Too late to openness

I saw an interesting comment Wednesday on BlackBerry’s late conversion to openness. VC Fred Wilson wrote:

So RIM has decided that it is time to make Blackberry Messenger (BBM) cross platform. They announced yesterday that by this summer BBM will be available on iOS and Android.

The time to do this was in 2008/2009 when BBM was huge and everyone was on it. The core users were beginning to leave for iOS and eventually Android and if RIM would have let them take BBM with them, they would now own the biggest cross platform messenger out there. BBM is great and everyone knew how to use it and was comfortable with it.

But RIM execs waited four years to make this move. When BBM hits iOS and Android this summer, they will face dozens of cross platform apps that people use to message each other, one of which is in the USV portfolio. My bet is this won't help RIM or BBM much at this point.

Even when I was consulting to Symbian from 2006 to 2008, people were speculating when BB (then Research in Motion) would license or partner with its email platform. (Its BlackBerry Connect mail client was available for a few Nokia phones during that time). RIMM held strong market share in the US until 2009, when it began its unchecked fall towards zero.

As someone who studies the strategic use of openness, I’ve seen this tendency to put it off openness until too late, across a wide range of companies, product categories and decades. Wilson attributes this to The Innovator’s Dilemma, which I interpret as an unwillingness of firms to cannibalize their own high-margin business with low-margin (or low price) business.

Yes, cannibalization is hard. Yes, Clay Christensen made an important observation why such cannibalization is so hard. But having studied these sort of choices over and over again, I think “Innovator’s Dilemma” is too pat an answer: sometimes it explains why a firm can adapt, but it’s rarely the complete explanation.

It often happens that the managers know exactly what they're doing — increasingly likely after the publication of Christensen’s book.. I’d split this into two subcategories. One is that it’s a rational choice — milking a cash cow to the end and using that cash while it lasts to do something else. (For example, from 1999-2002 I took the rents from my printer driver business and used it to finance a shift to a new career).

The other variant is that the managers get it but the owners do not, a classical principal-agent problem. If I’m getting commission on sales (or stock options on current capital appreciation), why do I care about company performance 2, 3 or 5 years from now? It may be perfectly rational for me as CEO to get while the getting’s good, even if I know it will eventually all come crashing down. (I call this the Ceaușescu theory of management, given the predictably unhappy end to the Romanian ruler’s reign.). As such a CEO, I hope to be lucky enough to be I’m retired to my Maui estate before everything falls apart)

Finally, what I think the most common explanation is Da Nile (that river in Egypt). I’ve worked with, for and competed with a wide range of companies that just can’t recognize — or can’t admit — that the competition is a serious threat. Christensen identified conditions where this happens, but often the explanation is much simpler one: arrogance or hubris. (In marketing, we say “they’ve come to believe their own propaganda.”) Certainly BlackBerry/RIM has had this problem for years.

Intel’s once great founder-CEO (now Stanford business professor) had it right: only the paranoid survive. But having escaped Hungary after Soviet tanks invaded the country to crush a popular uprising, the former András Gróf lacks the complacency common among highly successful US business leaders.