The competitive lessons from Apple squeezing the juice out of BlackBerry
I feel like I’m dating myself with the fact that I can remember the days when BlackBerry was cool. It seems an eternity ago when BBM groups, the dirty ‘r’, and brick breaker were considered culturally relevant.
Believe it or not, Research in Motion (RIM) was still selling BlackBerry phones until January of this year. For the small Venn Diagram of folks who crave competitive strategies AND love Sex and the City, you may have noticed Carrie Bradshaw rocking with the QWERTY keyboard in the most recent reboot of the show.
But, the BlackBerry versus Apple retrospective is a story ripe with juicy lessons on competitive strategy.
It’s the story of two competitors — with the entire world as its viewing audience — battling over two different visions of what a mobile device can do.
It’s the story of product innovation. Fate-sealing mistakes. Competitive positioning. And billions of lost dollars.
It’s the story whose ending has now changed how our entire world exists.
So, how the heck did Blackberry slip from its lofty position as the pre-eminent smartphone, and what was Apple’s competitive advantage to erase their biggest competitor?
Let’s find out in our latest edition of VERSUS, where we break down how the biggest businesses in the world compete to win.
Big business leads to big business…and Blackberry’s advantage over other phones
Founded in 1984, Blackberry was then named Research in Motion (RIM) and specialized in building modems and pagers.
However, the start of their commercial success occurred when RIM presented the ‘Leapfrog’ prototype to their client, Bell, in 1998. The top half of this two-way pager featured a prominent screen, while the lower half was adorned with a sleek keyboard.
The pager was smaller than its chunky predecessors, but more importantly, RIM’s prototype brought a unique value proposition that would kickstart the smartphone revolution:
For the first time ever, people could send and receive work emails away from their desks.
How people communicate was about to change forever.
RIM began to develop this product — now named BlackBerry — and took the business world by storm for four key reasons:
Product: The ease of email communication was a game-changer.
Marketing: BlackBerry gave away its devices to influential bankers, politicians, and business leaders. Their product, and brand, became synonymous with the corporate elite.
User experience: The QWERTY keyboard allowed for far quicker texting and emails.
Security: IT department heads and governments trusted RIM’s security capabilities. As a result, these enterprise businesses bought thousands of Blackberries for their employees.
These four factors quickly propelled BlackBerry into becoming a real player in the phone market, eating away chunks of Nokia’s — the then legendary leading phone maker — market share. RIM had found the perfect product-market fit with business professionals and an organic brand to go with it, paving the way for the smartphone revolution.
“You get a BlackBerry, you get a BlackBerry, and you get a BlackBerry!”
Although BlackBerry’s early success was with corporate buyers, the total market for smartphone users was quickly expanding beyond just the business world.
And nothing accelerates your commercial success to the broader market quite like the Oprah Effect.
Blackberry got that stamp of approval from Oprah Winfrey herself right after they launched a new phone in 2005.
Then RIM really took it up a notch, releasing more affordable models of their phones, like the BlackBerry Pearl, along with their new and exclusive messaging app, BlackBerry Messenger. BlackBerry’s were suddenly more attainable and the exclusivity and coolness of BBM was catnip to a younger audience raised on apps like MSN messenger.
Oh, and if you didn’t have a BlackBerry? Well, then you weren’t allowed in the BBM chat.
It was their equivalent to the iPhone ‘green bubble of shame’.
While this kind of ‘bulletproof’ social proof, the exclusivity of the BBM club, and their cutting edge technology did help broaden Blackberry’s appeal, there’s a lot more needed to cater to a wider set of buyers than just Oprah’s word.
The product also has to provide long-standing value to these different audiences.
And a competitor you may have heard of — Apple — was entering the fray, brimming with innovative product ideas that would transcend RIM’s vision for mobile communication and dominate a market that was about to grow 12 times larger…
Apple’s Competitive Advantage Part 1: No more buttons!
January 9, 2007 — Steve Jobs paces across the stage in his signature black turtleneck and nondescript jeans. He proceeds to share with the world Apple’s vision for three new products:
A widescreen iPod with touch control
A revolutionary mobile phone
A breakthrough in internet communication
Jobs explains each product line with his eyes fixated on the ground, calmly walking back and forth the stage.
Yet the fervour amongst the crowd grows louder and louder.
Jobs pauses. He then stares out towards the audience grinning, like a zookeeper dangling meat in front of a pack of drooling lions.
“Are you getting it yet? These are not three separate devices. This is one device. And we’re calling it the iPhone.”
Now it’s time to queue the not-so-subtle stab at competitors.
“Let me talk about a category of things. The most advanced phones are called ‘smartphones’… so they say,” Jobs smirks. “They combine a phone and some email capability… and all have these little plastic keyboards on them. The problem is that they’re not so smart and they’re not that easy to use.”
Then a four-quadrant matrix appears on screen, with the iPhone situated at the uppermost right corner.
The two axes that underpin the graph? Smartness and ease of use.
In a little over four minutes, Jobs puts on a competitive masterclass.
Product innovation. A clear and consumable message. And clinical competitive positioning of Apple’s competitive advantage in space.
Apple has drawn their swords, while RIM remains obliviously glued to their BlackBerries.
Those that ignore their competition, are doomed to lose to them
RIM’s biggest mistake? They miscalculated where the market was going. Until it was too late.
Those that ignore their competition are doomed to lose to them
RIM’s biggest mistake? They miscalculated where the market was going. Until it was too late.
Apple sold a modest 1.4 million iPhones upon its release in 2007. Meanwhile, 4 million BlackBerry phones were sold in Q4 alone.
RIM were still considered the innovative disruptors in the space, rapidly eating into Nokia’s market share. They were well on their way to category leadership, and fast.
Plus, the new-to-market iPhone was by no means a finished product. It was incredibly expensive. Calls would suddenly drop. And the battery life? Fuggedaboutit.
But RIM fixated on these short-term shortcomings, failing to see the bigger picture that Apple was painting as they fixed the small errors in their brushstrokes along the way.
In particular, RIM were steadfast in their belief that customers were attached to the QWERTY keyboard layout. The full-screen device was not only jarring, it was the reason iPhone’s battery could barely last through a coffee poop break.
Ironically, that perceived weakness became one of Apple’s two biggest competitive differentiators that would launch them towards category leadership.
Even at that time, it seemed like an ill-advised view by RIM’s leadership. In Wired’s 2008 review of the iPhone, they specifically noted that “the iPhone is a lifestyle phone, not a business phone.”
The broader market was already validating iPhone’s product, despite the revenue numbers not yet backing it up.
But before we get into just how badly the touch screen squeezed the life from BlackBerry, let’s get to the other differentiator first.
Apple’s Competitive Advantage Part 2: The App Boom
Nowadays, the App Store feels like a logical extension of our iPhone experience. One simply doesn’t exist without the other.
However, back then it wasn’t so clear-cut.
As they prepared to release the iPhone 3G, Apple was gaining momentum. There’d been a resounding approval for the speed and ease of their internet browsing, especially compared to BlackBerry.
Plus, minor issues like the dropped call problems were becoming a thing of the past.
Product parity was not only in sight, but Apple also had a secret recipe that would cook up the biggest differentiator yet.
Arthur Levinson, a biotech executive and board member, pitched the concept of the App Store — a space where developers could create third-party applications for the iPhone.
But the idea was met with hesitation, particularly from Jobs. He felt that it was a gamble to vest over that much control over the direction of their product. Why couldn’t they just create these apps in-house?
The constant demand from developers, though, made Jobs’ decision inevitable. It was time to open the iPhone up to third-party apps. This was the start of their smartphone domination.
The App Store was an ingenious strategic decision because:
It crowdsourced ingenuity by incentivizing developers to produce third-party apps
It created another revenue stream, as Apple made 30% profit on app revenues
Developers flooded the market, creating fun and viral apps that had people glued to their iPhones.
I know that 16 year-old-Adam may be a sample size of one, but rest assured I was far more keen to share my Flappy Bird score with friends and attempt to become a Vine Star, than send email attachments in a BBM group. BlackBerry had marketed to a broader audience, but Apple’s product actually catered to that market. And the revolutionary App Store was central to nailing this product-market fit.
It was the start of a robust ecosystem that revolved around their product. This App Store became Apple’s competitive moat. By the end of 2009 they had sold 21 million iPhones, and this number continued to double for the next three years.
Meanwhile, it spiralled BlackBerry into a destructive feedback loop. Less third-party apps meant fewer people wanting to buy their devices, which in turn meant developers had fewer people to sell their apps to.
Once you’re playing catch-up, it’s too late
Aforementioned, the iPhone’s touch screen became the staple of it’s product differentiation. It’s size and usability offered clear benefits to the user.
Plus, once developers started creating apps that catered to a larger screen? Well, then BlackBerry’s goose was really cooked.
It took Apple a significant amount of time to develop touch screen capabilities that would result in a distinct competitive advantage. In fact, they even toyed with the idea of scrapping the touch screen and using the scroll pad many times during their four years of research and development on the original iPhone.
But their resilience paid off.
By the time BlackBerry had conceded that the touch screen was the future of smartphones, they were miles behind. Apple weren’t just making touch screens at that point, they were iterating on many versions that were already created.
This fracture that sealed Apple’s domination and BlackBerry’s demise?
The release of their own touch screen phone, the BlackBerry Storm.
The Storm is widely considered BlackBerry’s biggest failure. Not only did it not contain apps, but the phone was unbearably slow and the screen was unresponsive.
RIM had fully jumped from BlackBerry’s legacy concept and identity, trading it all in for what can only be described as… a shitty version of an iPhone.
All because they’d started too late, happily building soon-to-be-extinct smartphones while their downfall remained an afterthought.
I’ll let old Abe Lincoln summarize the touch screen saga in one sentence:
“Give me six hours to chop down a tree and I’ll the first hour sharpening the axe.”
Apple invest those hours into their product ahead of time and had now chopped BlackBerry up into pieces.
But it’s never just one competitor…
These Apple innovations and BlackBerry blunders laid the grounds for an onslaught. BlackBerry sales plummeted from 2012 onwards and faded towards obsolescence.
Although Apple may have said its biggest smartphone rival, competition doesn’t go away that easily.
The question now: is there whitespace available for even more innovation and disruption?
Manufacturers haven’t fully nailed the battery life conundrum.