US market share for Q3 2011 smartphone sales

I like to keep track not only of where the new technologies are going, but also of the history of the old ones, and how the older companies, that at the time may even be the leaders of the market, respond to new technologies and threats.

RIM is one such company, and so is Nokia. Both of these companies followed almost exactly in each other’s footsteps, and both took the wrong direction. I remember when the iPhone came out, RIM was very dismissive of it. They said the battery lasts too little, so no one will want it, because most of their customers want their own phones because they have long battery life.

The iPhone may be praised today for lasting a full day on one charge, but it used to be that phones like the Blackberry lasted at least a few days on a charge. The reason for that is simply because it didn’t do as much. Both iOS and Android are full OS’s, that are stripped down a bit and optimized to be as efficient as possible, but also be able to handle any tasks a real OS could handle. Now that iOS 5 caught up with Android in some features, that Android has been using for a long time, it seems even the iPhone 4S battery life has been reduced, but in the same time highly optimized Android phones like the Galaxy S II can achieve even better battery life than iPhone 4S right now.

The BB OS (and Symbian) was not designed like a full OS that can handle a lot. They were designed from scratch, to handle very little, but maximize battery life. In time they’ve kept adding more stuff to it, but it still couldn’t compete with the more modern mobile operating systems.

But RIM didn’t realize this, and they refused to see it for years. It’s very hard for a company to accept that they may have to change almost everything about their company, and almost all their technology, as soon as possible. So rather than try to build a new OS from scratch early on, to take on both iOS and Android, they took the easy, yet wrong, way out. They tried to keep improving the BB OS and try to catch-up with the other two. This is almost always the wrong strategy to follow, and they’ve wasted years on it. Now, even if they’ve realized their mistake – it’s way too late for them to change that.

But the worst part about all of this, was RIM’s gloating every quarter until late 2010, when things really started going downhill. Every quarter they were bragging about their new “record breaking” profits or revenues. That was a huge mistake on their part, not because they bragged about it, but because it was obvious they simply don’t get it.

They looked at the overall finances and saw a lot of money coming in – so everything must be fine, right? Wrong. By then, RIM was already dropping fast in market share in USA and Canada, mostly because of Android. It wasn’t until Android, that RIM really started to lose market share – and fast.

But if they were losing all this market share in their core markets, then where did all the money come from? Well, there are 2 things that managed to mislead them into thinking they are doing just fine.

The first one was that the smartphone market was now growing much faster than before. So even if RIM was selling more and more devices each quarter, they were still way slower compared to Android manufacturers. In fact they were slower than the average market growth, too, which should always be a sign of worry.

Market share matters. It’s not the only thing that matters, but it’s one of the most important things. Without market share, you might become less relevant, and people will talk less and less about you. Plus, having a lot of market share means, a lot of people actually use your products, so by default there will be more people talking about you.

So when RIM saw that they were selling more and more devices, they thought it’s ok, and they didn’t treat the loss of market share as a warning sign, that they are becoming less and less relevant to the market.

The 2nd thing that misled them, is the overall growth of the company. RIM started by losing “just” market share in USA and Canada, but eventually they started losing sales, too. But they still refused to see that as much of a warning sign, because they were growing very well internationally. So hey, if they are losing a bit in one market, but growing more in other countries to compensate for the loss, everything is still fine, right? Wrong again.

If you lose the core market, the market that made you popular and turned you into what you are today as a company – you lose everything. It’s just a matter of time before whatever made you lose in the core markets, will make you lose in the other markets, too. Basically you’re just surviving because of inertia. RIM kept growing in countries that have heard of “Blackberry” brand for years, and where Android smartphones haven’t been that popular yet.

But that was obviously just a matter of time, and RIM should’ve realized this. They should’ve only asked themselves this question (and answer it honestly): “Are our products competitive with the Android smartphones and the iPhone?”. I think the answer to that would’ve been obvious to most people – it should’ve been “No”. Well, if that was the answer, then they should’ve realized that as long as their phones are not competitive enough in this market, they will lose not only their core markets to these devices, but also their international markets.

But they didn’t realize that, at least not in time, so I guess their answer was “Yes, they are competitive”, which means they were just lying to themselves all along.

I wish I could say that all that RIM has to do now is move to Android, and everything will be fine. For this to work, they would’ve had to do it years ago. They should’ve at least had an Android phone launched in mid-2010. If they decide to do that now, it will take another 12-15 months before they actually release a device with it. That’s a long time in smartphone years. And I know they won’t do it anyway. They will first try to move to QNX, which is already a dead-end, and it will take them all of 2012 to realize this.

RIM simply needs to change everything if it wants to survive. It needs a new CEO (hopefully just one this time), and it also needs to change how they are releasing smartphones, too. Because even if they were to use Android now, they would still be behind in hardware specs from what I’ve noticed. They wouldn’t be able to compete with whatever device Samsung or HTC is releasing at the time.

RIM used to be the US market leader in smartphones with over 40% market share, just 2-3 years ago. Right now, HTC and Samsung are the manufacturers who sold the most units in USA in Q3, and they should be able to maintain the top 2 spots in the foreeable future, except in Q4 of this year when Apple should lead them again because of the iPhone 4S launch boost. But that should be only a temporary thing for the same reasons I explained why Samsung will remain global smartphone leader.