How to set a business on a completely new track while remaining a significant global player -Charles Eagan, Chief Technology Officer at BlackBerry writing exclusively for MIT Sloan Management Review Poland.
Every self‑respecting businessperson around the globe had one. The smartphone with an alphanumeric QWERTY keyboard by BlackBerry was synonymous with safety, speed and convenience. It guaranteed instant access to information. However, the manufacturer of these devices, extremely popular in the first decade of the 21st century, suffered severely when the iPhone appeared on the market, followed by other touchscreen devices. The company fought for its place in the smartphone market for several more years, but it did not come out victorious in this fight. This does not mean, however, that BlackBerry has disappeared. In recent years, it has become a world leader in the production of software for cars, invests in research on autonomous vehicles and is strongly interested in the mass use and security of the Internet of Things (IoT). Currently, BlackBerry solutions operate in over 175 million vehicles worldwide. And this number is increasing by several million every year.
Disruption affects more and more companies. New, innovative solutions and business models pose a threat to the growing number of traditional companies, including those with an established position. Airbnb is changing the hospitality industry, Uber transportation, Facebook media. The history of BlackBerry is also the story of an organization that has lost its dominant position due to the emergence of innovative rivals. What is unique about it, however, is that, unlike other giants defeated by the market forces of competition, such as Kodak or Nokia, BlackBerry has managed not only to survive difficult times, but also to reinvent its mission and goals, and maintain its status as a global player, completely changing the market in which it operates. As Charles Eagan explains:
“Before we analyze our transformation, let's retrace BlackBerry's journey to the top. The company was founded in 1984 (as Research In Motion (RIM)) and was originally a developer of connectivity technology like modems and pagers. The company is often credited as the pioneer of smartphone technology, manufacturing the world’s first widely adopted premium smartphone, that enabled people to work securely from anywhere. At its peak, BlackBerry owned over 50% of the US and 20% of the global smartphone market, sold over 50 million devices a year, and boasted a stock price of over 230 USD.
As a trailblazing innovator who brought email to handheld mobiles with its trademark QWERTY keyboard, BlackBerry became an instant hit with world leaders, corporate executives, and the rich and famous alike. Owning a BlackBerry device was a status symbol, and the CrackBerry “addiction” was a pop‑culture reference.
With increased uptake from enterprises and governments around the world, BlackBerry’s revenue grew. It continued to expand functionality in the BlackBerry Enterprise Server (BES) and BlackBerry (Operating System) OS and after successfully gaining a foothold in the enterprise market, expanded into the consumer market.
In 2000, the company introduced its first mobile phone product, the BlackBerry 957, which came with functionality for push email and the Internet. Over the following decade, the BlackBerry became the device of choice in corporate America due to its enterprise‑level security and business functionality.”
The most important factor that reversed this trend was a launch of the iPhone, the first smartphone with a touch screen. It happened in 2007 but did not immediately negatively affect the market position of BlackBerry. The first version of the iPhone had many shortcomings, and the habits of millions of users were not so easy to change. As a result, BlackBerry dominated the smartphone market until 2010, when it still held over 40% of domestic and nearly 20% of global market share.
At that time, however, the specter of a trend reversal was already very visible. It was then that the company began its flight forward. It decided to purchase the QNX software company, whose products today are the pillar of the entire organization.
“We did not give up the fight for the smartphone market right away. In 2008, we launched the BlackBerry Storm, which was equipped with a touch screen. It was followed by other similar devices, but in 2013, we saw a new opportunity and released the BlackBerry OS, a QNX‑based mobile operating system. But the increasing popularity of the Android and iOS continued to dominate.”
As a result, BlackBerry share value fell 87% between 2010 and 2013 - from about $ 60 to $ 8‑9.
The company started to look for funding and a new strategic approach. BlackBerry announced that it was considering a sale or joint venture. A consortium of investors led by Fairfax Financial Holdings Ltd. was prepared to pay US $ 4.7 billion to acquire the company. However, in November 2013, we already knew that the deal would not come into effect, but BlackBerry managed to issue convertible bonds and thus obtain a billion dollars.
In order to develop a new strategy, the company decided to replace some of the management staff, including the CEO. John Chen took the position. Previously, he had worked in the software industry, but was also a board member of Disney and Wells Fargo.
The vision of the new management presented at that time is crucial to understanding the current situation of the company. John Chen and his colleagues identified long‑term technological and business trends that are only today bearing the first fruits. They also had the courage to invest in them.
What are these trends?
“The first was the transition from the production of hardware to software and services, and their sale in a multiplatform model. Such a move was beneficial in the short term as it allowed for reduced operating costs and increased the return on investment, but it was also an effective solution for the long term. Today, enterprise solutions are one of the main drivers of business innovation.
The second trend was the growing importance of the Internet of Things and the ability to connect countless sensors into a network to monitor complex systems in real time. In 2013, the Internet of Things was just a buzzword, today, it is beginning to revolutionize manufacturing, commerce and many other industries.
Finally, we realized the development of autonomous vehicles and intelligent solutions for the automotive industry was going to have a massive impact on the industry. The role of automotive software has changed profoundly in recent years, and we anticipated security becoming a serious challenge. Software is now being used and is relied upon for critical operations that were previously being performed by hardware. The complexity of software and the functions it performs continues to grow and our customers rely on our software and services to help them build these complex critical systems.
It was on these three trends that BlackBerry developed its new strategy.”
In 2016, the year BlackBerry stopped producing smartphones, it invested 100 million USD in the BlackBerry QNX Autonomous Vehicle Innovation Centre (AVIC). The next year, in partnership with the city of Ottawa, Canada, the first public test of an autonomous vehicle (running on the QNX operating system) was conducted. In 2020, BlackBerry began cooperating with Canoo, a Californian start‑up that plans to offer autonomous vehicles through a subscription model soon. Naturally, these will use QNX solutions.
Autonomous cars are still a song of the future, but intelligent car solutions are already the present and it is in this market that BlackBerry is currently building its position. It mainly provides solutions in driving assistants and autonomous parking systems, as well as in connectivity, and in‑car entertainment and information systems. As we mentioned, these now operate in over 175 million cars worldwide, in major brands such as Audi, BMW, Ford, General Motors, Honda, Hyundai, Jaguar, Land Rover, Kia, Maserati, Mercedes, Porsche, Toyota and Volkswagen. This is impressive growth from its 2016‑level of around 60 million cars.
“An extremely important factor that allowed us to achieve this position is the emphasis on security.
For over 35 years, BlackBerry has invented, created, and built security solutions to give people and business the ability to stay secure and stay productive. BlackBerry created the mobile workforce with trusted security at the very beginning and provided the freedom and the assurance to work whenever and wherever. Today, BlackBerry continues to put that trusted security protection, everywhere. From cars, to mobile, to laptops, to name a few. Our security is sophisticated and intelligent.
We are seeing functional safety requirements in more and more automotive systems. The good news is that BlackBerry QNX has a very strong pedigree in building safe and secure software for mission‑critical, safety‑critical and life‑critical embedded systems. This pedigree complies 100% to the ISO 26262 functional safety certification requirements in automotive, and as a result, we have invested significantly in this area and offer many safety certified products, including our QNX operating system, hypervisor, graphics monitor, communications software, development tools and other middleware
Beyond the growing importance of software, what we see is the car moving to more of a software platform that can support a broader ecosystem and car‑centric applications. The car of the future will become a software platform where monetization of (Advanced Driver Assist Systems) ADAS, suspension, and engine features and other valued‑added services are enabled. The car is becoming a mobile platform that will present new, nontraditional business opportunities for automakers and many others.
Recently, we announced a multiyear, global agreement with Amazon Web Services (AWS) to develop and market BlackBerry IVY, an intelligent vehicle data platform that combines BlackBerry QNX’s automotive software and AWS’s broad portfolio of services, including IoT and machine learning services. BlackBerry IVY will enable automakers to accelerate time to market to build, deploy and monetize new in‑vehicle applications and connected services across multiple vehicle brands, makes, and models. Securing all those systems becomes a growing challenge.
But our vision of the future does not focus on the automotive industry only. We think more broadly. *In 2021, our strategy is to connect, secure, and manage every endpoint in the Internet of Things. Beyond a secure enterprise or secure building, we think about building critical infrastructure, securing utilities, automotive safety, and securing the end consumer themselves. BlackBerry protects business, endpoints, and people, with smarter security solutions that are more effective and require less resources to support, that produce a better return on investment for their users. This is the foundation of BlackBerry’s mission and vision of Intelligent Security -*everywhere.
In recent years, BlackBerry has continued to showcase its market prowess, announcing strong industry partnerships and product launches that have catapulted BlackBerry to the heights of cybersecurity excellence.
The future lies in the Internet of Things. The vast, fast‑growing global network of internet‑connected devices and endpoints represents an enormous opportunity for businesses across every industry, and the next stage in the digital transformation of enterprises. But that opportunity does not come without great risk.
Hospital tech, cars and roads, power and water grids, airliners, industrial equipment - everything is being brought online. There are already tens of billions of connected devices and endpoints worldwide, and that number will only grow larger.
In such a hyperconnected world, cybersecurity is not just about protecting data, but also protecting people – the secure flow of information is both mission- and safety‑critical. Because when everything is connected, everything is a target. And if even a single endpoint in a system is unprotected, nothing is secure.
Securing the Internet of Things is a massive undertaking and requires a completely new approach to cybersecurity. BlackBerry understands this, which is why we are working closely with leaders in every sector to change the way their organizations secure and protect everything from bring your own devices (BYOD) and wearable technology, to credit card data and movie scripts.
We are historically well‑positioned in this regard. The magic in our smartphones that made us a global brand is the elegant and durable architecture and Internet Protocol ( IP) we developed for highly secure, reliable, and efficient device‑to‑device messaging and communications. That same architecture has broad applicability today across the billions of fast‑proliferating IoT endpoints. We are trusted by some of the world’s most secure organizations to safeguard their people, assets, and data.
With help from our vast partner ecosystem, our software cybersecurity portfolio has never been stronger. In October 2020, BlackBerry announced the launch of the BlackBerry Partner Program that combined the award‑winning BlackBerry Enterprise Partner Program and BlackBerry Cylance Partner Programs into one comprehensive structure.
Through tools like BlackBerry UES BlackBerry QNX, and BlackBerry Jarvis, we stand ready to secure, connect, and protect the digital enterprise. Finally, having recently undergone an evolution of our own, we know what is required for businesses to successfully complete their digital transformation.”
A Timeline of Transition:
1984 – RIM is founded by University of Waterloo engineering student Mike Lazaridis and University of Windsor engineering student Douglas Fregin.
1996 – RIM releases its first keyboard‑based device – a two‑way pager called the Inter@ctive Pager, also known as the RIM 900.
1997 – RIM goes public and is listed on the Toronto Stock Exchange. Two years later, the company debuts on the Nasdaq, and receives regulatory approval in the U.S. to sell its first BlackBerry device – a pager with email called the 850.
2004 – The first BlackBerry devices with voice‑calling and colour screens hit the market – RIM turns 20 years old and tops one million subscribers on its devices. By the end of 2004, it has more than two million subscribers.
2007 – RIM becomes the most valuable company on the Toronto Stock Exchange (TSX) with a market capitalization of more than 67 million USD. Its smartphone subscribers hit 10 million.
2008 – BlackBerry launches its App World marketplace to compete with Apple’s App Store.
2010 - RIM passes 40 million users and ships its 100 millionth smartphone. It buys Ottawa‑based QNX Software Systems, which later becomes a key part of its software business.
January 2013 – BlackBerry launches the BlackBerry 10 operating system.
August 2013 – BlackBerry announces it’s conducting a strategic review and says it’s considering a sale or joint venture. A month later, a consortium of investors led by Fairfax Financial Holdings Ltd. bid 4.7 billion USD to take BlackBerry private. The deal collapses in November, and BlackBerry opts to raise 1 billion USD through a sale of convertible debt to investors. John Chen becomes the new CEO.
2016 – In September, Chen announces that BlackBerry will stop making smartphones, and outsource all hardware development and manufacturing to outside partners.
2018 – BlackBerry buys Cylance Inc. – the industry leader in AI and ML‑based security delivering true next generation capabilities – for 1.4 billion USD in an all‑cash deal – the company’s biggest acquisition ever.
2019 – Chen, along with Canada’s Prime Minister Justin Trudeau, announce 310.5 million USD to expand the QNX operating system. The federal government pledges 40 million USD to the project on BlackBerry’s commitment to create 800 new jobs.
2020 – BlackBerry launches BlackBerry Spark, the company’s single platform to secure and manage endpoints. Providing organizations with a Zero Trust architecture and a Zero Touch approach, BlackBerry Spark leverages artificial intelligence, machine learning and automation to provide improved cyber‑threat prevention and remediation, while offering visibility across all endpoints.