Jan. 27 (Bloomberg) -- The travails of Research In Motion Ltd., the Ontario-based maker of the BlackBerry mobile messaging device, follow a pattern sadly familiar to technology-company watchers and admirers of classical tragedy. Brave innovation and superb execution create a new market, which the upstart dominates. But ultimately the very scale of the new champion’s success drags it down.
No tech company, least of all RIM, can be unaware of this cycle. The main lesson is in plain sight: Technology firms must be their own most formidable competitor. They must strive as eagerly as their rivals to displace their own commanding technologies. If they don’t, somebody else will.
The lesson may be clear, yet applying it is almost impossibly hard. One reason is that the bigger the initial success, the greater the reluctance to dismantle it. On Jan. 22, RIM proved the point. Its formerly class-leading, class-creating products have been failing in the new market for smartphones. Consumers and businesses are dumping their BlackBerrys for Apple Inc.’s iPhones or smartphones powered by Google Inc.’s Android operating system. RIM’s belated effort to market an iPad competitor was a costly and embarrassing flop.
Revenue and profit have slumped and investors have hammered the share price. Earlier this week, RIM announced that its founders and co-chief executive officers, Jim Balsillie and Mike Lazaridis, were stepping down. But the new CEO, Thorsten Heins, is a company insider who promptly affirmed his commitment to the founders’ vision.
What leads technology innovators astray is the idea that market dominance, once achieved by their own disruptive technologies, can be guarded from future disruption. This complacency is understandable because great innovators experience their sector’s barriers to entry firsthand. Economies of scale, the power of established networks, and the salience of industrywide standards and platforms make it hard to break through. However, the force of a sufficiently powerful innovation can overcome these barriers. And here’s the point: the next sufficiently powerful innovation is always on its way.
RIM created valuable proprietary technologies. The particular way BlackBerrys connect to mobile networks was its main strength because it allowed the devices to work more securely and corporate IT managers to exert the control they desired. These benefits were overwhelmed, however, by the amazing ease of use and range of applications offered by newer smartphones.
RIM was too concerned about defending the technologies it had created, and not concerned enough about giving users of its devices the best possible experience -- a strategy that could have meant surrendering its previous advantage.
Eastman Kodak Co., which filed for bankruptcy this month, is the classical instance of this syndrome. A paradigm-shifting innovator -- in the 19th and 20th centuries, that is -- Kodak led the development of film-based photography, established overwhelming presence in its burgeoning new market, and for decades reaped profit accordingly.
Sadly, Kodak can also fairly claim to have invented digital photography, the technology that destroyed film. But with a near-monopoly to protect, the company grew that business too tentatively. In a way, it wanted digital to fail. It rested on its laurels and the power of its brand.
Newcomers with less to lose arrived and swept its business away. Fujifilm Holdings Corp., its Japanese competitor, is one such rival. Less wedded to past success, it innovated across a wider range of technologies and embraced digital photography more wholeheartedly. Fujifilm is still a successful business, whereas Kodak is bust.
Will Microsoft Corp. one day be another Kodak? It’s possible. Microsoft still has a hugely profitable near-monopoly in its Windows operating system to defend, and has been an unimpressive innovator in technologies, including smartphones, which now threaten to challenge it. Compare that with Apple, which began its recent startling run with no similar grand success to inhibit it. That, by the way, has now changed. Today, Apple has its own platforms to defend and is no longer led by one of history’s most instinctively disruptive bosses.
Examples of wholesale corporate reinvention -- of shattering competition that works from the inside out -- are few and far between. In the technology sector, International Business Machines Corp. comes to mind. In its 100-year history, the company has been a serial self-reinventor: from mechanical tabulating machines to computers, from mainframe computers to personal computers, from computing machines to computing services. Transitions as demanding as the one that leveled Kodak have been taken in stride, not once but repeatedly.
Paradoxically, innovation for its own sake has not been the animating spirit of IBM, one of the world’s most innovative companies. Instead, it has been the desire to build and keep relationships with customers. That is worth pondering. Technologies come and go, but you always need customers. The watchword might be: Put their needs first, then innovate without mercy for their sake, not your own.
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