Blackberry’s Astonishing Fall

Classes started this week at Kellogg; Northwestern is on the quarter system so things get going rather slowly in the fall.

I began my two marketing strategy classes with a round of introductions: I had each student go through their background and then mention one of their favorite brands.

This is always an interesting exercise; it provides a glimpse of the brands people are thinking about. The most frequently mentioned brands were Google and Apple, which isn’t a big surprise. But Jiffy Lube and Olive Garden made the list, along with about one hundred others.

One brand was conspicuously absent: Blackberry. Out of more than 140 MBA students, not one mentioned it.

While this isn’t a scientific study, it is one indicator of how far Blackberry has fallen.

Four years ago, Blackberry was an incredibly hot brand. President Obama was apparently a loyal user. Oprah, too, along with almost everyone who was someone. The company’s revenues more than doubled in 2009 and net income increased in a similarly remarkable fashion. RIM, Blackberry’s parent, had a market capitalization of more than $75 billion in 2008.

Today Blackberry is in significant trouble. Revenue is falling. Net income tumbled in the company’s 2012 fiscal year. The company lost money in the three most recent quarters. The brand is quickly losing ground to competitors. More important, perhaps, the Blackberry brand is developing negative associations: old, out of touch and inflexible.

Not surprisingly, the stock has crashed; the company now has a market capitalization of less than $4 billion.

Blackberry is a wonderful, and tragic, example of a business that failed to defend. Competitors attacked and the brand was not able to respond effectively.

Defensive strategy is incredibly important. Indeed, as I argue in my new book, Defending Your Brand: How Smart Companies Use Defensive Strategy to Deal with Competitive Attacks, protecting the core business must be a manager’s top priority. Growth is good but as Blackberry shows, defense matters more.

11 Responses to “Blackberry’s Astonishing Fall”

  1. CoreyBlake9000 (@CoreyBlake9000) Says:

    Pretty fascinating Tim. Is Blackberry’s fall a failure to defend or a failure to innovate, or are they one in the same? I vividly recall my switch three or four years ago when trying to search the internet on a Blackberry was a complete joke. The iPhone was like oxygen and made my old Blackberry feel like an antiquated flip phone. Since then, I’ve always felt that negative association with their company and their devices; like people who still used those devices had yet to wake up, or weren’t as enlightened as those of us who made the switch. To be honest, I now feel the same about my old Dell PC (I made the Mac switch around the same time). The idea of going back to any of those old devices feels, frankly, absurd.

    • Tim Calkins Says:

      Corey–Blackberry clearly has an issue with both innovation and defense. But I think the defensive part is particularly notable; Blackberry just wasn’t able to slow new entrants. It was fairly clear what Blackberry needed to do to slow losses to the competition (a better browser tops the list). The company just wasn’t able to execute.

      Tim

  2. David Says:

    Is it the brand falling or BB not sticking to its core competencies (and thus poorly using its brand)? BB was never the really cool gadget. It had an edge because IT departments of big companies loved it. It was (is?) more secure, provided push capabilities, typing emails is fairly fast, had good back-office software, etc. Troubles started when BB tried to brand itself toward end-users and forgot to focus on buyers (which were – and still are? – the flip-flopped crazy looking guys in the basement of the companies … ;-)). To me, it is a classical case of a company that forgot about its true strength and to build on it but rather ventured on a new terrain (end users) where it had a lot of weaknesses, including a weak brand … BB got diluted and Apple saw the opportunity. Many of my colleagues are using iPhone at works now (I will probably switch out of my BB one day… I already have an iPad and iPod touch) and they love it for its bells and whistles but, at the same time, they have many issues with emails and calendars synchronization which, guess what, is the very think a professional need and what BB is good at … if I were BB I would focus on selling to big companies and make sure my back-office software and ‘professional’ features keep ahead of competition. But that’s only me :)

    BTW professor, what do you think about the new Samsung SIII ad mocking people lining to get their iPhone 5?

    • Tim Calkins Says:

      David—Thanks for the comment. I think BB retains its edge with company IT departments. The problem is that this isn’t sufficient; people want the better devices and ultimately IT departments will have to respond by letting people use a variety of devices.

      I suspect executives at RIM thought they were fairly secure given their IT department support. Underestimating competitive threats is a classic defense problem.

      Samsung is doing a good job attacking Apple.

      Tim

  3. Rahul Says:

    Professor, have been wondering what should the brand do now. Or is this a story which is history now (like Kodak). I am still not sure how could they have defended or slowed down the revolution which was changing the complete industry (I think it was all about the touch and experience of Iphone and not much about the other features). I see this more from a window where both the incumbents (Nokia and Blackberry) could not grasp the industry change. Or probably changes in high-tech industry happen so fast nowadays that one miss and you are out of the race.

    Kodak was lucky that the move in their industry took place over 4 -5 years (though they still could not change). However in this case, the change happened in 2 -3 years.

    This brings me to another point, that probably one hindrance to innovation in today’s world is that you are not able to capture value to the full. Before you can completely make returns for your investment, there is another player with a new innovation. But innovation is no more about economics and maximizing profit it is more about staying afloat..

    • Ajith Alex Jacob Says:

      As much as it is about innovation and a defensive market strategy so to it is a matter of having good service levels for existing customers. The products of late have been substandard and so to have service provided to the customers who own them. From my experience I have learnt that it is better to move with the crowd when switching a product even when having the popular product is no longer a niche.

  4. smartbytes Says:

    Hi Tim, interesting read. I too had to speculate on what would happen with RIM, given both their horrible results and the desperate attempts that their executives are taking to keep/ rein in their developers. This is something which may require more than just corrective surgery – more like an extreme makeover.

  5. Rahul Shahani Says:

    Prof Calkins, I work for Research In Motion, and have had a first hand view of the challenges faced by the BlackBerry band. I am currently finishing off my application to the MMM program, so we might be able to discuss why BlackBerry is still my favourite brand in your class next year.
    Rahul

  6. Alison Heiser Says:

    Another thought about defending Blackberry…sometimes managers are more wedded to their internal assets than their customer relationships. I suspect the keyboard was loved as “what brought them to the party” and also “what differentiates us”. At the same time, a new entrant like Apple always has more degrees of freedom to change things and start fresh. Sort of like the Netflix/Blockbuster saga. The incumbent is in a tough spot.

  7. Matt Wass de Czege Says:

    Not sure I agree that Blackberry’s demise was a lack of defense, it was more of a lack of offense. You have to understand 3 major factors that all came together for the perfect storm. Alison (above) hit on one of them.

    1. Corp IT stopped paying for phones and only payed the service for employees who needed it.
    2. Apple found a use for a Smartphone other then email, which justified the average user to purchase one. These users (who were recently cut off by corp IT) then went to work and asked for access, who was willing to because it cost them very little and kept users happy.
    3. RIM was plagued with the weight of their past success. Fear of appealing to much to consumers would cut off their loyal Corp IT base, where Apple didn’t have to.

    If it wasn’t for Corp IT realizing the ROI in point 2, Apple would not own the market like they do. Keep in mind globally, RIM is the #1 or #2 device in most big corporations, but slipping fast.)

    The point here is that RIM has always been comfortable selling BlackBerry to Corp IT, who issued devices and put strict controls on them. To this day RIM continues to develop for Corp IT first and consumer second. In the past RIM failed to get out of their comfort zone and appeal to the consumer market. They “defended” instead of going on the offense. If you have ever played RISK, they are like the guy who sat in Australia, defending his continent, not realizing, if he sits their too long, he will be trapped.

    I don’t think it is too late for RIM, but they will have to rebuild their brand and what it stands for. BB10 is very innovative and should have a good appeal for consumer and business users.

  8. Jose Says:

    Hi tim, i’m IT for the company i work for… we still love Blackberrys, but truth is, everyone else is bringing to work iphones, ipads, and phones and tablets running android. and of course we gotta move with the times.

    now. i got myself a new blackberry’, actually i’m testing it, its a 9900. wich is the best i think right now, even though i think they got newer ones now. it just feels plain old. i myself use a Tablet with a bluetooth speaker as personal phone (Galaxy Tab p3100). and i am thinking… RIM you feel sooooooooo outdated.

    your read was refreshing and yes, it reflects what most of us think about the brand right now.

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