TomTom tries to re-invent the core

TomTom is a fascinating example of a business trying to re-invent its core. TomTom grew rapidly from 2004 onwards following the launch of satnav devices for cars that helped you navigate to your destination. However, many smartphones now have built-in satellite navigation and maps at no extra cost for users. This has led to TomTom's core market is undergoing disruptive change. This week's announcement of a deal to provide mapping software for iPhones  suggests they may yet succeed, unlike Kodak, Blockbuster and Clinton Cards. These companies failed to re-invent their core, and paid the ultimate price by going bust.

Here are some of the key points from the TomTom story, drawing on an interview with TomTom founder and CEO Harold Goddijn in the FT

1. Renovate before you need to

Core renovation means pro-actively upgrading and improving the core when the business is doing well. To borrow a phrase from a French rugby coach, "To stay number one, train like you're number two". However, companies are often too slow to renovate their core. And this can be fatal when there is the threat of disruptive change.

Part of the problem is the storm of change may take a while to show its full force. And for a while the company's sales will tick along nicely. You see this with TomTom. As recently as 2010 revenues were still rising, up 3% versus the year before. But then the storm hit. Smartphone sales exploded, and TomTom's business imploded:

- Revenue down from €1.67 billion in 2008 to €1.27 billion in 2011, a drop of 24%

- Share price down from €60 in October 2007 to €3 now

- Market in latest year down 1/3 in North America (2.1 to 1.4 mill units) and down 20% Europe (2.4 to 2 mill units)

2. Re-define your market

A crucial step in re-inventing the core is to re-define the market, based on consumer benefits not products. In the case of TomTom this means re-defining the market as "personal navigational services" rather than "satnavs". This helps identify threats and opportunities beyond the current products, such as smartphones. This new definition of the core helps inspire and guide re-invention of the core. For TomTom this means repositioning from being seller of satnavs to selling software and services. As CEO Goddijn comments: "It's our ambition to enable customers to use world-class applications. Whether it's on a smartphone, in a dashboard or on a website, that doesn't really matter."

 3. Keep the cannibals in the family

TomTom have realized quicker than you're betting off having the cannibals inside the family. In other words, if the market is moving from satnavs to smartphone software, you may as well get more than your fair share of the new business. And here TomTom is working on several fronts to re-invent the core:

- Smartphone software: the recent announcement of a partnership with Apple for the iPhone drove TomTom's share price up 20% by itself. TomTom has also signed a deal with Research In Motion Ltd. to provide maps and real-time traffic information on its BlackBerry smart phones.

- In-car navigation: providing special software for internet-enabled phones, following the purchase of TeleAtlas in 2008 to get the necessary software, technology and content to connect cars with the Internet

- Insurance companies: providing technology for U.K. insurance broker Motaquote's Fair Pay Insurance product. This bases premiums on driving behavior, rewarding good driving with lower premiums.

4. The need for speed

The challenge with re-inventing the core is to move fast enough. TomTom's founder Harold Goddijn says "Deep at heart we are a software company. That has never changed." He calls satnavs "an expensive packaging for software." However, the transition from selling to satnavs to software is not happening fast enough to protect TomTom's total sales, as the graph below shows. Software sales are going up, but hardware sales are going down even faster.  This problem is recognized by CEO Goddijn, who according to the FT article isn't happy with the speed of progress.

5. Keep it real

I believe one reason for companies like Kodak, Blockbuster and Clinton Cards failing to re-invent their core business is not being close enough to the market and the customer. The risk is to be too inwardly focused, worrying about your own business model and asset base. So, its good to see that Harold Goddijn, on the left, is trying to "keep it real" and have an outward focus, saying in the FT article: "I'm trying to stay in touch as much as I can with the basics. When I'm travelling abroad, I test all my applications for local conditions to see how we have adapted to them". He also likes to work in the TomTom shop near his Amsterdam headquarters.

In conclusion, TomTom shows the need to re-invent your core when the market you operate in is undergoing disruptive change. The challenge is to re-define your core market based on benefits as a star-point for core renovation, and then to execute this at speed, so sales of the new core offering can off-set the decline in the old business model.

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[Meki]

I really like the TomTom, but I srtgnoly recommend buying new the refurbished version has (in my case) 18 month old maps on it and they will not allow you to update them for free will cost me an additional 90.00 Other than that, the computer interface, ability to update non-map information and ease of use is excellent. But the maps were a big disappointment (from Ohio to Myrtle Beach there were several times it thought I was driving through fields because of new road areas).

[Ugur]

that it would take about 10 minutes to get a latcoion/signal when turning it on after travelling great distances and found this to be true. I did find the same problem as other people- some of the newer roads were not on the map. But I still never got lost and that was great. You can save your hotel as a favorite address and never lose your way home. It was also great for finding gas stations, amusement parks, restaurants, etc. My 9 year old son loves to watch it and tell me what streets we have to turn on. I always know where I am, how far I have to go to the next turn, how far I have to go in my trip and what time I am expected to be there. Barring any traffic problems, I have found it to be very accurate. I shopped around at various stores testing out similar Garmin and Magellen models and kept coming back to this one. My husband is a skeptic and does not read directions. I showed him how to use this in 10 minutes. Now he uses it for his own trips (when I am not using it of course.) The portability makes it easy to take from one car to another. I bought a medium sized camera bag to store the unit in. I just detach the entire unit from the windshield and put it in the camera bag (still attached to the windshield mount.) This makes it easy to carry in and out of my house (I was told to avoid extreme temperatures to prevent damage to the LCD screen.) It also gives me the ability to put the bag in my trunk when leaving my car while in the city. I have been using this unit daily since I got it for Christmas (4 months ago). I have found the windshield mount to be quite easy, convenient and stable. On only 2 occassions, the unit could not locate an address, one of which was a 10 year old house, and had to use MapQuest as back up. Overall, I think this unit is great and have recommended it to many people. I can't imagine how I did this job without this unit! This is mandatory equipment for anyone who spends a lot of time on the road.

[Samira]

Wow, where do I start? After waiting 6 mohnts for this product to come out I discovered that our local Best Buy had received 6 units. I scrambled down to snag one thinking that they would all be gone during the 10 minutes it took me to drive there. After purchasing, I took the time to open and inspect the unit before I left the parking lot. Good thing I did because the $800 device was packaged in a brittle egg carton type material that completely disintegrated and the GPS was free to rattle around in the box during shipping. I tried to power up and nothing .dead in the box. I took the unit back in to the store and showed them what happened and they said they would get me another one. Fortunately I asked them to open the box of the new one and to our surprise, the same thing had happened. They opened all 6 boxes and 5 out of 6 devices were damaged to some degree. You would think that they would spend more than 10 cents to package a $800 GPS. Reluctantly I accepted the one unit that did not appear damaged and DID power up. Upon power up the first thing you notice is that the default language is NOT English. You spend the next half hour trying to find the language change screen while blind because it is several layers into the menu and instructions on how to change is not in the manual. I powered up and decided to give it a try and map my way home. One of the features of the 910 that attracted me to it was the text to speech that allows the unit to say street names and not gut turn right , etc. Guess what .not supported in English and feature is grayed out in the menu. The second feature that really attracted me to the TOM TOM GO 910 was Bluetooth and being able to use my Bluetooth phone hands free . Disappointment #2 .Blackberry devices are not supported. Actually there are not that many phones that are supported after looking at the TOM TOM web site. Being that the Blackberry is one of the most popular Bluetooth devices out there, and there are more Blackberries on this planet than any other cell phone, you would think that it would be supported. I just don't get that since I can buy a cheap $30 Bluetooth headset and it connects to ALL Bluetooth devices. My next observation was the strange mounting system for the 910. The only option you have is the windshield mount that comes with the 910. The suction cup mounting is well designed and works great but the other end that mates to the 910 is just insane. It has a weird connector which requires the user to couple the two ends at just the right angle to engage the electrical connector and lock the two ends together. Now disconnecting is a different story. Be prepared to get out a crow bar to separate the two. Ok, I'm exaggerating but not by much. There is a release button on the front of the 910 that you press and is supposed to disengage the 910 from the mount. Not so easy! You must press the button and pull REALLY hard to separate. I mean so hard that you think that it is going to break. This requires you to remove the entire system from your windshield since it would be almost impossible to disengage the 910 from the mount while it's still on your windshield. Want another mounting option other than your windshield? Forget it, it's not an option. Actually, there are no options or accessories currently available for the 910. I'm sure that they will have them eventually on their web site but not yet. Ok back to my first nav trip home. The 910 worked flawlessly and took me right to my front door. When I arrived I went to clear the current route from the 910 and could not figure it out. I spent the next 20 minutes going from menu to menu to find an option to clear the route and NOTHING. Finally I found a option button to add more menu items. I selected that and it added several more layers of menu items. I paged through all the menu items and found on the very last page a button to Clear Route . YOU HAVE TO BE KIDDING ME! I could go on but will leave it here. One last thing .be real careful to check the availability of the Tom Tom Plus features because not all of them are available in the USA either. In summary, I traded a prefectly good Garmin 2620 StreetPilot for the 910 and really regret it. I should have waited for the new Garmins with Bluetooth to come out this fall.

[Reuy]

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Review: In general it works great hoewver major issue is that in many of the illinois communities (unincorporated communities) it is not possible to find the these business and residential locations. Mainly be cause you cannot enter a letter in the house number addresses are 4N312 Illinois Aveor 32W432 dumbdumb st.,So not very useful. so far the Garmins, Magellans and Nuvis all work for these addresses. TOMTOM needs to get on the ball.

[arii]

Review: This product worekd fine for the 11 minutes it worekd. I bought it, used it to get home as a test, and it worekd well. Went to update it, which you must do via your computer at home. ANY INTERRUPTION IN AN UPDATE WILL CORRUPT THE UNITS INTERNAL FILES IRREPERABLY! In my case my anti-virus software happened to download an update. This rendered it into a 100 dollar paperweight. This was confirmed with tech support. Luckily it was returnable, and I bought a Garmin.

[Katie]

Review: Having owned a TomTom One-125 of which I enjoyed using exepct for its lack of text to speech', I ordered the One-S thinking it was essentially the same unit exepct with text to speech' added. WRONG I was !The One-S is actually chunkier and thicker than the 125 and utilizing a larger windshield mount, and is basically only the much older TomTom One 3rd edition with text to speech added. My biggest disapointment with the One-S (at least the one I received) is its poor routing navigation. When programing it to take me from point A to point B (fastest route), instead of taking me on main streets with timed traffic lights, it kept directing me off onto small streets with stop signs' at nearly every block, even though a major street was only 2 blocks away. Navigating me down many blocks of small streets with only stop signs required me to wait a long time (at stop signs) while attempting to cross busy major streets which have the right of way'.Sorry to say, I've subsequently returned the One-S.

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