BlackBerry and Nokia: The perils of a closed strategy

Had Nokia or BlackBerry countered Apple's closed ecosystem with an open strategy, things might have worked out differently

The recent sunsets of both Nokia and BlackBerry came as no surprise to many. While both companies made brave noises, trumpeting new strategies and exciting new products, neither garnered the response their history of enormous success had led them to expect as their right.

Experienced designers dutifully delivered shiny new products demanded by their management. Yet their products -- the Nokia Lumia and the BlackBerry Z10 -- failed to provide the parachute their plummeting reputations demanded. How could such well-funded efforts fail?

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Both companies succeeded by creating a closed ecosystem in the past (despite Nokia's flawed flirtation with open source) and naturally expected the same approach to work again. Both were challenged by the exceptional execution of a competing closed-ecosystem play by Apple. Together, these factors seemed to point to the need for further closed ecosystem strategies to rescue them.

But the world is changing. Closed strategies rely on customers' relative isolation from each other. They appeal to individual needs and desires, and they're sold without reference to any problems associated with them. The disadvantages of lock-in -- including high costs of migrating to other solutions, forced involvement of the vendor in future changes, vendor control of the aftermarket, and more -- become obvious only in the light of experience.

The power of the ecosystem

Closed strategies also rely on accumulating sufficient market power to overcome the objections of those who understand the issues. For example, many developers dislike the arbitrary nature of Apple's App Store, where a decision by an anonymous and unaccountable functionary can wipe a product off the Store.

Yet the opportunity granted by the huge market Apple has accumulated for apps overcomes the fear of the digital sword of Damocles hanging over each head. That accumulated market of third-party products also helps the vendor secure more sales. When it comes to mobile devices, customers buy into the ecosystem as much as they buy a device.

A successful closed strategy depends on isolated customers and accumulated market power. Neither can be taken for granted anymore. With a strong, diverse, and open market for Android apps and a strong, lucrative market for Apple apps, trying to start a new closed market is a tough job. In today's Internet economy, uninformed customers with no existing buy-in to Android or Apple are rare in the developed world.

The last thing you'd want to do would be to opt for a closed platform with few apps -- yet that's exactly what both Nokia and BlackBerry did. It came as no surprise to me that they were having trouble building a market for their rescue strategies. Customers didn't find the lack of apps and the closed platforms appealing. Developers didn't find the lack of customers compelling enough to spin up development in yet another programming environment under yet another set of grasping, restrictive licensing terms. Thus, they did not come.

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