TomTom, Nokia and You

I love my TomTom!  What a change from using maps, or route planning software.  The company that has so successfully exploited the market for us all to have a device in our cars, to help us get from a to b in recent years, has just announced that is cutting 10 per cent of its staff.  Smartphones, with relatively short product life cycles, can offer much the same basic functionality these days for a fraction of the cost.

Like Nokia before it, that evolved from a somewhat diversified forestry company to be the largest manufacturer of mobile phones at one time, TomTom has been faced with thinking carefully about how it should position itself in this changing world and it has now diversified into in-car systems and fleet management traffic solutions.  In 2010 it launched it’s Traffic Manifesto which laid out TomTom’s mission as “to reduce traffic congestion for all”.

What interests me isn’t what they have decided to do as much as the underlying thought process which can help any business whose competitive strength is being eroded.  TomTom started out in 1991 developing software for mobile devices.  By 1998 they were market leaders in PDA software but in 2001 decided that the emergent GPS technology was big enough to focus on, which they have done to great success.  In 2005 they got into telematics to help them develop fleet management systems and then in 2007 they acquired automotive engineering skills to enter the in-dash market.  Most notable perhaps, in 2008, they bought a digital mapping company.

In just over twenty years TomTom have evolved from being a software developer to a navigation-system firm.  They specialised to take advantage of a niche opportunity and are now faced with taking a more generic and diversified market position that they hope will give them another twenty successful years.

Rather than describing themselves as being in the GPS handheld market, they have taken a more generic position of being in the Navigation Business.  Whether it works for them or not only time will tell but it is arguably a more rational decision than BP’s “Beyond Petroleum”.   It is often wise to stand back and think more generically when faced with change which limits your market space.  If the US railroad industry had considered itself to have been in the transportation business, rather than just railroads, when the first aeroplane flew overhead, they may have had a different future too.

If you feel that your market position is under threat, think more generically, it often works.

Mark

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