In the late 1990's, the giants of the wireless industry didn't give Research in Motion much thought. Before the company created its soon-to-be-ubiquitous BlackBerry devices, it was building two-way pagers aimed at a corporate market that barely existed.
The behemoths -- companies like Nokia and Motorola -- focused on the big consumer market where the hardware, software, and sales process looked completely distinct. Over the next 10 years, up to the introduction of the iPhone, RIM romped from triumph to triumph, dominating the enterprise market and building upon that success to create a strong position with consumers as well. In hindsight, the industry incumbents were trapped in a classic Innovator's Dilemma in which they focused on their biggest, most profitable customers (consumers and the wireless carriers who sold to them) while ignoring new sources of growth that demanded new competencies and business models.
It is deeply ironic that RIM is in exactly such a situation now. On the eve of its developer conference, it is touting a new operating system it hopes will rival iOS and Android, while boasting of its strong position with highly demanding corporate IT customers. Yet it faces slim odds of earning respectable market share among consumers with iPhone and Android look-a-likes; those competitive systems are very slick, have a huge library of applications, and have already passed muster with many IT gatekeepers. RIM's next-generation devices look to be too late and of interest only to the most demanding corporate clients (ask Digital Equipment about how that strategy worked out for them as they entered the PC business in the 1990's). A third player could make a go of the enterprise market by playing asymmetrically -- HP might have made room for its ill-fated webOS devices by bundling them with server purchases and optimizing corporate apps for those environments. But RIM lacks many other assets to leverage, and it does not have deep pockets to finance an acquisition binge.
So, what can RIM do?
One route would be to double-down on the enterprise, expanding beyond the company's device-centric business model to provide mobile security services (potentially for non-RIM devices as well), bandwidth management systems, and thoroughly-vetted apps. It could also develop devices suited for particular industry verticals, much as Cisco has done with its Cius tablet or Panasonic has done with its Toughbook line. Enterprise sales take notoriously long, but for all of the strength iOS and Android have shown in these environments they remain a different world. RIM could stop thinking of itself as a device-maker and instead focus hard on the overarching jobs that CIOs and business leaders are trying to get done. Within 3-5 years, it could transform its profile into a solution provider much like IBM has accomplished. The company's best shot at executing such a strategy might be through merging with Dell, which offers the datacenter hardware, corporate salesforce, and IT service capabilities that could turbo-charge this offering.
Another path for RIM would be to build on its strength in emerging markets. The company derives about half its revenue from these markets today, and its market share in many fast-growth countries is substantially higher than in North America and Europe. RIM's strengths in encryption and bandwidth management can be real pluses in these markets, and the company has been willing to sell at the relatively low margins necessary to win share in these settings. Of course, low margins are not a good thing, and price competition may make RIM gun-shy about targeting these markets even more aggressively. (Again, ask Digital about how its fear of the low-margin PC industry worked out for protecting its strength in fancy mini-computers). Yet this is where the growth is. In just the past two months, Brazilian company Positivo Informatica has launched its Ypy tablet tailored for its home market, and DataWind has launched its Aakash tablet that it will wholesale for under $50 to the Indian government. The BlackBerry doesn't need to sell for $50, but it needs to be inexpensive. Conceivably, RIM could also strike deals with carriers to gain a share of data revenues in markets where the device itself is sold inexpensively by the carrier (practices vary around the world about whether devices are sold by carriers or independently). A low-cost business model garnering revenues partly from services would be a big change for RIM, but change seems imperative regardless of the strategy chosen.
These are tough choices to make. As with any company facing an Innovator's Dilemma, the short-term pain may be considerable. Yet, looking just a bit longer-term, there may be few better alternatives.