Who Moved My Smartphone? What the Smartphone Revolution can tell us about Strategic Planning and Development

It’s 2005. The market for mobile phones has reached a critical mass where, instead of being led by technology, it can now lead technology. Many market players like Nokia, Motorola, Palm and Microsoft have been trying to establish dominance in the emerging field of “smart phones” – mobile devices that not only place and receive calls, but also do email, browse the web, and run applications. But there’s one company that has beat the rest of them to market with a usable product – Research In Motion.

RIM makes the Blackberry, a powerful and expensive line of phones targeted at corporations and high-end business users. They have strategically conceded the lower-profit consumer phone and OS market to Nokia and Symbian in order to focus on the faster-growing high-end market. They keep firm control over their development, integration and applications, ensuring a polished and predictable finished product. They have a well-defined roadmap outlining the steps they plan to take over the next three years and are rapidly taking market share from their biggest competitors, Palm and Microsoft.

Some people at Apple are looking at the consumer electronics market and see the acceleration of smart phones. They look at the technology that’s out there and wonder, “How can we compete with a market leader like RIM?” In the short term they can’t, but if they look further down the road and can anticipate (or cause) even one major market change, they can steal not only RIM’s market share but also its crown as the market strategy leader.

Apple gazes five years ahead and sees the opportunity for the power of a personal computer to fit in the palm of your hand. Apple has historically hung its hat on its hardware business, but the iPod and iTunes store has proven to be a massively profitable success. What they really want is a larger software business to add diversity and help their profit margins grow further. They leverage the iPod expertise to prototype some hardware, Take the OS X ports for the iPod and AppleTV, and borrow from the Cocoa/OS X development platform to attract developers. In 2007 they release the iPhone, and by 2008 they have established themselves as the powerhouse in mobile application development, delivery and sales.

Meanwhile, Google has also been looking at the consumer electronics market but with a much broader goal. Unlike Apple they already are a software company, and they are looking for ways to get their products more deeply integrated with the user experience. They foresee the proliferation of powerful, portable hardware, and instead of wanting to sell one device, they want to run ALL the devices. In 2005 Google acquires a startup company called Android that has been secretly working on a lightweight operating system designed to run on any mobile device. In 2007 they establish the Open Handset Alliance with major device manufacturers and cellular carriers. With their expertise in software design and rapid application development, they build a world-class open-source development platform. Aided by the launch of a few Android-powered “Netbooks”, developers worldwide get engaged in the platform and it becomes an industry standard practically overnight.

In 2008 Apple eats up market share at a pace that no one, including Apple, had dared to expect. RIM is shell-shocked. Although their 3-year strategy put them in complete domination of their old competitors, they forced to overhaul their entire business strategy in the wake of the iPhone. On the hardware front they don’t stand a chance of competing, and on the software front they realize they failed to anticipate the needs of third party software developers to help them adopt their platform. Still clutching to the market share lead, RIM struggles to adapt to a future they didn’t anticipate.

Apple not only anticipated, they created a market revolution, and they ride the high tide into 2010. They become the market share leader, but more importantly they are the market strategy leader. Most major features and capabilities come out on the iPhone first while Google chases close and RIM and lags further behind.

Throughout 2010, Android evolves and improves steadily, approaching feature parity and challenging Apple on new features. Thanks to their highly open development model and the sheer number of developers, progress on Android’s roadmap outpaces Apple by a large margin. Android begins development on version 3.0, bringing Android’s latest features to tablets and netbooks. By the end of 2010, Apple and Google are even on market share in mobile phones.

Suddenly a shift occurs. Late in 2010 Apple goes to market with the first iPad, turning what had previously been a novelty device into a desirable and useful consumer product. What seems like a successful power move by Apple exposes a key weakness – their OS, API, and in turn their whole strategy had been narrowly focused on mobile phones. Every application written for iOS is confined to the resolution of the original iPhone. Apple is forced to back-pedal, releasing a quick fix that requires developers to choose between two fixed screen sizes. After application developers rewrite and re-release their software for the iPad’s screen size, Apple releases another API change to permanently resolve the screen issue. The multiple API changes cost Apple a number of months, in terms of both internal and community development time.

Through mid-2011 many Android-based tablets are released, which lag behind Apple in features but are popular due to lower price. Android-based products are continuously released from multiple manufacturers with new hardware and software – a pace that Apple cannot begin to match. Within 8 months of their first tablet OS Google releases Android 4.0, merging the 2.x smart phone and 3.x tablet branch while adding and refining many cutting-edge features. By the time Apple responds with iOS 6, Google’s momentum is too strong – it has made two more major releases. The Android 4 release in October 2011 marks the moment Google becomes the definitive market strategy leader not only for smart phones, but for all mobile devices.

What has happened to RIM? By the start of 2012 their smart phone market share shrunk to 13% in the US and just 6% worldwide, putting them in a distant and shrinking third place. Google’s Android has jumped to 47% over Apple’s 30%, and in the broader Mobile OS market Google is running away with a whopping 60% of new sales.


Looking back on what has played out between these three market giants, all three of them accomplished their strategic goals with three very different end results:

RIM planned for 3-year dominance over its recognized competition and it was wildly successful. Even with the overnight success of Apple eating 18% of the smart phone market, RIM’s share grew from 26% to 40% between the end of 2005 and 2008. But their lack of vision and planning for the long-term has seen their share shrink from 40% to 16% over the subsequent 3 years, with Gartner forecasting less than 3% by the end of 2015. That’s just one tenth of the market share they had 10 years prior.

Apple planned to create a new software market over a 5-year span while revolutionizing the smart phone market, and it succeeded at doing both. Going from zero to 25% market share in 3 years is the kind of brilliance that inspires seminars, articles in Forbes and “Company of the Decade” awards. The expansion of iTunes to include the App Store has boosted their profit margin and ensured their longevity. Despite all their efforts and investment, Gartner predicts their smartphone and tablet market share has peaked and will lose points by 2015. Instead of being the industry leaders they expected, Apple are now following Google when it comes to strategy, features, and market share.

Google planned to make itself an indispensable part of the computing experience by providing an extensible software suite to power all mobile devices. Their software is used across competing hardware vendors in multiple market segments, providing a one-of-a-kind layer of insurance against market changes. Their product strategy looks so far forward it sets the planning horizon of the whole industry, and as a result they are not compelled to regroup, change gears or chase after others. Their commitment to long-term business strategy is evident in their commitment to product design and development methodologies, and is the differentiating factor that makes them such a successful industry leader.

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