I’ve been fascinated by the BlackBerry turnaround, primarily because it seemed like the very nature of the company had changed. It was a smartphone company and now it is an endpoint security company selling services and software. Given that this kind of shift, which was attempted with firms like HP, has proven to be nearly impossible, BlackBerry seemed to do it relatively easily. It was therefore surprising that BlackBerry’s CEO got on stage at a BlackBerry analyst event this week and professed that this seemingly impossible move was surprisingly easy.
In his explanation, it struck me that there is a lesson here. Let’s talk about how to make a hardware to software pivot, which should be impossible, very easy.
While we all mostly thought of companies like Apple, BlackBerry, and even IBM as hardware companies, they are all one-stop shops. This means that while we focus on the hardware, behind it are software and services that keep it all working. The iPhone would be worthless without the apps and the system to deliver and manage them. IBM’s success was largely the result of its software work. And BlackBerry’s solution was defined by security at both the client and server.
For BlackBerry, it had QNX, the operating system not only used in nuclear plants but deeply penetrated in automobiles. It has a secure collaboration platform, a secure connectivity offering, endpoint security, secure data transfer technologies, organizational connectivity solutions, identity management, event processing, remote monitoring, and a wealth of secure embedded software skills and offerings. And this is far from an exhaustive list.
Most of these things were locked up into targeted solutions but with the advent of IoT, most all these elements can be broken out and sold to others to address similar problems to what BlackBerry had to address with its secure phones, but now with IoT.
Time to Market
BlackBerry didn’t have to develop a lot of things. It already had them, and it had to repackage and modify them so that they could be sold and implemented. While this isn’t trivial, you do have to reorganize, redefine, and change the metrics for sales (not as problematic as you might think given that BlackBerry often sold direct to business and not always through carriers). But it is a ton easier than if you had to build up software and services organizations and then develop a host of new products from scratch. Given the acquisition of QNX, it got a trained salesforce to sell to enterprise and utility customers and by breaking out the other offerings, it just gave that salesforce more product and then expanded their reach. Not trivial but not that difficult either, certainly a far cry from the impossible task that many of us thought it was.
BlackBerry has been coining a new term, EoT, for Enterprise of Things. This is IoT as applied to the enterprise. Think less Amazon Echo, and more COO. This effort is focused on creating a secure, reliable solution for the mess of crap we are connecting to our networks, much of which is unsecure. BlackBerry is positioning its offerings against this threat. Out of an estimated 46 billion things connected to the web, by 2021, a huge percentage is under corporate control and responsibility.
BlackBerry has cited a new law it is calling the BlackBerry Law, which says “every thing connected to a network exponentially increases the security risk to that network.” This is because that thing connects to every other thing and could compromise some or all of them. We saw this recently when a casino (strangely famous for weird breaches as a class) was breached through a connected aquarium pump.
Wrapping Up: Not Impossible, but Was It Easy?
BlackBerry’s seeming pivot still fascinates me, now more than ever, because it was more a pivot on perception than it was necessarily a pivot on product. It reminds me a bit of Amazon’s move to AWS. This was basically the company taking technology it was using internally and marketing it externally to gain economies of scale. That, too, had never been done successfully before, to my knowledge. It was able to accomplish this because the company thought ahead and created something that could be used and sold.
BlackBerry basically unbundled its technology and changed its mission. The sustaining issue is its image; people still largely look at the company as if it were a failed hardware company. Yet, as a software services company, it grew 21 percent CAGR over three years. Margins have gone from 46 percent to 75 percent, operating margins have gone from -5 percent to +8 percent, and debt has dropped to nearly half of what it was in 2016.
As I’m finishing up, BlackBerry’s CFO is on stage and he is disputing the “easy” part of this. It wasn’t easy, but it should have been impossible. The fact that they got it done suggests it was easier than we all thought. Everything is relative and against impossible, anything that gets done certainly appears easier. Something to noodle on this week.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+