Startup lessons from BlackBerry’s demise
At its peak BlackBerry was one of the most influential tech companies in the world. The company grew from a broke startup with just a few engineering and product visionaries in 1984 to a peak stockmarket value of $55 billion in 2008. In 2009 1/5 of all smartphone users had a BlackBerry. Then why is their current market share in the single digits just 6 years later? After establishing an incredible initial product market fit the company was unable to anticipate or respond to massive changes in the handset market. This was exacerbated by weak leadership that lead to a fragmented and unclear vision in their time of crisis. Where did things go wrong for what was one of the most valuable tech companies in history, and how can these lessons be applied to startups in 2016?
Finding product market fit can lead to huge success
A lot has been written on product market fit so I won’t spend too much time diving into the definition here. But consider this: BlackBerry stumbled upon a goldmine with a resounding product market fit tied to one key feature- the ability to check and send email on the go. That’s it, just email. They started with a small problem, defined the pain for people and presented the solution. Their phones weren’t even phones initially, they were PDAs that didn’t support voice calls. This simplicity helped BlackBerry own a previously undefined and unremarkable product category. “Unlike other mobile devices, ‘it wasn’t trying to solve all problems, but taking one use case — e-mail — and trying to deliver it in a new paradigm,’” (John McKinley, CTO for Merrill Lynch in Losing the Signal p.75). Expanding beyond their expertise to make their products appealing to additional markets is where the trouble started.
But to keep it, you must adapt to shifting forces in the market
A lot of Blackberry’s demise can be tracked back to the 2007 launch of the iPhone. Sure, the company had problems before then (funding shortages early on, constraints by an aging communications network, a major patent lawsuit spanning 2001–2006), nothing caught them off guard as much as the launch of the iPhone. In 2007 BlackBerry and its co-CEOs Jim Balsillie and Mike Lazaridis were seen as untouchable. The arrogance they had as a result of the company’s meteoric rise hastened their downfall. Take for example Balsillie’s initial thoughts on the iPhone: “It’s kind of one more entrant into an already very busy space with lots of choice for consumers. But in terms of a sort of a sea-change for BlackBerry, I would think that’s overstating it.” BlackBerry responded to the launch of the “Jesus phone” by doubling down on the four pillars of their success to date: strong battery life, conservative use of carrier’s spectrum, government-level security, and ease of typing. Especially for the consumer market (which they aggressively pursued), the iPhone demonstrated that these factors weren’t what was most important to users.
“Apple reset what the expectations were. Conversations didn’t matter. Battery life didn’t matter. Cost didn’t matter. That’s their genius. We had to respond in a way that was completely different than what people expected,” (Mike Lazaridis speaking with hindsight in “Losing the Signal” p.168).
If the co-CEOs were woefully blind of the shortcomings of the products they released following the launch of the iPhone, not everyone at BlackBerry was. As can be the case, the sales teams tasked with selling their new products served as something of a canary in a coal mine. A major component of BlackBerry’s initial success was a bottoms up sales strategy to open the door to huge corporate clients by bypassing risk adverse CIOs. With their diversification into the high-stakes consumer market, they risked trying to create a product that worked for both Enterprise and consumer markets- ultimately satisfying neither and losing product market fit. “Balsillie’s sales leaders came to RIM’s all-executive Tuesday noon meetings stocked with product complaints from carriers, saying they couldn’t make their numbers because of quality issues, and further badgered their engineering colleagues at separate cross-functional gatherings. These meetings… became tense sessions that turned sales and product people against one another,” (“Losing the Signal” p.183). The adversarial climate between the Product and Sales teams removed the possibility of a healthy feedback loop that could have presented an opportunity for a turn-around.
If you lose your vision, narrow your scope
Chasing down two different types of users, enterprise clients and consumers, quickly unveiled cracks and led to a series of failed product launches. The Storm was presented as BlackBerry’s response to the iPhone. “The Storm failure [in late 2008] made it clear that we were not the dominant smartphone company anymore. We’re grappling with who we are because we can’t be who we used to be anymore, which sucked… It’s not clear what the hell to do,” (Jim Balsillie in “Losing the Signal” p.170). This lack of a company vision culminated in the failure of the PlayBook tablet. Not only could the co-CEOs not agree on who their new product was for and what made it special, but the product didn’t have the core feature BlackBerry created a new product category around- email.
BlackBerry had many opportunities to branch out of its core handset business. They could have focused on enterprise services, building up adoption in emerging markets, and perhaps even spun their popular BlackBerry Messenger (BBM) into a messaging service to rival WhatsApp or WeChat. But instead, they tried to do too much without a clear vision.
If you’re interested in learning more about the rise and fall of BlackBerry, I highly recommend reading Losing the Signal, the book that prompted me to write this post.