50 million devices sold (as of July 2006)
A part of pop culture around the world
Highly functional electronic gadget
iPod? Nope. Motorola's RAZR. So how can a product that is so wildly successful be threatened so easily? It's not just the iPhone that will be stealing the sexy from Motorola, but new phones from other companies like Nokia and Sony. After a few years, and gaining a huge segment of the market the RAZR is being made almost irrelevent in the modern cell phone marketplace. How could Motorola let that happen?
My answer is that they didn't turn the RAZR into a platform. The iPod is the best example of this. The iPod itself is pretty darn good, but there are very worthy competitors to it, and yet it achieves almost total domination in the portable media player industry. That's because Apple developed an entire ecosystem of products and services that revolve entirely around the iPod that extend, enhance, and fill in its capabilities. There are literally hundreds of accessories that you can buy for your iPod. There's also the whole iTunes service.
Both devices have an active hacking community around them, but this isn't enough. Motorola never really encouraged the development of these enhancing services. There is no Bluetooth headset that works specifically with the RAZR and matches its form factor. There's no RAZR specific software that is easy to use and manage. There's no online address book service that works specifically with the RAZR/Motorola. Obviously a lot of the reason for this is due to the carriers and all kinds of different operating systems, but now Motorola is in a very difficult position.
By not capitalizing on their former success there is absolutely no switching cost involved in choosing another phone. Now Motorola has to continually fight in the ultra-competitive market on exactly the same footing as every other cell phone manufacturer. They got lucky once with the RAZR, but will they be able to strike gold twice when the competition is twice as fierce? It doesn't look likely.
This serves as a lesson to all CE companies. You can't design your product with the goal of it becoming massively successful and gaining an ecosystem, because if it doesn't, the product ends up being way worse. BUT be prepared for massive success! Be prepared to develop your product into a platform that makes the product even better and at the same time builds loyalty for your customers so don't switch.
With 10 days left before the iPhone bomb drops, it might be too late to go after the high end market. But the RAZR is still pretty darn popular as it moves into the cheaper market, so it's not too late to develop the platform. And make the RAZR2 have the same benefits so an original RAZR user has a very clear upgrade path.