Why can't pioneering innovative companies sustain their first mover advantages - Essay Example

…………………………………………………………………………..xxxxxx ……………………………………………………………………….xxxxx …………………………………………………………………………….xxxx ……………………………………………………………………………xxxxx @2013 Why can’t pioneering innovative companies sustain their first mover advantages? - Research in Motion case study Introduction Research in Motion (RIM) is a leading manufacturer of wireless devices. The manufacture of first mover advantages enabled the company to emerge from an unknown small entrepreneurial firm into becoming a global force in the sector of wireless devices within a very short period of time. The breakthrough product for this Canadian company has remained to be the BlackBerry (Sweeny 2009). However, the arrival of iPhone in the market has overturned everything for Research in Motion leaving the company struggling to cope with the fast follower’s challenge. Rivals such as Google and Apple which performed well in the market have led to a downward performance in the company’s stock prices. Apple first launched iPhone, a device which took a dominant position in the market and more so in the consumer segment and is now taking leads in the corporate market where BlackBerry’s were dominant. Google Android and Apple’s tablet PC, iPad are also consuming the previous BlackBerry market share a situation which has led to negative impacts on the volume growth and margins of the company resulting from increased competition. The case for Research in Motion leaves one wondering why pioneering innovative companies are unable to sustain their first mover advantages in the market. 1. Changes in share prices for Research in Motion in the stock market Research in Motion Ltd (NASDAQ:BBRY) DETAILS Previous Close 13.06 Open 13.13 Day's High 14.92 Day's Low 13.00 Volume 92.82 Mil Avg Daily Vol (13 Wks) 62.23 Mil Bid 15.00 Bid Size 400 Ask 16.00 Ask Size 1,000 52-Wk High 18.32 52-Wk Low 6.22 Dividend Rate NA Yield NA Source: http://investing.money.msn.com/investments/stock-price?symbol=us%3aBBRY The graph below shows fluctuations in the stock prices for the last 5 years with more reduced prices from 2012. That is, the company has recorded ups and downs of 15% over the last 3 years when it comes to its share prices. This is because of the existence of stiff competitors in the market competing for the same market share with Research in Motion Ltd. The ups and downs in the share prices of Research in Motion Ltd may also be attributed to consumption of its market share by the competitors and especially in the consumer market. The introduction of new and improved products in the market by the competitors has made BlackBerry’s less competitive making RIM Ltd loose its significant number of consumers. Source: http://www.bloomberg.com/quote/BB:CN/chart When the BlackBerry’s become less competitive, the stocks also become less competitive a situation which has led to the reduction in stock prices. The increased competition and a reduction in market share have led to a reduction in the total volume of stocks traded in each trading day. Analysts also attributed the drop in stock prices in the company to the increased prices of the new BlackBerry mobile phones, a price which is too high for the emerging markets. With the increased prices, the company has been having huge problems attracting customers away from Androids by Google and iPhone platforms by Apple Inc. Source: https://www.google.com/finance?cid=663276 2. First mover advantages of Research in Motion’s BlackBerry BlackBerry was the first brand to be introduced in the market with mobile email which was highly compatible with the corporate requirements. BlackBerry then become the market leader and has continued being the market leader. BlackBerry was the brand in the market to integrate mobile communication, corporate email and internet capabilities into a gadget which is conveniently hand held. Many competitors have been trying to imitate the BlackBerry products together with its features to no avail making BlackBerry a market leader since it was introduced in 2002 (Sweeny 2009). The stranglehold of BlackBerry was highly challenged by Apple Inc when it introduced iPhone in 2007. Unlike other competitors which had tried to imitate the product, Apple created a totally new design which then challenged the BlackBerry. Research in Motion was the significant company to enter the market with wireless devices like BlackBerry (Heeley and Jacobson 2008). That is, Research in Motion was a pioneer company in this technological market industry. The introduction of this device in the market drove the company to the pinnacle of its innovation success. With the company being the first to enter the market, it was able to enjoy the advantages of it innovation success by acquiring a large market share. The company also gained an advantage over its potential rivals with the introduction of a new product BlackBerry into the market. Being the first in the market, Research in Motion was able to create a defensible ground. The company captured market share very easily without any worry of its rivals as none of its rivals manufactured the same product with the company (Waters 2006). Research in Motion Ltd beat its rivals into the market by consolidating its position which makes it compete more effectively which leading to increased or expanded market share. As a first mover into the industry, Research in Motion Ltd had gained enough control of the market which followers were not able to follow for a substantial period. As a result, the company was able to make a huge profit margins and a monopolistic status. The acquisition of technological leadership is a first mover advantage which drove Research in Motion Ltd to the pinnacle of its previous innovation success (Chakravorti 2004). The company had the full potential to capitalize in the marketing business of iPhone due to the first mover advantages enjoyed but was not able to capitalize in the iPad business hence the loss of market share. The adventure of iPhones and iPad from Apple Inc left the first mover advantage enjoyed by BlackBerry quite unsustainable as the iPhone, iPad and Android surpassed the definition of a smart phone. Research in Motion was quite innovative in the manufacture of the BlackBerry. The development of a highly technical product made the company stay ahead of all potential and existing rivals (Porter 2008). The first mover advantages enjoyed by Research in Motion drove the company to a heightened level of innovation success which the company enjoyed before Apple Inc and Google eroded its market dominance by the good performance of the iPhone and Androids respectively (Afuah 2009). In this case, one can say that Research in Motion did capitalize fully on its first mover advantage a situation which left opportunities for competitors like Apple and Google to gain a second mover advantage. BlackBerry was and continues to be the only breakthrough product for the company (Sweeny 2009). However, the company has not been innovative enough to come up with more innovative smart phones which would compete effectively with the two stiff competitors. This clearly explains the drop in the performance of the company in terms of stock prices. 3. External and internal factors which prevented the company from maintaining its first mover position in the market a. Context The problems faced by Research in Motion are attributable to the failure of the company to keep the company as innovative as it used to be (Afuah 2009). The fact that Research in Motion Ltd was the first company to manufacture wireless devices means that innovation was highly practiced in the company. The company entered into the market with innovative strategies where it introduced a new and unique product into the market. BlackBerry was the brand which was introduced into the market in the year 2002 and created an industry standard for close to five years. The introduction of the innovative brand, BlackBerry made Research in Motion Ltd to rise from a small entrepreneurial firm into a global dominant force as a result of the innovation strategies and the first mover advantage (Sweeny 2009). The innovativeness of Research in Motion helped the company in establishing its first mover advantages. However, the innovativeness of RIM ended there, and as it is now, the company may be at the beginning of its end or at a turning point. Tidd and Bessant’s (2009) model describes an innovation process as one that brings productivity and quality improvements in the products. The case for RIM Ltd is an indication that no innovation process was happening as there were no improvements on the company product. BlackBerry was introduced in 2002 and has since then remained the only breakthrough product for the company. This is an indication that Research in Motion Ltd has failed to keep the company as innovative as the other companies. The year 2002 was along time ago and since then; technology has evolved with many of its competitors embracing innovation in order to be up to date with the changing technology. BlackBerry product was a high innovation product but the fact that the company has only that product as its breakthrough is a failure on the part of the company’s innovation strategies (Sweeny 2009). To maintain its first mover advantage in the market, Research in Motion Ltd should have embraced further innovation in developing the BlackBerry further or develop a new brand in the market. This would ensure that consumers are supplied with new, improved and technological products which improve the confidence in the company. By doing so, the company would have been able to maintain its market share and its first mover advantage in the market as there would be little fear of losing the consumers to competitors with improved brands like Apple and Google. First mover advantage usually creates a significant advantage for the particular company. An early entry into the market allows the company an early penetration into several segments hence market domination. This is the same with the case of Research in Motion with its BlackBerry brand. The company and the brand were able to define all the standards of the industry by being the first company to move into the industry. However, iPhone conformed to all the standard of BlackBerry and improved on all of them. iPhone is quite innovative compared to BlackBerry and this has helped it in re-defining the industry standard (Sweeny 2009). Lack of innovativeness by the company has prevented it from maintaining its first mover position in the market. Today, Research in Motion Ltd is a dying giant in terms of its innovation, market share and revenue obtained from the sale of its products which is fast loosing its subscribers from the developed nations-the largest consumers. The failure of Research in Motion in maintaining its first mover advantage in the market may also be attributed to the company’s failure to develop an innovation strategy that delivers high innovation performance (Chakravorti 2004). Research in Motion can now be termed as Research, no motion, and this has made the company a lost empire. RIM failed in the development of innovation strategies as it thought that it had already acquired the first mover advantage status. The company also failed in undertaking strategic innovation initiatives which would help it sustain the first mover advantage it enjoyed. The company might have forgotten that technology is rapidly changing and new models will always come, and that is why it got stuck with one product. For the company to maintain its first mover advantage, it should have exercised a constant innovation in order to improve its status quo and to help it in building a stronger brand which would be an innovation strategy for the company (Bessant and Tidd 2009). Improved innovation strategies would have ensured the delivery of high innovation performance brands which would have made the company acquire a competitive advantage over any potential competitor hence sustaining its first mover advantage. Failure to develop innovation strategy for the company which dealt with technological products led to the neutralization of the first mover advantages once enjoyed by Research in Motion Ltd. Based on the Tidd and Bessant’s (2009) model, the company did not have any innovation process taking place as no new products were developed b. Search The problems with Research in Motion Ltd can be attributed to its failure to take advantage of all available sources of innovation (Chakravorti 2003). Failure to make use of all available sources of innovation has left BlackBerry battling for relevance in the market. The company failed in noticing various sources in the market given the changing technological trends. Every one would like to enjoy and use the wireless technological device and not just the professionals. BlackBerry failed to notice the changing demand for the device with increased consumer demand than the professional demand, and that is why it was overtaken by Apple Inc’s iPhone as the Smartphone was tailored for use by both the professional and the consumers. This is the main reasons why it was overtaken by the first iPhone released by Apple as it had encompassed the available innovation. The iPhone was not just innovated to the email addicted professionals like in the case of BlackBerry, but it was expanded, not just to meet the demands of the business people but also for the great mass consisting of tech-hungry and well heeled consumers (Sweeny 2009). The failure to make use of the available sources of innovation was also coupled with poor innovation strategies. For example, iPhone entered into the market and consumed the market share for BlackBerry, but Research in Motion Ltd never responded. By the time the company responded, Apple Inc had already released its iPad 2 in the market which means that BlackBerry’s market share was no more. The BlackBerry brand for Research in Motion is facing a stiff demand from low end products like Nokia and Motorola among many others. This is an indication that the company has not used any of the available sources of innovation to work on its brand and to improve it to meet the changing needs of its customers (Dvir and Lechler 2004). The company has also continued loosing a great number of its subscribers from the developed markets which is attributable to its low quality product compared to those offered by its competitors. From all indications, Research in Motion Ltd seems to have lost the will for any innovation. The company CEO, Lazaridis says that the company has once built something great, BlackBerry which went viral and succeeded in the market beyond anyone’s expectations. However, the company was caught flatfooted by the change which made the company suffer from Founder’s Syndrome. The company was too close to work and in a paradigm which is outdates where the smart phones had been souped-up pagers instead of handheld computers. To Research in Motion, it is a story of a happy ending having left a legacy in the market. The problems faced by RIM Ltd can also be associated with the failure of the company to make use of innovation network in the development of a new product (Birkinshaw Bessant and Delbridge 2007). Innovation networks would have been quite useful in helping the company to outsource innovation strategies for the development of a new and improved technological product. Research in Motion did not conduct enough market research on innovation which would have helped it acquire innovation networks enough for new product development. The BlackBerry competitors seem to have made maximum use of innovation networks which enabled them to develop new products which met the changing needs of the market (Sweeny 2009). Research in Motion lacked this and that are why it was not able to develop a new product ever since it developed the BlackBerry product which has since been over taken by technology, consumer needs, innovation and time. In this case, Research in Motion failed in launching a counter attack on its fast followers; Apple Inc and Google as it failed to devise the necessary innovation strategies which would have helped it in the development of a new product, failure to keep the company as innovative as it used be and the failure to use innovation networks. All this factors are responsible for the failure of Research in Motion Ltd to sustain its first mover advantage (Nichols 2008). c. Select The current problems with Research in Motion Ltd can be attributed to the company’s failure to select the right innovation projects for the development of the next generation of blockbuster products (Chakravorti 2004). Demand for different technological products changes with the change in technology, and this are something that the management of Research in Motion Ltd never into a serious consideration. Development of the next generation of blockbuster products calls for re-definition of the market in order to ensure all the needs of the target market are well catered for and to ensure no room is left for competitors products (Nichols 2008). At first, the company was in the right direction, having brought to market an innovative product for the generation. However, the company failed to maintain its first mover advantage by failing to choose the right projects to help in the development of blockbuster products. With the introduction of iPhone and Androids in the market, BlackBerry was no longer a blockbuster product or a breakthrough product for Research in Motion Ltd, and this called for the use of the right innovation projects to design a product which would beat the blockbusters in the market (Dvir and Lechler 2004). However, the company failed to right innovation to counter attack these fast movers in the market hence contributing to its lost glory. As the company’s major competitor, Apple Inc made use of the right project to come up with the next generation of blockbuster products, iPhone. The choice of the project came with its share of uniqueness. For example, the iPhone was very slim and had a large touch screen which did not have any physical keyboard. Unlike the BlackBerry, iPhone highly improved the convergence of a mobile phone, internet browser, digital camera, a music player and an in-built GPS. The iPhone was also efficiently connected to iTunes which is an online store for Apple for purchases of movies and music. The iPhone bettered the BlackBerry and created a new standard for the smart phones. This shows how a faster mover like Apple Inc applied the right project to help in the development of the next generation of blockbuster products which ended up being a breakthrough product for the same company (Geroski 2000). This is what Research in Motion Ltd should have done to sustain its first mover advantage in the market, choosing the right project which is in line with the current technology in order to develop another blockbuster product. Conclusion The introduction of stronger brands into the market has huge consequences on the company which enjoys the first mover advantage. Research in Motion Ltd enjoyed all the advantages which came with being a first move but it lacked the necessary innovation strategies to sustain the market position. This was the beginning of its downfall where it was overtaken by fast followers in the market. Research in Motion seems to have had only one breakthrough product, the BlackBerry which was quite unprofessional for them (Sweeny 2009). Moreover, they assumed that the product will continue rocking in the market for the fact that it was the first wireless device to enter the market. This is one area where they were very wrong. The company should have either made technological advancement on its BlackBerry Brand or go an extra mile to develop a new blockbuster product in line with the current technology and the market needs. By doing this, company would not have lost its first mover advantage to the fast movers like Apple Inc and Google. Constant innovation processes would have been the only way for Research in Motion Ltd to continue with its momentum on being a first mover advantage (Chakravorti 2003). Upon the loss of the first mover position in the market, innovation process is the best way to go for the company in order to regain momentum in the market. Research in Motion should have conducted a market research on its potential competitors to determine what they were likely to bring to the market. By doing this, company would have been able to counter attack its competitors (Porter 2008). It is therefore very important for the first mover advantage companies to formulate innovation strategies to compensate for the first mover advantage deficit. For example, despite the fact that BlackBerry enjoyed a first mover advantage, the brands brought into the market by Apple Inc were so strong that it allowed the iPhone brand to overcome the company’s first mover advantage deficit. Company’s having the first mover advantage should go an extra mile to guard it by developing strategic initiatives. There is noting which is sustainable for ever. However, sustainability is very crucial to businesses and companies, but when all innovation strategies are easily replicable, and then competition becomes ruthless which eventually leads to a zero sum game. From the experience of Research in Motion Ltd, one learns on the importance of constant innovation as a way of improving the status quo. A first mover advantage company and more so those dealing with technological products should ensure constant innovation as this will enhance the relevance in the market through the development of highly improved products. Constant innovation strategies are therefore the way to go in sustaining first mover position in the market (Afuah 2009). References Afuah A. 2009. Strategic Innovation: New Game Strategies for Competitive Advantage. Routledge Bessant, J. and Tidd, J. 2009. 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Strategic management Journal Nichols D.S. 2008. Return on Ideas: A Practical Guide to Making Innovation Pay. John Wiley & Sons Porter M.E. 2008. Competitive Advantage: Creating and Sustaining Superior Performance. Simon and Schuster, Research in Motion Ltd (NASDAQ:BBRY). http://www.bloomberg.com/quote/BB:CN/chart. Accessed on 13th March 2013 Sweeny A. 2009. BlackBerry Planet: The Story of Research in Motion and the Little Device that Took the World by Storm. John Wiley & Sons Waters D. 2006. Operations Strategy. Cengage Learning EMEA Read More