TomTom: naVigating tHrougH uncHarted WaterS

A select few companies in the world can rightfully claim to have navigated clients to their desired
location with pinpoint precision. TomTom can. Ever since its inception in 1991, the Dutch company
has sold millions of navigation devices, which it still does to this day.

When Harold Goddijn founded TomTom, the road ahead was hardly evident. TomTom started out as
a small software firm, developing mobile applications for personal digital assistants (PDAs). As more
accurate GPS satellite readings became available, a new navigation product for the PDA was
developed and released as the TomTom Navigator. Although innovative, the real breakthrough came
when the software was released in its own box. This all-in-one Portable Navigation Device (PND), the
TomTom GO, was solely responsible for the company’s massive sudden growth, making the
company’s revenues soar from €39 million in 2003 to €720 million in 2005. Goddijn proved to have a
solid sense of direction.

Being well aware that neither products nor

software last forever, he decided to invest in areas that would broaden the company’s revenue base.
He knew a mobile platform for navigation products by itself cannot be the foundation of a
sustainable business model. Various platforms, multiple hardware suppliers, and the threat of piracy
remained ever-present. Sensing these potential dangers to TomTom’s core business, Goddijn
realized he had to map out TomTom’s

strategic directions, as he searched for new avenues to broaden the firm’s base. Goddijn set out on a
journey of strategic acquisitions and partnerships. In 2005 the German telematics company
Datafactory AG was acquired, laying the foundation for the ‘Telematics’ business unit, an arm of
TomTom which provides fleet management systems. The next year TomTom took over Applied
Generics and their specialization at using data from mobile networks for advanced routing of
vehicles formed the basis of TomTom’s traffic services. Later, in 2007, an automotive engineering
team from the Siemens research and development division was attracted, as it was expected that
within a few years each car would have built-in navigation by default. In order to reinforce these
acquisitions, a digital mapping company called Tele Atlas was purchased. The acquisition of this
company was paramount, as its core business operations were parallel to TomTom’s own map
creating processes.

Things did not run as planned. The process

would cost TomTom more than it had bargained for, as an all-out bidding war broke out with
Garmin, its biggest competitor. Although TomTom initially offered €2.0 billion for Tele Atlas, it
eventually ended up paying the exorbitant sum of €2.9 billion in 2008. Meanwhile, the global
financial crisis ravaged the economy, and Google, TomTom’s largest licensing client, announced it
would offer Google Maps for free, based on its own content. The scarcity value of digital maps
deteriorated. As a result of these three events, TomTom’s stock value plunged, declining by 95 per
cent between November 2007 and February 2009.