After CEO John Chen gave the handset division a year to return to profitability or face being axed, Michael Garwood looks at where it has gone wrong for the manufacturer
In 2007, former Soviet Union President Mikhail Gorbachev famously said: “If you don’t move forward, you begin to move backward”.
Now, you may wonder why on earth I’m quoting Gorbachev in a trade magazine – but those words, which were actually used while discussing the need to eliminate nuclear weapons, can be applied to any business – particularly in mobile.
Coincidentally, that speech was delivered a month before the first ever iPhone went on sale – a release which prompted a momentous leap forward in the handset space.
For too long, the industry had remained stagnant. Key decision makers of the telecom world were exposed and embarrassed by Apple that day, failing to have the foresight their positions demanded.
Apple, a wake-up call
Apple was a breakthrough, not just in design, but features that customers wanted before they even knew it. It didn’t simply enter the space, offering a slightly better camera and bigger or brighter screen – a strategy largely adopted by all who came before it.
Those that reacted survived to tell their tale. Those that stood still are now either dead (Nokia – in its original form), or dying, BlackBerry.
Now, it’s easy to suggest the success of the iPhone is the reason for BlackBerry’s demise. Google it, there’s plenty. Such statements let too many people off the hook. It’s an easy excuse.
For me, it’s down to bad management and BlackBerry is a key offender. Its downward plight has been staggering, going from a position of leadership to one now teetering on the brink.
To give it some perspective; just five years ago, sales numbers peaked at 52 million. Last year they had plummeted to just seven million, and forecasts for this year are less than half of that.
Apple had its staff adopting and delivering a Gorbachev-esque speech from day one. BlackBerry didn’t, and pending a miracle of Leicester City Premier League winning proportions, the company’s future in the hardware space will be soon be confined to the history books.
So where does the blame game start?
For many, its attempts to break the consumer market was a major part of its downfall, losing focus on its core – which made it the secure handset of choice for the likes of the FBI, CIA and the US President. But others have caught up.
Security is one thing, but people, whether they are consumers or in business, want more from their device. Even President Obama has ditched his BlackBerry in favour of a Samsung Galaxy. BlackBerry’s reliance on its outdated OS and its lack of apps meant it was being left behind in the new market. Loyalty from customers was being abused, due to BlackBerry’s inability to tempt app developers in the same way Apple and Android had.
In addition to that, the quality of its hardware also become a concern.
The launch of the BlackBerry Storm in 2008, its first with a touchscreen, was hampered by persistent software issues and unresponsive keyboard, whilst the Pearl’s roller-ball navigator was a regularly sent for repair.
Make or break BB10
Updates to follow-up models were minimal and uninspiring.
By the time it launched its “make or break” BB10 OS and Z10, sales were down to 28.1m.
But the move failed to halt the slide. Reaction to BB10 was mixed. The genius of Android and iOS is anyone can use it with a bit of practice. BB10 required a whole new level of learning, particularly with the full touch.
It was also becoming the centre of ridicule, making some truly bizarre decisions such as the appointment of Alicia Keys as its “chief creative officer.” Yes, that’s Alicia Keys, the pop singer. (She was quietly ushered out a year later).
BB10 was its attempt to move forward from a company perspective, but it was playing catch up from an industry one.
But remarkably, the risk of failure is one worth making if you ever get given the top seat at BlackBerry. Because despite reporting continued massive losses, redundancies in their thousands, BlackBerry seems to have money to burn when it comes to the boardroom.
For example, former CEO Thorsten Heins walked away after just 18 months with a $56 million pay off – despite guiding it through the worst performance in its history.
But that’s nothing compared to current boss CEO John Chen (pictured), who is currently listed as the highest paid CEO in all of Canada. In his last recorded annual earning (2014), he was paid almost $90 million. Yes, $90 million! That’s $25 million more than Apple boss Tim Cook.
In addition to that, he received a $90-million share package from BlackBerry Ltd as part of his joining (payable over five years) and has access to a private jet to get him too and from his Californian home to Waterloo, Ontario. (You’d think someone as committed to the cause might have moved closer to the office by now).
Legacy of errors
But what exactly has he done at BlackBerry?
Apart from cutting thousands of jobs, it seems very little has gone right. The announcement BlackBerry was to launch its first device using Android was a welcome one – albeit nearly a decade too late, but somehow even that went wrong. Chen lauded the idea that BlackBerry’s decision to outsource manufacturing to Foxconn would enable devices for under $200. Yet the Priv cost a whopping £600 SIM free. That’s £50 more than the Galaxy S7 and the same as an iPhone 6s Plus. I wonder how may jobs were cost as a result of that poor decision? It can’t go on.
Of course, this isn’t all on Chen. It’s a legacy of sitting back and failing to make the big decisions. Decisions that, unfortunately will likely see Chen go down in history as the man who killed off BlackBerry handsets.