BlackBerry – The Disrupter that Got Disrupted

BlackBerry smartphones were once the peak of mobile technology. In the late 1990s and early 2000s, carrying a BlackBerry device was a status symbol in the business world. But despite its early dominance, BlackBerry eventually failed and vanished from smartphone marketspace. The story of BlackBerry is a cautionary tale of how slow adaptation to changing market trends, lack of consumer focus, complacency, poor leadership decisions, and a failure to innovate ultimately killed a multi-billion dollar company which was once a pioneer of the industry.

The Origin of BlackBerry

A decade and a half ago, there was no bigger status symbol than the BlackBerry. It was a tech gamechanger. BlackBerry Limited, known as Research in Motion (RIM) until January 2013, was founded in 1984 by two Canadian engineering students, Mike Lazaridis, and Douglas Fraggin. They started working on wireless motion technology. In 1989, the Canadian phone company Rogers contracted RIM to work on its mobile text network, a system specifically designed for messaging.

The Rise of BlackBerry

Gathering expertise in mobile messaging from Rogers project, RIM introduced its first two-way messaging pager in 1996. It was one of the first pagers with BlackBerry’s trademark QWERTY keyboard. The name "BlackBerry," was inspired from the small, round keys on the keyboard that resembled the fruit. The pager’s main feature was its ability to integrate with email. It ran on its own operating system, with secure, encrypted messaging. It quickly became popular with business people, on Wall Street, in law firms, etc. The first prominent release from BlackBerry, the Inter@ctive Pager 950, was in 1998. It had a small-sized screen, keyboard buttons, and the iconic trackball that allowed seamless syncing and continuous access to corporate emails. It became an instant hit, and then there was no looking back. RIM's revenue skyrocketed and increased by 80% to $85 million after the release of 850 pager in 1999 which supported “push email” from the Microsoft exchange server. It would not be wrong to say that BlackBerry led the foundation of today’s messaging system.

In the 1990s, bandwidth was limited and BlackBerry understood this constraint and devised an instrument that shared bits of electronic data communication in such a manner as not to overload the networks. In 2000, BlackBerry launched the first smartphone, called the BlackBerry 957. While other companies sold devices that could barely function over a network at exorbitant prices, BLACKBERRY devices were affordable and they operated well. The devices from BlackBerry were launched with QWERTY keyboards used for typing lengthy notes. BlackBerry devices soon became a necessity among business people.

Gradually, in an attempt to target an everyday, non-business user, BlackBerry added more features to its devices. The ‘BlackBerry Pearl’ was launched to target non-business users. The device featured various multimedia elements such as a camera, and also came with a new feature called ‘BlackBerry Messenger (BBM)’. It was a huge hit with the public and garnered a lot of positive feedback. Between 2001 to 2007, BlackBerry saw worldwide expansion and the addition of new products to its range.

The Hype and the status symbol

The hype of the BlackBerry carried to celebrities and politicians like Lady Gaga, Madonna, Kim Kardashian, ex-US President Barack Obama who became its fans. The BlackBerry was instrumental in changing the way that humans worked. Owning a BlackBerry meant that you didn’t have to be stuck at a desk. It meant that one could carry their office around with them at all times. If you had a BlackBerry, you were signalling to the world that you were busier than most people. It meant you were needed. BlackBerry laid the foundation for the development of smartphones.

The Number Game

BlackBerry devices were revolutionary, and found everywhere. At the end of 2007 the company had a market capitalization of more than $60 billion. In 2008, its global user base grew to over 20 million people. At its peak in Q1 2009, BlackBerry had 20% of the global mobile smartphone market. In the U.S, the BlackBerry hit its peak in September 2010, with almost 22 million users, or 37% of the market share. By 2011, it had sold more than 50 million units worldwide.

However, technology changes quickly and this change altered BlackBerry’s market landscape drastically. BlackBerry went from 20% of the global mobile market share to almost 0, making it discontinue its master product.

The Rise of the iPhone and Android

Apple iPhone was a new player in the smartphone field set to disrupt the mobile phone market in the way BlackBerry had. Steve Jobs revealed the device to the world in early 2007, calling it a “revolutionary product”. The introduction of the iPhone in 2007 marked a turning point in the smartphone industry. With its sleek design, touch screen interface, and extensive app store, the iPhone changed the way people interacted with their mobile devices. Apple made smartphones intuitive and enjoyable to use. Downloading music, social networking, streaming video – Apple created limitless possibilities in a sleek, user-friendly package.

BlackBerry, failed to understand changing consumer demand and recognize iPhone as a direct competitor. Lazaridis in fact dismissed iPhone as a ‘toy’. Due to their early success, BlackBerry remained complacent and this was the beginning of their downfall. When the iPhone started selling well, BlackBerry hastily released a touchscreen device (BlackBerry Storm), which often didn’t work properly. Subsequent devices reintroduced the keyboard in a combo touchscreen-keyboard setup (e.g., BlackBerry Bold), which helped the company briefly but eventually could not do much as the market continued moving toward the experience offered by iphone and other Android based phones. After many attempts to change its strategy, BlackBerry eventually was forced to exit the hardware market. BlackBerry's market share declined sharply by the mid-2010s. On January 22, 2012, Mike Lazaridis and Jim Balsillie resigned as the CEOs of the company. On March 29, 2012, the company reported its first net loss in years. In 2013, the company's board of directors replaced its CEO and began a restructuring plan to try to save the company. Despite its efforts, the company was unable to turn things around, and in 2016, BlackBerry announced that it would no longer manufacture smartphones and would instead focus on software development. 

Lessons to be learnt from the fall of BlackBerry

The rise and fall of BlackBerry offer valuable lessons for companies in general and especially companies operating in the fast-paced and ever-evolving technology industry.

1. Adaptability is crucial - Companies must be willing to adapt and respond to shifting market dynamics. BlackBerry's failure to recognise the significance of touch screen technology and adapt its devices accordingly proved to be a fatal mistake.

2. Complacency Kills – An organisation should never believe that their position is undisputable, no matter how successful they are. BlackBerry became set in their ways, unwilling to upset a winning formula. When the marketplace began changing rapidly, BlackBerry failed to change with it. BlackBerry assumed that its loyal customer base would continue to purchase its devices.

3. Consumer focus is essential for long-term success - Companies need to focus on the User Experience. Companies must prioritize intuitive design and adapt their products to meet evolving consumer preferences. The biggest mistake of BlackBerry was that it did not foresee and incorporate the change in customer behaviour towards touch screen with more inclination towards apps and app-related services.

4. Innovation is key to staying competitive - BlackBerry's reluctance to innovate and introduce new features and functionalities limited its ability to attract and retain customers. In today's fast-paced technology, companies must continuously innovate and evolve to meet the ever-changing demands of consumers. They remained fixated on keyboards, battery life, and enterprise software – important factors once upon a time. But the market preference changed to touchscreens, apps, and processing power.

5. Pay close attention to market innovation (especially competitors) – Companies must keep a track of new innovations in the industry. Competitor’s information should also be tracked very closely.  Never take your position for granted. Close attention must be paid to disruptive innovations.

6. Flexible & Forward-looking Management – Adaptable strategic thinking was one of the mistakes made by top management at BlackBerry. They never expected that consumers will make a shift towards screen touch mobile phones or even change preferences so rapidly.  Management should be ready to re-strategize to align with the market’s needs. Leaders must stay flexible, hungry, and forward-thinking. They should also have a culture that encourages and rewards innovation within their organization. This involves creating an environment where employees feel empowered to share ideas, experiment, and take calculated risks. Companies must be willing to reassess their business models and make bold decisions to adapt to changing market conditions.

How Geopolitical Events Impact Oil Prices

Crude oil, also referred to as ‘Black Gold’, is a raw natural resource that is extracted from the earth and refined into products such as gasoline, jet fuel, and other petroleum products. It is a non-renewable resource, which means that it can’t be replaced naturally at the rate we consume it and is, therefore, a limited resource. Crude oil is an important global commodity that is traded in markets around the world. It is currently the primary source of energy production.

Price of Crude Oil

Price of crude oil has significant impact on global economy. Rising oil prices mean higher petrol prices, higher shipping costs, and increased input costs for industry. Like any other commodity, oil prices mainly depend upon its demand and supply. When the demand is more and supply is less the price rises whereas when the demand is less and the supply is more, the price falls. Changes in supply and demand can be due to political, geopolitical events or natural disasters.

Major Suppliers of Oil

The United States, Saudi Arabia, and Russia are the leading producers of oil in the world. Establishing control on the reservoirs of oil has been a source of many political conflicts across the globe for years.  In the late 19th and early 20th centuries, the U.S. was one of the world’s leading oil producers. But, U.S. oil production fell during the middle and last decades of the 20th century. The U.S. started to import oil. Its major supplier was the Organization of the Petroleum Exporting Countries (OPEC) consisting mostly of Gulf countries, founded in 1960. OPEC countries are some of the world’s largest holders of crude oil and natural gas reserves. So, one can say that OPEC nations play a major role in determining supply of oil and its price.

Historical Events that impacted oil prices-

The global price of crude oil was relatively consistent in the 19^th century and early 20^th century. This changed in the 1970s, with a significant increase in the price of oil globally. Some of the notable events that led to price fluctuations in oil prices include -

Ø  Arab Oil embargo 1973 – Arab members of OPEC decided to put an embargo (prohibit) on oil exports to the United States, Japan, and western Europe, which together consumed more than half the world’s energy. OPEC’s decision was made in retaliation for Western support of Israel against Egypt and Syria during the Yom Kippur War (1973).

Impact – The price of oil quadrupled to almost $12 a barrel by 1974 due to the embargo. These economies were already experiencing difficulties and actions of OPEC led to a steep recession accompanied by rising inflation. As a result, the U.S experienced its first fuel shortage and first major increase in gasoline prices since World War II. The U.S. government took various measures to reduce domestic consumption. President Nixon considered military action to seize oil fields in Saudi Arabia, Kuwait, and Abu Dhabi as a last resort. Although the oil embargo was lifted in 1974, oil prices remained high, and the capitalist world economy felt the pressure throughout the 1970s.

  

Ø  The Iranian Revolution 1979 – Iran witnessed a popular uprising in 1978–79 that resulted in the toppling of the monarchy on February 11, 1979, and led to the establishment of an Islamic republic. This Iranian revolution led to social unrest and severely damaged the Iranian oil industry.

Impact – There was a severe loss of output and a rise in prices. Oil prices more than doubled to $39.50 per barrel. The situation worsened following the outbreak of the Iran-Iraq War in 1980. Oil production in Iran and Iraq fell drastically leading to economic recessions worldwide. In 1981 the price of oil stabilized around $32 per barrel. By 1983, major capitalist economies had adopted more-efficient methods of production, which led to an over-supply of oil. Oil prices returned to pre-crisis levels by mid-1980s.

Ø  The Gulf War 1990 – On August 2, 1990, Iraq under the leadership of Saddam Hussein invaded Kuwait, a fellow OPEC member. Iraq and Kuwait had been producing a combined 4.3 million barrels of oil per day. The threat of loss of these supplies along with threats to Saudi Arabian oil production, led to a rise in oil prices.

Impact – The dispute lasted only nine-months and the price spike was less extreme. Oil prices rose from $21 per barrel at the end of July to $36 per barrel in October. The U.S led military success against Iraq helped to bring oil prices down.

 

Ø  Decline in Oil prices 1980 to 2000 - After 1980 there was a steady decline in oil prices over the next 20 years, except for a short-term increase during the Gulf War as mentioned above. It generally remained under $25 per barrel. Mexico, Nigeria, and Venezuela expanded their production during this time. The Soviet Union became the largest oil producer in the world, and oil from the North Sea and Alaska also flooded the market.

 

Ø  Period from 2000 – 2008 – After 9/11 terrorist attacks, oil prices fell again to around $20 in late 2001. Period after that saw various geopolitical events, natural disasters and other factors like Middle East tension, soaring demand from China, North Korean missile tests, conflict between Israel and Lebanon, worries over Iranian nuclear plans, Hurricane Katrina, etc leading to a gradual increase in oil prices. Oil prices reached its highest at $147.30 in July 2008.

 

Ø  Financial crisis of 2007-2008 and period after that - The second half of 2008 witnessed a deepening economic recession and a severe financial crisis that impacted oil and gas prices. The global recession led to decreased demand for energy in late 2008, with oil prices falling from the July 2008 high of $147 to a December 2008 low of $32. This was almost a fall of 78%. Oil prices stabilized by August 2009 and remained between $70 and $120 through November 2014. US oil production started to increase substantially after that. Oil prices once again fell sharply to around $34 per barrel by early 2016. U.S became the largest oil producer by 2018.

 

Ø   2020 Russia–Saudi Arabia Oil price war – Ø  As a result of the COVID-19 pandemic, demand for oil came down globally causing oil prices to fall. On 5th March 2020 an OPEC summit was held in Vienna where it was agreed to further cut oil production. The group was expected to review the policy on 9th June during their next meeting. However, on 6th March, Russia rejected the demand, marking the end of the unofficial partnership. Oil prices fell 10% after the announcement. On 8th March 2020, Saudi Arabia started an oil price war with Russia, which led to a 65% fall in the price of oil in 3 months. Crude oil prices fell below zero for the first time in history. A negative price suggests sellers were paying buyers to take deliveries to avoid storage cost, as oil demand crashed globally. The over-supply led Russia and Saudi Arabia to end the price war and OPEC and its allies agreed to production cuts. In the second half of 2020, oil prices started rising amid further production cuts and a gradual reopening of world economies post COVID-19. Oil prices shot up again to about $85 by Oct 2021.

 

Ø  2022–2023 Russia–Ukraine War

Russia attacked Ukraine on 24^th February 2022. Following Russia's invasion, the U.S, the European Union and other countries, imposed sanctions on Russia. These countries announced that they would ban or cut down Russian oil imports. Both the invasion of Ukraine and the series of reactions from Western countries sent the prices of oil and gas soaring. The price of crude oil increased from around $76 per barrel at the start of January 2022 to over $110 per barrel on 4 March 2022.

Geopolitical tensions, Sanctions and Impact on Oil-Importing Countries

It has been seen historically that the geopolitical tensions between OPEC members and Western countries have been one of the major factors for extreme changes in the price of oil. Sometimes these tensions lead to one nation or a group of nations coming together to impose sanctions on an oil-producing country. As a result, there is a shortage of oil supply and the price rises. For example, former US President Donald Trump wanted to bring down Iranian oil exports to zero. He imposed sanctions on Iran and this threatened to wipe out around 1 million barrels of oil per day from market. This resulted in oil price increasing more than $75 per barrel for the first time in 2019. Oil sanctions also have an impact on countries which import oil. For example, oil is highly important for a developing economy like India to move forward and achieve high levels of growth. But the problem is that India is world's third largest oil importing and consuming nation and imports more than 80% of its crude oil needs. A rise in oil price leads to an increase in prices of all goods and services because of its use in transportation of goods and services. It also affects us all directly as petrol and diesel prices rise. As a result, inflation rises. With the increase in inflation, purchasing power is reduced, expenditure increases, savings decrease. It also affects companies - directly because of a rise in input costs and indirectly through a fall in consumer demand. All of this ultimately slows down the business and economic activities and thus slows down the GDP growth rate. According to a recent calculation, a $10/barrel increase in the average crude oil price for this fiscal (2024-25) pushes up the net oil imports of India by $12-13 billion during the year.