David Brooks, "The Creative Monopoly": But Have a Look at BlackBerry

Have a look at the graph for shares of Research in Motion, the manufacturer of BlackBerry. In June 2008, the shares touched $144 per share. In February 2011 they were just under $70. Yesterday, they closed just over $13, with market capital hovering at some $6.7 billion. What happened? Answer: Apple's iPhone.

In his New York Times op-ed "The Creative Monopoly" (http://www.nytimes.com/2012/04/24/opinion/brooks-the-creative-monopoly.html?_r=1&partner=rss&emc=rss), David Brooks contends that business success is not necessarily determined by competitive adroitness, but rather the ability to create a novel market, which you can then dominate, i.e. legally monopolize. Brooks writes:

"Sports and war are competitive enterprises. If somebody hits three home runs against you in the top of the inning, your job is to go hit four home runs in the bottom of the inning.

But business, politics, intellectual life and most other realms are not like that. In most realms, if somebody hits three home runs against you in one inning, you have the option of picking up your equipment and inventing a different game. You don’t have to compete; you can invent.

We live in a culture that nurtures competitive skills. And they are necessary: discipline, rigor and reliability. But it’s probably a good idea to try to supplement them with the skills of the creative monopolist: alertness, independence and the ability to reclaim forgotten traditions."

I agree with Brooks in part: I value innovation and the ability to create new products and markets. On the other hand, look what's happening to BlackBerry. Research in Motion's innovation carved out a new market, which it was able to dominate, but only until a more attractive technology arrived on the scene.

Today's competitive landscape is cutthroat: You can create a next generation technology, but you must be alert to how and when it will be superceded, or how long it will take competitors to play catch-up.

Not easy, but in my opinion, also not impossible. Examine the time and effort invested in the underlying technology and also determine from where the competition will inevitably come. Check how long will it take them to catch up, and in the meantime, see if you can maintain the distance between you and your competitors by honing your innovative edge. Can you systematically create new market needs?

The Sony Walkman was replaced by its own Discman, which in turn was rendered obsolete by the iPod, and Sony is struggling (over $36 per share in February 2011, and $16.51 at yesterday's close with market capital now down to some $17 billion), but still seeking to create new markets for its primary product, i.e. ingenuity.

And Apple, which overpowered the BlackBerry with its iPhone, and which sent the Discman to its grave with its iPod? Some $350 per share in February 2011 and over $571 yesterday, with market capital now of approximately $530 billion.

How long can Apple maintain its edge in today's brave new world? Stay tuned and don't flip channels, because it all happens so fast.

[I do not own shares of Research in Motion, Sony or Apple, and this blog entry is not a recommendation to buy or sell these companies' shares.]