BlackBerry: Down But Not Out?
The smartphone innovator is down, but is it poised for a comeback?
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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 Interview with L. Cheung, 8 December 2015, former BlackBerry employee.
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Student comments on BlackBerry: Down But Not Out?
I was among the few to have used a personal Blackberry Bold until a year or two ago (along with an iPhone for work). It had both a touch screen and a keyboard, so it was the best of both worlds, notwithstanding the trendy factor. Per your post, I did not care about enterprise-class security features, but found it much better to type on physical keys for e-mail, texts, etc. than on a touchscreen. However, when the app ecosystem exploded recently with highly practical apps such as Venmo, Instagram, and Udemy, I found that because Blackberry did not keep pace in terms of innovation, the lack of apps just no longer justified the physical keyboard. The company made an effort to port the Amazon Android app store into its OS, but by then, I had already switched.
I did not realize they were coming out with an Android-based phone in 2016; I hope it is well-designed and comes with a physical keyboard, and maybe it is worth checking out again.
Blackberry’s focus on security drove its high adaptation by corporate clients, for whom this was a big concern, but their lack of focus on innovation and productivity became their downfall. I particularly remember when we had blackberry blackouts on our work phones repetitively, and what followed was a push on management’s side to find a solution that addressed both security and reliable productivity. I wonder however, now that corporations have evolved to other smart phone operators, allowing them to achieve both productivity and security as these platforms have also evolved, if this is a market that would be open to reconsidering blackberry use after an unsatisfying user experience. It was often that someone had a blackberry for work and another phone for their personal use, and now that one have one phone for both, that is sometimes subsidized by the company, who is blackberry’s target market now or in the future? This is not very clear to me so it will be interesting to see how they evolve to address this.
There are some great points raised. I think at the root of many of these problems is the fact that BlackBerry is headquartered in Waterloo, which is a relatively small (and cold!) city, far from Silicon Valley. A major takeaway for me was that the broader ecosystem in which a company is immersed is critical to fostering innovation.
Although BlackBerry successfully recruited from the University of Waterloo, which produces world-class engineering talent and was literally beside BlackBerry’s offices, it was tough to recruit non-local talent. Moving to Waterloo was a major downside for a lot of prospective employees. Coupled with the need for rapid headcount growth, it was challenging to keep the company’s human capital quality high, which is critical for a tech company that needs to innovate to stay relevant.
Waterloo’s tech scene today is actually becoming reasonably strong, but it wasn’t really the case during critical inflection points in BlackBerry’s history. Consequently, I think BlackBerry developed an insular culture. It’s much easier to stay at the forefront of tech trends when technology is pervasive in your society. Also, with increasing technological complexity comes the need for partnership, which I believe is much easier with close geographic proximity. One major dimension is the need to build a third-party app ecosystem, as zjohn mentioned.
Thank you for this post. It brings back so many memories. I bought my first blackberry when I was in undergrad and they had just launched their more economical versions which were less oriented towards corporate. The attraction was always security (as you mentioned) and the exclusivity. This is what individuals and corporate paid for. My brother worked in Banking and I remember his blackberry had a disabled phone camera. The Blackberry Messenger, one of their early and very popular features – was part of the enterprise service which let you send unlimited data across to other blackberry users. However, soon they couldn’t deal with the rush of OS agnostic apps like whatsapp, which were free and reduced exclusivity. Few years later, RIM decided to make BBM platform agnostic. A risk but a necessary one, some say, to reduce the restriction its users felt. Whenever I look back – I wonder if there was anything inherently wrong in their business model to charge a fees for the ‘service’ they provided. My personal view – I don’t think so. Today with rise of Android and iOS, firms are questioning the privacy and security issue. While a decade back, RIM ensured your data was encrypted and safe, today banking and consulting firms are spending a lot to test and make these new OS safer and still keep a circle of exclusivity. I believe it is important to evaluate the likelihood that customers will ask for the same ‘service’ again and does it, then, make sense for RIM to invest so much to change for the customers today or rather invest for the customers of the future.
Excellent post – fascinating to read about the birth, life, and slow march to death of a formerly innovative company. Found your operating model analysis to be spot on – my question focuses on how (or if) BlackBerry should go about fixing these deficiencies. Some thoughts:
1) Insufficient research & development: This seems like an area that can be fixed by budgeting more financial and human resources at the problem. Why wouldn’t BlackBerry raise outside funding and throw more money at the problem?
2) Lack of innovative culture: This seems particularly difficult to fix. Many CEOs have failed to turn around companies because they could not fix their culture (e.g., Mayer at Yahoo). Do you see an opportunity at BlackBerry or is it hopeless at this point?
3) Failure to focus on user experience / Restricted scope: Could not agree with you more – the user experience is atrocious. Worse than just isolating users, I believe it’s the user experience that led to developers not wanting to develop for BlackBerry, thus causing a worse user experience, isolating more users, and beginning the death spiral. At this point, I can’t see a world where BlackBerry can get users engaged with their interface.
Your recommendation and analysis of BlackBerry future leaves some room for optimism. However, why do you believe Google and Apple, with better strategic positioning and stronger operating models and cultures, would allow this to happen?
While it is true that Apple and Google are far ahead of BlackBerry at this point in time, there remains a number of BlackBerry loyalists who would happily switch back to their beloved device provided they could access their Apps. With its keyboard for ease of typing and perfected email push technology, something that Apple and Google have yet to get just right, there would appear to be a viable market remaining for BlackBerry provided that its new offering can reengage it customer base. It will be interesting to see how this progresses in the coming months.
It is intriguing to see how such a giant to fall so quickly. More importantly, would the fall of this pioneer of closed OS ecosystem be alarming to Apple today?
Thanks for the reasoning on Blackberry’s fall. Among these operating deficiencies, I feel the reluctance to partner external developers had played a key role. Although Apple was also a closed OS system, it welcome and collaborated with external developers. This partnership further improved the user experience and therefore adherence, resulting in an effective ecosystem. Meanwhile on RIM side, the attitude towards developers was more guarded and alienating. This mentality left RIM alone with limited application offering, and eventually expanding gap with Apple in user experience.