Updating My Smartphone Market Analysis: The Market Is At A Strategic Inflection Point

NOTE: My original post, originally published in January 2013, continues to be one of the most viewed on the site.  Android and Apple have enjoyed an estimated 98% market share between the two, and many of my earlier projections regarding this market appear to have been borne out. However, the smartphone market has now matured to the point that it is at a strategic inflection point which has major implications for the future of this market and the major competitors. 

The Rapid Maturation of the Smartphone Market Should Have Been Foreseen

The signs of a dangerous strategic inflection point in the global smartphone market have been evident for some time: the rapid rise of domestic Chinese competition combined with the predictable end of the Western consumer fascination with “the next smartphone.” Five years ago, Samsung Electronics, the South Korean technology giant sat atop the Chinese market, selling nearly one of every five devices there. Today, Samsung is an also-ran, controlling less than 1% of the world’s largest smartphone market. Samsung has trimmed local staff and last month closed one of its two Chinese smartphone factories.  Surely, Apple must have been aware of this and the growing number of much lower cost domestic Chinese competitors that were already hammering Samsung.  Apple’s release of a lower cost iPhone, the XR, in Asia in October 2018 appears to have been a case of too little too late. Sales of the device have been disappointing in both Japan and China, and Apple has been relegated to offering “trade-ins” to camouflage slashing the price of the XR.  Apple had ample warning over at least a five year period.

Meanwhile, I sensed a very different kind of maturation of the smartphone market in North America and Europe. In what I like to call the smartphone market “Star Wars” phenomenon, each new generation of smartphones was greeted with a hysteria that was only paralleled by the Star Wars craze. This simply could not continue indefinitely.  Beginning in 2017 it was apparent the smartphone market as a whole was already shrinking, and there was significant anecdotal information in the media that smartphone hysteria was waning, if not publicly available hard data. I began having discussions about this with Tim Bajarin, one of the top Apple analysts.  As Apple moved to launch the iPhone X and broke the $1000 price point barrier it encountered clear if perhaps not overwhelming evidence that the smartphone market was softening: more people chose not to upgrade their phones. I like to say that the last major feature consumers seemed to want/need was water resistance, as so many had already experienced the disastrous “toilet drop.”  I view the Bluetooth earbud phenomenon as a distraction and perhaps a hint of the coming change. Samsung flirted with water resistance as early as the Samsung Galaxy S5, perhaps because water resistance had become a standard feature in the Japanese market. By 2018, water resistance was standardized, and the market began experimenting with “the next big thing” for phones, folding screens. WTF? It was clear to me that the smartphone market had run out of gas, and was undergoing rapid maturation, as phones were no longer fascinating and novel, but just simply commodity devices.

To my mind, and IMHO, this has been a case study in a classic “strategic inflection point” that was missed by both Samsung and Apple. Samsung might be forgiven for being the first to cross into the inflection point, while the media was still promoting “the next smartphone” hysteria, and not yet recognizing the sense of the market. Apple has no such excuse. The rapid maturation of the smartphone market should have been foreseen by Apple. Apple’s most disturbing move was the decision to increase pricing rather than delivering greater value, at exactly the wrong time. The crucial rhetorical question is what are the larger implications for Apple’s future business?

READ MORE:  Apple Beware: Samsung’s Fall in China Was Swift 

READ MORE: Samsung Profit Outlook Surprisingly Weak

 

Vendor Data Overview

Smartphone vendors shipped a total of 355.6 million units worldwide during the third quarter of 2018 (Q3 2018), resulting in a 5.9% decline when compared to the 377.8 million units shipped in the third quarter of 2017. The drop marks the fourth consecutive quarter of year-over-year declines for the global smartphone market. 

Quarter	2017Q1	2017Q2	2017Q3	2017Q4	2018Q1	2018Q2	2018Q3
Samsung	23,2%	22,9%	22,1%	18,9%	23,5%	21,0%	20,3%
Huawei	10,0%	11,0%	10,4%	10,7%	11,8%	15,9%	14,6%
Apple	14,7%	11,8%	12,4%	19,6%	15,7%	12,1%	13,2%
Xiaomi	4,3%	6,2%	7,5%	7,1%	8,4%	9,5%	9,5%
OPPO	7,5%	8,0%	8,1%	6,9%	7,4%	8,6%	8,4%
Others	40,2%	40,1%	39,6%	36,8%	33,2%	32,9%	33,9%
TOTAL	100,0%	100,0%	100,0%	100,0%	100,0%	100,0%	100,0%

 

 

 

2009 to 2012

In one of the most interesting high tech scenarios in years, the “smart mobile” OS (operating system) market is shaping up to be a classic Battle of the Titans. Key strategic issues, theories, speculation, and money, lots of it, are making this a great real-time strategy and marketing case study for management students of all ages (smile).  So as Dell prepares to fade into the sunset, get yourself a drink of your choice, and some popcorn, sit back and watch it all unfold.

The best metaphor I can apply to this might be a “destruction derby” featuring at least two players,  or perhaps a bizarre multidimensional Super Bowl or Rugby World Cup match, with four teams on one playing field with four goal posts at each cardinal point of the compass..  At the moment all four teams are tackling, passing, and running at each other in a confused pile. There are scrums, rucks and mauls in multiple locations. Two competitors, Google and Apple appear to be winning. The other two, Microsoft and Research in Motion, are pretty banged up, but still playing.

The two currently dominant competitors, Google Android with its acquisition of Motorola Mobility, and Apple IOS are rapidly consolidating and expanding their global market positions, via partnerships, vertical integration, and application development ecosystems. Microsoft has publicly committed to spending massively to make Windows 8 the third OS option, but a recent IDC mobile OS market forecast projects Microsoft with only a miniscule share in 2015.  Something tells me that Steve Ballmer will go on a rampage if that happens, rather like the video of him screaming and dancing on stage in my post “Extrovert or Introvert, Authentic Presentations Take Practice,” November 30th. http://mayo615.com/2012/11/30/introvert-or-extrovert-authentic-presentations-take-practice/

The key question is whether Microsoft or RIM, will be able to establish a third mobile OS to a survivable market position.  It is not at all clear that either can do so at this point.  The market is also speculating that mobile hardware market leader Samsung, is possibly considering making its own play by creating its own mobile OS ecosystem.  While this may seem far fetched, this kind of vertical integration seems to be making a resurgence as a strategic move, after having been discredited.  Then there is the perennial Nokia, who has seemed to be on death’s door, but may be coming back. As a strategic partner for Microsoft, Nokia’s fate may have a huge bearing on Microsoft’s strategy to reinvent itself as the PC goes into atrial fibrillation. Will Amazon enter the fray with its own smart phone entrant, and if so, with whose OS?  Will Research in Motion and the Blackberry be able to achieve a survivable market share, or is RIM already a walking zombie?

Finally, in a kind of death dance patent dispute reminiscent of the film, Gladiator, Nokia and RIM are now locked in new lawsuits and counter-lawsuits, as if to say, “If neither of us are going to survive, we might as well kill each other for the entertainment value.”

Here’s a more concise overview of the race to be the third mobile platform:

• The argument in favor of a third platform is straightforward and compelling: A new, robust competitor will prevent the dominant platforms from growing complacent or stifling innovation. Apple and Google are pretty happy with the status quo. Consumers are probably not consciously pining for a third mobile platform. Developers would happily get behind a third platform if it widened their revenue streams.
• Microsoft has a head start: It launched Windows Phone in 2010, and tablet-friendly Windows 8 this year. It is experienced in building developer communities. However, Windows Phone has so far only managed a paltry 3 percent platform market share.
• Amazon has the most potential to upend the market: A smartphone would be a natural extension of Amazon’s distribution empire, and its Kindle Fire tablet play. Unfortunately, the most recent E-reader forecasts show them in sharp decline as growth in full-functional tablets squeeze them out.  Amazon has 106 million unique visitors accessing its sites, many of them with credit cards on file. 
• Samsung is a dark horse: Its dependency on Android may become a liability and push the South Korean manufacturer into the platform business. Samsung’s strength is its hardware sales prowess — Samsung shipped over 56 million smartphones in the third quarter of 2012. 

Read more: http://www.businessinsider.com/bii-report-the-race-to-be-the-third-mobile-platform-2013-1#ixzz2IepLaaka

For Management students, this real time case study offers the opportunity to apply and ponder:

1. The time tested 1976 Boston Consulting Group (Bruce Henderson) “rule of three and four.”  In a stable mature market there can be no more than three surviving competitors, the largest of which can have no more than four times the share of the smallest of the three.   Here, the question is whether a third competitor can successfully emerge at all?

2. Barriers to market entry. Former Intel Marketing VP, Bill Davidow‘s book, Marketing High Technology, An Insider’s View, still considered the standard on the topic, suggested his own metric for a barrier to a new market entrant, or even a competitor just struggling to survive the market shakeout. The market entry barrier rule of thumb in dollars is three-quarters the most recent annual revenue of the market leader. In this case, that is a very big B number…  Microsoft has the bucks, but is it just too late?

3. Vertical integration. Rumors of Samsung introducing its own mobile OS seem implausible, but hey Nvidia just announced its own gaming console to compete with Microsoft, Nintendo, and Sony.

4. Resources and capabilities. It is necessary to consider the respective resources and capabilities of each of the many direct players, and those playing in related markets that bear on the mobile OS market.

5. Related markets, new markets, peripherally involved competitors and products which all could play a role in the eventual outcome of this. The integrated Internet HDTV market is only one example. Featuring Apple, Microsoft, Google, and Samsung, and the HDTV manufacturers, it could influence things.  What if Amazon were to vertically integrate and introduce its own smart phone?

This is the hairball of this Century so far.  Are you all still with me, here?

Ballmer Resignation From Microsoft and Missed Strategic Inflection Points

Missed Opportunities

Much has been written this week about the announcement from Steve Ballmer that he will resign from Microsoft within a year.  Microsoft shares bounced upward on the news, giving an indication of investor sentiment, which might have been expected to drive the stock down. Ballmer, a flamboyant extrovert has exasperated many observers, as the exact opposite of Bill Gates. Some bloggers have commented with praise on his 13 years as President of Microsoft.  But no less than Walt Mossberg of the Wall Street Journal, who also writes for All Things D, quietly tweeted an endorsement of the blog post below by Lauren Goode at “All Things D.”  Goode chronicles the major product and strategic events over Ballmer’s helmsmanship of Microsoft. Perhaps the most glaring blunder has to be also the most recent: Windows 8.  Even the most casual observer probably senses that Microsoft lost its way as the PC business began to contract, and failed to make new strategic moves quickly enough.  Was the corporate culture at Microsoft resistant to major structural change?  Was Ballmer himself too much of an old PC guy to get it?  We will begin to learn the facts over the next few months and years, as the story unfolds.

Strategic Inflection Points: When Companies Lose Their Way

Reblogged from All Things D

By Lauren Goode

Better Late Than Never? Ballmer Product Pipeline Shows a Very Mixed Record for Microsoft.

AUGUST 24, 2013 AT 8:13 AM PT

Larger-than-life CEO Steve Ballmer will be remembered for a lot of things during his 13-year tenure at Microsoft, but what about the actual products he oversaw?

Overall, it is a very mixed bag, with Microsoft late on every major game-changer of Ballmer’s time in office, while rivals like Apple and Google surged ahead. That includes in MP3 players, multi-touch smartphones, multi-touch tablets, search, smart assistants and wireless beaming of video.

Better late than never? Not so much.

To get an idea of that, here’s a timeline of notable moments in Microsoft’s product history since 2000 and how they fared:

Windows 2000: Microsoft celebrates its 25th anniversary and releases the Windows 2000 operating system the same year Ballmer is promoted to CEO. Microsoft continues to upgrade and support Windows 2000 until July of 2010, during which time multiple vulnerabilities in the system were exposed.

Pocket PC 2000: Microsoft announced the Pocket PC 2000, the company’s first step in the personal digital assistant market. Two years later, the Pocket PC 2002 is released. Some of these Pocket PCs are sold as “phone editions,” meaning they can make cellular calls. Five years later, Microsoft phases out the Pocket PC and Smartphone brands in favor of the more overarching Windows Mobile brand.

Windows XP: Touted as the “biggest release since Windows 95,” Microsoft releases the Windows XP operating system in October 2001 with variations of the system for both home and business users. “It features login screens for home and corporate systems alike — something many Windows 95/98 users have never seen,” CNET wrote at the time. About 17 million copies were sold in its first two months.

Xbox: Microsoft jumps into the videogame console market with the release of the Xbox in 2001, one of company’s most successful consumer products to date.

SPOT watch: SPOT watches —or “smart personal object technology” — hit the market in 2004, made by Fossil, Suunto and other watchmakers and developed by Microsoft. SPOT watches stick around until 2008, until Microsoft threw in the towel on the niche product.

Zune: Microsoft launches its iPod competitor, the Zune, in 2006. And although Microsoft will go on to release several more models,including the Zune HD, the product line is discontinued in October 2011. Its Zune Marketplace is also being phased out, to be replaced by Xbox Music and Xbox Video.

Windows Vista: The new OS, released in 2007, focuses on security and has a redesigneduser interface. But it isn’t very well-received and eventually earns a spot on TIME’s “10 Biggest Tech Failures of the Last Decade” list. AllThingsD’s Walt Mossberg will later write that Windows 7, launched in 2009, “leaves Vista in the dust.”

Bing: Replacing Live search, Microsoft’s new search engine, Bing, is unveiled atD7 and released in June of 2009. “Search and advertising, we are a small share … It’s all about Google. They have share, we don’t have share,” said Ballmer. It’s still all about Google. According to a recent report by comScore, the Mountain View, Calif.-based search giant grabbed 66.7 percent of the marketshare, while Bing only grabbed 17.9 percent.

Retail stores: Microsoft announces its plans to open up a chain of Microsoft retail stores in 2009. In October of that year, it opens the first one in Scottsdale, Ariz. By 2012, the company has nearly two dozen stores across the U.S. and, in 2013, Microsoft partners with Best Buy to create Windows Stores inside more than 600 Best Buy locations in North America. So far, the Microsoft stores have not caught on as Apple stores have.

Kin: Remember the Kin smartphone in 2010? Yeah, we didn’t think so.

Windows Phone OS: Later that year, in an attempt to catch up with Apple, Google and RIM in the fast-growing smartphone market, Microsoft revamps its aging flagship mobile operating system, Windows Mobile, and replaces it with the new Windows Phone OS.

Kinect: “Project Natal” is finally revealed in 2010: Microsoftannounces the Kinect, its motion-sensor gaming device that is supposed to breathe new life into the aging Xbox. At the D: Dive Into Media conference in February 2013, Microsoft execsreveal that 76 million Xbox consoles and 24 million Kinectshave sold to date. Microsoft consistently beats out the Sony PlayStation and Nintendo Wii as the top-selling console, even as the videogame industry stumbles.

Windows 8: On October 26, 2012, Microsoft launches the Windows 8 operating system and the Microsoft Surface tablet. The response to both is tepid. Hardware makers call out Windows 8 as confusing to consumers. Within months Microsoft has to assure users that it is making fixes to the OS. And, in July 2013, it is revealed that Microsoft has only made $853 million in revenue on Surface tablets between the October 2012 launch and the close of the fiscal year.

Xbox One: Gamers and “regular” consumers eagerly await the launch of the Xbox One, the company’s $499, next-gen gaming console, due out this holiday season, as well as“Project Spark,” a build-your-own-game app for Microsoft platforms. But, even before its debut, there is a load of controversy about a range of issues that tarnish the announcement.

Better Late Than Never? Ballmer Product Pipeline Shows a Very Mixed Record for Microsoft..

The Enemy of My Enemy is My Friend: Should Microsoft buy Blackberry?

Readers of this blog will recall last week’s post on the International Data Corporation‘s (IDC) report on the mobile phone market.  The problems for both Microsoft and Blackberry were exposed again for all to see.   Microsoft’s Windows Phone market share at 3.7%, would have been even smaller without Nokia. Blackberry’s situation was even more dire.  A few months back Microsoft and Blackberry opened another new patent war on each other, as if this would somehow help their situations.

This week Blackberry has announced the inevitable search for a potential buyer to take the company private, as has also happened recently with Dell Computer. The suggestion that Ballmer and Microsoft should consider purchasing Blackberry is actually a potentially very interesting idea.   A broader market consolidation, with much larger implications, may be on the horizon.

The enemy of my enemy is my friend: Should Microsoft buy BlackBerry?

BY NATHANIEL MOTT
REBLOGGED FROM PANDODAILY ON AUGUST 13, 2013

BlackBerry was the undisputed king of thesmartphone market for years. Now, after ceding themajority of its marketshare and valuation to Apple and Samsung, the company hasput itself up for sale. Speculation that it will be acquired by Microsoft, its primary competitor for the bottom of the market, runs rampant, partly because the two companies are said to have considered such an arrangement before.

So hypothetically, if that deal goes through, what would a world in which Microsoft acquires BlackBerry look like? In theory, the two would be able to combine their strengths — those being Microsoft’s growing media empire, and BlackBerry’s experience developing hardware — and finally pose a threat to Apple and Samsung. In practice, such a world is unlikely to exist, largely due to the capricious smartphone market.

Microsoft needs Nokia. The smartphone-maker’s products are said to represent 80 percent of globalWindows Phone handset sales. Nokia warned investors in March that a Microsoft-built phone could threaten its business; it’s unlikely to stand by if Microsoft acquires BlackBerry and puts the company’s decades of experience with hardware to use. (Never mind how delighted consumers and investors might be to see Nokia cut ties with Windows Phone.)

Nokia CEO Stephen Elop is already under pressure from shareholders to “choose another road” lest it find its way to hell — it isn’t hard to imagine that sentiment being expressed louder and louder if Microsoft were to acquire BlackBerry.

The idea that Microsoft and BlackBerry would simply combine their marketshare and begin posing a larger threat to Apple and Samsung is flawed. Microsoft would have to leave BlackBerry alone, allow it to build the same products it’s been building, and perpetuate a business that put the company in a position to be acquired in the first place for that to happen.

Assimilating BlackBerry into Microsoft and using it to create Windows Phone products might alienate users who still appreciate BlackBerry’s phones and operating system. Making Windows Phone resemble BlackBerry’s software might do the same to all the people who like Microsoft’s mobile operating system. A combined company might be able to find a middle ground that leads to future gains, but it’s unlikely that the new marketshare could be found by combining the current numbers.

And then there’s Microsoft’s newfound emphasis on devices and services. Microsoft CEO Steve Ballmer is reorganizing the entire company to make devices like the Xbox and Surface tablets central to its purpose — bringing BlackBerry into the fold might facilitate that process, but it could just as easily cause problems.

Or again, if the two companies are kept separate, why bother purchasing BlackBerry in the first place? (Insert “for the patents, stupid!” comment here.) It’s not like the company developed a tablet that proved to be more popular than Microsoft’s Surface tablets, and people aren’t exactly lining upto purchase its latest smartphones, either. As “a former high-level source intimately involved in Microsoft’s acquisition strategy” tells Fast Company:

What Google did with Motorola is insane. Everyone was like, ‘Oh it’s about the patents.’ It turns out that it wasn’t about the patents — they actually want to get in the business of building devices. That was an expensive way to do it. I think Microsoft thinks that if you want to build your own devices, you hire new designers, get new hardware guys, and do it.

It’s a better path than acquiring a huge company with a completely different business model.

Could Microsoft acquire BlackBerry and turn it into something useful? Probably. BlackBerry’s patents, its enterprise-facing products, and its broad reach could be appealing to any buyer willing to pay the proper price. But such a deal is unlikely to change BlackBerry’s slide to the bottom of the smartphone market — and, since Microsoft has made gains because of that slide, slow Microsoft’s already sluggish ascent.

Latest IDC Mobile Market Report Underscores Importance of Industry Analysis

Android OS Was on Nearly 80% of Devices Shipped in the Second Quarter, IDC Says

Students of Industry Analysis will note the importance of high technology industry analysis firms, like International Data Corporation (IDC), which this week issued its quarterly reports on the state of key technology markets.  The report has today been seized upon, sliced and diced by the Wall Street Journal, and a host of other media sources. The technology blogosphere is alive with comment, PandoDaily, Gigaom, TechCrunch, Gizmodo have all been furiously offering their own spins on the IDC Report.  It is amazing to see so much of the industry talking about nothing else but IDC today.  Similar firms like Forrester, Gartner and others offer similar industry analysis reports, but IDC is the big dog, and the mobile market is their dog food.

But There’s More…..

Some of the best industry trend information is not immediately obvious, buried in the depths of the report….My favorites

1.  Microsoft’s Windows Phone is going nowhere fast at 3.7% market share.  Microsoft shareholders are rumored to be agitating for change, and Steve Ballmer’s head may be on the block.  Without Nokia’s support, Windows Phone would have an even smaller share of the market.  Microsoft’s catastrophic blunder with Windows 8 has only added to their woes.  IDC had previously correctly predicted this in 2012, which shows the reason for the immense interest in the IDC report.

2. Blackberry, despite doing an admirable job of turning things around, is still in freefall. Simply too little too late. This week’s latest resignations of key executives serves to underscore IDC’s analysis

3. The tablet market is a very different market from smart phones. It appears to be driven by the emotional devotion of iPad users, The entire tablet market seems to move on Apple’s  moves, and the lack of any new iPad launches has depressed the entire market,  This could suggest, as Blackberry’s CEO has said, that the tablet is not really a viable market. It may be squeezed between smart phones and the residual laptop market, and eventually disappear.

Read on….

Google Inc.’s Android software continues to steamroll the competition in smartphones, posing bigger problems for companies like Apple Inc., Microsoft and BlackBerry Ltd.

New data Wednesday from research firm IDC found that Apple’s share of the globalmarket slid to 13.2% in the second quarter from 16.6% in the year-earlier period. Handsets running Android, meanwhile, jumped to 79.3% from 69.1%.

The signs are particularly ominous for one-time market leader BlackBerry, despite some high-profile product announcements recently. Devices running its software accounted for just 2.9% of global smartphone shipments in the three months ended in June, compared with 4.9% for the same period in 2012.

Android is given away free to handset makers by Google, whose strategy is to make money on advertising associated with mobile devices. It has long powered smartphones offered by industry giantSamsung Electronics Co.,005930.SE +0.08% but has lately also benefited by Chinese companies such as Lenovo Group Ltd., 0992.HK -0.68%Huawei Technologies Inc. and ZTE Corp. that are grabbing a bigger chunk of the smartphone market.

“You are seeing tremendous growth in the developing world,” said Steve Mollenkopf, president and operating chief of mobile chip giant Qualcomm Inc. QCOM -0.58% Companies selling there are “picking up Android and driving that.”

Market share, of course, isn’t the same thing as making money. Apple earns more profit from its iPhones because it can charge more than rivals can. Its average sales price, excluding any carrier subsidies, was $710 in 2012, compared with an industry average for smartphones that year of $407, IDC estimates.

Smartphone Smackdown

Samsung, which is No. 1 by unit shipments, and No. 2 Apple account for essentially all the industry’s profit, Canaccord Genuity estimates. The firm puts Apple’s second-quarter smartphone operating profit at $5.99 billion, with an operating margin of 33%; it estimates Samsung’s profit at $5.63 billion, or 19%, including both smartphones and other handsets. Many others are losing money in the business, it estimates.

But high prices aren’t helping Apple’s share in some markets, said IDC analyst Ryan Reith, especially in some developing markets where most smartphones get sold for $390 to $450, he said.

Apple, which is expected to announce new products this fall, has also suffered from the lack of new handsets to drive demand now, Mr. Reith said. Apple’s shipments did grow 20% in the second period, IDC said, though lost share because the smartphone market grew more quickly.  An Apple spokesman declined to comment.

BlackBerry, which launched its new operating system in January, was overtaken as the No. 3 supplier of smartphone software in the second quarter by Microsoft Corp., whose share in smartphone software grew to 3.7% from 3.1% last year.

The Canadian company accounted for roughly a fifth of smartphone sales in 2009. But the impact of its new line of phones has been slight so far.

BlackBerry is “in a really tough spot right now,” Mr. Reith said. “They’ve shown their cards and the industry really hasn’t reacted the way they had hoped.”

A BlackBerry spokesman declined to comment.

Read more: following are my previous posts on the evolving Mobile Market Mega War:

Mobile OS Market Share: War of Titans Worth Following

Multidimensional Mobile Market War: Silicon Rust Belt

Mobile World Congress: Mega War Gets Even Weirder

Microsoft’s New End Game Strategy: Pray

Integrated Big Data, Cloud, Smart Mobile: Big Deal or Not?

Mobile Market Share: A Multidimensional War of Titans Worth Following

NOTE: This post, originally published in January 2013, continues to be one of the most viewed on the site.  As Google and Apple now are estimated to enjoy 98% market share between the two, many of my projections regarding this market appear to have been borne out.

In one of the most interesting high tech scenarios in years, the “smart mobile” OS (operating system) market is shaping up to be a classic Battle of the Titans. Key strategic issues, theories, speculation, and money, lots of it, are making this a great real-time strategy and marketing case study for management students of all ages (smile).  So as Dell prepares to fade into the sunset, get yourself a drink of your choice, and some popcorn, sit back and watch it all unfold.

The best metaphor I can apply to this might be a “destruction derby” featuring at least two players,  or perhaps a bizarre multidimensional Super Bowl or Rugby World Cup match, with four teams on one playing field with four goal posts at each cardinal point of the compass..  At the moment all four teams are tackling, passing, and running at each other in a confused pile. There are scrums, rucks and mauls in multiple locations. Two competitors, Google and Apple appear to be winning. The other two, Microsoft and Research in Motion, are pretty banged up, but still playing.

The two currently dominant competitors, Google Android with its acquisition of Motorola Mobility, and Apple IOS are rapidly consolidating and expanding their global market positions, via partnerships, vertical integration, and application development ecosystems. Microsoft has publicly committed to spending massively to make Windows 8 the third OS option, but a recent IDC mobile OS market forecast projects Microsoft with only a miniscule share in 2015.  Something tells me that Steve Ballmer will go on a rampage if that happens, rather like the video of him screaming and dancing on stage in my post “Extrovert or Introvert, Authentic Presentations Take Practice,” November 30th. http://mayo615.com/2012/11/30/introvert-or-extrovert-authentic-presentations-take-practice/

The key question is whether Microsoft or RIM, will be able to establish a third mobile OS to a survivable market position.  It is not at all clear that either can do so at this point.  The market is also speculating that mobile hardware market leader Samsung, is possibly considering making its own play by creating its own mobile OS ecosystem.  While this may seem far fetched, this kind of vertical integration seems to be making a resurgence as a strategic move, after having been discredited.  Then there is the perennial Nokia, who has seemed to be on death’s door, but may be coming back. As a strategic partner for Microsoft, Nokia’s fate may have a huge bearing on Microsoft’s strategy to reinvent itself as the PC goes into atrial fibrillation. Will Amazon enter the fray with its own smart phone entrant, and if so, with whose OS?  Will Research in Motion and the Blackberry be able to achieve a survivable market share, or is RIM already a walking zombie?

Finally, in a kind of death dance patent dispute reminiscent of the film, Gladiator, Nokia and RIM are now locked in new lawsuits and counter-lawsuits, as if to say, “If neither of us are going to survive, we might as well kill each other for the entertainment value.”

Here’s a more concise overview of the race to be the third mobile platform:

• The argument in favor of a third platform is straightforward and compelling: A new, robust competitor will prevent the dominant platforms from growing complacent or stifling innovation. Apple and Google are pretty happy with the status quo. Consumers are probably not consciously pining for a third mobile platform. Developers would happily get behind a third platform if it widened their revenue streams.
• Microsoft has a head start: It launched Windows Phone in 2010, and tablet-friendly Windows 8 this year. It is experienced in building developer communities. However, Windows Phone has so far only managed a paltry 3 percent platform market share.
• Amazon has the most potential to upend the market: A smartphone would be a natural extension of Amazon’s distribution empire, and its Kindle Fire tablet play. Unfortunately, the most recent E-reader forecasts show them in sharp decline as growth in full-functional tablets squeeze them out.  Amazon has 106 million unique visitors accessing its sites, many of them with credit cards on file. 
• Samsung is a dark horse: Its dependency on Android may become a liability and push the South Korean manufacturer into the platform business. Samsung’s strength is its hardware sales prowess — Samsung shipped over 56 million smartphones in the third quarter of 2012. 

Read more: http://www.businessinsider.com/bii-report-the-race-to-be-the-third-mobile-platform-2013-1#ixzz2IepLaaka

For Management students, this real time case study offers the opportunity to apply and ponder:

1. The time tested 1976 Boston Consulting Group (Bruce Henderson) “rule of three and four.”  In a stable mature market there can be no more than three surviving competitors, the largest of which can have no more than four times the share of the smallest of the three.   Here, the question is whether a third competitor can successfully emerge at all?

2. Barriers to market entry. Former Intel Marketing VP, Bill Davidow‘s book, Marketing High Technology, An Insider’s View, still considered the standard on the topic, suggested his own metric for a barrier to a new market entrant, or even a competitor just struggling to survive the market shakeout. The market entry barrier rule of thumb in dollars is three-quarters the most recent annual revenue of the market leader. In this case, that is a very big B number…  Microsoft has the bucks, but is it just too late?

3. Vertical integration. Rumors of Samsung introducing its own mobile OS seem implausible, but hey Nvidia just announced its own gaming console to compete with Microsoft, Nintendo, and Sony.

4. Resources and capabilities. It is necessary to consider the respective resources and capabilities of each of the many direct players, and those playing in related markets that bear on the mobile OS market.

5. Related markets, new markets, peripherally involved competitors and products which all could play a role in the eventual outcome of this. The integrated Internet HDTV market is only one example. Featuring Apple, Microsoft, Google, and Samsung, and the HDTV manufacturers, it could influence things.  What if Amazon were to vertically integrate and introduce its own smart phone?

This is the hairball of this Century so far.  Are you all still with me, here?