Great post on how disrupting from the high end can destroy other companies

iphoneby Yutaka Tsutano

Competing with a Mac
[Via asymco]

Publicly, Mr. Lazaridis and Mr. Balsillie belittled the iPhone and its shortcomings, including its short battery life, weaker security and initial lack of e-mail. […]

Internally, he had a very different message. “If that thing catches on, we’re competing with a Mac, not a Nokia,” he recalled telling his staff.

From How BlackBerry blew it: The inside story – The Globe and Mail

The whole article is worth reading, detailing as it does the decision process inside BlackBerry during the painful disruption of its core business.

What struck me most however was how similar their decisions were to those of Nokia at about the same time. Consider:

  • The engineering priorities placed on optimization around constrained hardware. Although engineers knew how to build the right products, the business priorities caused them to be deployed in the wrong direction.
  • The delays these misdirected efforts caused. Mobile phones have narrow windows of opportunity but long lead times. A strategic mistake is very costly and most probably impossible to remedy. In the case of BlackBerry, buying QNX came too late while for Nokia the deprecation of Symbian was catastrophically managed.
  • The feedback loop from network operators which shut down any initiatives for improved user experiences. Your best customers provide all the wrong information when the market is being disrupted. Ignoring them is impossible while complying is a strategic mistake.
  • The demand from network operators to develop “killers” to competing platform-based products[1] and the subsequent “jumping at the opportunity”.
  • Listening to large buyers at the expense of users. While BlackBerry was guided to omit consumer features from its enterprise buyers, Nokia never secured enterprise buyers of any significance[2]. Nevertheless it created the “E series” business-friendly phones which suppressed features like cameras and music.
  • The celebrity sponsorships and wasted promotional efforts in the face of structural failures.  This is manifested today by HTC as well.

The parallelism of this synchronized failure can be seen in the following graph showing smartphone volumes.

[More]

The collapse of Blackbberry and Nokia happened 16 quarters AFTER the iPhone was released. There was plenty of time to respond, if they had known what to respond to.

They saw the iPhone based on their own views – it was very highly priced smartphone. They sold lots of cheap smartphones. There should have been no competition at all.

They failed to recognize, though, that the iPhone was not a high-priced phone. It was a cheap computer, brings the ehtos and disruption of personal computers to a new space.

Most instances of disruption have been seen from the low end – a competitor comes in at a cheap price (think Kia) and then starts moving up the value chain.

But Apple came from the other end and caught these guys not looking.

The only other disruptive company I see doing this is Tesla – they started by using a high end sports care to get the money needed for a more moderate price sedan. Now you can get the most advanced car on the planet for $50-60,000. Wonder how Lexus etc. feel about this?

Will they be in the position of Nokia or RIM in a few years?

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One thought on “Great post on how disrupting from the high end can destroy other companies

  1. A friend has a Tesla – his very very low running costs take its all in cost to that of a BMW 3 series – he talks this up all the time – and time will tell

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