Posted by It has been a long time in the making but the writing has been on the walls for some years now. According to the latest Gartner report, Canada’s once beloved tech giant, BlackBerry (formerly known as Research In Motion) has finally fallen to a global market share of 0.0%. Once the shining beacon of Canadian technology, BlackBerry was, at its peak in 2007 (the same year that Apple launched the iphone), the largest company in Canada by market capitalisation with a value of nearly $70bn. The firm was so synonymous with the word smartphone that the media had dubbed it the “CrackBerry” given how addicted its users were with constantly checking it for updated messages. So entrenched was BlackBerry that President Obama fought for months to keep his when he moved into the White House in 2009 and when handlers wanted to take it away, he replied, “They’re going to pry it out of my hands.” Obama finally won and kept his BlackBerry which he used until his final year as President in 2016.
Unlike Obama, I was never a fan of the BlackBerry even while the rest of my cohorts on Wall Street were all carrying one along with a cell phone to every meeting. I hated the idea of carrying two devices and never did. Ultimately, I used my own personal Dopod (the brand name that HTC used to use in China) “smartphone” PDA running WIndows Mobile (photo left) with the BlackBerry connect app installed. A few years later, I switched to an HTC Desire (photo right) running the Android operating system but also with the BlackBerry connect app installed. When I first did this, I had our IT department at the Bank of China send a tech to my office to install the BlackBerry connect app so I could access our enterprise e-mail server (being a Managing Director has some privileges). When the IT tech finally came by my office, he said he didn’t know how to install it, so I had him use his administrative login and installed it myself. When I asked him why he was standing behind me watching intently while I was synchronizing my smart phone with my desktop computer, he said he was “learning from me” – so much for tech support.
While Apple and Samsung (iOS and Android) were ramping up, BlackBerry was slow to react and innovate. Contrary to popular belief, it did not succumb from a massive onslaught overnight. Rather, it died a slow and painful death of a thousand cuts as the iPhone kept getting better and better while BlackBerry rested on its laurels and refused to adapt to the changing marketplace. BlackBerry actually kept growing for several years and only reached its peak in subscribers and profitability in 2011 when revenue hit nearly $20bn and subscribers nearly 70 million. Now, a mere five years later, like the other Canadian tech darling of the 1990s Northern Telecom, it is near oblivion.
What did BlackBerry do wrong? As bad a magazine as Time is, they do a pretty good job of explaining it in their article, The Fatal Mistake That Doomed BlackBerry.
First, after growing to dominate the corporate market, BlackBerry failed to anticipate that consumers — not business customers — would drive the smartphone revolution. Second, BlackBerry was blindsided by the emergence of the ‘app economy,’ which drove massive adoption of iPhone and Android-based devices. Third, BlackBerry failed to realize that smartphones would evolve beyond mere communication devices to become full-fledged mobile entertainment hubs… BlackBerry insisted on producing phones with full keyboards, even after it became clear that many users preferred touchscreens, which allowed for better video viewing and touchscreen navigation. When BlackBerry finally did launch a touchscreen device, it was seen as a poor imitation of the iPhone. BlackBerry saw its devices as fancy, e-mail-enabled mobile phones. Apple and Google envisioned powerful mobile computers and worked to make sending e-mail and browsing the Web as consumer-friendly as possible.
BlackBerry’s last hope now is a strategic partnership with China’s electronics giant TCL. TCL is an anomaly in China in that it does not have a Chinese name much like Sony never had a Japanese name. According to Wikipedia, TCL’s name comes from Telephone Communication Limited although I personally believe the other moniker “True China Lion” is probably more likely as I never did get an official answer to that question the many times that I asked it in the past. More uncharitably, many Chinese refer to it as Tai Cha Le (太差了), which means “too/very poor/bad”. TCL is probably best known for its television sets as its handset business never really gained critical mass in China’s crowded mass market which is now being dominated by telecommunications giant Huawei.
Should I be so hard on the ineptitude of BlackBerry’s management team? To be blunt, yes. To have presided over the fall from being the dominated smartphone brand and company on the planet (with proprietary technology and software to boot) to zero in less than a decade is sheer incompetence. Sure, BlackBerry isn’t the only company to do so and is in good company. Former telecom giant Nokia was once so big it accounted for over half the market value of the entire Finnish Stock Market. Even once mighty and dominant Sony has fallen on very hard times in the past decade as Apple and Samsung have gutted many of its core business lines.
As a student of business history, I do have some sympathy for BlackBerry because I have often wondered what it would be like to run a doomed business and what management could have actually done to avert ultimate collapse. These are the quandaries that make great Harvard Business School case studies. What do you do when you are Kodak (and to a lesser extent Fuji Film) who dominated photography for decades but are faced with the prospect that your core business (film, chemicals and photographic paper) is about to go the way of the Dodo with the advent of digital photography. In the early part of my investment banking career, a fellow analyst once wrote a glowing report about Hanny Magnetics, a Hong Kong based company that controlled more than 90% of the world’s floppy disc market in the mid-90s – a great position to be in except for the fact that nobody was using floppy discs anymore. Similarly, Creative Technology in Singapore controlled 70% of the sound card market for PC’s in 1995 and was raking in the cash; until computer manufacturers started to integrate audio control directly onto the motherboard. It is the age-old classic business dilemma of being the world’s leading manufacturer of buggy whips in the age of the automobile.
In fact, the number of examples of businesses successfully re-engineering themselves is so exceedingly rare, one really needs to give a standing ovation to the ones that do so. My favourite example is 3M. To most people, the company evokes images of office supplies like Post-it notes and Scotch tape. In fact, 3M stands for Minnesota Mining and Manufacturing although one would be hard pressed to find any mining interests within 3M’s sprawling business empire today.
The problem with BlackBerry is that it’s core business did not go the way of the buggy whip or photographic paper. The smart phone is still very much an integral part of the world today and is probably the single biggest and most profitable segment of the consumer electronics business. Our little hand-held brushed-aluminium bricks not only replaced the cell phone, it also replaced the portable music players, digital cameras, video recorders, PDA’s (does anybody remember the Palm Pilot), calculators, books, newspapers, voice recorders, GPS devices, watches, portable radios and personal gaming machines to name a few. Unfortunately for Sony, things like the Walkman, digital and video cameras, PSP (Playstation Portable), and laptop computers were some of its biggest and most profitable product lines.
One of the most misunderstood and misquoted great scientific minds is Charles Darwin. His 1859 book, On the Origin of Species, is one that the left and right seem to like to abuse for their own ends. Liberals like to beat up conservative Christians for their views on creation as Charles Darwin is probably the core founder of the theory of evolution. Likewise, right-wing wags like to talk about survival of the fittest and capitalism red in tooth and claw. In fact, Darwin’s original term was “natural selection” although he did adopt the term “survival of the fittest” later. But by this, he meant “better designed for an immediate, local environment” because Darwinian evolution is all about ability to successfully reproduce in a specific environment, not about being the strongest, biggest, or fastest. Personally, if I were to try to summarise Darwin’s theory in one sentence, I would say it should be “survival of the most adaptable” and maybe even add the phrase “in a specific environment” for clarity.
To me, “survival of the most adaptable” actually captures the true spirit of evolution in both the physical sense and the more metaphorical social sense. The dinosaurs were the biggest and strongest creatures around; they just weren’t capable of adapting to a changed environment when a giant asteroid hit the earth (or whatever climate change theory you want to believe in to explain their extinction). Likewise, “survival of the most adaptable” applies to our modern social constructs like business. As I alluded to above, history is full of companies that were titans of their time and seemingly unstoppable, until some technological or market change came that they could not adapt to. This is actually the norm, not the exception. Here’s a bit of Wall Street cocktail party trivia that few, even amongst investment bankers, know. There is only ONE company that was amongst the 12 stocks that made up the Dow Jones Industrial Average when it was created in 1896 that is still one of the 30 component stocks in the DJIA today… Do you know which company that is?
Come on, take a guess.
Alright, if you haven’t figured it out by now, I’ll tell you. Its General Electric. Yes, the company that Thomas Edison founded (and funded by J.P. Morgan). Let’s see if the current round of revisionist history around Nikola Tesla (under appreciated and robbed by Edison according to some) and Elon Musk’s namesake for him, Tesla Motors, has the same longevity.
Getting back to the original point, BlackBerry had everything in place a decade ago to be amongst the Apple, Samsung and Huawei’s of 2017. It had proprietary technology (hardware and software), a commanding market position, strategic partners (the giant telecom companies were all on board) and even a strong product and brand name. It even had the time and resources to adjust to the changes that Apple unleashed on the smartphone market in 2007. It just lacked the foresight and ability to adapt to a rapidly changing environment and each successive misstep made by its sclerotic management team led it further down the road to oblivion in less than a decade. The biggest tragedy is that BlackBerry was a rare glimpse of a Canadian company that was a global leader in its field; a brand that was known and used by millions around the world. And it failed spectacularly after soaring so high in such a short period of time. I guess we Canucks should be content we still have Lululemon… for now.