Wednesday, July 13, 2011

RIM's Bad Strategy

There is an article over at The New York Times discussing how RIM might find salvation in the smartphone market by cozying up with carriers. Basically, the carriers are worried about Google and Apple having so much control over the cell industry and they want a counterbalance.

Unfortunately, doubling down with the carriers is the worst idea. RIM has been cozier and better served by the carriers than any other company in the past decade, which is precisely why they're in the shitter.

The carriers are lazy. They have an oligopoly in the United States and only really care about squeezing as much money from customers as possible. They are expanding their networks more slowly than their European or Asian counterparts, they're services are slower, and they cost more. What the carriers are concerned about, if Apple and Google have their way, is that they will lose the ability to squeeze money from customers when they become what's known in industry-speak as a dumb pipe. Basically, the company is nothing but the channel through which services run.

This is actually an enormously profitable place to be, but it's not romantic and it's very hard to be a rip-off, which is what the cell companies want to be. As such, the cell companies want the status quo to change as little as possible. RIM was attached to these corpses more tightly than any other company. If your company is tied to another company that wants to keep the status quo, there is no motivation to change and innovate. This state of affairs was as much responsible for RIM's current state as any internal problems the company might be having.

It was also directly responsible for a company like Apple, being lead by a legendary boardroom bully, being able to shove its way in and completely upset the old business model.

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