Blackberry Versus iPhone

Dig deeply into the recesses of time circa 1996 to the sound track of Pearl Jam or Soundgarden.

Brand names such as Apple Newton, Palm Pilot or Nokia flip phone will likely clear out a few cobwebs holding on to an ancient memory.

The design goal for early mobile devices was to implement one or two use cases that the corporate desktop was used for. Add mobility and voila – a portable desktop!.  Add the ability to synchronize with the desktop’s Microsoft Office based eMail and calendar tools and you’ve got yourself a winner!

The second use case was to play music from a library downloaded from CD’s ripped on your computer, Napster or purchased from a music store.

The third major use case was to support Internet browsers.

Finally, the fourth use case supported custom applications which extended the functionality of the device.

The Apple iPod second generation was the forerunner of the iPhone. It supported all four use cases.

I bought mine in 2006 for $600. It had eMail that synched to a mail server, came with a version of Safari web browser, played music from my CD collection, supported custom apps like one that enabled you to store files on it using an internet Connection. I’ve used it every day as an alarm clock for the past 11 years.

The fifth use case proved to be a game changer for the PDA industry was to add a phone and texting feature.

By the mid 2000’s, RIM became a $50B company. It had 50% of the market for mobile devices.

By 2008, its fortunes fell to a market cap of under $5B. On June 29, 2007, Steve Jobs launched the Apple iPhone. It was in reality a prototype. The device would support voice, text, eMail, Internet access and camera use cases. AT&T committed to investing in developing their wireless network to support the bandwidth hungry iPhone. Until this point, the carriers were a major partner in the Blackberry story of carriers focused on the Blackberry’s  secure communications feature.

Lazaridis and Balsillie became distracted by personal side projects – the Perimeter Institute for Lazardis and Balsillie’s attempt to buy an NHL team.

In a nutshell, RIM failed to counter the force of the iPhone by promoting its unique value proposition regarding secure messaging to global corporate, military and government customers.

The iPhone was a consumer product. Blackberry was an enterprise product. The leaders of RIM attempted to compete with Apple as a consumer product and left the drawbridge that crossed their moat wide open.  They were lucky as no competitor tried to cross it.

One key delta between Apple’s and RIM’s approach was the keyboard. Apple used as software keyboard while the Blackberry had a physical keyboard. The software keyboard is cheaper to make and won out. A simple solution would be two offer two models  – one with a keyboard and one a soft keyboard and let the consumer decide.

RIM lost focus on what it was – a provider of secure communications devices.   Regardless of the outcome, RIM owned this niche. The story of RIM reminds me of Nortel and its failure to play the relentless innovation drive. By 2011, Android and Apple had overtaken RIM.

The founders were gone, headquarters moved from Waterloo to Mississauga, shuttered numerous Waterloo properties and renamed the brand to Blackberry Limited. John Chen is now CEO. The stock trades as BB on the Toronto Stock Exchange and BBRY on NASDAQ. The company is doing so so with sales of $342M in Q2 and yet reported a net loss.   The company has switched to licensing software and  servers which enable Android devices to provide secure communications foo Android devices. RIM has 3,000 global customers for its secure communications system.

There are shades of Nortel at RIM where success makes the corporation less hungry for innovation. RIM’s product line failed to make inroads in the consumer market. Its moat to be defended from Apple was to continue to be a provider of secure communications devices. Apple never attacked RIM’s core product offering.

RIM should have:

  1. Position the Blackberry is the only choice for secure communications – its core use case. This also means abandoning the consumer market to other players.
  2. Launched an Android compatible phone with a software and hardware keyboard. Going Android would enable RIM to take advantage of an existing android app store. RIM’s play book apps would have a like for like migration path to Android. The phones ran on the QNX operating system. This step would involve eating the investment in QNX.
  3. Move manufacturing to Asia
  4. Strengthen its relationships with the global telecom carriers and corporate security officers.

Today, the company is focusing on just such as strategy. Its branding identity is “A global software leader in securing, connecting and mobilizing enterprises”.  

If only it refocused in the product definition in 2007.

I am however confident that under John Chen’s guidance that Blackberry will return to profitability and again deepen it’s moat as the global market leader of secure enterprise communication systems.

Blackberry