Fast-moving market for mobiles waits on no incumbents
The answer, of course, is an epic market disruption that began with the launch of Apple’s iPhone five years ago and continued with the emergence of Google’s Android operating system – the incumbent companies have been hopelessly ill-equipped to deal with transformed customer expectations and technological challenges.
Horace Dediu, the most perceptive analyst of the mobile industry, calculates that in the fourth quarter of 2011 Apple and Samsung made 99 per cent of the profit among the top eight mobile vendors; HTC made 1 per cent, and the rest lost money. What revenues remain in the dumbphone sector of the market, which Nokia relied on to keep itself afloat, particularly in the developing world, has been commoditised by no-name entrants.
As Dediu put it recently: “A tipping point has been crossed. This is the point where some participants are disrupted enough that they cannot recover.”
This is a compelling illustration of the innovator’s dilemma that I wrote about a few weeks ago. Both RIM and Nokia are being disrupted to death – they both pioneered different areas of the mobile phone business at the high and low end, and both have been usurped by developments that they are neither agile nor technically adept enough to react to. The institutional biases towards preserving their existing revenue models meant they were at first oblivious to the attraction of touchscreen-based mobile devices – the Blackberry’s main selling point was its keyboard, and Nokia seemed incapable of innovating beyond its keypad design despite the plethora of various designs it churned out every month.
Then, when it became clear that the era of touchscreens and app stores was upon us, they lacked the key resource to be competitive in the field – user-centric software design experience. Both RIM’s Blackberry and Nokia’s Symbian operating systems were clear evidence of companies that created software as an afterthought to their hardware rather than as an equal and integral part of the design process; thus when software design became critical to success in mobile neither had the necessary expertise to challenge Apple or Google. Now Nokia is relying on Microsoft to gain traction with its Windows Phone operating system, which shows little sign of making up for lost time, while RIM is betting the house on its forthcoming Blackberry 10 operating system.
In mobile change can happen fast, so it would be foolish to write them both off entirely, but this disruption is likely to take at least one of them down, and soon. Amateur hour, it seems, is very nearly over.