It strikes me as two recently admired giants are both reported in free-fall, that even the strongest businesses eventually fail.
TAKE NOKIA
Once acclaimed as a global leader with up to 40% market-share, Nokia defined mobile phones with its sleek and simple UI. Back in the days of the 8210 when small size mattered more than function, or in the days of Snake-II, the grand-dad of mobile games, the it-phone of the moment was almost always a Nokia.
But they missed the smartphone train, the segment now lead by Apple and Samsung. Falling in third position in the juiciest part of the market, Nokia has a slim chance of maintaining its leader position. The math just don’t work, and the market knows it: once flirting with $40 (2007), their stock price is now below $6 despite leadership changes and recent news of a strategic alliance with Microsoft.
TAKE NINTENDO
Yes, they invented portable gaming with their 1989 GameBoy. Yes, the DS was a remarkable innovation that helped maintain a stronghold on on-the-go consoles for two decades. And yes, the 3DS is a fantastic product – I have one, and playing Zelda in crisp 3D graphics with no glasses is simply mind-blowing.
But now, people have discovered that they can play great games on their smartphones. My Nintendo 3DS spends most of its time in a drawer while the iPhone is 24/7 in my pocket… and the company share price just dropped a whooping 12% after it announced a price drop of their latest hardware from $249 to $169 in hopes to bolster disappointing sales.
LET’S CALL THIS A HORSE-CARRIAGE SYNDROME
Here are two companies that were the best at what they did. And still are by a long mile.
No other company can make feature phones as well-built and affordable as Nokia, and carry them to all corners of the world, from the posh West End of London, to the smallest villages of India and central China. No other company can make fun handheld gaming consoles and pair them with the widest library of top game properties like Nintendo.
But they are the best as making obsolete goods.
In a world moving to cars, they are the best at making horse-cariages. And despite leading a charge to make the best and most innovative horse-carriages ever made – electric horse carriages with no horses, 3D screens and OVI stores – they missed the bigger picture. The world no longer wants a horse-carriage, a standalone gaming handheld, or a feature phone.
No one challenges their dominance over their main business… because no-one cares. They have the largest share of a shrinking and eventually dead market.
The problem of course, is that despite smartphones and tablets, there is still short and medium term business to be made selling feature phones and gameboys. Likewise, there is still a big market for Microsoft Office software despite rise of Google docs and cloud computing. There’s still a market for Twitter despite Google+. But for how long? Unless these great companies re-invent themselves, they risk being left with laggard consumers while the majority follow early adopters to greener pastures.
WHY CAN’T THESE GIANTS CHANGE?
Because their own leadership has become their worst enemy. They are the best at what they do, and its the core of their business, sales and profits. It’s their passion and what made them legendary.
And you’d have to be crazy to stop focusing on our core, to walk away from something that made you so big and iconic, to let others eat away at a dominant market share that gives you unbeatable scale…. right? well, visibly, wrong.
Instead, the (hard) way to go is to see the shifts and organize your own competition from within. The challenge is to take risks with a core competencies or a core business, creating something new that might kill it. But is it really a risk? Take Apple… years ago, its business was made of computers and iPods. Now, it’s mostly iPads and iPhones. Their business of yesterday was killed by their business of today… and you can be pretty sure that they’re already looking for ways to make these obsolete too, and faster than you think.
It’s a matter of perspective.
Transportation did not disappear… it just moved from horse-powered to engine-powered.
Mobile Gaming is not disappearing… it’s just moving from standalone devices to multi-use devices.
Music did not disappear… it just moved from profitable sales of records to profitable sales of live performances and merchandising.
At the end of the day we all need to look for ways to make ourself obsolete.
Because if we don’t do it, someone else will.