Beleaguered smartphone maker BlackBerry, founded as Research in Motion in 1984, was ill-equipped for the smartphone revolution ushered in by Apple’s iPhone. An archetypal case for the dangers inherent in business model incentives that impede effective operating model design, BlackBerry watched its US market share tumble from 43% in 2010 to 3% in 2013. 
BlackBerry’s Business Model
More than a device maker, BlackBerry primarily focuses on increasing productivity and security for its enterprise customers.  In the late 1990’s, BlackBerry revolutionized paging devices by creating a device that could both send and receive text. In 2002, BlackBerry introduced the 5810, the first smartphone that enabled users to email securely, access the internet, and place calls, albeit using a headset.  Interestingly, as the first-mover, BlackBerry was able to command a unique pricing structure from retailers.  BlackBerry devices ran on a secured operating platform called BlackBerry Enterprise Service (BES), which enabled the company to collect a fee for the device as well as monthly access fees for BES.  Ultimately, it would be these monthly BES access fees that would be BlackBerry’s downfall.
BlackBerry’s Operating Model Deficiencies
Simply put, the revenues generated through BlackBerry users’ monthly BES access fees created an inverse incentive for keeping pace with evolving technology. These incentives manifested in four key operating model deficiencies:
- Insufficient Research and Development Rigor – To continue to evolve BlackBerry functionality would have required the company to move beyond BES, which would have both violated their security ethos and jeopardized their lucrative BES revenue stream.
- Lack of Innovative Culture – Despite being in cutting-edge technology, BlackBerry’s culture focused more on specialization within the secure BES environment than on innovating to keep pace with changing customer demand.
- Failure to Focus on User Experience – BlackBerry’s focus on security resulted in a lack of understanding end user experience and wants. BlackBerry mistakenly assumed that enterprise customers’ needs would align with corporate priorities, like security, rather than on customer-focused wants, such as access to Apps and improved web browsing.
- Restricted Scope – Perhaps most importantly, BlackBerry restricted its scope rather narrowly instead of partnering with developers willing to help improve the device like Apple did when it released the iPhone.  This lack of partnership in evolving the technology ultimately caused BlackBerry to be eclipsed by Apple.
The revenue structure created inverse incentives that caused BlackBerry’s operating model to fail, which ultimately caused the demise of the much loved “Crackberry.”
BlackBerry Now: Ready for a Comeback?
Rather than fading quietly, BlackBerry has been making strides towards a comeback. While still focused on productivity and security, BlackBerry has addressed deficiencies in its operating model. First, it has invested in understanding the user experience, thereby enabling it to design solutions to better address customers’ needs.  In turn, BlackBerry is now more focused on innovation and developing new products and functionality.
BlackBerry has also shifted its product mix, thereby increasing its scope. For example, BlackBerry offers full enterprise solutions for secure connectivity that are device-agnostic. It also offers BlackBerry Messenger (BBM), a secure messaging platform. More recently, BlackBerry announced that it would purchase Good Technology, which should allow BlackBerry to improve the functionality of its software on Android and Apple devices.  Further, BlackBerry has revealed plans to release a new phone on the Android platform in early 2016, which would allow users far greater access to Apps while providing features such as a keyboard that BlackBerry enthusiasts love. 
While it is too early to tell if these measures will save BlackBerry and help it regain market share, it seems that BlackBerry’s executives have corrected their operating model mistakes and have positioned themselves well for future success.
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