“Blackberry’s Era May Be Ending” is the New York Times title on a Reuter’s story about the pioneering leader in smartphones.  That RIM is in trouble is undoubtedly true – so much so it will not likely survive as a stand-alone company, if it survives at all!  The company is in a growth stall, with U.S. market share in the first quarter dropping to 41% from 55% last year.  Selling cheaply priced products outside the U.S. has masked the deep revenue problem developing at RIM – as the company tries to convince investors that it really isn’t falling way behind new competitors. 

It was just April 8 when I published  on this blog “Enterprise Customer Risk” in which I described how Blackberry’s ongoing focus on corporate customers allowed it to fall far behind in the applications development area ( see the 2 critical charts in previous blog showing the application weakness as well as market share problems).  Now Apple has 30 TIMES the number of apps available on the Blackberry.  On January 10 in “Winners and Losers from Shifts” this blog posted a chart showing how Apple hit 1 billion application downloads in its first 14 months of iPhone sales.  Two weeks ago MediaPost.com reported “Android Hits 1 Billion Downloads.”  Android now has about 100,000 apps, while Apple has about 225,000 apps.  RIM doesn’t even have 10,000 apps. 

RIM made a huge mistake.  It focused on its core market of enterprise Blackberry customers.  It tried to Defend its historical market share by focusing on its historical customers – and ignoring the smartphone non-user markets being developed by Apple (and now Google.)  As a result it’s price/earnings multiple has fallen to 10 – amidst clear indications that RIM is unlikely to ever regain much growth as this growth stall continues.

We might like to think this sort of rapid problem creation is limited to technology companies.  Unfortunately, not so.  Crain’s Chicago Business today reports that “Kraft Foods Sees Slowdown in U.S. Cookie and Cracker Sales, Complicating CEO Rosenfeld’s Growth Agenda.”  Kraft has had no measurable organic growth for over a decade, nor successful entries into new markets.  The last year Kraft’s CEO demonstrated no commitment to organic growth by putting all her energy into the acquisition of Cadbury in order to expand Kraft’s “core” market position – dominated by Oreo, Chips Ahoy, Ritz Crackers and Wheat Thins.  But now sales for the last quarter in the historical business are down 3.8%!

Kraft is another example of what happens when a company hits a growth stall.  It may have a few up periods, but overall it is 93% likely to never again consistently grow at a mere 2%!  Defend & Extend management uses obfuscation, like acquisitions, to hide underlying problems in the company’s ability to meet changing market needs.  Resources are poured into price cutting promotions and advertising, looking only at the marginal cost and the initial sales, which props up the over-spending on worn out products in a worn-out Success Formula – and in Kraft’s case even these aren’t able to keep customers buying brands that are over 50 years aged.  Ms. Rosenfeld will try to keep everyone’s attention on the top-line, hoping they forget that “growth” was manufactured by acquisition and that in fact both sales and margins are deteriorating in the “core” brands.

So, are you still trying to find your growth in this “Great Recession” by doing more of what you’ve always done – hoping customers will for some reason flock to your old way of doing business?  That, quite frankly, has almost no hope of working.  Customers are looking for new solutions every day.  If you focus on protecting old markets, maybe by asking old customers what to do, you’ll miss the emergence of new markets where underserved customers are creating all the growth.  If you don’t have plans to expand your business by 20% or more in new markets across the next 2 years you have more chance of burning up your resources than growing – and you might well end up like GM, FAO Schwarz or Sharper Image!