OVER THE EDGE OF THE TECHNOLOGY CLIFF

In the latter half of the twentieth century, two of the highest-flying tech firms were Wang Laboratories, manufacturer of word processors, and Research in Motion (RIM), a Canadian company that produced the famed Blackberry, which took the world of cell phones and electronic email by storm. It’s instructive to look at the timeline of these two companies, both in terms of technology and revenues, to see how things can go very badly very quickly for a company operating in a fast-changing environment.

According to columnist Joe Nocera of the New York Times, the growth of Wang Laboratories was so steep that the company’s founder An Wang kept a chart in his office showing when he expected the firm to overtake IBM. Wang thought it would be sometime in the mid-1990s. But he ran afoul of one of the principal rules of corporate survival: don’t ever believe that tomorrow will be just like today—only a little better. In other words, avoid falling into the trap of optimistic trend-following. And when IBM released the first personal computer the handwriting was on the wall for Wang. An Wang simply didn’t take the personal computer seriously. The firm failed to recognize that people wanted more from a computer than for it to be a glorified word processor. And even though the company tried to play catch-up once they caught on to this fact of technological life, the rest of the world was already a million miles down the road and Wang could never catch up. By 1992 Wang Laboratories was bankrupt.

At just about this same time that Wang was sinking into a financial black hole, RIM’s flagship product, the Blackberry, was dominating the cell phone and wireless email market. And as recently as five years ago, the company still had over 20 percent of the smart phone market. Now it’s less than two percent and still falling. What happened? The easy answer is that Apple’s introduction the iPhone in 2007 and similar devices from other competitors like Samsung sounded the death knell for the Blackberry. But the real story is a bit more nuanced than that.

To begin with, the founders of RIM made the same mistake about Apple that An Wang made about IBM: they just didn’t take the iPhone seriously. They thought the touch screen was inferior as an input device than the keyboard on the Blackberry and that long, detailed business memos and emails that were the specialty of the Blackberry crowd could not as easily be created with a touch-screen input. Obviously, they never envisioned ”apps” that would appear to solve all these sorts of problems.

Even worse, the Blackberry management fell in love with their existing customers and did everything possible to protect this base of loyal clients. So when a new competitor like Apple steps forward with a new technology instead of embracing that technology and building it into their own product, the firm stood paralyzed and instead focused all their resources on protecting what they’d already built. As with Wang, Blackberry finally bit the bullet and tried to play catch-up with Apple, Samsung, Sony, and all the other smart phone manufacturers. And again as with Wang, Blackberry could never catch up.

These two stories can be multiplied several-fold, raising the question of whether the collapse of a company dominating an industrial sector is inevitable. Basically, the answer is yes. Occasionally we see a firm like Burberry or General Electric cited as examples of firms that successfully reinvented themselves. But these are the exceptions that prove the rule. Companies like Wang and Blackberry are the rule, not the exception.

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