WHAT IS NOT THE CAUSE
Some will jump in here and say Tomi, the obvious disruptor was Apple's iPhone. And I agree, the iPhone has been the most important handset model ever, and we now measure time in the era before the iPhone and the era after the iPhone (as I correctly predicted before the iPhone was first sold in 2007). But this pattern existed before the iPhone (Siemens, Motorola), it coincided with the iPhone (Palm, Windows Mobile), and it happened after the iPhone stopped grabbing tons of market share (Nokia, Blackberry).
Yes, for those who didn't pay attention back in 2007, 2008 and 2009; the biggest growth in the iPhone market share, from zero to 17% - happened from the summer of 2007 to the summer of 2009. Since then Apple's iPhone market share has been essentially flat picking up only a few market share points to 19% for 2011. In the big iPhone growth years, Nokia mostly held flat and Blackberry actually grew market share in smartphones. So it is absolutely factually untrue to claim that Apple stole customers from Blackberry. And to a lesser degree same is true of the iPhone and early Nokia smartphones in 2007 and 2008. (Few remember that after the original iPhone 2G was launched in 2007, Nokia's contemporary smartphone, the N95 handily outsold all iPhones globally.)
After the iPhone big growth period ended and the iPhone was flat, only then Blackberry suddenly collapsed and so did Nokia. So the losses to RIM and Nokia did not go to gains to Apple's iPhone. Their losses were to the gain of the Android family, so while you can argue that the iPhone killed Palm and Windows Mobile, the evidence does not support the theory that the iPhone killed Nokia or Blackberry, on the contrary, those were relatively immune to the iPhone, it was Android which killed Nokia smartphones and Blackberries. I recognize that the widely-held myth keeps repeating the ignorant rant that the iPhone killed Nokia or Blackberry. We deal with the facts here, not myths.
To anyone who wants to comment on this thread - this pattern can be observed BEFORE the iPhone existed, so it cannot (solely) be caused by the iPhone. Yes, the iPhone may have boosted the damage, but then I would argue, its simply 'any' new and highly desirable phone can help boost the effect. The Razr for example caused Nokia's 2006 market share to fall. Thus, iPhone did not cause The Cliff. Period.LONG LEAD TIMES
As the name of this section goes, long lead time is a very, very important point. The typical development cycle for a completely new mobile phone is about 18 months from a clean table to in the stores. In the case of a newcomer company it can be longer - with Apple it was reportedly 30 months, because Steve Jobs looked at the intended 'iPod Phone' of late 2006 - and gossip says it looked like a Nokia candybar phone with regular buttons and a medium size screen - and Jobs said no, that is not good enough, and forced a total redesign, which then gave us the radical look of the iPhone with the massive screen and one button.
Today's Nokia Lumia 'shortened' development time is totally an illusion, as the outwardly look and feel was taken from an existing Nokia product, the N9, and the guts of the phone came from Compal, not Nokia's own process. Even then it took nine months to take existing parts and reorient them into 'Lumia' - but the first Nokia-designed and Nokia-manufactured Lumia phones that are not a rebadge will start with the Lumia 900 which launches this week, 15 months after Elop announced his Microsoft strategy…Have you wondered why Nokia's CEO said Symbian is dead, yet 12 months after that announcement - Nokia launched Symbian-powered 808 PureView as their key phone? Answer: long lead times.
Thus, if you have disappointing smartphone, in order to perform a total redesign would take your company about 18 months, but by that time 3 out of every 4 customers you had, will have bought a new smartphone and if they really rejected your current phone, this is essentially a problem you cannot recover from.NEEDS MORE STUDY
Naturally this analysis is not a massive peer-reviewed scientific survey. I am here to argue, for the first time in the public domain, that there is this phenomenon 'The Cliff' and it is peculiar to the handsets industry. It has already claimed several victims and it may well collect several more. The main point is that the rate of decline, if any handset maker goes over The Cliff, is catastrophic - essentially today, it means you lose half your customer base in less than 18 months, and another half again - or even faster. With Nokia when they went over The Cliff in 2011, they lost half of their market share in 9 months!
And then if any handset maker goes over 'The Cliff' - the total company is in utter chaos and panic. The normally sensible management moves will not work and can be severely counterproductive, such as mass layoffs. If your sales fall by half in a year or 18 months, no matter how profitable you had been, you will be plunged into loss-making (witness Siemens, Motorola, Palm, Nokia and RIM). And if you combine that with massive layoffs, you then can't market, can't sell, and can't develop newer models fast enough to help save you (witness Siemens, Motorola, Palm, Nokia and RIM).
I just wanted to spread the story, and to ask for comments, have you, respected readers and fellow thought-leaders in mobile consider 'The Cliff theory' and see if they see the pattern too. Are there other handset related brands engulfed in the same pattern? I only looked at the global numbers, are there regional patterns too. And I haven't seen this speed of decline in other industries, can you think of some? Is this phenomenon unique to mobile? And can we perhaps find a way for any company to be saved if it falls off 'The Cliff' - is there perhaps a strategy that worked for some player that saved it.
Please those of my regular readers who have mobile related blogs and publications, feel free to spread this story and give it your spin and opinion. Let me know what you think, and I'll post updates on this and include surveys of other thought-leaders on what they said about The Cliff.
I'd really like to hear if this makes sense, but it may be very valuable for us in the industry to consider now for example with Nokia and RIM so much in trouble, and as we consider the 'invincibility' of an Apple or Samsung for example (or Android). Five years ago, we had the same 'invincibility' around Nokia, Motorola and Blackberry. Do you see 'The Cliff' and do you agree it is an effect that stalks the players in this handset industry only?UPDATE
I have been convinced to refine the name. I think the follow-up article will be called 'Walking Blind by The Cliff' theory which describes even more accurately how brittle any lead in this industry can be. Imagine being blind, and walking on a hill with a deadly cliff. And not being able to detect when stepping into The Cliff. But anyone has stepped into it, the fall is irreversible. I will return with more articles about this, and include thoughts from the discussion thread. Oh, and Bruce Sterling at Wired and its Beyond the Beyond
has covered this story already (thanks Bruce!).ABOUT THE AUTHOR
For those who feel they cannot have enough facts and numbers about the handset industry, I wrote a statistical handbook about the handset industry in 2010. The ebook is called the TomiAhonen Phone Book 2010
and runs 171 pages and has 98 charts and tables including just about anything you could ask for, including sales numbers, installed bases, market shares, features, form factors, etc. The eBook costs only 9.99 Euros so if you need the numbers, that is the place to go. And now a special offer - I will be doing the totally updated edition for release in the summer of 2012. If you buy the 2010 edition between now and when the 2012 edition is released, I will give you both for the price of one. So if you order the TomiAhonen Phone Book 2010 now, you will get the 2010 edition now, and for no extra cost, the 2012 edition this summer when it is released. Is that a good value? To see more, please see TomiAhonen Phone Book 2010
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