Finnish telecommunications giant Nokia and Canadian Blackberry maker Research In Motion (RIM) have been bleeding market share over the past few years. Their latest quarterly results are another pair of nails in their respective coffins; RIM’s quarterly profits are down 25% from but a year ago. But both companies are ebullient about their chances of success in the future: RIM has increased its cash holdings by $610 million, leaving it with $2.1 billion in savings and Nokia – despite haemorrhaging cash over the past year with the release of its Lumia series to lukewarm consumer reception – promises several big-name innovations on which it is willing to stake its reputation. But the facts are in the numbers: both companies need to come up with something big, and fast. RIM has its bets on the BB10-powered smartphone range to be released in ‘late 2012’, and I can only imagine the pressure the designers and engineers are under to make it a huge success. Nokia, with relatively new CEO Stephen Elop at the helm, looks to transition to…something better than where it is.
It’s a gloomy outlook for both organisations. But there do exist opportunities for them to increase their market shares. Key to pinching those points is understanding the considerable systemic issues they face.
Nokia’s issues are complex, to say the least. But there are a few key systems which could be targeted. Firstly, with the death of its Symbian Operating System Nokia has been relegated to hardware manufacturer. That’s not a bad thing – plenty of hardware manufacturers are doing really well just now (look at Samsung, for example). The problem is that Nokia still has considerable consumer presence. Why on earth could that be a problem? Tomi Ahonen recently demonstrated on his blog that more people use a Nokia device than “drink Coca Cola…wear Levis’ jeans…smoke Marlboro cigarettes, or write with a Bic pen.”
The reason that’s an issue for Nokia is that their hardware now looks dated. And without significant upgrades enticing users to keep using their Symbian OS, they have no way of replenishing a market. It’s as if Apple had crumbled after release of the iPhone 3GS. If that were the only Apple offering on the market, the whole company would look dated in comparison with the new range of Android handsets. Yes Nokia looks to have put all its eggs in the WP7 and Windows 8 basket – but with such low market penetration is that OS any better than Symbian in reality?
RIM don’t have this issue. Their problem lies in their original distribution strategy – dictating to enterprises the kinds of features that they needed. E-mail? Sure. Remote printing from your laser printer? Less opportune. The ‘Bring Your Own Technology’ (BYOT) craze sweeping the business world is demonstrating that users would far prefer to elect their own feature set. Most of RIM’s profit margin in recent years has come from the consumer market – and Android and iOS are pinching that market at both the bottom and the top. Subtle shifts in consumer trends are having horrific ramifications on RIM’s bottom line.
Both companies, then, are in need of radical reinvention. And when I say radical, I really mean that – partnering with someone bigger, stronger and more innovative should not be out of the question. Or partnering with as many start-up firms as possible and leveraging the open source community. Both companies now stand on a precipice – they can risk it all in a carefully-planned but strategically dangerous radical move, or continue their miserable slide down the slope of dismal market losses.