In all the recent coverage about the fall of once-mighty Blackberry (BBRY), something was missing. The
press and pundits were all correct that the original smartphone leader paid a heavy price for its continued failure to respond to the iPhone disruption. But former cell phone king Nokia (NOK) also made a remarkably similar series of blunders over the same time frame. Could it be that management at two sophisticated technology companies was that inept? Or is there another way to explain the relentless erosion of two of the world’s most valuable business franchises?
The strategic choices the two companies should have made are fairly obvious: The iPhone proved instantly that consumers wanted not just better phones but well-designed mobile Internet devices. More interesting, then, are the organizational design choices the companies should have made to maximize the odds of discovering and executing a successful strategy in the face of a rapidly transforming industry.
Silver bullets are lacking when industries are transforming, but the companies could have done at least two things differently: diversify top leadership, including senior management and boards of directors, and build corporate cultures characterized by healthy paranoia.
To be fair, danger may have been difficult to see back in the heady days of 2007. Blackberry was the first to effectively put e-mail into the pockets of business folk around the world. Its elegant system worked anywhere and was bandwidth- and data-efficient. Meanwhile, Nokia figured out ways to scale the production of small mobile phones with long-lasting batteries. A $10,000 investment split between the two at the beginning of 2007 was worth $22,700 by yearend. Both appeared on numerous “most innovative companies” lists. In November, Fortune ran a cover story asking “Can Anyone Stop Nokia?”
The answer turned out to be a resounding “yes.” Nokia’s market cap was once more than €110 billion ($149.4 billion). In September of this year, Nokia sold its mobile handset business to Microsoft (MSFT) for about $7 billion. The market value of Research in Motion once stood at $83 billion. Last month, it announced it would go private by selling itself to an investment group for a less than $5 billion.