BlackBerry announced a couple of new products on Wednesday (the upcoming Z30 phone and BBM Messenger for Apple and Android devices) but neither really mattered in the face of the big news of the day, which is that the company is cutting 40% of its workforce, according to The Wall Street Journal.
It’s hard to see the positive in a cut that big, especially since it follows an ongoing trickle of layoffs over the past few months. The positive way to spin it is that the company is trying to reconfigure itself in an effort to improve efficiencies and profits, but the realistic way to interpret it is that the company is now in the final stages of its death spiral.
The decline and reasons for it have been well documented by anyone and everyone who covers technology. Two years ago, I wrote about several challenges facing the company, which was at the time still known as Research In Motion. One of the big issues, both then and now, is that RIM/BlackBerry was and is a solo player that makes only one thing – smartphones (it did try to make a second, the Playbook tablet, but flopped badly). As the dust from the smartphone war starts to settle – and make no mistake, Android and Apple have won – it’s clear there is no serious room for such dedicated manufacturers.
This is well-trodden ground. There just isn’t any long-term future in being a simple hardware maker, regardless of category. Whether it’s TVs, tablets, computers or phones, the same pattern repeats itself: somebody comes up with the sexy new thing that everybody wants and is willing to pay through the teeth for. Competitors pounce and eventually the price comes down to the point where no one makes money on said device anymore. Suddenly, that sexy new thing is a toaster – cheap and plentiful – while dedicated makers of it go under or are swallowed up by bigger, multifaceted companies.
There is considerably more money in software and all the other stuff that runs on hardware, and RIM/BlackBerry does indeed have some valuable assets there in the form of BBM and email security. The company should have re-oriented its business to focus on such services a long time ago, but it didn’t, which allowed competitors to catch up. If their respective products aren’t superior by this point, they certainly are “good enough,” which leaves BlackBerry up the proverbial creek.
There are other ways to survive the repeating hardware commoditization cycle, but BlackBerry is not positioned to do so. One is the Samsung way, which is through sheer girth and diversity. The South Korean conglomerate has its figurative hand in so many businesses, from electronics to finance to shipping, that it’s virtually immune to hardware devaluation. Whether people pay $500 or $300 for their smartphones matters little to the company; the devices are almost loss leaders that keep consumers in its overall ecosystem. A Samsung phone, for example, might be a gateway drug to a Samsung refrigerator (I speak from experience).
The other way is the Apple way, which relies on a constant stream of hot, sexy new things. Over the past decade, the company has found that the best way to stay ahead of that continuing hardware devaluation cycle is to continually create new hardware that people want. Along the way, Apple has smartly also brought people into its hardware and software ecosystem – an iPhone purchase might also lead to an iPad purchase, and once you have both, you probably have a bunch of content and apps that you don’t want to have to replace by switching to a competitor’s products.
Either way, the ecosystem is the key. BlackBerry has never had one, which is why it was always doomed to fail on both the financial front and the customer experience level.
In a way, there’s a very strong parallel that can be drawn to Canada’s wireless situation. New carriers such as Wind, Mobilicity and even Verizon or any other foreign entity that may or may not enter the country in the upcoming spectrum auction face the same big disadvantages. With big players Bell, Rogers and Telus able to offer a suite of services and a range of content, any solo players are going to have an incredibly hard time competing.
Isn’t it interesting, then, that Wind and small indie Internet provider Teksavvy just the other day announced a partnership of sorts? The ISP, which requires the use of networks from the likes of Bell and Rogers, has been experiencing problems in dealing with the latter, leading to connection and maintenance issues for its own customers. Part of the solution will see Teksavvy loan customers Wind mobile hotspots so that they at least have some sort of Internet access.
The quick-and-dirty fix is akin to both companies dipping their toes in the water in terms of dealing with each other, but they know all too well the disadvantages they face in dealing with their conglomerate-like competitors. There is strength in numbers – especially in terms of the products, services and ultimately ecosystem that a company can offer customers. The smart bet has this duo working increasingly closely together, if not ultimately merging. After all, neither of them wants to end up like BlackBerry.