I was struck this morning by two headlines which summed up the recent successes and failures of two household tech names:
- The Kindle Fire Is On Fire; Amazon Expected To Ship 3.9 Million This Quarter
- RIM To Miss Earnings Goals After Half A Billion In PlayBook And Outage Charges
It is notable how everything that Amazon does these days plays out well, whilst pretty much everything Blackberry does is a disaster. The stock markets have noticed as well; at $8.7bn RIM’s market cap is now only 2.6x their net income in the year to February 2010, whereas Amazon’s $89bn market cap is over 100x their net income in the twelve months to September just gone.
I’d love to be able to say that this was the result of a new business model succeeding versus an older one – e.g open was winning versus closed, or software versus hardware but that isn’t the case. In common with all the largest tech businesses these days RIM and Amazon have integrated hardware, software and media businesses. So the success of one and the failure of the other is down to quality of execution.
Amazon recognised the limitations of their core business (books) and adopted a bold and clear vision and which they executed with aplomb. The launches of Amazon Market Place, Amazon Web Services and the Kindle all cannibalised and even enabled competition with their book business.
RIM in contrast have been overly in love with their hardware form factor (which to be fair was excellent) and missed all the key developments in the smartphone ecosystem: the emergence of better operating systems, the emergence of app ecosystems, touch screens and tablets.
This is Schumpeter’s creative destruction in action. It is incredible how fast it happens these days. Five years ago RIM looked strong and I wouldn’t have guessed that they were soon to be competing with Amazon, let alone losing to them.
And Blackberry are also on the cusp of losing me. I’ve been a loyal Blackberry user for years now, but today I took my SIM card out and put it into my new Google phone. For the past two years I have run with two phones, an iPhone for apps and browsing and a Blackberry for email. I’m a heavy mobile emailer and until now nothing has been able to come close to the Blackberry for fast processing of messages, but the TouchDown Android app for email coupled with the latest Android hardware looks like it will be better.