Constructive criticism: How BlackBerry can get fresh again

If you follow the stock market and/or the press surrounding smartphones (or visit the CrackBerry forums for that matter), you won't be surprised to hear that as of late it seems RIM has been taking more than its fair share of a beating. The stock is down, even the loyalist of users are getting a bit antsy wanting an updated/new OS, more apps and new spec-rich hardware, and potential BlackBerry buyers have more competition to look at than ever. While RIM's market share and user base speak to their success of the past, much of the discussion taking place currently is directed toward the future and what RIM should be doing to make sure they remain a top player in the smartphone game.

Normally when you read rants or articles giving this kind of advice, they come from end consumers, analysts or bloggers like me, which is fine... but I find it very compelling and telling when it comes from somebody like Nadav Gur, who is the founder of WorldMate. Over the weekend Nadav posted to his blog an article entitled How BlackBerry Can Get Fresh Again, which outlines his thoughts on this whole discussion. Give a it read below and be sure to post a comment with your own thoughts. Agree with his thesis? Disagree? Sound off!!

How BlackBerry Can Get Fresh Again

by Nadav Gur, Founder of WorldMate

This past week has seen RIM posting mixed quarterly results - 41% increase in earnings, the 100 Millionth BlackBerry sold, still the #1 Smartphone player in North America and now the #4 handset vendor worldwide (in terms of volume), but still at the low range of analyst forecasts. Shares took a 4% hit, completing a 27% nose-dive in the last 6 months, on concerns that the iPhone and Android have stolen BlackBerry's thunder. Posting the results on the day the iPhone 4 hit the market didn't help much, but the question in investors and industry players' minds is fundamental - will RIM come back, or are Apple and Google on their ways to ruling the sector in the next few years? Clearly the people in Waterloo have their collective hands full.

Every now and then, it's time for some unabashed advice-giving , even if it is out of your league. When every soccer enthusiast out there can critique national soccer coaches or international referees, I think it might not be too outrageous for me to comment on the dilemmas faced by RIM's management. Apologies in advance for the long treatise - about something I care about.

1. Focus On Key Experiences - And Excel At Them

I was having lunch last week with a friend, a pretty well-known VC with very significant smartphone-sector involvement, who's recently switched his iPhone and Palm Pre for a BlackBerry Tour. It's simple, he said. In spite of all the advances these guys have made on user experience, neither of these devices gave him the level of e-mail efficiency that the BlackBerry does. "And when you have 5 free minutes to answer some e-mails, being able to squeeze in three instead of one makes the difference" he stated.

This great e-mail user experience got RIM to where it is today. It's not just about server connectivity, it's not just push, it's not just the keyboard - it's the totally integrated e-mail experience that often makes users email on their BlackBerry - even when their desktop is right there. But email alone is clearly not enough anymore - both because other vendors have generally caught up (well - almost), and because there are new domains for Smartphone utility out there which must be exploited to attract new legions to BlackBerry. What it does serve is to demonstrate is that if you can make the BlackBerry indispensable for a key horizontal application, you create real value and a long-term hold on users who care about it. RIM must build and perfect other experiences - not just enable them, but integrate them so seamlessly with the device, network capabilities and the existing tools and processes in use, that the added convenience and saved time generate unique value.

And guess what - there are so many experiences still out there for mobile devices on which to improve. Location-based services for instance are still in their infancy. Add context - e.g. where I intend to be, where other people are, where I was, how fast I'm moving - and you can create so much more value around basic human behaviors like commuting, parking, navigating crowded places and more. BlackBerry Drive sounds like a move in the right direction, by the way.

Another such experience that I won't go into much detail about (I'm biased) is Travel. A user activity that drives the biggest segment in world GDP, the #2 variable cost for corporations - and an activity that is by nature tied so strongly with mobility. There are other opportunities around personal and corporate finances (from balancing the budget to keeping track of expenses), tying these into retail and connecting all of these to payment services, identity and much more. As merchants, retailers and financial institutions use email to deliver key information, RIM can use an existing strength of its platform in clever ways to build brand new experiences for these applications that aggregate information from several sources and use those, alongside context, to deliver new convenience and efficiencies. The opportunities abound - if you execute on the utility and experience, and if you lead rather than follow. Which brings me to #2.

Note: RIM seems to get this to a degree with the "Super Apps" concept - but that's too conceptual - it is simply too abstract to be effectively marketed.

2. You Can't out-iPhone the iPhone - It's Time For Market Segmentation

Yes, sure. BlackBerry needs an equally good browser and similarly cool touch-UI. But in the eyes of the consumer, the battle for these is over, or at least it's become an iPhone vs. Droid saga. The greatest review on WSJ or BusinessWeek (or Oprah for that matter) would only get you to "well now BlackBerry is as-good-as", which is just not enough to sway the die-hard iPhone fans perception and make BlackBerry the Cooler device.

So don't expect that. You need to be decidedly better at some things the iPhone and Android camp have not moved on yet.. And these things must matter to an audience that matters. Some of the examples above are highly suitable for RIM. Killer execution on those experiences requires market segmentation and intense focus (don't repeat Palm's mistake to try to target Soccer Moms just because "they too multi-task..."). With RIM's historic stronghold in white-collar business professionals there is no need to move away drastically. Just think about what else these people need (beyond email and PIM) that could be done better. Find four or five of these "horizontals" to invest in, and innovate. If one or two sticks, you have a market advantage, in a segment that counts.

With smartphones going to be 50% or more of the market in a couple of years, there's room enough for everyone to grow - but not if they all target the same mindset / customer profile. Let Android and iPhone battle over "who's coolest" and try to be something else - to some other people.

3. Protect Your Enterprise Base By Innovating There Too - With Innovation that Appeals to The End User

Corporate customers built the house of RIM. The combination of making employees more effective (through email), always available (through push and the "CrackBerry Syndrome") and a secure environment, created the initial market adoption - but also some key brand values, including its association with financiers, lawyers and other white-collar workers. However we are seeing more and more that iPhone is infiltrating the corporate market , driven mostly by employee preferences (the cooler device...) and improved infrastructures from Microsoft, Apple and Google.

RIM cannot afford to lose its hold on the enterprise. Not only are these highly lucrative customers in themselves, but with RIM's distribution strategy tied tightly to wireless operator, this is a key reason operators are still very engaged with RIM, even though they see iPhone (and possibly Droid) as a more strategic brand for their consumer customers. As long as these highest-ARPU customers are tied to BlackBerry, the loyalty of operators is still there, at least to a degree.

Now how do you keep enterprises loyal, when it seems like they can get the security and control they need for "free" with Microsoft Exchange and iPhone OS 4.0 and "don't need BES"? Especially when it is the employees (or the executives really) who are demanding the other brand? The key is to innovate again. Go deeper into horizontal enterprise processes - and make sure what you create matters to the end-user, not just the IT guy or the CFO. Cause it's the grassroots who are now facilitating the advance of competitors into your turf.

Instant messaging through BlackBerry Messenger is a good first step, but it's easily replaceable unless it ties deeply into some other enterprises systems. Examples which are possibly more resilient are expense reporting, corporate travel management, and document / process management. Each of these is an ongoing headache for most corporations and a thorn-in-the-side for most employees. If you can provide a solution that creates a great experience for end-users and a cost-saving / efficiency enhancement for enterprises - you have an edge.

4. Don't Repeat Nokia's Mistake - It's About Margin, Not Just Revenue

Who is the world's largest smartphone manufacturer? Clearly it's still Nokia. After all - they sell the most "open operation system" phones. Don't they? Well if you look at the profit figures or company valuation - not really.

A few years ago, the top players in mobile decided the game is about volume. The challenge was building the $40 phone to sell billions of into the emerging economies. The winner will sell hundreds of millions of units a year. Well, guess what - Nokia emerged the pyrrhic winner with staggering market shares in emerging markets - e.g. 59% in India - only to see its shareholder value plummet. Last year, I conversed with a Nokia executive who claimed that "50% of the margin in the handset business is generated through the top 10% of phones sold". So - you can sell 9 times as much as everyone else - and still trail them in profits generated.

With Sprint becoming RIM's strongest partner - and appealing to blue-collars instead of white-collars, and with the buy-one-get-one-free deals with people like Verizon (who prefers Android - as it feels it needs to directly counter the iPhone), the risk of repeating that same mistake is real. NOK is down 71% in 3 years. RIM is on the precipice of a similar slide but it isn't too late to reverse course. Which ties back to point #2 above - RIM must remain the choice for top-end customers, and not get enamored with mid-market customers unless as followers of that former group.

Observation: RIM and Nokia are actually pretty similar and have some common issues, which brings me to my next point.

5. Innovation At This Scale Is a Silicon Valley Phenomenon

Both RIM and Nokia are great companies coming out of relatively small nations. Both are tightly managed from a Northern city pretty far removed from global technology centers, and over time both attracted much of the available talent of their nations. And when the local talent pool is depleted and new talent is hard-to-draw to your region - you start settling for less. A few weeks ago I met with an old friend, an extremely talented entrepreneur, who was wooed by both companies last year and ended up preferring a Boston office with Nokia to a Waterloo location with RIM. Location was 90% of that decision for him.

With the need to differentiate and innovate a key to the ability to get back the positive momentum - the old fortress is becoming a liability.

I am actually a fairly recent newcomer to Silicon Valley. Having resisted the move for years and having made crucial business mistakes because of it, I have to say this: you cannot be serious about technology innovation leadership without having Silicon Valley as a part of your DNA. The technology innovation world is not flat. It's a sink, and the sinkhole is somewhere between SFO and SJC. Many of the most talented people all over America and the world are sucked there eventually. It's the land where every man has a plan, a back-up plan, and a few ideas he's playing around with. I've written about it before, and six months later it is just clearer to me. If you're not in the Valley, or if your Valley presence does not have enough influence in the company, sooner or later you'll miss out on something big that's happening. And you're bound to miss out on some great talent - and that isn't a good competitive move. RIM has to find a way to make its Silicon Valley presence a bigger, stronger influence on what it does, and become a bigger, stronger influence (and attraction) to the rest of Silicon Valley. Winning the hearts and minds of the influencers there is crucial. It's a key factor in Apple's appeal and a great helper for Google and Android.

The inertia is currently in one direction - fighting to reverse it from Ontario is playing with one arm tied behind your back.

6. Re-think The Carrier Angle

RIM's credo is "we will live and die with the operators". Perhaps it's time for a change in the balance of power - that will ultimately help both RIM and the operators? Were AT&T so poorly served by giving Apple tight control over the iPhone? Isn't Verizon giving Google similar breadth?

In an innovation-driven space, where the relevant innovation is not anymore in infrastructure assets but in services, applications and integration - carriers are handicapped. They do not excel at innovation at the best of times. Having them regulate yours is ensuring there will be as little of it as they think they can get away with. The problem is - they often underestimate how much of it is needed, and when they make that mistake, they will take you down with them. RIM must be able to determine its rate of innovation on its own.

So there. I hope It wasn't that long. I'd like to thank my great editor, Ian Berman @ianberman. It's time for your comments.

Source: WorldMate