The fate of Nokia and Blackberry, or how strength turns into weakness

During the Mobile World Congress in Barcelona in February 2007, I had dinner with two senior executives of Research in Motion (RIM), now Blackberry. The two were truly content because their Blackberry mobile devices were riding a great wave of success. Having already conquered the corporate and government markets, they were starting to become popular with consumers.

At the time I was working with the GSM Association (GSMA) focused on a global effort to increase spectrum available for mobile broadband. We were advocating deregulation of the 900 MHz band for UMTS900, accelerated auctions of 2.1 GHz spectrum, re-farming of the 2.5/2.6 GHz band, and an early start into freeing up the digital dividend at 800 MHz in Europe and 700 MHz in the Asia Pacific and Latin America. Fast forward to today, and most of those spectrum bands have been made available, or are about to become available, worldwide. Mobile operators have embraced the new world of mobile broadband.

When I told the Blackberry executives what I was working on, one of them said: “Why do you need more spectrum? Our compression technology resolves all of your problems.” Although Blackberry’s unique compression technology did indeed allow fantastic email transmission via GPRS, the mobile world was already transitioning into 3G. But Blackberry’s leadership was apparently happy to sit on their 2G/2.5G laurels. That comment revealed they could not see web 2.0 taking off, and making mobile broadband an equivalent experience to fixed Internet complete with web search, social networking, maps, video and music.

Technology is very dynamic. Which means companies cannot afford to get too caught up in the source of their strengths. Early successes are no guarantee of future accomplishments. On the contrary, clinging onto a once-successful technology and business model which is being superseded can result in gigantic failures. And for Blackberry, it did.

The device market is extremely competitive. Giants rise and fall. Nokia is perhaps the prime example. The roots of its downfall are well known — weakness in the innovative and buoyant US market, and arrogance in trying to control the pace of innovation in Europe and large emerging markets. Its unbelievable market share of up to 60% of all handset sales in large markets such as India just made its fall more dramatic. Trying to delay innovation in a highly-competitive global market makes no sense.

Apple’s iPhone was the catalyst for both Blackberry’s and Nokia’s decline, as these companies lost out to the shining new star in high-end consumer markets while corporate customers also abandoned them. The iPhone and Google’s Android redefined the handset market, making use of operators’ mobile broadband capacity driven by new networks and spectrum bands.

Recent announcements of Blackberry winning new intellectual property (IP) rights for innovative features for the corporate market (conference calling, security) and Microsoft rebranding Nokia’s new consumer smartphones are encouraging. These companies accumulated great IP, and once upon a time had great innovation capabilities. The result of their comeback is uncertain, but it is welcome.