What RIM may be doing right


The Playbook is critical to the development of the new Blackberry platform. Even if it sells poorly (as it has) RIM has to support it and develop it to provide a base for new products.

It is very trendy these days to knock Research in Motion and its still ubiquitous Blackberry brand, but I think many of the critics have it wrong. My reasoning is fairly long and involved, so bear with me.

The standard analysis goes something like this:

Not too long ago RIM realized it was falling behind in the smartphone wars and that it was too dependent upon its business customers. So the guys who run RIM decided it was time to go after the much larger consumer market, which meant taking on Apple and Android (Google). But since Apple and Android are much larger and have much greater resources, this was a battle which RIM could not possibly win or even have much of a chance of competing in. So it is not surprising that they have not been able to pull themselves out of the tail spin they’ve been in for the last 12 months.

This is the kind of analysis we generally hear from tech writers whose insight goes back all of two or three years, or from investment advisors who know very little about technology or product development, and whose attention is fixed only on the direction share prices are likely to go in the next 6 months.

The Apple Example

The background story, of course, is the success of Apple. Fans of Apple are as fervent now as they have ever been, and are quite a bit more numerous than they were 10 or 15 years ago. Steve Jobs, we are told, was a visionary who changed the way we view the world. Apple products don’t just look nice and work well, but they redefine what it means to be a human living in the early part of the 21st century.

But there is another, more realistic, and more instructive way to look at the success of Apple. Yes, there is the design thing, but I suspect that is not nearly as profound an aspect of the success of Apple as the iFans make it out to be.

Apple has always tried to convince the world of its superior design, and by extension the superior intelligence and taste of its customers. But for many years Apple products – in spite of their presumed superiority and beautiful design – have been niche products. Apple computers have never owned more than about 15% of the worldwide desktop computer market, and depending on whose stats you believe that number still hovers at between 10% and 15%.

In fact, for those who don’t know their history, in spite of the alleged genius of Jobs and his superior products, Apple was in fairly deep trouble in the late 1990s. So much so, that in 1997 they signed a pact with the devil himself – Bill Gates. As a result, Microsoft bought 150 million shares of Apple in exchange for an agreement that, among other things, new Mac computers would be loaded with Microsoft Internet Explorer.

The Success of Apple

But that was then, and this is now, and in the interim, Apple must have done a few thing right to make themselves the company they are today.

To make a long story short, what Apple did in the very early 2000s was redefine an already existing product concept, uncover a previously untapped market, and gradually use that initial product concept as the basis – the “platform” – for an entire line of successful and highly profitable products.

Ironically, this very successful platform was not the Mac. It was the iPod. With the iPod Jobs took a relatively boring product – the personal music player – and used it as the basis for a line of products that has revolutionized the music and telecommunications industries, and to some degree at least, the entertainment business.

Because when you think of it, virtually all of Apple’s successful products since the early 2000’s have just been spinoffs from that original iPod – including the iPhone and iPad. They have taken the same basic concept and developed it upward into more complex products like the iPhone and iPad, downward into more simple products like the iPod Nano, and laterally into the highly profitable iTunes service. In so doing Apple has been able to expand and exploit a market niche that previously was poorly defined but, in retrospect, exploding with potential.

It’s about the platform

What I take from this little historical overview is that Apple has been successful because they developed a successful platform. The “platform” was “successful” because, first, it worked; second, it found a fruitful niche; third, it was appealing to that niche; and fourth it was expandable into other closely related products that appealed to that same niche, while expanding the niche upwards, downwards, and sideways.

It is this last point that makes it a “platform” and not just a “product” – the ability to take that initial product and create other similar but different products without having to reinvent the wheel.

Can RIM pull off a similar remaking of themselves?

The big questions is whether RIM has the kind of platform that can be relatively easily expanded into profitable niche products? They certainly did a few years ago. They virtually invented mobile messaging, and in a very Apple-like way they kept the most important components in-house – especially the secure push technology that is still at the heart of its appeal to business, governments, and other large organizations.

The problem is, RIM has not done much with their “platform” since those early days. They have not used it to develop successful spinoff products that bring new and exciting capabilities to their millions and millions of customers.

Yes, it’s true they have a wide range of phones with various levels of functionality, but they still remain essentially messaging devices. Their most aggressive improvements to their phones have been essentially copycat features – trying to catch up to the competition with touch screens and better web browsing. But they continue to fall short because the BB OS is outdated, has very few apps like those available for their competitors.

They also have virtually no chance of catching those competitors with these updated phones (the new Bold and Torch) because the current OS is a dead end and cannot attract developers because of that. Even RIM essentially has admitted so much because they have made it clear that their new generation of phones will have a brand new OS.

RIM’s new platform

This is why the Playbook is so important to the development of RIM’s new platform. And why they cannot afford to ditch the product even if its sales are disappointingly meager. They can’t ditch it because it is the “field of dreams” for their new platform.

The Playbook already uses the new QNX operating system that is RIM’s future, Even if they eventually do scuttle the Playbook in its current form it will have served one of its purposes. Not to be a profit centre in itself (although that would have been nice for RIM), but to be a developmental platform where the new OS can be given real world exposure. Where it can be tested, and upgraded, and where independent developers can target their app-building efforts.

This is why it has been a smart move by RIM to slash the price of their existing inventory of Playbooks. One way or another they are going to have to pay for development costs. One way or another they are going to have to build a user base for their new product line. One way or another they are going to have to provide an incentive to app developers. And seeding the market with Playbooks is actually a pretty good way of doing all these things.

So whatever you want to say about RIM’s beleaguered leadership, you have to give them credit for this. They recognized the need for an updated platform. They went out and bought one in early 2010. And less than 12 months after that they released a brand new product (the Playbook) sporting that OS.

Yes, the Playbook has been disappointing in some ways, but even after almost a year of trial and error marketing, poor sales, and slashed prices, the developmental facts remain the same. RIM needs a new platform and the Playbook is their prototype for all the products that will be developed in the future. This is why the Playbook is for RIM what the iPod was for Apple back in 2003.

Developing the new platform – which way to go?

I suspect that RIM will not try to beat Apple and Android at their own game. I suspect, and I hope, they will take a different course. Mobile phones with lots of browsing and game-playing capabilities are important. But they are not the be-all and end-all of electronic gadgets. While they appeal to a huge, rapidly-expanding market, products sold to that market will become less and less profitable, and more difficult to differentiate from their competitors.

What the success of Apple has demonstrated is that profits are to be made in niche markets with semi-dedicated devices (like the iPod). These can be dumbed-down low cost versions of the basic platform, or they can be tarted-up versions that can be sold at much higher margins. This same marketing strategy has been used by major car manufacturers for almost 100 years.

There are all kinds of niche markets that can use dedicated or semi-dedicated devices. The most obvious examples are many of RIM’s own dedicated messaging devices. But there are others: tablets used as operating manuals for upscale cars; eReaders like the Kindle, and many more.

There is an almost limitless number of niches that could use dedicated devices: Golf carts with simple GPS systems; ambulances with dedicated devices running completely customized software; special units running high grade apps designed for the construction industry, the financial industry, the music industry, the food services industry, etc., etc., etc.

Many people think Apple has these markets locked up, but a lot of these same people thought that about RIM a few years ago. At one time Microsoft looked unassailable. Not so much anymore. Even Google is scrambling to stay ahead of the curve – threatened by the paradigm shift known as social media. Things change. New things quickly become old. It’s a big world with lots of opportunities, and it is getting bigger every day.

The game for RIM is far from over. If they can successfully develop a platform that allows the sort of upward, downward, and lateral product development that Apple has engaged in for the last number of years, they could be well on their way to a completely rejuvenated future.

Of course having a rejuvenated platform is not enough. They need imagination and innovation in order to develop products that appeal to markets not yet tapped out, and not yet developed. Only time will tell if they can pull it off.

Amplify

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Dave H says:

Despite the early signs of indifference to the new CEO , it is probably in the best interests of all, that the old guard would give up their leadership to the newest egghead Heins , who will take on the latest trends and listen to consumers instead of continuing a slavish obedience to Bay Street.