This one is a must read for anyone interested in technology. The author extrapolates some fascinating numbers from RIM’s financial results to show why tech companies fail in general.
He calls it the “death spiral” – a situation where a company begins to cut margins to attract “mainstream users.” The problem is that when you cut margins, you have less to invest in R&D, which begins to turn away the early adopters.
Palm and the Pre with HP are used as a perfect example. Palm had a small, but fiercely loyal following as well as some good developers. When HP bought them, they didn’t commit to the smartphone platform. What’s that going to do? People sure aren’t going to be running out to buy Pre phones and write code for them. They run for the hills.
To sum it up:
To sum up, RIM is at risk because its natural market is saturating and many of its customers are considering a switch to other platforms. The company may be able to bumble along in this situation for years before the problem comes to a head, but once a migration away from BlackBerry starts it would be almost impossible to stop. So if the company wants to ensure its survival, it needs to act now. Two steps are needed:
–The BlackBerry line needs to be given a several fundamental, visionary innovations that will give its core customers a reason to stay; and
–The company needs to change its development process to guarantee proper design and integration in all of its products.
As the founders of the company, Jim Balsillie and Mike Lazaridis could probably pull this off without losing their jobs. And I know they have the courage to make big changes. But I doubt they can see the need, or especially the urgency. Their current processes and business practices got them to $15 billion in revenue; why should they change now? It’s much more prudent to focus on making the numbers for next quarter.