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Cisco, RIM and the Lure of the Consumer Market

The luster and excitement of the consumer market is set to claim another victim.
by Lance Ulanoff, published on July 20, 2011

What is it about the mass-market consumer space that attracts so many business-savvy companies and ultimately hobbles or even dooms them? There are companies, like Apple, that obviously understand consumers and consumer marketing strategy and then there are companies like Cisco and Research in Motion (RIM), which clearly do not.

News that Cisco is laying off almost 9% of its workforce is black mark for CEO John Chambers, a man whom leaders at smaller companies have all but worshipped. I don't know for certain that the cuts will come primarily in Cisco's consumer business, but the missteps that have led up to this news have been in the consumer space.

Cisco and RIM's travails are most interesting when viewed together, because I believe they have the same problem. Both desperately want to be a part of the consumer market. They don't necessarily want to be viewed as consumer companies, but they have a strong desire to have consumers recognize them for significant consumer products and services.

Both companies have spent recent years (if not longer) entering unchartered territory. In fact, Cisco began its consumer journey well before RIM, when it bought Linksys in 2003. This, though, was a good move and a very good fit for a company with strong networking and infrastructure chops. Consumers knew the Linksys brand for routers, but it was no great leap to imagine buying home routers from Cisco. Broadband saturation was picking up at this time, so this was a particularly good move. Cisco, however, took a cautious approach here and didn't introduce the Cisco name into the home router space until 2010. That router, but the way, was a real triumph. It looked like a gorgeous consumer product and worked better than any router I had ever used.

But this was not a true consumer product triumph. Consumers don't think of routers as consumer gadgets. Instead, they're necessities of the Internet lifestyle. The Valet's design and packaging were, though, heavily influenced by Cisco's purest consumer play: the acquisition of the Flip camcorder business. I have to say, I appreciated the way Cisco used the Flip team to drive the design and delivery of a product that would fit well with its core market segment.

Sadly, Cisco never understood that it bought Flip at precisely the wrong moment. The emergence of smartphones doomed the product line and Cisco unceremoniously shuttered it. The act of buying Flip and the way Cisco killed the business are perfect of examples of how Cisco does not understand the consumer market.

However, before Cisco dumped Flip, it introduced the UMI home video conferencing system. Here was a product no consumer wanted or understood. It looked and functioned much like a traditional business video conferencing system, but you knew it was for consumers because Cisco hired actress Ellen Page to hawk it on television.

I see interesting parallels in Cisco's dilemma and RIM, another company that desperately wants to be a part of the consumer space, but is incapable of truly understanding it.

Released before the turn of the century, BlackBerries soon became the must-have product among Wall Street types and businesses that prized constant access to employees via email. Cost kept the product from bleeding out into the consumer space—since it was the businesses that paid for the BlackBerry server back-ends. RIM then introduced the consumer-friendly Curve line, including the best-selling 8520. The design and interface attracted consumers at a time when there was little else like it (especially anything that could handle e-mail and texting as well). There were great deals from virtually all carriers on these phones and consumers snatched them up. For a time, it looked as if RIM, the enterprise mobile email-delivery darling had successfully transitioned into the consumer space.

RIM's best product, the BlackBerry Bold, continued the tradition and was, to my mind, the perfect cross-over product; a QWERTY-sporting phone that packed enough media pizzazz and screen resolution to satisfy consumers and businesses alike. Unfortunately, RIM's next move, what I would consider a pure-consumer play, was a disaster and points to how companies like RIM can sometimes misread the market.

RIM's BlackBerry Storm arrived in 2008, more than a year after Apple's game-changing iPhone. The Storm looked pretty good. It had a touch screen and sported an interface that was part BlackBerry Bold and part iPhone iconography. Too bad the device felt and worked as if the engineers at RIM had never held or used an iPhone. The device was not particularly responsive, lacked apps and, worst of all, had a terrible touch-then-press screen (the whole screen was a giant button). The phone was a flop and even though the Torch was the touch-screen phone the Storm should have been, it was too late for RIM.

RIM has a lot of phones coming out this fall and they could change the company's fortunes, but in the meantime, RIM has another problem on its hands: the PlayBook. Here is a product that should have been a winner all the way. RIM still has a built-in business audience and the PlayBook offers the bridge feature to marry business BlackBerries to the tablet. Smart. Except for the fact that the device arrived without that particular capability.

That's fine, companies make mistakes, their products have bugs and they resolve them. The PlayBook's inadequacies on launch are not RIM's biggest problem, though. It's RIM's insistence on marketing the device to consumers and as a consumer device.

RIM's advertisements are glossy, run in prime time, and show customers having fun—playing games and watching Jennifer Lopez videos—with the PlayBook. There's no sign of anyone getting anything useful done. Other companies signal their interest in the consumer market by hiring celeb endorsers, Cisco had the aforementioned Ellen Page and HP is using people like Russell Brand and Miranda Cosgrove to hawk the WebOS-based PlayBook and Veer, respectively.

It's true, consumers respond to celebrities, but would they trust one of them to recommend a tablet, phone and video conferencing system?

Apple, the tech company that bests understand consumers (sorry, Microsoft), rarely uses celebrities (except at product unveilings). They certainly have consumer-friendly advertising, but it's always focused on how to make these admittedly highly technical gadgets completely accessible to the average person. Unlike RIM, HP, and Cisco, Apple is not late to the consumer party. It's been speaking to consumers since the late '70s and targeted them in 1984 for the first Macintosh. For as much as the company professes an interest in the business market, I believe its heart will always be with consumers. Apple knows the market and how to deliver the products consumers clearly want.

As for Cisco and RIM: Cisco will survive this, but I bet it continues a hasty retreat form the consumer space. It will still sell routers under the Linksys name, but that'll be it. Even its new tablet, the Cius, is marketed as an Enterprise device. I applaud Cisco for this restraint.

RIM, on the other hand, still believes it can win the consumer space, but it could change its tune before the end of the year. The PlayBook can be a success, if RIM turns all its energies to marketing it for business.

Cisco and RIM's travails should be a lesson to all tech companies. I'm not advocating that all of them steer clear of the consumer space, but before any of them go into it or invest to heavily, they should know their own strengths and weaknesses and if they have the will to survive consumer's capricious desires.

Source: www.pcmag.com