Introduction
BlackBerry is often remembered as one of the earliest brands whose smartphones gained mass acceptance among business professionals and everyday consumers. BlackBerry smartphones are considered one of the most influential consumer technology products of the mid-late 2000’s and were highly popular among many. However, BlackBerry’s complacency and conservatism allowed current industry leaders like Apple and Samsung to acquire large amounts of market share, which ultimately led to their demise. When BlackBerry experienced their drastic downfall shortly after 2010, many thought the company’s best years were behind them. However, the company revitalized their business through leveraging their brand’s security and engaging in corporate development initiatives. Their current focus on enterprise software, cybersecurity and embedded systems catered towards different industries has helped them emerge as a strong contender and future market leader in the growing B2B software market. Their recent partnerships with Amazon Web Services, expertise in cybersecurity and Internet of Things (IoT) infrastructure, and strong management team have made them a future ready business that will continue to experience strong growth in the many years to come.
History
BlackBerry unveiled the BlackBerry 5810 in 2002, which was their first model that could be called a phone and the company spent several years enhancing the product by gradually implementing features like a color display, WiFi, instant messaging, and web browsing into future products, which was a portfolio of features that very few competitors offered. BlackBerry phones had a simple design, were intuitive and were targeted towards business professionals. The phones provided a way to complete tasks they would normally need a computer for, such as responding to emails and texts and browsing the internet. However, the increased connectedness the BlackBerry Messenger (BBM) platform provided users was the most critical component that fueled BlackBerry’s success. It was apparent that consumers desired instant connection to other users and the expertise BlackBerry gained through developing the Mobitex instant messaging network with Rogers gave them a competitive advantage in providing consumers with this feature.
BlackBerry’s unique value proposition of enhanced security, convenience and interconnectedness at the time fueled their tremendous growth in the mid-late 2000’s. At the time, BlackBerry dominated the smartphone market in the United States and had several contracts with governments and large corporations, which positioned them strongly for the next few years. Even after the release of Apple’s revolutionary iPhone with a full touch screen display later that year, BlackBerry continued to grow tremendously and had 50% market share in the US smartphone market and 20% of global market share by 2010.
BlackBerry’s exit from the smartphone market can be attributed to the company’s complacency, however their lack of awareness within their primary operating market, software exclusivity and the absence of a software ecosystem were all significant factors that led to their downfall. Although BBM improved connectedness among business professionals, BlackBerry’s decision to keep that software exclusive to their smartphones resulted in the company missing out on a significant growth opportunity. Consumer demand for cross-platform messaging applications did not waver, which led to the rapid growth of WhatsApp, a company that went on to be acquired by Facebook and grow into a $700 million business. In addition, BlackBerry restricted further development of their consumer software ecosystem due to the lack of a well-established app store, which limited any opportunity for software developers to help grow the platform. In contrast, Apple and Android’s operating systems provided several opportunities for developers to create applications for a broader market through their respective app stores. As a result, their 20% 2011 US market share decreased to less than 5% in 2012 and 0% by 2017. Many of the company’s top executives also departed and BlackBerry was forced to lay off a large portion of their workforce. By the end of 2011, BlackBerry’s stock price on the Toronto Stock Exchange (TSX) had plummeted over 90% from an all time high of $241.90 in July of 2007 to $14.80, which was lower than its book value per share (BVPS), signifying the market’s significant loss of confidence in the company. As a result, it was essential for BlackBerry to alter their business strategy.
Business Model Comparison
BlackBerry’s business model and revenue streams have transformed considerably over the last 10 years with their shift away from the B2C smartphone market to the B2B enterprise software market. Management’s decision to transition the company from primarily being a consumer facing (B2C) business to focusing more on business-to-business (B2B) transactions has been key in revitalizing BlackBerry.
BlackBerry’s current business-to-business (B2B) strategy focuses on serving corporate customers and governments, which has allowed them to leverage long-term partnerships to build a stable, recurring revenue stream through a Software as a Service (SaaS) business model.
In addition, shifting to a B2B model also allowed the company to hedge against the risk of volatile consumer preferences. Since everyday consumers tend to be more spontaneous with their purchases, marketing departments for consumer facing businesses must incorporate an element of emotion to their promotional campaigns, which can be a considerable disadvantage for companies that emphasize functionality over aesthetics. Avery Hartmans, senior tech reporter for Business Insider, explains, “[BlackBerry’s] company ethos was built around designing a great product that just worked and iterating on it very slowly. To that end, they would add small features over time, but they weren't shooting for big, sweeping changes that would shock and delight consumers.” BlackBerry didn’t have a significant enough focus on appealing to consumers and their efforts towards pleasing corporate customers and governments led to their sharp decline in market share within the consumer smartphone market, where Apple was able to entice consumers through their constant innovation and developments. However, BlackBerry was able to recognize their strengths and further cater their products and services to corporate customers who require more rational promotion and have a larger focus on functionality over emotional appeal.
The B2B Software Market and Enterprise of Things niche has provided BlackBerry with the opportunity to expand its customer base to industries where secure communication holds primary importance, which signifies that they have strategically capitalized on their strength in cybersecurity to expand to additional markets. The B2B Software market has also enabled BlackBerry to not have to track competitors as often because of the industry’s high barriers to entry. The company’s market share and growth prospects truly highlight their success within these new industries. According to BlackBerry’s 2017 Analyst Summit, there are an average of 10 million new “things” (devices, systems, etc.) that are added on a daily basis. Currently, BlackBerry has a 20% share of the enterprise mobility market along with a dominant 50% share in the automotive embedded software market. In 2016, there were 3.9 billion smartphones and 6.4 billion other connected systems and devices on a global scale. Through the year 2020, it is projected that there will be 6.1 billion smartphones and 20.8 billion other connected systems and devices. With this projected growth, the opportunity for future expansion is significant.
Business Strategy Transition
BlackBerry’s transition from the B2C smartphone market to the B2B software market influenced several organizational and operational changes, which enabled the company’s revitalization.
Through engaging in Mergers and Acquisitions (M&A) activity, BlackBerry was able to acquire two private businesses that have emerged as cornerstones in their current business model. BlackBerry began by acquiring QNX Software Systems in 2010 from Harman International for around $200 million. BlackBerry nurtured QNX after the acquisition and leveraged their expertise to enhance the system’s safety, security, scalability, and reliability. BlackBerry was able to apply the strengths of its brand and highlight the security element of QNX, but also recognized the system’s versatility and scalability, which they have been able to apply to several industries, such as medical devices, aerospace and defence, industrial controls, and heavy machinery. QNX provides flexibility to Original Equipment Manufacturers (OEMS) and has relatively low hardware requirements, which has been a catalyst in helping the company acquire significant market share within the automobile infotainment systems market, which control the data, communication and entertainment components within a vehicle. BlackBerry’s QNX software provides the operating system and middleware, with OEMs controlling the overall user interface and experience of the infotainment product.
Currently powering over 175 million vehicles on the road, QNX has become a vital component in automotive software, rail transport and commercial vehicles and is trusted heavily by OEMs and Tier 1 manufacturers.
The second major acquisition BlackBerry made was of Cylance in February 2019. Cylance was a privately-held cybersecurity company based out of California with a focus on artificial intelligence implementation within its security software products. With BlackBerry’s goal of being the world’s largest and most trusted AI-cybersecurity company, the Cylance acquisition provides immense value to the company’s preexisting cybersecurity portfolio. Cylance provides an AI-driven security system that monitors the entire attack surface with automated threat prevention, detection and response capabilities to prevent any potential software breaches. Cylance’s unique security capabilities combined with BlackBerry’s development of the first AI-powered endpoint management system position them to be a cybersecurity and IoT leader in the future.
In addition to their corporate development initiatives, BlackBerry also refined their marketing and sales strategies in order to align with their revised value proposition, mission and long-term vision. Upon making the transition, BlackBerry’s value proposition changed and they began to pitch themselves as “the most secure and comprehensive way to connect people, devices, processes and systems for the enterprise of things.” Their mission became “to be the world’s leading provider of end-to-end mobility solutions that are the most secure and trusted.” Their operations and goals consolidated towards their vision of “securing a connected future you can trust,” and BlackBerry began to focus their sales efforts towards corporate customers. Their big focus areas become enterprises, governments, healthcare and financial institutions, and BlackBerry transitions to working with industries where high levels of trust are required, with regard to mobile infrastructure. By doing so, BlackBerry was able to differentiate itself from technology giants like IBM and Microsoft. Under CEO John Chen, BlackBerry has focused on staying relevant in enterprise software, as security becomes increasingly more important in the workplace. In an emailed statement to the Financial Post, the company stated that BlackBerry is the "clear leader" in the security software market and "enterprises should think twice about relying on any solution built on the foundation of a consumer technology that lacks the proven security benefits that BlackBerry has always delivered."
Appointing John Chen to be the Chief Executive Officer (CEO) of BlackBerry in 2013 was another critical change that revitalized the company. As Executive Chairman and CEO, John Chen revamped the organizational team and directed the company towards its new business strategy. Prior to joining BlackBerry, Chen had a variety of experiences serving boards of large corporations like Walt Disney and Wells Fargo and working with the United States in their International Affairs department. He came to BlackBerry withproven leadership and turnaround experience spanning over 40 years in engineering, and his reputation extended beyond the technology industry. The company explained, “Prior to joining BlackBerry, John served as Chairman and CEO of Sybase Inc. where he re-invented the company and led it through 55 consecutive quarters of profitability, providing outstanding shareholder returns during his 15-year tenure.” BlackBerry has been very impressed by his initiatives and explained, “He led BlackBerry through a successful pivot from being a hardware icon to becoming a software leader.
Today the company is poised to leverage its brand strength and heritage in mobile security along with its enterprise cybersecurity and embedded software growth engines to accelerate into the Enterprise of Things, an emerging category with billions of connected devices and massive market potential.”
Future Outlook
Looking forward, BlackBerry’s future prospects are very promising. Their growth potential within the security software market, partnerships and strong management team make them a future ready business that is positioned to sustain strong growth. BlackBerry’s plans for the future are to focus on cybersecurity and increase their presence within the industry through continuing to develop and innovate their proprietary software and acquire private businesses that will enhance their cybersecurity capabilities. John Chen plans on establishing BlackBerry as a leader in secure mobile communications, crisis communications and embedded software, which are some of the fastest growing security software markets totaling $22 billion. Their corporate development team, which acquired QNX and Cylance, has also acquired Encription, which is a UK cybersecurity company that will be used to kickstart a new consultancy business called BlackBerry Professional Cybersecurity Services. By doing so, the company will further expand their portfolio of cybersecurity products and services and successfully work towards their long-term vision. Furthermore, they are continuing to completely disconnect from the smartphone market, which is highlighted by the sale of 90 of their patents to Huawei.
From a partnership perspective, BlackBerry recently announced that they are collaborating with Amazon Web Services to develop IVY, which will be their Intelligent Vehicle Platform and will allow automakers to consistently and securely read vehicle sensor data and create actionable insights, which will enhance driver and passenger experiences. Amazon explains that the goal of BlackBerry IVY is to “support more rapid development of new customer experiences and unlock new revenue streams and business models. It accomplishes this goal while reducing costs by moving processing to the edge and reducing raw data transmission. It also improves overall operations with enhanced data visibility and access.” BlackBerry IVY will also help the company build expertise within the data security field, as IVY addresses a crucial data access, collection, and management problem in the automotive industry. Since most modern cars and trucks are built by compiling several parts from different suppliers, each vehicle model requires a unique set of proprietary hardware and software components. Amazon explains, “These components, which include an increasing variety of vehicle sensors, produce data in unique and specialized formats. The highly specific skills required to interact with this data, as well as the challenges of accessing it from within contained vehicle subsystems, limit developers’ abilities to innovate quickly and bring new solutions to market.” In addition, BlackBerry has also partnered with Baidu to work on autonomous driving technology and they are working with Zoom to implement their video conferencing platform into BlackBerry Dynamics secure mobility platform. These partnerships will also help BlackBerry build expertise within a specific industry and allow the company to increase their market share and dominance within the automotive sector.
In conclusion, BlackBerry’s ability to remain resilient and alter their business strategy has highlighted their commitment to adapt and innovate to meet market demands. Through leveraging corporate development initiatives and modifying their marketing and sales strategies, management has revitalized the company. In addition, BlackBerry’s stellar management team, strong partnerships and enterprise and embedded software expertise truly highlight that the company is back and here to stay.