Blog: Battered ships – lessons from RIM and Nokia

This post was contributed by Howie Chan, Business Analyst at TechAlliance.

If you’ve read the business section of any newspaper lately, you’ve probably realized that RIM and Nokia are currently struggling to retain market share in the globally competitive mobile device industry. Lacking strategic options, efficiency and creativity, some analysts have even argued that innovation no longer exists or can exist at these two companies.

The rise of technology companies, such as Apple and Samsung, has driven more than a thorn in the sides of RIM and Nokia. What happened to RIM and Nokia? Will these companies be around in a few years? More importantly, what can we learn from these companies as entrepreneurs building business models in the technology space?

The size-up

Let’s begin by sizing up the companies on a few basic metrics.

RIM Nokia Apple Samsung Electronics
Founded 1984 1865 1976 1969
Headquarters (population) Waterloo, Canada (98,780)1 Espoo, Finland (252,730) Cupertino, United States (58,302)2 Suwon, South Korea (1,071,913)
Product/service focus Smartphones, tablets, enterprise business tools Mobile phones, smartphones, mobile computers, networks Computer hard/software, mobile phones, tablets, media players Semiconductors, LCD and LED panels, televisions, smartphones
Worldwide
all mobile & smartphone market share3

3%, 8%

21%, 8%

9%, 24%

23%, 26%

Number of employees

9,500

122,148

60,400

221,726

Operating margin (most recent)

-22.85%

-10.95%

33.04%

8.09%

Market capitalization (Aug 28, 2012  in USD)

3.73B

11.57B

632.25B

154.99B

YTD stock growth (as of Aug 28, 2012)

-51.21%

-36.12%

66.52%

10.65%

A quick glance at the above table clearly shows that RIM and Nokia are not doing well. Operationally, each of these companies is very different in terms of manufacturing, part sourcing, research and development, and talent recruitment. Culturally, these companies also have drastically different structures, values, and impressions.

On the opposite side, Apple has hit the bull’s-eye on most of these business model features: outsourcing manufacturing, sourcing parts from the best providers, designing for a user-focused experience and fostering a culture to promote these principles. Now, as Apple enters its post-Jobs era, it continues to outpace its competitors in growth metrics across the board.

As can be seen by their metrics, Apple and Samsung have been more successful at growing profits, producing new products, and integrating into a global technology environment. On the other hand, recent patent litigation and rulings have thrust these mighty giants against one another and have created an opportunity for RIM and Nokia to recoup their losses with an all important strategic “pivot.”

A strategic pivot occurs when management reconciles that what the company is currently doing – is wrong.

Apple made a successful pivot when it completed its full-fledged dedication towards the user experience by removing “Computer” from its corporate name. Samsung, like IBM, pivoted away from traditional hard disk production and now focuses on break-through technologies like NAND flash memory (a key component of its competitor’s iPhone).

A real strategic pivot has two distinct actions: a stop and a go (in a new direction). Moreover, a pivot occurs only when a strategic problem is identified and should not be mistaken for product development iterations.

So what can RIM do? RIM could consider dropping its consumer segment and operating system and focus on the management of enterprise mobile devices systems, managing the security and data transfer capabilities of mobile devices of all operating systems for MNEs – a pivot.

And Nokia? Nokia could drop out of the smartphone market and focus on developing markets in South America and emerging markets in Africa like Nigeria, Somalia and Kenya.

For the entrepreneur

Entrepreneurs face similar problems; in many circumstances, an entrepreneur is reluctant to make a strategic change because of the amount of time and effort he or she has invested to reach a certain business milestone, regardless of whether or not that business milestone is beneficial to the business.

Academia and business model experts alike have studied and discussed this phenomenon in much detail. Business methodologies, which go by such monikers as Change Management or the Lean Startup, provide a strikingly similar and profound lesson: Don’t be afraid to fail. Fail quickly and fail often but never make the same mistake twice.

In this case, entrepreneurs shouldn’t be afraid to make drastic changes. Going down with a sinking ship has historically been a noble thing, but practically, in today’s business world, it makes little business sense. Salvaging or re-purposing a battered ship is both practical and financially beneficial.

1Waterloo Ontario is part of the metropolitan area of Kitchener-Waterloo-Cambridge with a total population of 507,096
2Cupertino is part of the San Francisco Bay area with a total population of 7,150,000
3As a percent of Q1 2012 shipments: http://www.wds.co/enlightened/index.asp