Tuesday, July 1, 2008

The disruption that is iPhone

I continue to wonder how RIM is going to be able to position BlackBerry against Apple's iPhone.

In a previous post I suggested that RIM doesn't understand how to connect to individual customers. Its orientation is still towards corporate IT, even though it's met with a lot of success selling to individuals with the Pearl. What they don't understand is the extent to which the lines between personal and corporate merge when you have a personal device, something that much more so than a computer is an extension of oneself. Even if it is a corporate device, it's a lot more personal and therefore there's going to be a lot more pressure from individual users for corporate to adopt the device that suits them personally. Hence, Apple is at an advantage because it understands how to connect directly to its customers. RIM struggles with this--witness their very weak efforts to date to capture the pent up excitement with the Bold. Their response have been to wall themselves off from their customers, with the result that fan sites have become the best source of information. But all this analysis doesn't really get to the heart of how Apple is disrupting RIM (and other mobile phone manufacturers, though open source has not yet played its hand).

I have been re-reading Clay Christensen's 2003 classic The Innovators Solution (LINK). In that book he uses RIM and Palm to illustrate how to think through the innovators dilemna with respect to new products and features.. He asks what "job" it is that RIM and Palm are solving for their customers. His answer is that BlackBerrys are there to do the job of make-me-productive-in-small-snippets-of-time whereas Palms are there to help you keep you organized. He also suggests that RIM is there to do the job of keeping the user from getting bored--if the meeting starts to drone on, if you're in an airport, you can do something with your BlackBerry to keep yourself occupied (remember, this was written before other devices, such as Palms and Windows Mobile added as much functionality as BlackBerrys in this regard). He says that some of the competitors to the BlackBerry are actually the WSJ and CNN, in that this is what business people may turn to when they don't have anything else to do. Further, he suggests that it would be better for RIM to improve upon the jobs that it's already solving rather than try to also solve the keep-me-organized job with features borrowed from Palm such as effective calendaring.

Of course RIM did address the keep-me-organized job--extremely well, in my opinion. The BlackBerry solution is easily as good as Palm and has been so since about when Christensen's book came out. In fact, for BlackBerry to incorporate Palm-like features was relatively easy and also essential, since the job of making the user productive with e-mail and voice goes hand-in-hand with the job of keeping oneself organized. Christensen suggests that if RIM and Palm had stuck to their core competencies, people could have been satisfied with two devices for a very long time. History has shown this not to be the case. RIM has been ascendant and Palm is just about dead.

What is more interesting in Christensen's analysis, for the question of BlackBerry versus iPhone, is his observation that in addition to being a productivity tool, the BlackBerry has always been a boredom elimination tool. Here's where RIM was blind and where the iPhone excels. There is nothing that produces the "childlike wonder" of an iPhone, with its gorgeous screen, magical interface, incredible web browser, and integrated iTunes. Just like any good disruptor, Apple was able to attack RIM (and all other handheld devices, at least in the context of the United States market) by offering to do a job for mobile phone customers that RIM didn't even realize they were accomplishing: entertainment. BlackBerry is now struggling to catch up, with entertainment features tacked onto its soon-to-be-launched Bold. But Apple is already stepping outside the circle of entertainment. With the soon to be launched Apple ME "connect-to-the-cloud" product (which I've dubbed BlackBerry Enterprise Server for the rest of us), Apple will be eating away at the next level of market in which RIM seems only vaguely aware that they're in: small business customers who would love to seamlessly sync between their handheld device and their work and home computers (whether Windows or Mac) but have no inclination to deal with the hassle and expense of a BlackBerry Enterprise Server (BES--which has to itself sit on top of a Microsoft Exchange Server!). There is nothing on the market today that does more than vaguely approach the functionality that Apple will launch with ME--except BES+Exchange at an order of magnitude+ greater price point and complexity. And even before that launches, Apple is already gunning for BlackBerry's core customer base, the larger corporation. They'll soon offer corporations the answer to the question of "how do I manage these freakin' iPhones that everyone from the Boss on down insists I incorporate into the IT environment". --Apple will offer a product that does they same job as RIM's BES does, integrating with an Exchange server and giving corporate IT the ability to lock down individual iPhones. But additional Apple will offer an easy programming environment in which corporations can create and distribute their own, proprietary, corporation-specific applications.

Will RIM soon be just hanging by its thumbs, differentiated only by its physical keyboard? Next post: where I wish RIM was headed.

Related References:
Engadget: LINK
Engadget: LINK
Engadget: LINK
Ars Technica: LINK

From that last link: "If there is any good news for RIM, [RBC Capital Markets Analyst Mike] Abramsky also notes 'a significant expansion of the smartphone market' this year, meaning more potential customers for RIM. At least until Apple steals them."

July 16

Barrons: LINK

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