Case Study - The Demise of Blackberry
Introduction
Blackberry was once synonymous with the idea of a smartphone. As a device evolving from a humble pager, Blackberry was able to dominate the market by offering email and web browsing on mobile devices for the masses. As a result, RIM/Blackberry at its peak controlled over 50% of the US smartphone market share (Money.cnn.com, 2009). As one of Canada’s crowning achievement in the technology sector, RIM/Blackberry employed upwards of 20,000 employees and once was the most valuable company in Canada. Its signature QWERTY keyboard was everywhere. Despite of its success, today Blackberry has less than 1% marketshare, and has ceased making their own devices. Owing to this downfall was the appearance of Apple’s iPhone and Google’s Android devices. Its demise however wasn’t only due to the newcomers to the marketplace. Instead, we can break down Blackberry’s demies into several factors. One was complacency and slow market reaction. Blackberry did not recognize the change in the market and was reluctant to change due to its own success. Two was their focus on the wrong part of the market, ignoring some of the principles of capitalism. Finally, was their mismanagement of the ecosystem, in part owing to their vertical integration and ignoring the post-Fordist theory of flexible specialization.
History of Blackberry
Blackberry was founded as Research in Motion in 1984 by engineering students; Mike Lazaridis and Douglas Fregin. RIM originally began as a software and computer science consulting company, with Jim Balsillie investing in the company and becoming its co-CEO in 1992 (Leung, 2012).
Blackberry first began working on a wireless data transmission system in 1988 which would lead to its pager system and their Blackberry email service (Leung, 2012). It was upon their email service that Blackberry started to build their company upon; Lazaridis spoke of how they saw the opportunity “Watching Waterloo students eagerly embrace e-mail, they realized it would be the communication medium of the future and would eventually move to devices much like phones. A company that could provide those products would have an enormous opportunity. "We knew e-mail was going to be the foundation of business, that it'd replace fax," (Hempel, 2009).
This approach to promoting email services was something co-CEO Jim Balsillie also capitalized on in pitching the Blackberry to early adaptors; Targeting investors, he went across the United States meeting with analysts and bankers. "Every time I'd go up there and present, I'd sit there and ask, 'Who here uses Microsoft Exchange?'" he remembers. "And two-thirds would raise their hands. Then I'd say, 'Who here would like to get e-mail on their belt for free?'" He collected business cards and sent "e-mail evangelists"-kids just out of college-back to get the bankers up and running. Within a year the BlackBerry had become a staple on Wall Street. "It was a puppy dog sale," he says. "'Take a puppy dog home, and if you don't like it, bring it back.' They never come back."” (Hempel, 2009). Blackberry in this sense revolutionized communication in the workplace. It expanded quickly, striking partnerships with Dell, Nortel, AOL and IBM. These partnerships allowed them to sell to large corporate clients as well as expanding globally. Suddenly, “Email was no longer something you did at a desk. And being away from the office no longer meant being out of touch.” (Levy, 2015)
Blackberry’s initial focus upon emails with its design served them well as smartphones became ubiquitous. By the time other smart devices started appearing, Blackberry already had a tried and true formula with their own iconic QWERTY layout keyboards, and even in the case of their smaller bar-styled phone innovated with their “SureType” keyboard layout/algorithm which combined the traditional cellphone keypad with QWERTY style keyboard with predictive algorithms that far surpassed the normal T9 style of typing (Blackberry, 2004). All of this led to the development of the Blackberry messenger system (BBM). A precursor to many of the other instant messaging systems like Facebook Messenger and WeChat (Alexander, 2019). This design served it well with the onset of the overall popularity of instant messaging and social media.
This combination of Blackberry’s design with its productive keyboard, BBM and not to mention security was a winning formula for Blackberry. Something former CEO Thorsten Heins spoke about; We had a very, very successful recipe of what BlackBerry was all about. There were four main pillars: battery life; typing; security; and compression.” (CIO.com, 2012) and a result, RIM/Blackberry at its peak owned over 50% of the US and 20% of the global smartphone market.
As fast as the company rose to the top, Blackberry’s fall from grace was swift and quick. To illustrate this, we can look at their market share from 2010-2013. In 2010 even with the introduction of Apple’s iPhone devices in 2007 and then Google’s Android devices in 2008, BlackBerry continued to dominate the smartphone market controlling over 40% of US markets and nearly 20% of global market share in 2010 (digital.hbs.edu, 2018). It’s releases of it’s new OS; Blackberry 10 as well as flagship devices in the Z10 and Q10 could not stop its fall. As in two short years Blackberry’s market share would drop to 3.8% in the US and approximately the same globally. Subsequent attempts to release new devices and remain relevant failed, with Blackberry’s market share today being 0%, both in the US and globally. (digital.hbs.edu, 2018).
Smartphone Design
To understand why Blackberry failed we first must examine what consumers wanted in a smartphone in the first place. In Chang’s paper “Smartphone for mobile commerce” he outlines some of the drivers of what makes a good smartphone. While a little dated considering the paper was written in 2009, it provides good representation at the time when Blackberry was prevalent.
In Chang’s explanation, the smart phone is the combination of the mobile phone and PDA. While at its basis all mobile phone’s main function/feature is to make voice calls a smartphone must also be able to access the internet and emails. As well of this is the capability to receive and send texts (both SMS and MMS) and instant messaging. This is all on top of the user interface, form factor and weight (Chang, 2009).
Chang lists 19 recommended features for an idea smartphone; the first eleven being necessities while the last eight are simply desirable (Chang, 2009).
1. Multi-tasking operating system
2. Powerful SOC application processor and DSP communication processor
3. Real QWERTY keyboard
4. QVGA or larger display with high screen resolution
5. Internet access at 2.5G or 3G speed
6. Business productivity tool
7. E-mail, SMS, MMS, IM services
8. Personal Information Management (PIM)
9. Host synchronization
10. Voice communication and voice-mail
11. WiFi for VoIP and Bluetooth for cable replacement
12. Gaming
13. Camera
14. File management and manipulation
15. Video/audio streaming
16. Music player and mobile TV
17. GPS and navigation
18. Open standard IO communication and storage expansion
19. RFID and biometric features like fingerprint
The Demise of Blackberry: Slow Market response
According to Chang’s paper then Blackberry meets the requisite requirement of a good smartphone in 2009. Being excellent at first eleven of the points. However, if you explore the other last eight, we can see that many of this feature while considered niceties in 2009 are all features that have become ubiquitous features of smartphones or important selling points. This is exemplified by iPhone, Google and Samsung all battling each other for the title of best smartphone camera.
This leads us the first factor in Blackberry’s demise; it’s slow market response. The first strike against it came in 2007 with the introduction of the iPhone by Apple. Essentially combing a mobile phone and a big screened iPod with touch controls. The iPhone went beyond the 11 essential smartphone features as outlined by Chang. Steve Jobs, Apple’s CEO at the time called his company’s phone as “a revolutionary and magical product that is literally five years ahead of any other mobile phone.” (Muthukumar, 2017) The iPhone went on to quickly generate media attention, with some dubbing the iPhone as a “BlackBerry” killer. Blackberry however, saw no need to be concerned with co-CEO Jim Baisille going on to say, “The recent launch of Apple’s iPhone does not pose a threat to Research In Motion Ltd.’s consumer-geared BlackBerry Pearl and simply marks the entry of yet another competitor into the Smartphone market.” (Muthukumar, 2017).
On the surface, Blackberry had little to be concerned about as even with another newcomer in 2008 with the introduction of the Android mobile operating system, in 2009 Blackberry still controlled 55.3% of the market share in the United States. But the underlying numbers told a different story. Despite the head start Blackberry had with carrier and enterprise support Apple continued to gain ground. In October 2008, Apple briefly surpassed RIM in quarterly sales, but this was temporary, as Blackberry went back to sell more phones the next quarter. The real warning came with the launch of Apple iPhone 4. The iPhone 4 enabled Apple to sell more phones quarterly than the BlackBerry did in the entire 2010.
This is not to say that Blackberry did not see the trend brought on by Apple and later Google with touch screen phones and greater media capability. As a response in 2008, they released the Blackberry Storm; Blackberry’s first touchscreen device and it’s first without its iconic keyboard. The result of this was critical failure. It featured a touchscreen built to have capacitive feedback to feel like a keypad. The clickable touchscreen was a chore to use and in addition to this the Storm being a consumer-focused device shipped without any Wi-Fi capabilities, limiting its usage for the average consumer looking to connect at home or in a coffee shop for example (Wired.com, 2013
The Demise of Blackberry: The Wrong Market
As previously stated by 2013, Blackberry had completely been dethroned in terms of its market share and was starting to quickly fall behind both Apple and Google in terms of their devices and software. Also, by this time both Jim Balsillie and Mike Lazaridis had both stepped away from the company with Thorsten Heins taking over as CEO, and then with John Chen taking over in 2013. Upon becoming CEO Chen went on to say in a commentary with CNBC about the strategy for Blackberry going forward. In that commentary he highlighted what he believed were Blackberry strong points were (R. Muthukumar,2017):
• With a global enterprise customer base exceeding 80,000, the company has three times the number of customers compared to Good, AirWatch and MobileIron combined. This makes BlackBerry the leader in mobile-device management.
• Blackberry lovers point out that the red indicator light, the physical keyboard and BlackBerry Messenger (BBM) are major attractions. Messaging service, BBM, is also renowned in regulated industries for being the most secure mobile messaging service, and consumers love it, too.
• In a sea of identikit Androids, iPhones and Windows Phones, BlackBerry continues to stand out. They are built principally for communication. For emails, SMS, IM and making phone calls, a BlackBerry is still a good choice. The hardware QWERTY keyboard, allows lengthy hammering by even the least dexterous fingers. The square displays are perfect for reading and viewing email, documents and even spreadsheets. BlackBerry's server-side email software is secure, and remains in the control of the system administrator back in the office.
In 2013, Blackberry released their newest operating system; Blackberry 10 alongside the all touchscreen Z30 and more traditional Q5 with physical keyboard. It was little to late however. The Q5 was the better received of the two devices, in some ways affirming the business/enterprise approach that had worked for Blackberry. Both devices were criticized by CNET for lacking a big enough selection for apps and services. In 2015 for exapample, Android’s Google Play Store had 1.6 million applications while Blackberry at the same time had 130,000 (R. Muthukumar,2017). Brian Bennet aptly summarized the Q10 like this: “How compelling the BlackBerry Q10 is really hinges on whether you believe that the ideal mobile device needs to be an efficient messaging machine first and a gadget for running apps second. If so, and I admit you're in the minority, then the Q10's superb keyboard and message-handling capabilities make it a perfect match. Its long battery life and comfortable keyboard may be what you've been holding out for, and the inclusion of BlackBerry 10.1 is extra icing on the cake. Those who want a phone tied to a bigger ecosystem and one that offers a wider selection of apps and services, however, should look elsewhere.” (CNET.com, 2013)
Blackberry was still relying on the core values and not expanding on the new emerging needs of the wider consumer market. No longer did people wanted a phone just for work it had to do both.
Mismanagement of the Ecosystem:
BlackBerry’s story underlined that within a competitive capitalist landscape: success or failure isn’t merely the result of a good product or service, or a well-run, cost-effective company. It also requires an effective strategy to manage your ecosystem. Jacobides wrote in the London Business School Journal that the goal “is not to be vertically integrated but, rather, to control by managing differentiability, i.e. being the actor along the value chain who guarantees the product quality and shapes the experience – as well as managing the replaceability of other actors along the value chain.” (Jacobides, 2013).
In the case of Blackberry being a very vertically integrated company in the sense that they produced both the software as well as the hardware for the devices they sold. It made it difficult for the to pivot their direction when the marketplace began to change. This in a sense is outlined with Blackberry’s app store. As reported by CNN money, many of the most popular apps found on the iPhone and Android are not available. Trending and staple apps such as Instagram, Candy Crush and Google maps were not on the app store, and the big apps that were available like Twitter and Facebook are not made with frequent updates. Leading to bad reviews from the user base. Also reported was from the Blackberry news site BerryReview revealed last month that a single developer is responsible for 48,000, or 40%, of BlackBerry's apps (CNN.money.com, 2013). With not enough outside developer support and being tied up in designing their own operating system and devices, Blackberry ignored a fundamental part of the post Fordist system; flexible specialization. Flexible specialization is notable for the idea of producing diverse products different groups of consumers. Appealing beyond the use value of a product but to their sense of taste and fashion. Blackberry instead continued to dump money and resources into the enterprise/business market ignoring the needs of the general consumer as well as other groups.
Conclusion
Blackberry served as one of the pioneering companies in the smartphone industry. Once one of the largest tech manufacturers in the world; RIM/Blackberry, getting there with their innovation. It’s fall from grace came courtesy of it’s success in a way. Reluctant to change its previous winning formula, it fell prey to its own complacency and slow reaction to their market, focusing on the wrong part of the market and finally mismanaging their ecosystem and flexible accumulation. While Blackberry arguably have survived by learning this lesson, reinventing itself as a software and services business, with success of its QNX software now being used in 120 million cars (Financial Post, 2018). It’s days of selling smartphones are over.
References
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What killed BlackBerry: Terrible apps. (n.d.). Retrieved from https://money.cnn.com/2013/09/25/technology/mobile/blackberry-apps/index.html.