BlackBerry: On the Brink of Change

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    BlackBerry’s move to go private follows similar moves by BMC and Dell for similar reasons. The company needs to go back to being pre-public in order to address a market that changed faster than it could as a public company. Let’s talk about why it wasn’t as successful as it had hoped in 2013 and how going private strategically puts the company in better shape for the future.

    2013: Racing Full Out But Still Losing

    Unlike the last part of last decade where BlackBerry was ignoring market changes and seemed to have lost track of what its assets were, BlackBerry under new leadership this year hit the market with every asset in play and used every asset it had available to go to war. The company was outmatched. Had it made a move like this in 2007, things would have been far different. Back then, BlackBerry could go toe-to-toe with Samsung and Apple and win in this space, but over the last six years, BlackBerry’s resources dwindled while Samsung and Apple, the former with heavy support from Google and the Korean Government, came into their own. Samsung has become so powerful that it has begun to hurt Apple.

    In addition, we saw Microsoft throw resources at this segment that were beyond BlackBerry’s current means and it, too, fell short. This is a common mistake: Firms look at a market and set a budget that seems massive, but the companies don’t first step back and look at what the requirements are and so they fall short. It amazes me how few firms in this situation first estimate what it will take to be successful, then set a strategy and work by trial and error to see if what they are willing to spend will be enough. It would be like asking someone to build a house without first getting an estimate; chances are you’d end up with a half-built house and no money.

    Going after the general smartphone market was outside of BlackBerry’s resources, and while it had some interesting and powerful advantages (security and automotive), the company’s focus on the general consumer didn’t allow it to use those advantages effectively.

    Steve Jobs’ Example

    When Jobs took over Apple, he knew he was out matched. He had IBM as a lousy partner against Intel and he knew Microsoft had beaten the company in its prime, so he had little chance of beating Microsoft months from bankruptcy. So he changed the game. He started a process to turn Intel from competitor to partner. He swapped out IBM’s lackluster support for peace with Intel, and he convinced Microsoft to leave him alone. Bill Gates even invested in the company in exchange for Apple defending Microsoft in the anti-trust trials (which Apple did).

    Jobs then went looking for an opportunity that he could use to cause the market to change in a way that would favor Apple. He oversaw the development and success of the iPod, and then moved to recreate that event with the iPhone and then with the iPad. This is something that it appears Tim Cook never actually learned or realized, which I think will be a long-term issue for Apple.

    To make all of this work, Steve had to trim Apple down to the basics and, while still public, convert the firm from a technology company to a consumer electronics company, dropping the word “computer” from the brand in the process.

    Going Private

    I think, had Jobs taken Apple private, the change would have come much more quickly because he wouldn’t have had to try to balance the desires of financial analysts while transforming the company from one industry to another. It is a credit to his skill that he was able to get it done and this speaks largely to why he was CEO of the decade. It may also speak to the fact that he really wasn’t very good at alliances, which might have made going private impossible in the first place. You have to get a lot of folks with tons of money to trust you and those who knew Jobs didn’t trust him back then. (He had a rep for screwing people.)

    BMC and Dell have demonstrated how to do this and BlackBerry has apparently been reading from their scripts.

    Going private doesn’t assure that the firm will emerge again as a successful public company, but it does increase the odds that the company will be transformed and with that, the odds that it will survive.

    Wrapping Up: BlackBerry’s Future

    BlackBerry plans to double down on the business market, which is its strength. In a BYOD world, this is risky, but far less risky than trying to take Apple, Samsung, Google and Microsoft on in a battle for the consumer. To win, BlackBerry must first stabilize and assure the loyalty of its base. To do that, it needs to showcase at least two advantages: device management, which it has, and security, which it should have. As a Canadian company, it must showcase that it can stand up in the face of the U.S. NSA better than Google, Microsoft or Apple (all U.S. companies who are at the mercy of the NSA) and protect against carrier culpability (which is more difficult, but still possible). Then, the company will have a clear advantage with vertical markets that include government, law, pharmaceuticals, health care and finance. And it can focus on this in a way that a consumer-oriented company can’t.

    Finally, much like RIM’s success (the former name for BlackBerry) was based on the firm catching the technology wave that occurred when two-way pagers and PDAs merged, BlackBerry will be in a better position to catch one of the coming waves, such as the tablet/smartphone merger (phablets), wearable computing, telephony convergence (think of this as death of the landline) or something we haven’t yet anticipated. Instead of being fixated on making quarterly results, the company will be more focused on catching, or better yet, creating that next wave. This is something private companies typically do better and why we see so many firms that roar into becoming public companies later whimper about the lack of post-public innovation. Public companies just don’t like to take big gambles, but big gambles are what created the iPod, iPhone and iPad, and they also created BlackBerry and Palm.

    Much like a caterpillar and a cocoon, by going private, BlackBerry has a much better chance of emerging as a butterfly instead of becoming a dead bug.

    Rob Enderle
    Rob Enderle
    As President and Principal Analyst of the Enderle Group, Rob provides regional and global companies with guidance in how to create credible dialogue with the market, target customer needs, create new business opportunities, anticipate technology changes, select vendors and products, and practice zero dollar marketing. For over 20 years Rob has worked for and with companies like Microsoft, HP, IBM, Dell, Toshiba, Gateway, Sony, USAA, Texas Instruments, AMD, Intel, Credit Suisse First Boston, ROLM, and Siemens.

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