BlackBerry and the Hedgehog Concept

What do you get when you cross BlackBerry and a fox?

Anyone?

You get a declining market share, faltering stock price, and lack of focus in core business.
To those familiar with Jim Collins’ book Good to Great; Why Some Companies Make the Leap…and Others Don’t, you may recognize the fox reference and its contender, the hedgehog. Collins speaks of a famous essay by Isaiah Berlin about the fox that “pursues many ends at the same time and sees the world in all its complexity.” On the contrary, hedgehogs “simplify a complex world into a single organizing idea, a basic principle or concept that unifies and guides everything.”  The concept is explained with a fox that knows many things attempting to attack a hedgehog from all angles and by way of many strategies. The little hedgehog knows one thing and that one thing it does well; to roll up in a ball in defense to the attacks.  In the end “the hedgehog always wins.”

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 As this week’s read is Good to Great, I’ve thought about the application of the concepts in the book to a company that has been headlining the business news for the past few months. I’ve been attentive to BlackBerry because of its major downfall and the remnants that have the potential for a profitable turnaround. Back in its day, BlackBerry was at the top of the industry and one of the fastest growing companies in the world as told by Forbes magazine. BlackBerry had one simple concept and one focus; to manufacture and market wireless devices to the corporate and government customers. With the comfort of growth and booming sales came also complacency. BlackBerry, which was named Research in Motion at the time, made the mistake of failing to innovate and began to lag behind with its product offering. The growth was not sustainable once the iPhone was introduced in 2007 and the company began faltering.

Waking up from the fogginess of comfortable growth, BlackBerry responded in a way similar to the fox. The strategy to regain ground was to shift focus from what the company knew best (products catered to the corporate and government sectors) to the general consumer market. It added a new line of products that were now marketed to this market and nearly identical in design to the iPhone. BlackBerry was competent in marketing to the consumer, but not the best.  The strategy of the fox failed and the company was left with a stock price of just under seven dollars per share and millions in unsold inventory. 

With the recent change in leadership and rumors of a turnaround, there may very well be a hint of a comeback of the hedgehog. The new CEO of BlackBerry, John Chen, has made some executive decisions that are reinforcing BlackBerry’s original position. For one, Chen has decided to shift back to the principal focus of corporate and government customers. Furthermore, the company has decided to outsource design and production to Foxconn (oh, the irony) so that the organization can take more time to “wring value out of software and services business.” 

Profitable growth is a result of pruning away all that does not fit the Hedgehog concept.
In order to return once again to a thriving position in the market, BlackBerry must have the discipline to prune away all that does not fit what it does best in the world at. The decision to outsource to Foxconn may be those first steps. Truly finding that concept can take years but it is well worth the time and discipline. All jokes aside, there is potential for BlackBerry to once again be the hedgehog it was and focus on what it does best.

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$7 – What Happened to Blackberry?

Sophistication. Professionalism. Business Savvy.

Starry eyed and new to world of business, the Blackberry represented just that to me. One of my first interactions with a true business leader and mentor was a district manager of a store I was employed. He would travel to different parts of the state to review our sales, performance, and merchandising. He was professional and had business smarts about him as he walked through the store with a briefcase and a charismatic personality. I wanted to be just like him. At all times, it seemed, he had with him a Blackberry. It was a communication tool for connecting to other stores and the home office with reports and performance metrics. In my naivety, I quickly associated the Blackberry with these characteristics.

Blackberry at this time was booming. In 2009, it was even rated by Fortune magazine as the fasted growing company in the world. It had 84% sales grow increase per year. According to David Goldman in a 2009 CNN Money article Blackberry is Still Leader of the Pack “experts cite competitive pricing, business expertise, and new consumer products as reasons for RIM’s sustained growth.” In 2007 the stock price of RIM (Research in Motion is the former name for Blackberry) was as high as $236 per share and now the stock price is just under $7. Something must have happened.

And something did happen.

In 2007, the first Apple iPhone was introduced with is touch screen keyboard and app ecosystem. Unlike the Blackberry, which catered to the business professional and government employee, it was catered to the everyday consumer. Apple was able to pivot by shifting its business focus when it perceived that iPods were beginning to show signs of product maturity. It adapted to combine music, email, phone calls, and applications on one device. This adaptation to the dynamic technology industry was crucial to the success of its product line. Innovation was a strategy that gave Apple a competitive advantage.

Meanwhile in Canada…

While the iPhone was building in popularity with consumers, the Canadian based Blackberry sat back in its comfortable market space and continued to produce the same Blackberry product. Slowly, its product lines were becoming irrelevant in a world of advancing smartphone software and technologies. According to a Canadian analysis of the company, there were ideas by top management on how to work through the problems that were arising in the beginning but the good decisions failed to be implemented.

One of the responses by the CEO at the time, Mike Lazaridis, was to buy a software development firm called Torch Mobile. This firm specialized in internet browsers for mobile phones. What iPhone did that Blackberry didn’t was have a fully Internet-capable browser. Furthermore, Apple and android used newer software platforms as compared to RIM. Lazaridis’ decision to buy this firm was a signal that he would lead the company into a red ocean strategy (where the market is full of sharks and bloody with competition). It was a mistake to decide  to be a copy of the top competitors  and  to go head to head against the competition with which it was already losing.

Back at the workplace….

I watch as the third party tech rep stops by to pick up a Blackberry from the marketing department to be repaired. It is dropped with a hollow THUNK! into a box of broken Blackberries that are soon to share the same fate. THUNK just like the stock price of Blackberry. They should have thunk outside of the box and thunk sooner.  The box full of outdated Blackberrys was a symbol of the slow response and the lack of innovation that began the company’s downfall. What had been a symbol of authority and sophistication to me was now a symbol of poor decisions by leadership and poor corporate strategy.

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When sharing is more than caring- the four concepts of corporate strategy cont’d

It is only when long held conventional thinking is shaken that we can begin to reconstruct our view with more effective strategies. Last week, I discussed the first two of the corporate strategy avenues that were conceptualized by Michael Porter, a leading voice in the world of strategic management.  These first two were the most conventional portfolio management and restructuring; the most common corporate strategies worldwide. In his article published in the Harvard Business Review, Michael Porter argues that are two more concepts of corporate strategy that are “the best avenues of value creation.”  These two are transferring skills and sharing activities. Why are these strategies the more effective path to adding shareholder value?

To first answer this question, we must start with a strong foundation. That foundation is the value chain of a corporation consisting of primary and secondary activities. Transferring activities is about the interrelationships between businesses. One of the ways to better understand the relationship is through a company’s value chain.  With the value chain as the basis of strategy crafting, a corporation can better understand the similarities of business units. When value chains are similar, knowledge can be transferred from one unit to another. Learning is then made into a competitive advantage. With this concept executed, a corporation moves more swiftly down the learning curve.

When the similarities are discovered, a corporation can then begin to connect differing business units. Sharing activities is the linking of value chain activities between businesses. This is a step beyond transferring skills in that it uses the activities that have been transferred and related to gain advantages such as economies of scale. Examples of activities that can be transferred can include anything from technology innovation to advanced human resources systems. Results of this concept are often the reduction of the cost and competition of business units in a corporation.

The findings of the four concepts were published in the 1980s. With the rapid advancement of capital markets, it seems inevitable that these findings will, in a way, expire. Instead, these concepts are timeless truths about corporations that can be applied now. It is unfortunate that corporations today still cling tightly to traditional strategy thinking and continue down the route of portfolio management and restructuring solely as means to creating shareholder value. The transferring of skills and sharing activities seem to be such simple concepts of corporate strategy and, in a way, they are. Nevertheless, these two are less common then of the four.

Sharing won’t just benefit the business units but the corporation as a whole and the shareholders. The concepts are proof that thinking out of the box and investing time to integrate and share activities and skills can be one of the strongest strategies in even the most advanced economies. I predict that as corporations advance globally, transferring skills and sharing activities will become more and more commonly selected and implemented corporate strategies. They are, after all, vital to a corporation’s success.