In a recent interview with the Telegraph, Thorsten Heins admitted that RIM had considered Android to replace the Blackberry operating system. They decided against it because “If you look at other suppliers’ ability to differentiate, there’s very little wiggle room”. On the face of it, that would seem to be a reasonable conclusion. But if you take some time to scratch below the surface of that assessment, it appears that RIM’s leadership may not comprehend the state of the mobile computing industry. It assumes that there is “wiggle room” for new mobile platforms, and ignores just how mature the smartphone is.
Wrong Assumption About Market Maturity
To say you won’t pick Android today because “you can’t differentiate” is like a PC manufacturer in 1998 going with some completely new operating system because “it is hard to differentiate from all the other Windows PC manufacturers”. Sure, if you were a PC manufacturer back in the late 1970’s and even into the very early 1980’s, choosing one PC operating system over another was an important decision. Building your own OS was even was an option, because the industry hadn’t settled itself out yet (and if you were going to take a bet in the late ’70s, you either would have built an Apple II clone, or built something around CP/M). But there was really only one viable choice starting in the 1990’s, and that was Windows.
If the smartphone industry was in the same “state” as the PC industry was in the late 1970’s and early 1980’s, then I could buy the argument that a new operating system would be a viable option. The problem is that the smartphone isn’t a new segment, it is a mature one, being about 15 years old. It has already passed through the early stages of growth and development, and is nearing the point where the “smartphone boom” is about to level off. Smartphones represent more than half of all mobile devices in the field in North America, Western Europe and parts of Asia. Anywhere from 60-70% of all new mobile phones sold are smartphones. Growth in smartphones will slow overall, although some growth is still available in large regions like China and India. But the core growth will start to taper off. Now it is about replacement, and capturing buyers from “the other platform”.
So where is the smartphone market in terms of maturity? It is essentially in the same state as the PC industry was in the mid-to-late 1990’s, in that it is clear which are the dominant platforms. In PC’s, it was overwhelmingly Windows. The second-biggest PC platform, the Macintosh, was an order of magnitude smaller. The smartphone industry is a little different, in that there are 2 big players (Android and iOS) and neither is going to give up much ground any time soon. With 2 major platforms effectively dead (Symbian and WebOS), one moribund (Windows Phone) one on the way down (Blackberry) and irrelevant “experiments” at the margins (MeeGo/Tizen, Bada, Firefox OS), it is pretty clear where consumers and enterprise customers are spending their money. Adding Blackberry 10 to the mix today is like the introduction of Linux for the desktop back in the late 1990’s: the odds of success are effectively zero. Linux on the desktop didn’t put a scratch in the dominance of Windows. BB10 will likely suffer the same fate, but without the benefit of being available on a variety of hardware platforms.
A Cultural Blindspot
The problem for RIM actually reveals a flaw in the RIM culture: where they are comfortable in innovating. When you look at what RIM does, and where they have traditionally put their effort, they tend to focus (a lot) on the software for their devices, and the infrastructure to support services. The hardware, while respectable, is generally unremarkable. They put little effort into the industrial design beyond building a rather good keyboard. The overall designs aren’t horrible, but they aren’t “gotta have it” attractive, nor are they interesting or unique.
Ultimately, that makes RIM a software and services company, and it is hard for a company that has never had to innovate on the hardware to understand where the opportunities lie. Consider that HP, Dell, Acer, ASUS and Lenovo all make PC hardware, and all of them make respectable money doing it. Like most consumer products, their margins are razor-thin. Apple is one of the few companies that can charge very healthy margins on their products and not suffer because of it. But all of these manufacturers have found ways to differentiate themselves, even if only just a little, and make a decent living making PC’s that run Windows.
What’s sad, in some ways, is that RIM does have significant software differentiators that would give them a huge leg up on the other Android manufacturers. They have BBM, better security, strong infrastructure and strong enterprise integration. From the comments made, RIM seemed to think that differentiation had to be in hardware, when in fact adding something to the software could have made an Android device with the Blackberry name stand out. RIM certainly would have helped Android gain some ground in the enterprise, an area where Android is struggling when compared to iOS.
A Chance At Redemption
Had RIM decided to go with Android, they would have at least had a chance at redemption, and possibly even longevity. RIM had plenty of ways to innovate while adopting the Android platform. But RIM has taken a rather shortsighted path. It appears to be based on assumptions that the smartphone market is still new and fluid, when it is anything but. Rather than bring their strengths to a platform with a strong ecosystem, RIM has essentially chosen exile. The ecosystem is important. It is what allowed Windows to dominate the PC world. It is what gives iOS and Android their positions in the market. A platform without apps and content isn’t interesting to consumers or enterprise users. It isn’t enough that the device come with the mandatory basics like phone, contacts, calendar, notes, browser and e-mail. People and companies want to customize their devices, and make them useful. What defines “useful” varies, and that is where a rich collection of apps and contents enters the picture.
RIM could still switch now. The hill is steeper than it was even a year ago, but it isn’t an impossible climb. But the time to make the switch is while there is still money in the bank. RIM’s cash horde is going to keep dwindling as sales drop and losses increase. Making a multibillion dollar bet on a new operating system in a mature market is a longshot. There’s taking risks, and then there’s taking unnecessary risks. Sure, a miracle might occur and BB10 rises to prominence. But the odds of that so slim as to be close to zero. There are better bets, and RIM has talents and assets it can bring to the Android table, and succeed with them. Wandering in the wilderness with a custom OS no one cares about is not the path to future longevity.