Knowledge for All

[Arief Budi Prasetyo]

BlackBerry: From RIM to RIP?
Published: September 25, 2013
BlackBerry is paying a huge price for failing to understand its
customers, anticipating their needs and taking seriously the threat of
competitors. Is it too late to change the fortunes of this once
category-leading brand?
From its first introduction of a two-way paging and wireless email
device in 1998, Research in Motion (RIM) was in the right place at the
right time. Business customers and consumers alike had an unmet need –
they wanted to remotely communicate using the increasingly popular
text and email platforms. In 1999, the company offered business
customers the BlackBerry 850 pager, so named because the small keys on
the device resembled the surface of a blackberry. It used a
proprietary, complementary delivery platform (BlackBerry Enterprise
Server), and each successive product introduction and enhancement was
built upon customer-evolving needs. In April 2000, RIM offered its
first smartphone, BlackBerry 957.

The Sweet Taste of BlackBerry
With texting and email accessed and used easily, BlackBerry became an
enterprise staple. Business users created a culture of “CrackBerry”
addicts. RIM leveraged this popularity in the corporate space by
introducing a consumer-oriented device, the BlackBerry Pearl 8100,
which included multimedia applications, such as a camera. The phone,
along with RIM’s extensive carrier agreements, propelled the brand
into the stratosphere. In 2009, RIM achieved 20.7 percent smartphone
worldwide market share and was the clear leader over the
2007-introduced iPhone and Android platforms. RIM stock was at $66.20
– its highest point.

Losing Customer Focus, Underestimating Competition Sours the Brand
Shortly after reaching its pinnacle, RIM rushed the release of the
PlayBook tablet to extend its reach into the newly-created tablet
space. It was met with average reviews and poor sales. This
ill-conceived strategy, coupled with its closed operating system and
Wi-Fi-only connectivity, caused PlayBook sales to tank, so much so
that RIM introduced fire-sale pricing for unsold inventory.

In the start of 2011, the BlackBerry 7 devices gave RIM's legacy
platform one last surge, but a worldwide service outage tainted the
line's and the company’s reputation. Seeing the outage as an
opportunity, Apple and Google both reinforced their delivery of a
better user experience. All along, these fierce competitors
anticipated what the customer wanted – not only a smartphone, but also
an extension of their lifestyle. By the spring of 2011, Android became
the market leader, and Apple would eventually rise to second place by
2012.

While the company began 2011 at 20.7 percent market share, it closed
the year at only 8.8 percent. In July of that year, RIM’s losses were
so significant that the company reduced its 20,000-person workforce by
10 percent. Finally, and not unlike Merck’s current approach to
transformation, RIM recognized that it needed to learn from its
competitors’ success and begin anticipating its customers’ needs,
ultimately transforming its business model.

A Stagnant Company in an Ever-Changing and Fierce Market
RIM put a bandage on its problems – once the company recognized them –
but to date has failed to regain its leadership role in the market.

RIM began its transformation from the inside and worked its way
outward. In January 2012, co-CEOs Balsillie and Lazaridis stepped
down, and COO Thorsten Heins assumed the role of RIM’s new CEO. RIM
struggled to hold on, but its financial status, sales and workforce
continued to diminish. The company went through another round of
layoffs, letting go 30 percent (5,000 individuals) of its remaining
workforce.

Still far behind the competition, RIM announced that it was planning
to delay the introduction of its BlackBerry 10 smartphone until 2013.
Coincidently, this announcement caused a rare sign of optimism. With
the excitement of the 2013 launch, the company reported a
smaller-than-expected loss on September 27, 2012, with shares up more
than 10 percent in after-hours trading and a subscriber base growth of
two million in three months. However, RIM’s stamina was still in
question, and the company was still failing. By the end of 2012,
BlackBerry’s smartphone market share fell to its lowest point: 1.1
percent worldwide – far behind Apple and the number one share leader,
the Android platform.

Can BlackBerry Be Juiced for a Comeback?
In January 2013, RIM launched software to prepare businesses for its
impending BlackBerry10 launch; rebranded its app store as “BlackBerry
App World”; and re-launched as BlackBerry World to offer users access
to multimedia content (and in order to compete with iTunes, Google
Play and Amazon); launched two BlackBerry 10 phones; and changed the
company’s name from Research in Motion to BlackBerry. After the
launches and name changes in January 2013, BlackBerry posted a profit
of $94 million in the fourth quarter of its fiscal year.

As the months passed, the market continued to evolve, and BlackBerry
fell short of analyst expectations. On June 28, 2013, the company’s
shares fell 25 percent in pre-market trading, and the company reported
a net loss of $84 million.

The Price You Pay for Not Anticipating Customers’ Needs
Heins (BlackBerry’s CEO) has spent most of 2013 getting the company’s
“house” in order. This summer, BlackBerry faced another round of job
cuts, announcing the elimination of another 100 positions, along with
the retirement of co-founder Mike Lazaridis. Incapable of transforming
with the market, BlackBerry announced that its board launched a formal
review of its "strategic alternatives,” which suggests that the
company could be parceled and sold. More recently, on September 20,
2013, BlackBerry announced it was laying off 4,500 or 40 percent of
its remaining global workforce in conjunction with its report of a
nearly $1 billion second-quarter loss – and moving its focus to
commercial and government customers. And, most recently, on September
23, 2013, BlackBerry announced that it agreed in principle to be
acquired by an investment group led by its biggest shareholder,
Fairfax Financial Holdings Ltd, for $4.7 billion. Its future is
anything but certain.

Learning From the Blackberry Jam
RIM took its greatest and narrowly focused specialty – two-way paging
– caught the business and then consumer market at exactly the right
moment and soared to market-leading heights. However, overconfidence,
complacency, neglect of customer needs and an underestimation of the
competition – who came to understand their customers better than RIM –
put the company into a near-death spiral.

As a company, Merck will continue to address and confront external and
internal challenges so we can help save and improve lives far into the
future. Despite the pressures we face, we can – and must – adapt and
succeed in the marketplace. The long-term potential of innovative
medicines, vaccines and products is significant, and many unmet needs
remain globally. Every person within Merck is accountable to help
identify changes that will make us a stronger, more competitive
company. Success requires that we all act urgently and with a One
Merck mindset. If we do, we can emerge as victors, meeting commitments
to patients, customers and shareholders alike.


This is the second in a four-part series on how companies successfully
responded to – or failed to respond to – changing market drivers. Next
in the series: Learn how prioritization, focus and behavioral change
transformed Ford Motor Company into a driver for success.