Quote of the week: “BlackBerry has a strong international brand and a loyal customer base.”
Whenever you hear a CEO invoke the power of a brand to allay fears about a company’s future, you know it’s time to run for the exits.
In this case it was Mike Lazaridis, Co-CEO of Blackberry maker Research In Motion (RIM), drastically reducing the company’s earnings outlook last week and implicitly telling investors the company has run out of ideas.
No amount of brand strength can save a technology company in trouble. A strong brand is halo created by the power and continuing ‘relevance’ of products that stay ahead of the game and keep customers loyal. Once that relevance goes, loyalty goes with it. The BlackBerry, the device that revolutionized the way workers communicate, has run its course from a hot gadget with pent-up demand to a discounted product that has been eclipsed by the next new thing.
As it fumbles to launch new models and tardily reacts to the innovations of Apple’s iPhone and devices powered by Google’s Android software, demand for the Blackberry has dropped like a stone. RIM has seen its share of the North American smartphone market shrink to 17% from 50% in 2009.
Critics say time is running out for RIM, as for Finland’s Nokia, another company that fell from its perch as a cellphone leader at warp speed. The speed of Nokia’s decline is breathtaking.
In 2007 Nokia was at the peak of its power. It made four in every 10 mobile phones sold worldwide and demand was exploding. BusinessWeek lauded the Nokia brand as the 5th ‘best’ in the world, one place behind GE. In June that year Apple released the iPhone and the game abruptly changed.
Nokia’s share price has fallen by two-thirds since then as it tried, unsuccessfully, to produce an iPhone killer. In the meantime, low-cost Chinese manufacturers, using Google’s Android software, have eaten into Nokia’s sales of basic handsets in emerging markets and are moving up the value chain quickly, commoditizing the entire industry in the process.
To survive, every technology company needs a healthy dose of paranoia, as prescribed by Andy Grove, the former CEO of Intel. In his landmark book “Only the paranoid survive” Grove refers not only to the idea that everyone else may well be out to get you, but that the best way to be prepared for changes in the market is to anticipate those changes.
The changes to be alert to are called strategic inflection points – points in time when a new technology, or the innovative application of an existing technology (like touch screen), disrupts the market.
Successful companies in decline rarely recover to their previous greatness because they become complacent and reactive, like Nokia, Motorola and RIM.
As one analyst put it in reference to Blackberry: “A soufflé doesn’t rise twice.”
The Blackberry name: Research in Motion struck gold when it developed a portable wireless device that allows users to get and send e-mail, phone and browse the Internet. Why Blackberry? David Placek, president of Lexicon Branding, says he steered away from names that were directly linked to the word “e-mail,” since consumer research shows that word can increase clients’ blood pressure. Instead, his team looked for something “more natural, more entertaining and more joyful that might decrease blood pressure.” Someone (who?) pointed out that the tiny buttons on the device keyboard looked like a collection of seeds, Lexicon began exploring different fruity names: strawberry, melon and an assortment of vegetables were all bandied about, with no success. The company finally settled on blackberry because the word is pleasing to most ears and the device, at the time, was black.
BlackBerry sticks better than something like ProMail or MegaMail. If you want to get attention, you don’t describe something, you create a new concept.
- How the iPhone and Android sandbagged the BlackBerry (tech.fortune.cnn.com)
- RIM: What Did You Know and When Did You Know It? (mondaynote.com)
- BlackBerry Still Not Ripe for Investors (online.wsj.com)
- RIM’s BlackBerry Can Rise Again (fool.com)