November 8, 2017    10 minute read

BlackBerry: When Sweet Success Turns Sour

Ripe No Longer    November 8, 2017    10 minute read

BlackBerry: When Sweet Success Turns Sour

The unveiling of the iPhone in January 2007 was an event that would go down in history. Mike Lazaridis, the founder of BlackBerry, watched the televised report from his treadmill. He could not understand how Steve Jobs had managed to pack so many features into one phone. As soon as he arrived at work the next day, he rushed his co-CEO Jim Balsillie into his office to show how revolutionary this new concept was. Mr Balsillie was not as impressed. While Lazaridis urged his business partner to re-evaluate their future plans, Balsillie responded with the famous last words – “It’s ok – we’ll be fine”. Fast forward 4 years and BlackBerry had gone from a smartphone powerhouse to a company at the precipice of potential extinction.

The Launch of BlackBerry

Blackberry, formerly known as Research in Motion, was founded in 1984 by a group of students in Waterloo, Canada. Their original aim was to provide a wireless data connection service and they quickly obtained a leading position in the market. Their competitive advantage over other engineering firms allowed them to successfully manufacture and sell pagers. Despite the lack of competitors, they continued to innovate on their two-way beepers. The introduction of the Pager 850 was accompanied by a name change, and thus, BlackBerry was born.

Combining wireless push email service with a pager function, it immediately gained attention from the corporate world, causing the demand to increase substantially as a result. In order to retain their status as a market leader and technology pioneer, they released their first Qwerty keyboard BlackBerry smartphone in 2002.

BlackBerry is Ripe

By 2005, BlackBerry had built a solid subscriber base of 4 million users worldwide. It was around this time that BlackBerry Messenger (BBM) was released, a free BB to BB instant messaging app that would go on to become one of RIM’s crown jewels. They managed to monopolise the instant messaging industry with their low data costs and high data security. Naturally, the ability to communicate swiftly and safer than ever before was appealing to corporate workers. The fact that this free service was exclusive only to BlackBerry phones allowed them to attract more customers who may previously have been with other brands. A year after the unveiling of BBM, BlackBerry had amassed over 12 million subscribers and was now worth $67bn.

Blooming Apple

As Apple began to impose themselves as a major competitor in the market, RIM quickly began to struggle. While the iPhone managed to package web browsing, maps, touch controls and breakthrough Internet technology into “one small and lightweight handheld device”, Lazaridis was left scratching his head wondering how something so simple yet so complex was possible. Unlike Google who introduced Android, BlackBerry management lacked the vision to correctly evaluate the threat.

Wasted Opportunities

After being approached by Verizon to develop an “iPhone killer”, RIM executives rushed to create their BlackBerry Storm in what was described as their most complex and ambitious project of all time. However, the hasty release meant that the technology had major flaws and the single processor led to a slow, laggy experience – characteristics that summed up the way BlackBerry appeared to be heading.

Another nail in the coffin for RIM was Google’s Play Store and Apple’s App Store in 2008. These facilities allowed third-party apps to be developed freely and distributed on these phones, something that BlackBerry was renowned for inhibiting. As a result, their feeble attempt at creating their inadequate App World was futile. Considering BlackBerry had almost a decade head start in third-party software, this was another embarrassment to add to their growing catalogue of errors.

Poor Timing

Apple continued to revolutionise the industry, this time with the unveiling of the iPad in 2010. However, Lazaridis knew that he could not make the same mistake again and decided to enter the tablet market. Unfortunately, the expensive device was flawed and had a weak battery life, ironic considering the fact that battery life was the one thing they used to slander Apple.

From 2007 onwards, the company tended to lag one or more stages behind its competitors in the domain of pioneering innovation technologies. An unusual lack of cooperation between CEO’s Balsillie and Lazaridis meant that management stayed too focused on protecting its legacy and underestimated the influence of consumer trends its rivals introduced.

The Changing Customer

Although Blackberry had built their reputation on being the ultimate handheld device for corporate workers and businessmen, their failure to recognise the significance of their changing customer base was pivotal in their eventual downfall. Despite BlackBerry attempting to get their devices into the hands of as many lawyers, bankers and politicians as possible, BlackBerry Messenger created a new user – the teenager who simply wants to use BBM because all their friends do. The surge in the younger demographic using BlackBerry phones handed RIM a lifeline, it was a chance to capitalize on the youth’s tendencies to follow trends.

Connecting the Youth

In 2010, an Ofcom study revealed that out of 2,500 mobile phone users in the UK, 37% of the teenagers chose Blackberry as their primary phone. Even though the BlackBerry was outdated and lacked so many features present in iPhone, the low price (£25 a month) seemed to provide a cheaper alternative for students. Positive reviews about BBM gained traction and very soon it became known as the best IM service for its ability to text instantly and from any location for free. In fact, in 2011 it was actually blamed for “helping to connect young rioters who fought police and wrecked shops in London.”

Unfortunately for BlackBerry, the arrival of apps like WhatsApp and Viber threatened to invade their existing consumer base. By 2011, WhatsApp was responsible for over 1 billion messages per day. People could text people with other phones without having to worry about SMS charges.

Selfie Takeover

After seeing their friends pull out iPhones from their pockets with their HD cameras, people just didn’t want to settle for such poor camera quality anymore. Before long, the “selfie” craze swept people of all ages across the world and apps like Instagram and Snapchat accommodated those people who wanted to share photographs of themselves easier. Meanwhile, Balsillie was desperately trying to convince the public that the real “cool” thing was having a slightly longer battery life. Consequently, they failed to keep hold of this new demographic due to a flat-out refusal to innovate. Of course, hindsight is a wonderful thing, but surely more could be done to prevent this avalanche of failures that took BlackBerry from having 20% market share in 2010 to just 8.1% in the space of a year.

Stopping the Rot

Since the release of the iPhone, touchscreen phones were constantly rising in popularity. Although it was a slow burner in their early years, by the release of the iPhone 4 they had set a precedent that other giants like Samsung, Motorola and Sony had no choice but to follow. Meanwhile, despite industry forecasts anticipating this shift, Lazaridis opted to stick to their physical Qwerty keyboard which had once worked so well for them.

There were multiple advantages to introducing touchscreen phones. They could directly compete with the newer phones, adhere to changing consumer trends, and avoid the risk of declining market share. This seems like a pretty straightforward decision, what possible reason would they have to not keep up with their rivals? In Blackberry’s case, they had tried previously and failed miserably.

Instead of taking the time to develop a serious competitor, they rushed and were left with a faulty product. Perhaps they felt that it was just far too expensive to try again. After all, Apple provided serious barriers to entry with their patent on their zooming and scrolling techniques.

Similarly, the aforementioned introduction of applications like WhatsApp and Viber, who provided free messaging and free calling respectively on most mobile phones, became a major threat to the future of BBM. A possible option would be to reopen the debate about whether to introduce BBM on non-BlackBerry devices. This was an idea that had previously been brought up but was shut down and caused internal rifts among the board. It would expose a wider audience to the capabilities of BlackBerry and could generate more revenue in the future.

Of course, the drawback would be that they would no longer have exclusivity over BBM and people would just move on to a better phone as BBM would be available there too. As a result, the suggestion was squashed by Mr Heins, backed by Lazaridis. At the very least, introducing free calling through BBM in order to compete with applications like Viber could give BlackBerry a competitive edge over other devices.

Global or Local?

BlackBerry gained popularity amongst the youth in many countries across the world. These consumers can be less reliable in terms of brand loyalty because they are more concerned with what’s trendy at the time. Nevertheless, they were contributing to a huge proportion to their sales and it would be irresponsible to disregard them.

As a result, the company became divided on a crucial decision that could possibly determine the future of RIM. Staying with the same target segment would be a less risky and cheaper operation, since they wouldn’t need to focus on implementing exciting new features that would appeal to younger consumers. BlackBerry were already an established brand in the office segment, so they would avoid the heavy sunk costs of advertising to attract younger users. Furthermore, Business employees were happy to stick with a secure phone with a longer battery life at the expense of having flashy designs with advanced apps and easy to use interface.

On the other hand, expanding to the teenagers would diversify their sources of income, a positive attribute in a highly competitive market. Perhaps if they could find a way to upgrade from Java to a newer software like that of Apple and Android, they could be in a better position to adjust to the future trend of user-friendly apps. Of course, this would not be cheap and could lead to RIM deviating too much from their original value proposition.

That being said, some members of the board feared that the risk to handset sales was not worth the projected profits that Lazaridis claimed would be obtained from adding BBM on hundreds of millions of non-BlackBerry phones. However, this could be a solution that may stop the declining revenues that occurred from people leaving BlackBerry for better phones.

Approaching Expiration Date

Although they were at the peak of their revenues in 2011, their market share was plummeting every quarter. They had the choice of innovating and adapting to trends like their rivals, or keeping to their original target segment and hoping that this would be enough to keep them competitive. Looking back, it seemed as though it was a fairly obvious decision to make, and one that wouldn’t be overly difficult to execute.

However, internal rifts about which directions to take on major decisions meant that there were numerous changes in board personnel and thus, their vision for the company. BlackBerry ignored all warning signs because they believed there was no point deviating from their value proposition that had made them so successful. Even when they did decide to adapt, they were either hastily produced failures or they were so far behind their competitors at the time of launch.

In many scenarios, it is easy to understand why certain decisions were made because there can often be obstacles in terms of resources, funds and technology. In BlackBerry’s case, all they had to do was pay more attention to changing trends and the competition in the market rather than arrogantly avoid adjusting their plans until it’s too late. We can only assume the Apple that had fallen on Mr Balsillie’s head is what made him believe “everything was ok”. As of today, they currently hold 0% market share in the smartphone market.

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