Past Failure as a Key to Future Trouble: Google, Best Buy and RIM

Three companies recently announced plans to improve their fortunes. Google (NASDAQ: GOOG) will launch its own tablet PC to challenge the Apple (NASDAQ: AAPL) iPad, the Wall Street Journal reports. Best Buy (NYSE: BBY) will close stores to stanch profit bleeding. Research In Motion (NASDAQ: RIMM) will restructure how it is run and hinted which products it plans to emphasize. Each of these firms have made similar decisions in the past. Each has failed. Market conditions and competition make it highly unlikely that their second efforts have a chance to succeed. The past is, as has often been said, the best predictor of the future.

Google believes, for some reason, that a new tablet PC, which will carry its brand and run its Android OS, will succeed where many other companies have failed. It is not for want of trying that Android has done well on smartphones and not tablets. Android is not nearly as fully featured as the Apple OS. Apple has many more apps for the iPad. And Apple’s multimedia content is unmatched. Google tried to launch a branded smartphone — the Nexus — which was an abysmal failure. The Google brand, so powerful in search, did not translate into hardware success. Google could not offer complete hardware support to customers. Why that would change is a mystery.

Best Buy will close 50 stores and fire 400 workers. That is not much for a company with 180,000 workers. Best Buy’s sales have been stagnant. Most observers believe that this is related to Amazon.com’s (NASDAQ: AMZN) dominance in the sale of consumer electronics. This certainly true. Best Buy has only a modest Internet presence. Also, management has been slow to revamp stores and prune the weakest ones. Brian J. Dunn, Best Buy’s CEO, has been a failure. But the real management problem is with powerful chairman Richard M. Schulze, who has de facto control of the company. He has been unwilling to replace management or change the firm’s direction much. He started the predecessor to Best Buy in 1966. As long as he holds his post, it is unlikely Best Buy will alter its path because Schulze has hung on to an old and troubled business model.

Research In Motion is a greater failure than Best Buy or Google. New CEO Thorsten Heins will be unable to stop the downward spiral in BlackBerry sales. The smartphone business is dominated by Android-based products and those from Apple. Even the BlackBerry’s strongest position — in the business and government markets — has been eroded. Its server technology, so valuable in the past, has been replaced by the desire for businesses to use products with better features. RIM cannot replace its old products fast enough to keep up with the furious pace of Apple and smartphone leaders, which include especially Samsung. The BlackBerry’s market share has been overwhelmed by remarkably powerful competitive forces. RIM probably will be sold for a fraction of what the company was worth just a year ago.

Google, Best Buy and RIM have each announced plans to move forward and reverse past mistakes. Each has fallen so fair behind in the markets it hopes to retake, that their efforts are nearly impossible, no matter what their managements say.

Douglas A. McIntyre