How Blackberry Can Be Profitable and Relevant in 2017
Focus on Consulting & A.I. Rather than Devices
Blackberry, once a technological juggernaut now finds itself struggling in today’s technology market. Given the fact that they have already missed the smartphone train, where does Blackberry go from here?
The answer: Focusing solely on Software Consulting/Services
Why no smartphones you may ask? There’s a simple answer to that. Blackberry, being obsessed with its trademarked keyboard, envisioned a future where its hardware would never be replaced. But as history has shown, technology is consistently changing and being able to adapt to new market conditions are essential for any company not just in technology, but in oil & gas or even finance. For Blackberry to catch up to the smartphone train would be a difficult task- it’s just moving too fast. They tried in 2013, but ended up with a $1 Billion write down of its new phones- BB Z10. Android currently dominates the market share with over 1 billion active 30-day users followed closely by Apple. In Blackberry’s latest quarter, the company announced it sold 1.1 million devices. But with sales of the new devices growing at a slower-than-expected rate, how long will it take for them to catch up?
If we look at IBM- a company that started with $950,000 in revenue in 1911 to close to $100 Billion a year in today’s market by shifting focus from building machines to business services- we can begin to see what Blackberry needs to do in order to sustain itself in the technology industry. IBM’s original business plan was to solely produce hardware, such as punch card machines, computers and hard disk drives such as the first 350 RAMAC Disk Storage Unit.
And like Blackberry, they were extremely successful at it, so they stuck with the plan for quite some time. But come 1985, like the smartphone market today, there were other competitors looking to take a bite at this new money generating sector. The so called ‘IBM clones’ started to hit the market led by Apple, Dell and Compaq. But unlike Blackberry, IBM noticed that in order to prosper in the new challenging environment, they would need to adopt a different strategy. Fast forward to 1991, and its board approves a plan turning the once known machine building powerhouse to a “world-class services company”. By 2000, IBM made $33 billion a year in services revenue. Add another 10 years and that figure had grown to $56 billion a year. Today, IBM is a well oiled machine that makes close to $100 billion a year selling services- only services- to businesses.
Now let’s see how IBM’s strategy applies to Blackberry. John Chen- Blackberry’s new CEO from 2013 to present- outlined an eight quarter turnaround plan involving outsourcing manufacturing and focusing on software business services. The latter part sounds like IBM right? Due to this plan, its software business services revenue surged 153% in the most recent quarter. But despite a $137 million increase in software services revenue, overall revenue fell to $658 million. So where is this decrease coming from you may ask? Phones. As mentioned previously, before Chen arrived, Blackberry announced a $1 billion write down of its new phones. And even with Chen, Blackberry is still pushing out new models such as the Passport, Classic and Bold. Don’t get me wrong, many companies and consumers still purchase them for its impeccable security, but with android phones offering similar security features and consistently getting better (such as Samsung Knox), how long will Blackberry last in the phone business?
If the drive happens and its software business keeps expanding like IBM’s services, and they reduce or nix its phone business , then I believe Blackberry has a very promising future ahead.