October 6, 2013

How the Mighty Fall applied on BlackBerry

Jim Collins has written several books on the subject of company sustainability and growth. The books follow companies from the birth to the bitter end:
  • Good to Great - Will explain how to transform a good company into a great company.
  • Built to Last - When your company is great, this book will explain how to keep the company great.
  • Great by Choice - Why some companies survive a state of chaos - such as the credit crunch of 2008, and spikes in the price of oil - while other companies perish under the same conditions.
  • How the Mighty Fall - Investigates how and why a once great company begins to decline and how to reverse the decline

This article will explain how the model from the book How the Mighty Fall can be applied to the once great Canadian company BlackBerry. Released in 1999, the first BlackBerry device was an email pager, and the company would become one of the great developers of mobile phones. The stock market reflected their greatness:

The BlackBerry stock. Source: Yahoo

From the stock chart it's easy to see that something happened in 2008/2009, and that something was first Apple's iPhone and then Google's Android. Due to the competition, the number of US BlackBerry users peaked at 21 million users in the fall of 2010. The question is why the decline continued and if the decline can be reversed? According to the book How the Mighty Fall, the decline of a company can be described by five stages. It's possible for a company in decline to skip one of the stages, but most companies in decline follow this model:

The five stages of a company in decline. Source: How the Mighty Fall

  1. Hubris born of success. The company becomes arrogant and loses sight of the true underlying factors that created success in the first place.
    • BlackBerry argued how keyboard-equipped phones had always done well with corporate customers and how it would be a mistake to follow Apple and Samsung who sold touchscreen phones.
    • The executives argued how they had time to reinvent the company because they had managed to do so in the past.
  2. Undisciplined pursuit of more. The company makes undisciplined leaps into areas where it cannot be great or the company tries to grow faster than it can hire great people. When an organization grows beyond its ability to fill its key seats with the right people, it has set itself up for a fall.
    • BlackBerry expanded fast across the world. In 2009, Fortune said that BlackBerry was the world's fastest-growing company. But the large company became a slow company, thus they were always late to launch new products.
  3. Denial of risk and peril. Managers in the company begin to ignore negative data, and focus only on the positive data. They blame external factors for setbacks, rather than accept responsibility.
    • The market for keyboard-equipped mobile phones was dead, but you could still hear BlackBerry executives saying "I don't get this" when they saw a touchscreen phone. They thought customers bought the BlackBerry because of the keyboard. One the other hand, other executives said "If that thing [the iPhone] catches on, we're competing with a Mac, not a Nokia." But concerned executives were dismissed as non-team players.  
    • An executive argued how the launch of a new phone was "an overwhelming success" when the sales lagged behind the iPhone and customer returns were high.
    • Feedback from customers never reached the co-CEOs (BlackBerry had two CEOs) because top executives didn't want to.  
  4. Grasping for salvation. The company tends to hire a charismatic leader or outside savior that's supposed to save it, it tries different bold strategies, creates products or acquires companies that doesn't fit within the Hedgehog concept.
    • BlackBerry had a plan to convince wireless carriers to replace SMS with SMS 2.0 called BBM (BlackBerry Messenger). It became the company's top strategic priority, but was killed in 2013.  
    • BlackBerry's "iPhone killer," the Storm, was cobbled together quickly and wasn't ready for the market. The customers hated it.
    • BlackBerry acquired Torch Mobile that had created a mobile Internet browsers, but it was complex and time-consuming to re-fit this browser for the BlackBerry phones.
    • To satisfy both consumers and corporate users, the BlackBerry phones were equipped with camera, games, and music applications. But the large corporate customers didn't want personal applications on corporate phones. Neither consumers were satisfied, they wanted apps but it was difficult to develop apps for BlackBerry's system.
    • Delayed with six months, the PlayBook (BlackBerry's "iPad killer") lacked third party e-mail and apps.
    • BlackBerry recruited an "outside savior" -  the artist Alicia Keys as a Global Creative Director.
  5. Capitulation to irrelevance or death. The setbacks starts to erode the financial strength of the company, and key persons abandons the company.
    • In Q2 2013, the company reported a USD 965 million loss, primarily due to unsold phones. The company cut 4500 jobs - or 40 percent of the workforce. 

In September 2013, BlackBerry signed a letter of intent to be acquired for $4.7 billion by a consortium led by Fairfax Financial with the intentions to take the company private. But can BlackBerry be saved? According to How the Mighty Fall, it can, and the book includes several examples of companies that were in decline before they recovered. These companies include the steel producer Nucor and retailer Nordstrom

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