Initially, one of the legendary arguments between Bill Gates and Steve Jobs was whether to license a platform or build a full product. When Apple was failing in the 1990s, the company tried licensing, and Jobs killed the effort after returning to the company, as the companies licensing the software were more successful than Apple was. Then, nearly a decade later when Palm was in trouble, they took the extra step of splitting the company into two parts: hardware and software. The software part eventually failed, and a few years later, HP bought the failing hardware part and killed it.

RIM is currently looking at these options, and given both prior attempts failed while going back to the original argument, Microsoft was successful in suggesting there is a path that these firms could have, but didn’t take. With Microsoft now looking at going into hardware with its own tablets, there is some thought that the licensing model may not be working at all.

Let’s explore this.

Apple’s Licensing Failure

We spent a lot of time looking at this a decade ago, and the cause for the failure was Apple remaining in the hardware market with a premium product that was no longer premium. Let me explain; initially, PCs were very expensive and most individuals couldn’t afford them, so most were bought by or for businesses. In the 90’s, prices dropped like a rock, and while the Apple brand was consistent with a premium product and Apple’s prices trended higher, they tried to price match, and the end result was relatively expensive, attractive, products with low reliability. In other words they were both relatively expensive and unreliable.

The licensees focused on building Windows PC clones that ran Apple software. They priced under Apple and their products, which leveraged the vastly larger Windows eco-system, were more reliable. They weren’t very attractive, but since businesses were still buying most of the machines, user taste didn’t count for much. Thus the Apple Steve Jobs returned to was being killed, because even though the Apple market had a unique Toyota/Lexus component the Lexus part, the part that Apple built – putting it plainly – was crap.

Jobs fixed his product quality, but I doubt he needed to destroy the Toyota part of the market in the process. Still, given he was CEO of the last decade; it is hard to argue that what he did didn’t work.

Palm’s Failure

Palm never segmented their market, but initially when Palm hardware and software split up, hardware remained loyal to software and software got Sony to license. This meant that Sony was taking a section of the market from Palm hardware, and they couldn’t make it up with anyone else. Palm eventually licensed the Microsoft Phone platform, but that effort was too late to be successful.

On the Software side, Sony aggressively brought out new products several times a year, and each product was both unique and dramatically different than the prior offering. So you had Palm Hardware with traditional Palm looking devices and Sony, which had no consistency whatsoever. The market was never given enough time to accept these vastly different designs and Sony eventually pulled the plug killing the effort. After that it was just a matter of time before Palm Software was sold and then shut down. Palm Hardware created the WebOS to rebuild Palm but then bungled badly the Palm Pre and they are history as well.

RIM’s Future

At the core of RIM’s problem is the belief that the platform is obsolete and no longer useful. That is a very different starting point than where either Apple or Palm was. Both firms were slipping but their platforms, at the time they began their efforts, were seen as popular. This is what allowed them to get the licensees in the first place coupled with the idea that there really weren’t any good alternatives.

In market right now, both Google and Microsoft have alternative platforms. Google isn’t managing its OEMs well, and is upset that Google bought Motorola in suggesting they might be willing to look at an alternative. There really is only Nokia on the Microsoft platform, and Nokia currently appears to be failing, suggesting that Microsoft isn’t much of a competitor in this space at the moment. In fact, Microsoft pretty much sunk Nokia with their recent announcement, making existing Windows Phones – including Nokia’s top selling models – prematurely obsolete. This means that firms might be willing to license from RIM, but only if they are convinced that users/buyers would want the result.

This creates a cart and horse problem where licensees may not line up unless the Blackberry platform is attractive to buyers, and this platform may not be attractive to buyers until the right licensee lines up and produces a hot new phone – a problem similar to the one Microsoft is addressing by building their own Surface Tablets.

This suggests, in the end, that if they can’t do it right by themselves, the extra complexity of licensing might only delay the fall of the firm not protect against it.

Wrapping Up

Licensing a platform and eco-system can be done very profitably, as Microsoft has shown, but Microsoft’s model also showcases a weakness against firms like Apple; the inability to craft a compelling solution because the solution is owned, at least partially, by the Licensee. If you are already having a relevance problem, you would need a partner strong enough to change your image, and a partner with that strength likely wouldn’t licensee if you had an image of failure in the first place – unless, of course, you fully funded their effort. Otherwise, licensing may both slow and assure the eventual failure of the firm.

What RIM is proposing can be done; there may even be people who would help them do it, but the result will still require users to get excited about it. In the end, it is that unmet need for excitement and demand that is driving RIM users to competing brands. If they can’t fix this they are gone, regardless of whether they license or not. That should remain their highest priority.