Apple did from Mac OS 8 to OS X, and Nokia was trying to do with Qt). In any case, I think the soft, gradual transition would've been better - developers should see the market response and determine where to put their resources.

Louis

@Lee: RIM isn't going to be successful with QNX either. Let's just step back and think for maybe a minute. RIM's problem was a software stack with poor App and multi-touch support and a much of competitors with unlimited messaging with push products. The response was to buy QNX, which is not a complete set of multi-touch app frameworks. So we have to believe that a company which had flopped before at the very task would now rapidly roll out something competitive to iOS.

How is this supposed to happen? Android or WP are the only plausible routes, and WP fits better, since it might let RIM roll some of the big corporate and government accounts over for another cycle.

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