Incumbency can be like a gift from a wicked fairy godmother, one that sounds like a good thing at first, but if poorly managed, can turn deadly. In particular, incumbent tech companies, after they achieve market dominance, have a peculiar tendency to asphyxiate their once innovation-oriented culture. I speak of Microsoft and RIM and their ongoing struggles to master the tablet market.
Last week at the IdeaCity conference I was given a Blackberry Playbook, RIM’s answer to the tablet wars. Not the disastrous first version of the Playbook, but the latest upgrade. Then as if on cue, Microsoft just announced that this fall, after years of sitting out on the exploding tablet market, will finally dip its gigantic toe into the waters. Microsoft will launch a hybrid tablet/laptop called “Surface” to compete with Apple’s iPad.
Unlike the RIM Playbook, no one has yet been kind enough to give me a free Surface. According to online demos, the Surface looks quite lovely — a thin tablet with a snap-on keyboard. But I love my new Playbook. It’s gorgeous — sturdy with a high-res screen that glows like a jewel. The wireless hurries along. The frame is just heavy enough to feel snug and strong in your hands. (I confess that I’m old school in that I’m prejudiced in favor of slightly heavier gadgets; like old, metal kitchen appliances, I associated heft with high quality.)
I have an iPad, which is no doubt also an impressive piece of technology engineering. But I like my new Playbook more. And that makes me sad.
It makes me sad because becoming attached to my new Playbook may be like becoming attached to someone who has a terminal illness. I hope common wisdom is wrong, but common wisdom has it that the Playbook and by extension, RIM, don’t have much longer to live. Why?
RIM launched the Playbook too little, too late. As a result, the Playbook, unfortunately, though it’s an appealing product, will likely fail to gain much market share. In a vicious feedback loop, a small market share will mean that app developers don’t want to spend their time writing apps for the Playbook. Fewer apps will attract fewer users. Eventually, the Playbook’s user base will slowly shrink to the point where it’s no longer profitable and the product — and perhaps the entire company — will be discontinued.
People have written volumes about RIM’s demise as a company, how it failed to take advantage of faster data networks and new software development models. But the underlying reason isn’t just changes in the environment — RIM used to handle new markets and new technologies just fine. The deeper underlying reason is that like so many once-dominant companies, RIM got caught in the big sleep that can be the hidden cost of market incumbency.
According to dictionary.com, an incumbent is defined as someone (or something) that
1. holds an indicated position, role, office: e.g. the incumbent officers of the club.
2. is obligatory: e.g. a duty incumbent upon me.
3. (Archaic) is resting, lying, leaning, or pressing on something: e.g. incumbent upon the cool grass.
What happens when you blend “indicated position,” “obligatory,” with “resting on something?” You get an organization whose primary focus is on defending or maintaining its dominant position, using its lack of forward movement as the weapon of choice.
Is Microsoft’s Surface similarly doomed? I hope not. I am an ardent Windows fan. I have a Windows laptop now and want my next one to be Windows.
Microsoft’s new Surface tablet, like RIM’s Playbook, may not get the opportunity it deserves to enjoy a long and healthy life. The Surface’s longevity will depend on whether it can capture a good chunk of the iPad’s market share, hence developer attention. Unless the Surface takes off, if I buy myself a Surface and get attached, I may be inviting slow, painful bereavement into my future.
I usually write about new technologies and how universities bring research to the marketplace. I was intrigued by the cautionary tale of the unfolding tablet market, however, since the “incumbency effect” pops up in all kinds of industries (including universities too, but that’s another entire article).
The danger of market incumbency — regardless of whether it’s induced by state protection, deep pockets, huge cash reserves or a strong brand name — is that having control of a market or service makes it too easy for an incumbent organization not to respond promptly to what its customers want. As a result, incumbent companies falter if they spend their energy and resources on protecting their kingdoms rather than developing and investing in new strategies.
Companies who fall prey to the gift/curse of market incumbency stop launching new products. Or their new products are so darn weird, late or dysfunctional it makes you wish you could have been a fly on the wall during planning meetings. Customer service falls apart. Bewildering discussions with an incumbent company’s customer service “team” can make you wonder whether you’re being used as an unwitting pawn for an employee who plans to make a series of hilarious YouTube videos.
Formerly innovative organizations can quickly become incumbent organizations, which can quickly become faltering, no-longer-incumbent organizations. Having a track record of creating excellent technology doesn’t immunize a company against the negative effects of poorly managed incumbency. After all, not that long ago, RIM was *the* company for innovative, user-oriented smart phones. RIM’s Blackberries used to be so popular and addictive they were called “Crackberries.” Almost everybody had one. I had one until I reluctantly switched to the iPhone two years ago. Blackberry smart phones were awesome.
People make fun of it now, but Blackberries had a physical keyboard that helped those of us with clumsy paws type better, plus a nice little rolling trackball. Unlike Apple’s iPhones “built to shatter” engineering strategy, Blackberries were tough. A friend of mine literally ran over his Crackberry with his car. Its case cracked and the belt clip fell off. But the Crackberry survived intact and hasn’t complained once. Though I won’t put it to the test, I’ll bet my new Playbook could also survive being run-over: its frame feels so wonderfully solid.
Perhaps near-failure is the best cure for a incumbent company that has given in to the siren’s song of complacency. IBM doesn’t get enough credit for being a company that has continued to re-invent itself for nearly a century. IBM defeated a near-terminal illness a decade ago and now is alive and well.
Like IBM, Apple, the very same company that’s now crushing RIM and maybe Microsoft was very nearly the victim of its early success in the fledgling home computer industry. A few years ago, Apple faced an uncertain future as fewer and fewer people bought Macs. The iPod and its follow-on dynasty hadn’t yet come into being.
During those years when Apple was staggering against the ropes, I was working at Microsoft. Tucked away on the edge of campus was a sleepy little division called the “Mac BU” (business unit). A small team of developers worked in MacBU’s corporate Siberia, adapting Microsoft software to run on the Mac and vice versa. The Mac BU was regarded with benign disinterest. Some Microsoft employees speculated that perhaps keeping the Mac BU around — despite Apple’s poor prospects — was an act of charity. After all, Bill and Steve had once been twenty-something software tycoons together.
Nobody would have predicted what would happen just a few years later. Today, Apple has fought its way out of the grave and has innovated its way back into market dominance with an unrelenting onslaught of iPods, iPhones and most recently, iPads. It’s once domineering frenemy, Microsoft, is now borrowing some of Apple’s moves to crack into the tablet market.
Being an incumbent organization can be dangerous. State support can disappear. Technology and culture change so fast that what once was a wonderfully solid market position can quickly crumble to dust. A company’s market incumbency — both a gift and a curse — can quickly erode after just a few years if a company falls under the spell of organizational bloat and misshapen, politically-tainted product strategies.
I hope that RIM and Microsoft will live long and prosper and that their tablets will thrive. As someone who never identified with the whole white Mac and grooving along while wearing ear buds ethos, I want RIM and Microsoft to continue to offer an alternative to Apple products. The clock is ticking, however. Then again, maybe, if we just wait long enough, Apple will again succumb to the curse of poorly handled market incumbency. If that happens, the life cycle will begin anew and we will witness a fresh generation of hungry and innovative companies to fill the void.
image credit: crunchtechnica.com
Melba Kurman writes and speaks about innovative tech transfer from university research labs to the commercial marketplace. Melba is the president of Triple Helix Innovation, a consulting firm dedicated to improving innovation partnerships between companies and universities.