BlackBerry Pulse Check
BlackBerry is showing a measurable pulse along with some encouraging cognitive activity. Its short-term prognosis is improving somewhat so it can be removed from the critical list and reclassified as in serious condition. However, we’ll just have to monitor it carefully and watch day-by-day to see how things turn out. As it is now, well, you just never know.
Watching the resurrection of BlackBerry over the past couple weeks has been interesting. I use “resurrection” liberally. BlackBerry né Research In Motion (RIM) has essentially been on life-support for the past couple years. It’s critical condition is the result of compound injuries including the astounding global market share losses, repeated delays in releasing its new OS, decimation of employee ranks – not to mention the shakeup in corporate management – then exacerbated by the amazing growth in competition from Android and Apple. It’s a wonder there was enough breath left in RIM to rise from its bed in ICU; many observers in the United States had basically written the company off. I recall the first time I looked at RIM’s much flogged Playbook and just shook my head, “Oh boy, another dead-on-arrival tablet.” So what has kept BlackBerry alive? Is it sustainable?
Time for a Pulse Check
Outside the United States/North American market, BlackBerry has a huge and loyal user base. European and Latin American customers especially have a long and strong love affair with their BlackBerrys. As in the United States, RIM was the first-to-market with a full-featured business solution for mobile workers. Following closely on its success in North America, it rocketed to first place among enterprise users in Europe and Latin America. Europeans loved its simplicity and functionality and made BlackBerry the number one smartphone in numerous European countries. According to BlackBerry CEO Thorstein Heins, the United Kingdom alone represents some ten percent of all BlackBerry sales over the past few years. Latin Americans embraced it first for corporate use and it quickly found its way to the small business community. While Europeans primarily used it for mobile communications while away from the office and their wired communications networks, many small business users in Latin America that didn’t have reliable computing and telecom networks made it their primary form of communicating, essentially leapfrogging from no-tech to high-tech. Pre-paid service plans further drove BlackBerry use deeper into the hands of Latin America’s shadow economy – by some estimates accounting for as much as forty percent of some emerging nations’ GDP. Add to this growing customer base huge numbers of personal and casual users from Latin Americans at the bottom of the financial pyramid that found the money to buy a cool phone – a status symbol.
But what does this embedded loyalty mean to BlackBerry’s future given the company is essentially rebooting? Well, while there are loyal users aplenty, BlackBerry has been busy shoring up the critical component of its recovery – the development community. Without apps it is dead. Call the coroner. Developers have been focusing their resources on Android and Apple and more recently Microsoft’s Windows Phone 8. To rekindle enthusiasm within the developer ranks, Thorstein sent BlackBerry’s developer team on the BlackBerry Jam World Tour during the second half of 2012 and early 2013. With more than three-dozen stops in all, Antarctica was the only continent missed. To further convince the developers that BlackBerry will be a viable commitment of resources, the company offered developers an easy path to tweaking Android apps to run on the new BlackBerry devices.
We now have a society of embedded loyal users and app developers ready to offer these users a reason to buy the new products. So what’s up with the rather meager launch of the Z10 and Q10 devices? According to the initial media releases, the BlackBerry Z10 was flying off the shelves in Europe, especially the United Kingdom. Stephen Bates, the UK’s marketing director, has been quoted as saying that the Z10 “exceeded expectations.” Well, just what were the expectations? You don’t have to jump terribly high to easily clear a very low bar. Surfing the web, one finds numerous reports from analysts and bloggers reporting retail stores quickly selling out of their five-to-fifteen allocated units. Tight inventory like this is usually reserved for Black Friday laptop blowout sales at Office Depot. Is this a sign of confidence, or a lack of confidence?
Did BlackBerry’s ODM limit production until there was sufficient demand to extend enough credit to fill the pipeline? Pacific Crest analyst James Faucette suggests BlackBerry may be using the tested tactic of holding back inventory to enhance demand and consumer buzz. Is mimicking Apple’s marketing tactics a good idea? My take – not so much. Apple is strong; it has $137 billion in cash on hand. RIM has less than $3 billion. If it is to play against the big guys, it needs a lot more money or a completely different strategy. And most importantly, the BlackBerry needs some differentiators.
What does the BlackBerry Z10 do that an Android or Apple device doesn’t? Oh, it runs Android apps and Apple doesn’t. Well, does it interface seamlessly with the Apple ecosystem as all Apples do? Nope.
Last year, Thorstein told analysts the future success of BlackBerry depended upon recapturing its market position in the United States. Holding its opening night in the United Kingdom smacks of Hollywood’s “limited release” of questionable films. BlackBerry’s UK release and resulting short-term buzz, along with its expensive Super Bowl ad, won’t have any measurable positive impact in the United States. The ad was buried in the third quarter when the lights went out. Did you see it? Do you remember it? USA Today’s Ad Meter ranked it 38th out of 54 spots. Not memorable. If BlackBerry is really relying on a U.S. comeback, this was not a good marketing strategy to capture the hearts and minds of U.S. customers. First, U.S. consumers have a memory half-life of about four hours so the Super Bowl spot will be meaningless if it hasn’t already been forgotten. Second, for six weeks BlackBerry will be exposed to any and all negative publicity the blogosphere will generate (including this piece) and will have neither the resources nor the time to effectively counter them.
Treatment Plan and Prognoses
“BlackBerry is showing a measurable pulse along with some encouraging cognitive activity. Its short-term prognosis is improving somewhat so it can be removed from the critical list and reclassified as in serious condition. However, we’ll just have to monitor it carefully and watch day-by-day to see how things turn out. As it is now, well, you just never know.” At least that’s what I’d say to the family and loved ones.
Robert C. Chapin, Partner
Andrew Seybold, Inc.