The mismanagement of RIM and Nokia

Friday, September 9, 2011

If you've opened an Organisational Theory and/or Design textbook anytime in the past 10 years, you'd likely have come across the story of the Xerox corporation and the massive capitulations they made in the late 70's and early 80's and the massive struggles they had in trying to reclaim their former glory. Initially started as the Haloid company in 1906, Xerox was the first company to implement the xerographic photocopier (hence the name) and bring it to market in 1959. Having had a stranglehold on the necessary patents required to implement a similar copier, Xerox controlled the industry with ~95% of the marketshare in that segment.

With the patents locked up, a strangehold on the industry and 70% gross profit margins, Xerox created the Palo Alto Research Center (PARC). If the name sounds familiar(and it very well should), it's because this research center is the very reasons that PC UI's, Ethernet and the laser printer as we know them today even exist. Pretty impressive stuff to say the very least. Sadly for Xerox, the company management was unable to look beyond the massive profits they were making. This coupled with the massive distances between company headquarters in New York and the research and development teams based on the other side of the country in Palo Alto, California made for a rather sticky situation for the monetisation of the massive amount of innovation going on at PARC.
IBM and Apple, seeing the promise the GUI held and the massive disadvantage they would be at in the event that Xerox actual got a hold of that technology and more or less beat them to the punch. This coupled with expiring patents on the xerographic process, new-to-the-field companies like Canon and Ricoh meant Xerox's marketshare and subsequently profits fell like a meteor from 95% in the early 70's to 13% by 1982. Such a fall, such a lax attitude amongst employees, such an unwillingness to actually innovate is a key and unfortunate side effect of the large organisation with little in the way of management motivation.

Whilst Xerox eventually extricated themselves from the aforementioned failures and a few other mismanagement and decision-making failures, the time it took to do so was on the order of YEARS. It was closer to 2 decades before the company gained any significant respite.

Now that we've gone through that pre-amble, take a gander at the situations with Nokia and RIM. Nokia went from the maker of cheap and reliable phones to the sole, major producer of Symbian devices and indeed had control of well in excess of 50% of the smartphone market in 2006 to a company struggling to maintain its lead as top smartphone manufacturer with the likes of Apple, HTC and Samsung creeping up on them.

Similarly to Xerox, Nokia were unable to look past their marketshare lead, their engineering advantage (which some would argue that they still have with their significant R&D budget), and the raw features that each and every device packed in to see that the experience of the user and the touch paradigm would be the wave of the future. Touch technology in particular being something they'd implemented in labs and experimental devices many years before the iPhone jumped on the scene. Alas, management was slow to adapt and tried to price competitors out of the game. Failing that, and losing the reputation they'd had as innovators of the industry and leaders of the market, Nokia have been on a long, slow tumble downwards,  a spiral seemingly only paused by the announcement of a change in CEO and corporate culture.

Time will tell whether the direction undertaken was the right one, but it's fair to say that at least Nokia has observed the need to change direction and have taken a rather bold step in that direction. RIM on the other hand, have decided to stick to their guns (and multiple CEO's) and keep their development and future plans as internal solutions. Whilst that strategy may not necessarily be a bad one, their approach can be seen as the antithesis of Nokia's approach (i.e. slowly phase out internal solutions and associated expenses, perform R&D into future opportunities and cut costs in the short-term).

RIM has recently announced a set of new devices running Blackberry OS 7 a seemingly minuscule update to the well-worn Blackberry paradigm that some of us have come to know and loathe. Simultaneously, they've committed their future to their QNX platform for upcoming devices, in spite of what can be seen as a floundering developer ecosystem and massively disjointed development environment. Similarly to Nokia, they've seen decreases in their marketshare numbers and though not as precipitous as Nokia's is only down to the unique selling feature of BBM and their carrier relations in the third-world, something I can personally attest to (and dismay at).

In both cases, a reluctance to accept change, change focus in terms of target audience and innovate on products has resulted in marketshare tumbles and lowered forecasts and outlooks for both companies, with shareholders in both organisations more or less up in arms.

All of the above-mentioned problems, distill down to  mismanagement at the highest levels and of course middle-management, whether the company management can extricate themselves from this situation will be interesting to see regardless.

PS. It seems HP is taking a few cues from Nokia, what with their flip-flopping on the whole TouchPad, WebOS, hardware spinning-off motivations.


Post a Comment


© My Stream All rights reserved . Design by Blog Milk Powered by Blogger