Blackberry: Thinking like a product company in a platform world.
At its peak, Blackberry owned over 50% of the US and 20% of the global smartphone market and boasted a stock price of over $230.
Today, BlackBerry has 0% share of the smartphone market, Stopped its phone manufacturing completely.
I am sure by now you’ve read some articles or blog posts about how blackberry neglected the touch screen or about how it lacked innovation until it was too late.
But I argue the reason why Blackberry failed is much bigger. It is also related to how Apple and Amazons are valuated at more than trillion $$ and Blackberry shifted completely from the smartphone market.
So in this article we are answering the following questions:
- Why was Blackberry tremendously successful?
- What’s the most important event that signed its death warrant?
- Why Apple now has more than 1 trillion $ valuation and blackberry is blackberry.
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Peak Blackberry
“The idea of a wireless device to send and receive email was revolutionary. It was like looking into the future and knowing that this idea just made too much sense for it not to happen.”
Adam Adamou — Early RIM investor.
And he was right, back in 1995 that’s what the company used to convince investors at blackberry ( was called “RIM” at the time), one year later Inter@ctive Pager was released.
On top of email and messaging services, One of RIM’s strongest selling points was safety. With promises of tougher encryption processes, they garnered the attention of major businesses and governments, alike.
Fast-forward a few years ahead, RIM is going strong, gaining more market share and improving its products with newer, better cameras and the caveat was the new BlackBerry Messaging service (BBM).
It was perfect for teens. It could send images, voice notes, pictures, locations, create group chats and, of course, text. Does it sound familiar? That’s right. They made WhatsApp before WhatsApp was cool.
At its peak, the BlackBerry brand sold around 50 million devices per year, with annual sales of almost $20B. Its stock rocketed from $2.15 per share to $230 per share. Celebrities craved BlackBerry. Kim Kardashian had three just in case one of them broke down.
The tipping point:
“iPod with touch controls”, a “revolutionary mobile phone”, and a “breakthrough Internet communicator” — Steve jobs 2007
By these words Steve Jobs announced the iPhone, Disrupting the whole smartphone market and a multitude of other markets.
The Iphone with its big screen, Ipod features and wide-loved brand, took the market by storm, suddenly the big phones with a lot of buttons seemed boring and out of date.
Even after the introduction of the iPhone and up until 2011, sales of the Blackberry increased so they had reason to be confident. It was just that Apple had a different strategy and, along with RIM’s mistakes, it would prove deadly for the BlackBerry.
Let’s go over those mistakes briefly and focus on a big market shift that was the ultimate reason why Apple is Apple now, while Blackberry’s smartphones are dead.
- Slow Reaction to Disruptive Technologies
Blackberry took the business oriented approach like strong security features, a lot of message and email services and a long lasting battery.
Apple took a different approach, like easy to use applications like Safari, and also a very limited battery capacity, At the end, the customers showed what they cared about. - Marketing and R&D, What?
RIM’s combination of a lack of marketing and poor R&D department meant they cannot pivot their business strategy to match the market demand.
This was demonstrated by the company releasing a flip phone-styled BlackBerry, even when the demand shifted to big-touch-screen phones. - Lack of focus:
RIM started off as a company who provided products to the corporate environment and became lost in the consumer market. They lost their differentiation within the industry when they began focusing on the consumer and not what their primary business strategy was; subsequently losing corporate consumers and their competitive advantage in the smartphone industry.
All of these reasons are valid, But there is one big shift that was the ultimate weapon in Apple’s hand.
RIM was thinking like a product company in a platform world.
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The platform world:
The Iphone was an immediate hit. Companies didn’t switch from the blackberry, but the individuals did. They wanted Iphones.
The bad news didn’t stop there, the Iphone success brought another competitor, Google. In 2007, Google unveiled its Android operating system, labeled as “The first open and comprehensive platform for smartphones.”
The keyword : open.
That meant opensource, anyone could use and contribute to it and develop apps for it.
One difference between Android system and blackberry is that Android is targeted for developers, while blackberry OS targeted business users,
This is a big difference that Blackberry at the time didn’t understand.
The fact that android and later Apple targeted developers with their OS meant that it’s more efficient and easy for developers to develop apps on those platforms, So that meant the start of the application stores, Perhaps the ultimate factor that led to blackberry’s tremendous failure.
For Apple, The app store was an immediate success, with over 10 million app downloads in the first week. While RIM was thinking the customers wanted features and specs, Apple let the customers decide what they want, the App store gave tremendous flexibility for the users, ”There was an app for it” that was a catchphrase back then.
Apple essentially found the winning formula, a big community of software developers that like the system and consumers that are hungry for the best and most recent apps.
A similar story happened with android, Its app store has been a success with 1.8 million apps by end of 2015.
So Why was the App store such an enormous hit?
1. Platform is a business model that facilitates the exchange of value between two or more users, usually through a large network of users and service providers, the platform goal then is to facilitate the transaction between these two parties.
Like Uber, It facilitates the ride but doesn’t own any car, Like ebay, It doesn’t own the products but facilitate the transaction, like the Apple app store, It doesn’t develop the apps, it just provides a way for the people to use the apps.
2. The app store is built from the ground up to be developer-friendly, that means the main service providers, the developers, have a big incentive to put money and effort in this platform, because after all an application is a product, it needs time and money. So business-wise, it was more efficient to develop for IOS with good software support and a big consumer market, rather than Blackberry OS which lacks both.
3. Legacy code in Blackberry, blackberry OS was built with the business needs in mind, curated for the email and security features.
So when RIM realized the huge wasted opportunity, they tried having an SDK and a framework for developers to develop apps, but it’s not that simple.
Simply, the system was too complicated, developing software is like building a physical structure, you cannot just edit the top floors with whatever you like and expect everything to work.
Also when Blackberry pushed their application store, it was too late, the consumers were already either on android or on IOS, simply there is no demand for applications on blackberry phones.
That meant developers have even more reasons focus on Ios or android, which made the blackberry market have even less apps which lead to less demand and its a cycle that spirals until the whole system collapses.
Like the difference between GM, the Car manufacturer, and Uber.
GM has the traditional supply chain of product, warehouses, distribution network, authorized sellers, so It has some problems as maintaining QC of the product, handling and controlling the supply chain…
While Uber which is a car sharing platform, has a different set of problems,for example it focuses on how it could have a large customer base in both the riders and the car owners, which is a double ended problem, you need one to feed the other, and how it could facilitate the service transaction.
Summary:
The app store is perhaps the biggest reason why Apple has more than a trillion dollar valuation, considering that the iphone is still its biggest contributor to its revenues and profits, and the app store was a big feature for the early versions of it.
In 2007, It could have made another phone and provided apps for it like the other phone manufacturers.
But instead, It provided a platform, it used a new business strategy, instead of being the service manufacturer, it made a platform where anyone can participate, sell and buy its own services.
The business model of platforms provides tremendous opportunity for growth, Amazon would have never reached this market valuation and growth if it were manufacturing the products and selling them on the internet like any “traditional” business.
Blackberry failed due to several reasons, but I think the biggest reason is being a product company in a platform world.
I also recommend the book : Modern monopolies, It covers the platform business model in great detail.
Let me know your opinion in the comments. :)
References:
https://www.investopedia.com/articles/investing/062315/blackberry-story-constant-success-failure.asp
https://slidebean.com/blog/startups-what-happened-to-blackberry
https://slidebean.com/blog/startups-what-happened-to-blackberry
