BlackBerry and the Innovator’s Dilemma

RIM BlackBerryThe Innovator’s Dilemma

Many years ago I read a terrific business book by Clayton M Christensen entitled “The Innovator’s Dilemma”.   Christensen’s book discussed how revolutionary new technologies could fundamentally “disrupt” long-held business models and unseat long-time industry leaders. It also discussed how individual companies, in an attempt to satisfy existing customer needs, could become prisoners of old ways of thinking and, despite their best intentions, not adapt to the new ways of doing business.

To help the reader understand the “Dilemma”, Christensen provided many examples of companies and industries that had fallen victim to the change created by disruptive technologies.  Christensen’s first example concerned the large format disk drive industry, which I’ll do my best to summarize.

Companies in the large format disk industry produced 14-inch diameter disk drives that were used in conjunction with mainframe computers.  The focus of the industry was to innovate continual increases in the number of megabits that could be stored in a square inch of disk space.

For years, a company’s success in the large format industry was determined by their ability to compress more and more data into every square inch.  The most successful companies were those that were able to achieve ever-higher storage densities thereby producing an ever-lower cost per megabit per square inch.  These disks, because of their sophistication and complexity, tended to be very expensive.

Things began to change for the large format disk industry following the advent of the Personal Computer.  The PC industry required small, relatively inexpensive disk drives, which precluded them from using the highly sophisticated technologies embodied in the large format drives.  The measure of success for the PC industry focused on the lowest cost per drive as opposed to the lowest cost per megabit per square inch.

The companies that produced the large format drives were not interested in supplying disks to the PC industry.  The PC market was too small when compared to the mainframe industry, the revenue per drive was too small and the required storage densities were so low that they offered little interest to the large format makers.

Other companies stepped in to fill the void left by the large format manufacturers.  As the PC industry grew, the demand for smaller disks drives grew exponentially. Before long, the 5¼-inch disk drive was matching, and in some cases exceeding, the sophistication of the large format drive but at a much lower unit cost.

As the sophistication grew and the cost declined, mainframe computer makers began looking to storage arrays composed of multiple 5¼-inch disks to satisfy their storage needs.  It wasn’t long before the large format makers were out of business.

The BlackBerry Saga

As I’ve watched the BlackBerry (formerly Research in Motion, or RIM) saga unfold, I’ve thought often about “The Innovator’s Dilemma”.  I’ve found it to be rather paradoxical that BlackBerry, once a company that capitalized on disruptive technologies to unseat other established industries/companies, has itself become a victim of disruptive technologies.

For those of you who don’t know the story of BlackBerry, allow me to share my perceptions of the BlackBerry story as I experienced it during my 20 years in the wireless and mobile industries.

BlackBerry: The Disrupter

Twenty years ago visionaries were extolling the then-latest innovations in wireless data technologies as “world-changing”. Those with vision imagined a world in which consumers could use emerging mobile devices, such as the Motorola Envoy, to wirelessly buy things, send messages, retrieve information, back up data, etc.

As companies and developers began to pursue the wireless data vision, industry associations were formed, conferences were produced, magazines were started, consultants emerged, and many wireless data startups were launched.

The country’s leading market research firms quickly forecast that the wireless data industry would be worth billions of dollars in less than five years. At conference after conference, industry pundits spoke of the world-changing potential of wireless data.

Every wireless data deployment became a poster child for the technology’s success. Yet despite a growing number of intriguing implementations, the industry never seemed to fulfill its world-changing promise. That, however, didn’t dampen the industry’s optimism. Every January 1, one could hear the same familiar refrain: “This will be the year wireless data takes off!”

As the years came and went, company after company failed. Larger, more established companies absorbed those that survived. Consolidation was rampant, but industry revenues were still low. At the time, the most common explanation for the industry’s shortfall was this: “They (the buyers of the technology) just don’t want to take the time to understand what it is and what it can do for them.”

The problem, however, was not with the buyers’ willingness to understand; it was the lack of an easy-to-understand, high utility killer application.  Then in the late nineties RIM’s Blackberry mobile messenger entered the market.  The BlackBerry was essentially a two-way alphanumeric pager/email unit that operated over a data-only wireless network.  Almost overnight it seemed as if RIM had created a viable business case for wireless data.

Others in the wireless industry, specifically the large, established paging carriers of the day (e.g. Skytel, PageNet, WebLink Wireless, Metrocall, etc.) began launching two-way pagers/email services of their own.  But as the paging carriers tried to catch up, RIM morphed into a convergent communications provider that delivered both voice services and mobile emails over cellular networks.   What made RIM unique was that they sold an early-generation smartphone, which was really just a combination PDA/cell phone, that was linked to their secure and feature-robust mobile messaging ecosystem.  No one at the time could beat this disruptive combination.

Paging carriers, unable to compete with the disruptive nature of a convergent (voice & data) solution, began to fail, consolidate or dramatically shrink.  Although many would say that it was cellular-based text messaging (SMS) that doomed the paging industry, it was really RIM, in my opinion, that spawned the wave that dethroned an entire industry.

BlackBerry ruled the convergent airwaves for much of the 2000’s.  Mobile professionals developed an addiction to anytime, anywhere email delivered on their RIM-branded, message-enabled, PDA-equipped cell phone.    Corporate IT departments all over the world found themselves pressured to install BlackBerry mobile messaging servers to meet the needs of their information-hungry mobile staffs.

BlackBerry: The Victim of Disruption

Just when it looked as if no one could touch RIM/BlackBerry, along came Apple’s 2008 3G iPhone coupled with their consumer-focused, content-driven, commerce-centric, application-ready mobile ecosystem built to use AT&T’s newly-minted unlimited wireless data plans.  The day it was launched, the writing was on the wall for RIM.

Anyone who understood Apple’s new disruptive mobile model knew that RIM was behind the 8-ball.  RIM’s greatest strength, their installed base, enterprise-focus and network-optimized, messaging-centric view of the world, became their greatest weakness.  Not everyone saw this though.

Corporate IT departments greeted the purveyors of early iPhone applications and innovations with the same question: “Does your app/innovation run on BlackBerry?”  The answer was inevitably “no” but few CIOs had the latitude or insight to understand why developers were not accommodating the “smartphone” platform with the largest installed base.  Unfortunately that caused a lot of deals and innovations to be lost until the CIOs finally began to embrace the advantages of the new Apple-inspired model.

RIM responded to the competitive pressures by creating a touchscreen smartphone, which didn’t do anything to further their fortunes.  They also tried to catch up by trying to create an Apple-like ecosystem and user experience of their own, but Apple’s head start and app-enabled innovations were insurmountable.  Unfortunately RIM was in the unenviable position of trying to match their enterprise-focused, messaging-centric model against Apple’s consumer-focused, content driven, commerce-centric, app-ready model.

RIM’s efforts were further frustrated by the lack of consumer advocacy, which was an unfortunate by-product of their long history as an enterprise-focused corporation.  Amazing as it may seem, RIM was actually treading the path trod by mini-computer manufacturers during the PC revolution of the early 80’s.

In the early 80’s, mini-computers makers such as Wang, DEC, IVPhase, Control Data, Prime, etc. dominated the corporate office automation market.  Consumers, however, were buying PCs for home use and reading PC enthusiast magazines for fun.  It didn’t take long before these consumers were demanding that they be allowed to use PCs at work and to connect to their work systems from their home PCs.

After a lot of resistance, CIOs and IT managers began to buckle under the pressure. Slowly IT departments began to introduce PCs to the workplace and allow employees to connect to work via their home PCs.  That turned out to be the end of the mini-computer’s dominance of office automation.  After 2008, a comparable scenario began to unfold with smartphones.

The growing consumer embrace of consumer-focused, content-centric, commerce-oriented, app-ready mobile ecosystems/models from Apple, and subsequently Google, led consumers to demand that they be allowed to use their personal smartphones at work.  Just as in the early days of the PC, the IT departments began to acquiesce.  RIM, because of their enterprise orientation, failed to amass the consumer advocacy needed to secure their role within this new consumer-driven movement.  CIOs were so busy working to meet the needs of their iOS/Android-toting executives that they didn’t have any mindshare left to support BlackBerry.

BlackBerry: What’s Next?

So here we are today pondering the future of BlackBerry.   It has been speculated that they are ceding the consumer market to Apple and Google (Android) in favor of the enterprise market.  History has shown that abdicating the consumer market may not necessarily be a good move particularly when the consumer is clearly setting the pace.

If BlackBerry does abandon the consumer market, it remains to be seen how they’re going to effectively play in the enterprise market without the consumers’ support.  Some say it will be through supporting the BYOD (Bring Your Own Device) market, but that model is becoming well established with many competitors now offering device management services.  Others say it will be by expanding its legacy messaging services to accommodate all devices, but that market is under competitive attack as well.

However it goes, BlackBerry does have one indisputable advantage.  They have many years of experience working within corporate IT departments.  They know how to talk to CIOs and they have a feel for their hot-buttons.  They will, however, have to work hard to break from old ways of thinking, which will require them to be sensitive to the consumer’s influence on the enterprise market.

Regardless of what happens to them, their story is a vivid example of how one’s core competence can be both a blessing and a curse as disruptive technologies introduce change.  It is also an example of how ignoring trends developing in the consumer market can bite a business in the backside.

Final Thoughts

If I were running BlackBerry, I would not give up the consumer market.  I would focus on building a content-centric infrastructure that includes, but extends beyond, messaging.  I would focus on serving both businesses and consumers with the same synergistic offering.

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