We’ve been following the wireless data, handset, and carrier market for many years. Research In Motion reported quarterly results last Thursday evening, and announced that they have shipped 12.1 million Blackberry devices into their channel, but added 4.5 million new subscribers. In other words, a lot of units filled the channel, but about one-third sold through the channel. Moreover, the Company will stop providing guidance on net subscriber additions in a quarter. (That is very bad). The stock was up about 4% in after-hours trading, but ended the day up only 0.5%.
Despite the rising tide lifting all smart phone boats, those numbers aren’t that great.
It’s the software that makes the hardware sing. That means applications. RIM doesn’t have anywhere near the same number of applications for Blackberrys as are available for the other two main platforms.
Frankly, we don’t understand why so many people are missing the point about the current battle between Research in Motion, Apple, Google, and Nokia. (By the way, Nokia and its new ex-Microsoft executive are toast in the USA, but that’s a subject for another blog post). It’s not about the hardware, and it’s not about all the hardware based functionality such a sliding keyboard, or a front facing camera, or a semi-functional antenna. It’s not about a touch screen or a soft keyboard. Those are all beautiful designs.
Any average pianist can play the notes on a piano and sound good. A great pianist plays the “music”.
In other words, it’s the software that creates the VALUE of the hardware.
A recent survey by Motorola (remember them?) indicated that 64% of all GenY mobile users used their mobile device for shopping activities in the last two weeks.
Was it the hardware that enabled that shopping or was it the software?
According to Motorola, there are 4 billion mobile phones vs. 2 billion credit cards, vs. 1 billion computers, vs. 1 billion landlines.
There are 4 births per second. Approximately 39 mobile phones are sold…..per second.
These enormous numbers are enabled by unique, innovative, and productivity enhancing software.
The reason Apple’s iPhone and various handsets using Google’s AndroidOS are as popular as they are is directly the result of the productivity enhancing applications available for those hardware platforms. Both Apple and Google opened up their respective operating systems to the wild creativity of independent third party software developers. Ironically, iPhone’s market share numbers are falling behind Google’s market share directly as a result of the fact developer’s access to Google’s AndroidOS is “more open” than that of the iPhone. In fact, Steve Jobs is making the same mistake today that he made 20 years ago with his personal computer OS that led to the near death experience at Apple. It is closed, relative to the openness of AndroidOS.
Nokia introduced an application marketplace in……2001. Research In Motion announced that it would be licensing its BlackberryOS to any hardware vendor in……2002.
Yet, both of these very early efforts died on the vine. Nokia didn’t provide a developer’s kit toolset, and RIM thought that they could charge a fee to hardware vendors because Microsoft was charging a fee for its mobile Windows operating systems.
Does anyone remember Verizon’s “open access” announcement in late 2007 that it would allow any CDMA device to access its network and allow those devices to download any application from the network by mid 2008? Google’s Android was the major beneficiary of that announcement.
What can an entrepreneur learn from these lessons? As Mike Maples Jr. suggests: Be Different, Not Better.
Google offered its AndroidOS to any hardware vendor, for the astronomical price of …..Free. Google had determined a different method to monetize their development cost. Apple offered its rabidly loyal developers a development tool kit, and provided a marketplace for those applications which piggy-backed off the wildly successful music marketplace used by their iPod product line. Both were different from what was the accepted method of sales and distribution. Both looked at the existing market, figured out the rules of that market, and then figured out how to get around the rules.
We’re sure that Nokia and RIM will become a great Harvard case study on how massive scale and market share prevents innovation. They were dominant globally. Why would they change? It was left to the companies that had no market share, and nothing to protect to change the rules and be different.
Be different, not better.
Richard Piotrowski CFA is a former #1 ranked securities analyst, and the Managing Partner of Outram Research LLC, which focuses on assisting startups and prospective turnaround companies to define their value chain, as well as define an executable product, partnership, competitive and exit strategies. You can follow Richard on Twitter: @Angelpitchdoc. He can be reached at email@example.com, or at his blog: angelpitchdoc.wordpress.com. Also check out our website: www.outramresearch.com