BlackBerry’s (formerly known as Research in Motion) business model is to “design, manufacture and market innovative wireless solutions for the worldwide mobile communications market.” This requires development and integration of new software, hardware and services technologies. The company originally focused on business customers, who were drawn to BlackBerry by the security of the network, user-friendliness and functionality of the hardware, and the seamless integration of its products and services. As BlackBerry emerged as the leader in the smartphone market, the business model evolved to include sales of hardware to individual consumers through wireless carriers.
Lack of technological innovation / loss of focus in R&D
New product innovation was essential to the continued success of BlackBerry’s business model. However, BlackBerry’s R&D team could not keep up with its peers. The R&D process failed to adapt to consumer demands or to accurately predict what consumers desired. Not only were the new products of poor quality, the releases are better remembered for their numerous delays and unfulfilled promises. Needless to say, that’s not a recipe for success for an “innovative” company.
BlackBerry had an opportunity to compete with the original iPhone, but it failed to do so when it released the Storm with numerous technological flaws. The launch of the Z10, the long-awaited first phone on the BlackBerry 10 system and BlackBerry’s first touchscreen-only device, went against the company’s business model that was driven by a focus on the business customer. There was nothing innovative about the new phone – it was merely a poor attempt to imitate Apple and Samsung products. The team failed even more miserably with the first tablet, the PlayBook. After many delays in releases, the initial version came out without functionality for e-mail and lacking other key tablet features. It’s hard to imagine that the business vision behind the PlayBook lacked these critical features.
BlackBerry’s software was falling further and further behind its competitors’ as the engineering team consistently ignored customer feedback. In an attempt to improve the software, BlackBerry acquired QNX Software and quarantined a team to build BlackBerry 10, the new software platform. However, the results were far from positive. Not only did this move further split the company, the new BlackBerry 10 system was very different from the previous well-known BlackBerry 7 system and was poorly integrated with BlackBerry’s hardware and services. Instead of saving the business, BlackBerry managed to isolate its only remaining loyal customers, who could no longer identify with the product.
BlackBerry Messenger (BBM) was the pioneer and global leader among all messenger platforms. Unfortunately, the team couldn’t agree on a plan to make the messenger service cross-platform. You don’t have to look past the valuations of What’s App and Kik to realize how big of a mistake BlackBerry made. Even worse is the fact that BlackBerry failed to see the importance that apps would play in the smartphone market, and that apps would drive the consumers’ smartphone purchase decision process.
Highly Ineffective Management
Effective execution of a business model requires an effective management team. A business that relies on innovative solutions to stay relevant needs decisive leadership. BlackBerry had neither. A dual-CEO structure was questioned both by industry experts and the financial community alike. The dual-CEOs could not agree on many key decisions, resulting in inefficiencies and a lack of forward thinking. When the co-CEOs were replaced, the company wrongfully chose Thorsten Heins as the replacement. Heins had been part of the inner circle for years and thus lacked a fresh perspective, which was badly needed to spark innovation. Management was slow to make decisions, and when it did, the decisions were late and in conflict with the business model, such as the Z10’s noticeable lack of a physical keyboard.
BlackBerry appealed to the business customer through the promise that the phone will be “Always On, Always Connected.” The last competitive advantage that BlackBerry had was the reliability of its network, which was very valuable to the enterprise customer. And that’s precisely why the 2011 three-day outage was a final deathblow to BlackBerry. Business customers lost their only remaining justification in remaining loyal to the BlackBerry product. Unfortunately, this failure could have been avoided had the company been less complacent. The rapid growth of the smartphone market required BlackBerry to rewrite its core networking software; instead, BlackBerry simply increased its number of servers. The expansion was poorly handled, and BlackBerry failed to act upon this ticking time bomb.
2007, 2008 and 2010 Research in Motion Annual Reports and 40-F Filings (Accessed through FactSet)
2014 Blackberry Annual Report and 40-F Filing (Accessed through FactSet)
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