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Syd Weighs In

Will the iPhone go the way of the BlackBerry?

About the author

Sydney is a professor of strategy and leadership, and Dean for Executive Education,  at the Tuck School of Business at Dartmouth and the author of 16 books, including Why Smart Executives Fail. Follow him on twitter: @sydfinkelstein

(Thinkstock)

(Thinkstock)

Medical researchers love working with mice. The reason they love mice is because they die so quickly. This short lifespan concentrates time, enabling researchers to identify patterns over time in a way that would not be possible with, say, humans.

It turns out that the world of business has its own lab full of mice, also known as mobile device companies. Think about it. The downward spiral at Research in Motion (RIM) makes us wonder what will happen to the beloved — or formerly beloved — BlackBerry.

What’s more, if you look at the global mobile device industry over the last two decades, a period in which cell phones have become such a central part of our lives, you would find a fascinating pattern of great success quickly followed by stunning breakdown and failure. What does a closer look at this business lab and its mice tell us?

A little history: in the 1980’s a genius company of engineers leveraged skills built over decades of designing cool electronics like car radios and pagers to come out with the world’s first cell phone, the DynaTAC from Motorola. With constant improvements, Motorola became the global leader in mobile telephony.

And then came digital. Like Kodak and cameras, Motorola was slow to adapt to the shift from analogue to digital, and fell by the wayside, giving way to other companies that moved faster. Today, Motorola is an also-ran. Companies like Nokia and Ericsson took over first, only to be surpassed by Research in Motion, followed by Apple’s iPhone and then, most recently, Samsung’s Galaxy phone.

The pace of change is so quick in this industry that staying on top requires constant innovation — and not of the incremental type. Leaders in virtually all industries are facing greater demands to adapt to changing competitive circumstances, making the mobile device world an applicable lesson for others.

Motorola, for example, spent years trying to make their phones smaller, while everyone else was making their phones smarter. According to news accounts, when the iPhone was introduced top managers at RIM were borderline hysterical, but not with fear. The iPhone was seen as a toy, not as a serious threat to the dominant position BlackBerry had carved out among corporate customers. After all, RIM executives thought, they were successful because of their killer app: email. Such was the adoration, and addiction, of users that their phones were called “Crackberries.”

And now the BlackBerry is almost dead, 6 years after the first iPhone was introduced.

I needn’t predict the demise of the iPhone — it has already started. Samsung’s global market share is now around 33%, versus Apple at 17%.  Three years earlier customers were buying four iPhones for every one Galaxy. But I also won’t put much money on Samsung retaining its commanding lead, given the short lifespan of winners in this industry.

Staying on top is incredibly difficult, but the reason has less to do with technology and more to do with people.

The twin evils that beset successful companies time and again — complacency and arrogance — have taken up residence in the DNA of the industry. You would think leaders would be alert to these threats, but they don’t act as if they are.

Motorola is a classic example. Although the shift from analogue to digital appears to explain their failure, stopping there misses the real story. Motorola actually owned several key patents for digital phones — they knew how to make them, but they chose not to. Instead they licensed those digital patents to their primary competitors at the time, Nokia and Ericsson.

One would think that watching the accelerating increase in royalty payments would have given leaders at Motorola some idea of the tremendous growth of digital, but they chose to stay pat. A famous line by one of the senior leaders in the mobile phone division at the time said it all: “Forty-three million analogue customers can’t be wrong!”

The game had changed on Motorola, they knew it, but they still didn’t change with it. While the details are different, the same thing happened to Nokia, to Ericsson, and to RIM. Like mice in a lab, one day you’re navigating the maze, and then all of a sudden you’re not.

The BlackBerry is particularly instructive, since it was such a runaway hit from Wall Street to Hollywood. And like Motorola, RIM was a proud technology-first company, dominated by smart engineers who were convinced that their device was the best.

As it turns out, Apple was playing a different game, based less on engineering and more on design, creativity, and brand. Then, as now, no one was arguing that iPhone’s email interface was superior to BlackBerry’s. But it didn’t matter. The game had changed. Though executives from the very top on down at RIM “knew” they had the better horse, customers didn’t care.

It must be exceedingly difficult for an engineering-driven company to design the best product — and still lose.

It could be called “the engineer’s lament” when people simply refuse to believe a reality which is different from what they already know. Today, with Apple under attack by Samsung, we will see if this extends to something like a “designer’s lament”.

In both cases, the seemingly simple act of recognizing that the world has changed is made so much more difficult by the complacency, and sometimes the arrogance, of leaders who cling to past assumptions and past successes.

In an industry with rapid-fire innovation like that of the global mobile device industry, attitudes like these constitute a death sentence.

The pace of change is so quick in this industry that staying on top requires constant innovation.

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