The Fate of Blackberry

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I live just down the street from a major Blackberry office complex, and Blackberry employs thousands of people in this local (Waterloo) area, so I have a natural interest in how the company is trying to resurrect itself.

If Blackberry succeeds in remaking itself it will be because they finally adopted a realistic, workable strategy. Until last year that strategy evaded them.

A year ago at this time previous CEO Thorsten Heins had successfully taken the company through the beginnings of at least two fairly monumental tasks: trimming their workforce, and introducing BB10, the new operating system for their phones.

When John Chen took over he further clarified their strategy: concentrate on “enterprise” (business, government, military, institutions), beef up BBM, look for new opportunities for QNX, and make the production of handsets (phones) much less central to their future profitability.

Many Blackberry watchers still do not realize the importance of this last strategic decision. Going forward, “handsets” will not be what defines Blackberry. It will be software and services with an emphasis on the needs of “enterprise”.

Many observers have pointed out that Blackberry’s shift to enterprise is still somewhat dependent on the production and sale of actual devices (phones, tablets, etc.) Of course this may be true, and is why Chen and the Blackberry team have not completely abandoned devices. But they are adopting a more rational approach to the introduction of new phones: offloading manufacturing, targeting specific markets (eg., the Z3 to Indonesia), and building new products specifically for business (bringing back some features familiar to older business customers).

Lying behind these strategic shifts is a simple question: If you had your choice of the kind of company you wanted to create, and the strengths available to you which would you choose?

Option A. You could try to revive the old RIM/Blackberry by focusing on hardware devices requiring extensive manufacturing, marketing and distribution resources, a relatively huge workforce, and large, risky, up-front developmental costs. You will be competing with established giants like Apple and Samsung. And you will have to do so with a tarnished image that has clearly lost favour with consumers.

Or…

Option B. You could re-engineer the company to focus on software development and sales, as well as the provision of related services focused on business, government and institutions. No huge manufacturing facilities required. No risky production of inventory that may not sell. No dependence on wireless carriers to sell your product. No costly follow-up and repair facilities required.

In retrospect the choice seems fairly obvious – assuming that they can get the pricing right. Blackberry is by no stretch of the imagination starting from zero with Option B. Their wireless systems are used by thousands of enterprises around the world – businesses, governments, military outfits, hospitals, etc. – and they have an acknowledged (by almost everyone) superiority in wireless security. Providing “security” is almost guaranteed to be increasingly important as time goes by.

To build on these strengths makes perfect sense.