Understanding Business Failure: BlackBerry - Case Study Example

Introduction

The recent decades have brought great changes in the world of technologies making companies rethink their ways of performance in order to satisfy the new preferences and tastes of customers, be able to compete with rivals and earn more profit (Daft & Marcic, 2008). Therefore, firms who were not able to be differentiators in presenting products and services, new technological changes have become challenges, a sort of trial of business capability and firmness. Companies who did not manage to overcome these challenges experienced failing of revenues, failing number of subscribers and loss in profit. On the contrary, companies with the exceptional technology have achieved top position with strong balance sheet and such exceptional technology has helped them in ensuring customers to be fully embraced. A Canadian telecommunication and wireless equipment company BlackBerry Limited, known as Research in Motion, is an example of the company, which has faced challenges that resulted failing of its revenues and led to loss in profit in the recent years. Starting as RIM in 1984, the founders could not even think that their technology would grow in the most valuable tech company in the world in designing and producing of the breakthrough technology. Being easy in operation, secure and efficient, BlackBerry smartphone device was aimed to provide people with opportunities to send and receive emails being out of office. At the same time, the product was not aimed to affect general customers, however, soon the brand has earned customers among mass and enabled the company to sell through 80 carriers and 40 countries attracting millions of subscribers.

With the appearance of such players as Apple, Android and Microsoft, BlackBerry has faced tremendous challenges in terms of irrelevance of its technology (But, 2013). Thus, email was no more the distinguishing thing in the device and the new market conditions have created tough situation for BlackBerry. Being the iconic brand at the beginning of its launching, BlackBerry has captured millions of admirers through proprietary and unparalleled encryption technology amongst the corporate clients and mass people. However, operating in the intensive competitive market, BlackBerry’s fortunes took a turn for the worst. In addition, power outages in the world-renowned encrypted network have affected the reputation of the company and the shareholders were demanding for changes in the company’s performance (Arthur, 2011). For the first in fifteen years, BlackBerry shares closed at $6 keeping failing as iPhone and Android came along.

Source: BlackBerry Ltd., (2016).

The indicated chart illustrates the ratios of BlackBerry over the recent years with the annual financials to keep failing, displaying decline in revenues, selling and income of the company. The other source has also displayed BlackBerry as the company with problems especially when it comes to its income decline in the recent years (Statista, 2016).

Source: Statista, (2016).

Such poor statistics has appeared only after 2007 when Apple has introduced its iPhone to public with putting a full web browser on its device, which BlackBerry could not manage to do. Prior to the birth of iPhone, it was the time of BlackBerry to have the iron grip on the smartphone market with the users to have email in their pockets and other tools needed to rule the smartphones. However, with the new product to enter the market and several mistakes have led BlackBerry to business failure (Baldwin, 2013).

Multi-level root cause analysis

• Understanding failure

Failure is always a possibility for business because the entrepreneurs are the carriers of change and creators of growth of certain inducts and market. According to researchers, the success of the modern entrepreneurship is in understanding of possibilities of creating services and products and the exploitation of consequences of business process (Forsberg & Mattsson, 2015). The other aspect of understanding failure is called by the fact that in the last decades, business literature has given much emphasis on the topic of business failure and a large number of stakeholders are concerned over company’s activity and its evolution. Therefore, it is possible for failure to lead to the macroeconomic and microeconomic consequences for the partners of the company (Crutzen & Van Caillie, 2003).

Lukason and Hoffman (2015), state that early theories of business failure causes contrast between the industrial organisation and organisational ecology perspectives opposed to the strategic choice and the organisation studies perspectives. The other cause of failure is associated with the firm size and the age. Thus, the liability of newness is based on the new companies’ development of procedures, acquiring of new skills and establishing relationships that older firms have already established. In understanding the causes of business failure, Richardson, Nwankwo and Richardson (2016) divide the types of failure into frogs, where the boiled frog failure is associated with the organisation to become slow in adapting to the new things. Hence, one cannot keep up with the new business environment.

The number of researchers have provided with the considerations about the causes of boiled frog failure context, where complacency born of competitive success, blindness of top management to new and different business natures and hierarchy orientation, cultural rigidity and push of organisational growth rather than productive growth are the main reasons for business failure. The drowned frog, according to Forsberg (2015), refers to the situation when the frog feels that one needs to be all over the place at the same time and this situation leads to the frog drowning in its own market. In the organisational setting, the drowned from represents failed ambitions of the entrepreneurship. Other words, the one-man rule of the ambitious leader cause business failure. The third type of business failure refers to the bullfrogs or show-offs, where the status and power are the most important things for the company. The main reasons of failure of bullfrogs are that the firms are too optimistic over their products and sales volumes, which contrast with the actual revenues and costs.

To some extent, failure of BlackBerry Limited is connected to blindness of its top management to new business nature, which with the introduction of iPhone was altered. Consequently, it is possible to assume that the failure context of BlackBerry refers to boiled frog (Castaldo, 2012). In addition, some other characteristic of such type of failure is associated with the company to become slow in adapting to the new things despite the fact the company was going to impress the world customer with the new PlayBook.

Instead, during the official launch of the new product, the co-CEO of BlackBerry did not mention all the new and distinguishing features of PlayBook giving the opportunity to Apple to demonstrate its superiority and capture the customer. BlackBerry was displayed as outdated, one-dimensional and as sexy as a mid-1970s calculator. The drowned frog type of BlackBerry failure is about failed ambitions of the company’s management because it did not take into account the products of other than Apple companies. Thus, Steve Jobs of Apple was not the start and end for BlackBerry to fail, but the introduction of Google’s Android operating system has negatively impacted the performance of BlackBerry. According to Brady and Miller (2010), the new system was similar to Apple’s and encouraged third-party applications, letting the customer to customize each phone with mobile apps, which could track ocean currents and located nearby pizza parlors. BlackBerry could hardly compete with such features.

• Root cause analysis

The process of root cause analysis is used to investigate the root causes of the events regarding safety, environmental, reliability and production impacts. Here, the events investigated are associated with the occurrences that have the potential to produce different types of consequences. RCA as a tool is designed to help to identify what and how the event occurred and why it happened. In the organisational context, the failure investigators are able to determine why it happened and then, if possible, to specify corrective measures to prevent future events (Tomic & Brkic, 2011).

For the organisation to start analysis of its failure root causes, Serrat (2009), offers to use the five whys technique, which helps to solve the problem through starting at the end and result, reflect on what caused the problem and then question the answer five times. The technique is effective because it helps to accurately state the problem and complete honest answer to the problem question. It is also the determination to find the underlying cause of the issues and is aimed to resolve them. If to apply the techniques of five whys towards the failure of BlackBerry, the first “Why” would stand for why the company’s revenue is still falling. The answer can be related to the number of subscribers to fall. Then it is obvious to ask “Why” less people wish to use BlackBerry’s product. It is because the customers pay more attention to the new things, like iPhone, operating system of Google and even Windows Phone, which have managed to gain larger market share in the recent years (Hicks, 2012). The third “Why” stands for why customers like iPhone and Android and see no need to use BlackBerry former pioneering product. The answer will be because BlackBerry is not really interested in the consumer market with the new people to be captured. Instead, BlackBerry is clinging on to the ones it already has (Arthur, 2014). Spending little to push the company, cutting back sales, marketing and administration, BlackBerry added itself problems with the outdated product, where the main distinguishing feature, email, became no longer the requirement of the majority of users. In addition, Apple’s iPhone opened door for greater mass of well-heeled and tech-hungry consumers, who are deep-pocketed competitors.

The fourth “Why” refers to why is there no appropriate respond of BlackBerry management on the consumer changes that would enable the company to attract people and gain competitive position as it was when the company introduced its innovative smartphone. The answer is that it is the fault of BlackBerry’s management in its inability to insight that consumers and not only business customers would drive the revolution of smartphones. In addition, BlackBerry did not manage to find its own way as the “app economy” captured mass of customers, those who recognised iPhone and Android-based devices. Finally, BlackBerry failed to realize the future of smartphones and their evolution beyond mere communication devices (Gustin, 2013). “Why” BlackBerry did not consider the full potential of smartphones. It is because it was primarily oriented on business customers and such goal was actually gained. When new players appeared on the market stage, BlackBerry was not ready to adapt its performance to the new conditions.

• Business environment

It is also the role of different macro and micro-economic causes, which affected the activities of BlackBerry. Thus, changes in demographic and growth of population have contributed towards the expansion and constant progress of smartphone industry. The popularization of smartphones primarily due to iPhone introduction has allowed users to acquire any type of information and create the new form of social community. The new customers are now able to impact public opinion and improve the infrastructure of social communication (Song, n.d.). For BlackBerry that means that its device is not longer needed for the “closed circle” of people, but people need more open means of communication with devices with strong access to information and networking capabilities, which unfortunately BlackBerry could not provide.

The external environment of the smartphone industry contains political segment where many regions of the main markets maintain a competitive industry structure and allow numerous providers to compete in the given marketplace. Thus, when the iPhone was introduced, BlackBerry felt the new product would damage and launched Blackberry Storm, which at first had great success among the U.S. customers and even made the company Fortune’s fastest-growing company. At the same time, the new product failed and was abandoned due to the new product, Google Android launching (Silkoff, Mcnish & Ladurantaye, 2013). Among the main factors of internal environment that affected the performance of BlackBerry are the intangible resources, in particular management, where the new CEO is expected to benefit the company from the refreshed corporate culture. While the company was ruled by co-CEOs, their dominant management style did not facilitate in leading the company to the new and innovative ideas (Evans, 2012).

• Responses to the failure

Business failure, as in the case with BlackBerry does not necessarily relate to the bankruptcy or liquidation of the company. It is more of the business survival matter shaped by the owner’s performance. Hence, when the iPhone was introduced, BlackBerry presented its own response to failure through introducing the Storm smartphone that was expected to compete against the iPhone. The new touchscreen device had to have the entire glass panel with users’ click similar to typing the traditional keyboard. However, such response was not planned well and the device turned out to be buggy with slower than iPhone’s browser and many crashes.

With that, the response of BlackBerry to the new product could not meet the demand and became the massive failure of the company. The only hint on the extrapunitive response was connected with the fact that Apple presented the better model of smartphone that captured the hearts and souls of millions of users and left BlackBerry aside. It is also obvious that the response of BlackBerry was neither impunitive as the company simply knew of the situation in the market (Dattner & Hogan, 2011).

Exit strategy

It is one of the BlackBerry’s considerations to exit the world of smartphones, but to focus on the software and services as the company sees deep market share losses on the device front. In fact, the company has already entered the five-year strategic partnership with Foxconn that manufactured its smartphones the recent years. In the meantime, BlackBerry continues to run its devices business with the expectation that the smartphone unit sales will be stabilized (Trefis team, 2014). Wennberg et al (2009), states that it is useful to rely on the prospect theory, which means that the high-performance exit is equivalent to exit in the gain situation while low-performance exit means to exit in the loss situation. In other words, if the project is successful, it accelerates liquidation and if it is unsuccessful, its leads to the delayed liquidation. For BlackBerry, it is not the only way to improve its performance if to consider exit strategies, as new technological advances open more opportunities for its device to be improved.

The Storm and PlayBook are similar to failures, which every entrepreneur experiences prior to the development of exemplary products and services. With the new CEO, BlackBerry has several ways to face the challenges of new business environment. Hence, the current performance of BlackBerry is improves and is experiencing positive free cash flow and stabilized revenue. It turns out efforts toward growth. In addition, the company is proud to be trusted device at the White House and it will continue to ensure businesses that Blackberry is the most secure enterprise. Finally, the company remains its focus on the security, privacy and enterprise mobility management through bridging the approach to consumer and enterprise markets.

Conclusion

BlackBerry’s rise and fall is the example of how quickly the markets change in the current turbulent business environment. One product is changed into another and the dominance of one company is given to another. For BlackBerry, such up and down means that new products may not work well and market can change, thus resulting decline. Consequently, chances to successfully change the course and get back on the feet are poor. At the same time, BlackBerry has several ideal for coming back and capturing new potential. This paper examined the causes of BlackBerry’s failure and it has also showed the ways to overcome challenges in the business environment. It presented the responses of the company to its failure, which can be the examples to other companies in how to manage business failures.