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Innovation: Blackberry's Long Fall from the Top

Sept. 2, 2013
"If you want to stay ahead, you need leaders with an appetite for risk... You need leaders willing to say, 'screw the market, if we make great stuff we'll do just fine.'"

In January, Blackberry (IW 1000/412) released its long awaited, long delayed Z10 smartphone and operating system -- a combination that was supposed to offset the fallen mobile king's disastrous performance these past two years and return it to its former "crackberry" glory alongside Apple (IW 500/4) and Samsung (IW 1000/14).

But that didn't exactly work out.

Greeted with a lukewarm reception by a jaded market, last quarter sales of the Z10 fell nearly a million units short of estimates, sending stocks tumbling some 90% from its 2008 high. And that follows a nearly 40% drop in revenue last year, which sank the company 172 spots on the 2013 IW 1000 list.

See Also: Manufacturing Innovation & Product Development Strategy

Things are so bleak at Blackberry right now that the company has formed a special committee to explore "strategic alternatives" to help bring in some cash -- alternatives that included putting the whole company up for sale.

This is a stunning turn of fortune. The company that defined the smartphone market just a few short years ago -- the company that gave the world enterprise mobility and its first taste of anytime, anywhere connectivity -- has fallen from an unshakeable throne at the top down to the auction block in less than five years.

A crash that big that fast begs a couple of questions. First, what happened, exactly? And, how do you keep it from happening to you?

Looking for Answers

"The story at Blackberry unfortunately isn't that rare," explains Peter Sheahan, CEO of ChangeLabs, a Sydney-based large-scale behavioral change consultancy firm.

"It's the same thing that happened to MySpace and to Nokia (IW 1000/109) and, to some degree, to Sony (IW 1000/48)," he says. "Sometimes this is the price of being on top."

The problem, he says, isn't necessarily with the products these companies offer. In Blackberry's case, the fall doesn't suggest any defect with the Z10 or its software; it doesn't mean that there was necessarily anything wrong with any of its products, in fact.

It's a problem, Sheahan explains, with innovation.

In the beginning, he says, Blackberry -- then Research in Motion -- was young and agile enough to make important "leapfrog innovations" that disrupted and redefined the market. But when the iPhone was released in 2007 and the public began to turn more toward consumer-focused smartphones, the company was too involved with its leading technologies and too big as an organization to make the change in time.

"They couldn't re-orient the whole company because they had such a dominant market position that was so profitable that they were just too scared to kill that profit center or otherwise undermine it," Sheahan explains. "They believed that their monopolistic position would carry them through."

As a result, Blackberry stuck to its buttons too dearly for too long and has been lagging behind the market on every move since, unable to recreate the energy or momentum of its youth.

And like MySpace fell to Facebook and Sony to Apple, like Nokia fell to Blackberry at the very beginning, so too has Blackberry fallen.

Lessons Learned

Avoiding this fate, Sheahan says, requires a different way of thinking about innovation.

"Executives at the senior level have got to ask their R&D folks if they are investing in something new or just keeping the company up on the rails," he says. "That can be a really powerful set of questions."

It's powerful, he says, because at a certain point it becomes impossible to shift the trajectories of a successful enterprise.

"It's not that these companies don't spend money on innovation, it's that the politics of those places just kills the new ideas before they go anywhere," he explains. "Everyone already knows what's best and you can't convince them otherwise."

To stay relevant, he says, top companies need to maintain an entrepreneurial drive at the leadership level.

Read Peter Sheahan's advice for innovators in his IW Take 5 Q&A at iw.com/take5-sheahan.

"If you want to stay ahead, you need leaders with an appetite for risk," he says. "You need leaders willing to say, 'screw the market, if we make great stuff we'll do just fine.'"

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