Case Study

Postgraduate Diploma in Business Management

PROGRAMME
Postgraduate Diploma in Family Business Management

MODULE Organisational Behaviour

YEAR One (1)
INTAKE July 2022
TOTAL MARKS 100
FORMATIVE ASSESSMENT 1 [100 Marks]

Read the case study and Answer ALL questions

What happened to BlackBerry: Zombie stock or comeback king?

What happened to Blackberry? The company, once the most valuable in Canada, has effectively been a zombie stock for a
while. Is the picture painted by the stock a fair one, particularly for a company whose revenues are up 20% YoY?

Much has been written over the years about what happened to BlackBerry. The company, once briefly the most valuable
company in Canada, has effectively been struggling for a long time, with its stock hovering flat around the $10 mark,
effectively a zombie stock. The Q2 2019 earnings release has done little to help: the company missed estimates, sparking
a new sell-off and another wave of articles. Is the picture painted by the stock a fair one, particularly for a company
whose revenues are up 20% YoY? It belies all the changes that have taken place in the company in the last 10 years,
including hiring a new CEO, its pivot towards reinventing itself as a software company, and its efforts to become “the world’s
largest and most trusted AI-cybersecurity company” and acquiring Cylance, an innovative and successful company in the
booming cybersecurity space.

The recent history of the company makes for an interesting case study on how a hardware company can stay alive and
become a more modern software company and on how a company that was presumed to be a dead man walking can turn
(or perhaps, fail to turn) its fortunes. It is also, in some ways, a cautionary tale about the importance of perception.

BlackBerry Stock Price Evolution

A Brief History of BlackBerry

BlackBerry was once iconic: all bankers and similar professionals clutched one of those smartphones with a keyboard and
the little wheel on the side or trackball in the middle. In the famous picture that sparked the Texts from Hillary memes, it was
a BlackBerry that Hillary Clinton was using. It was dubbed CrackBerry, hinting at how widespread its use was and how
dependent people were on them. Obama famously refused to give his up when he entered the White House in 2009.

Their key functionality was the ability to send emails on the go, as well as its BBM (BlackBerry Messenger) platform—
essentially a mobile version of AOL’s AIM. The technology, however, quickly became obsolete with the rise of Apple’s iOS
and Google’s Android, with the company going from a market share of over 33% in the UK in 2011 to an insignificant one
currently (0.04%). The United Kingdom is a perfect illustration of a trend that has affected BlackBerry globally: its market
share declined to 0.

Market Share of BlackBerry Globally

So What happened to BlackBerry? A lot has been written about why BlackBerry lost out to Apple and Samsung for
dominance of the smartphone market, so it does not really bear to be repeated in great detail. Fundamentally, the mistakes
were linked to an excessive focus on enterprise over consumer tastes and preferences, an OS that nobody was building
apps for, and phones that looked clunky and did not have desired functionality: the physical keyboard did not make up for
the lack of SmartScreen, or the size of it.

Ultimately, the story of BlackBerry is one of failing to keep up with how people interact with a new and rapidly changing
technology. It bears many parallels to the decline of email usage: email, once revolutionary and ubiquitous, was considered
to be on a rapid decline. Sleeker, faster ways of communicating, many of them mobile-native, were taking over (e.g., Slack
and WhatsApp). A lot of communication also became image-based rather than text-based - and email did not lend itself well
to that. It had gotten to the point that some were (and still are) predicting the death of the medium in the near future. The
tone of reporting, however, has recently become significantly less catastrophic: email is apparently seeing a resurgence but
used in a different way. It has now become less of a personal or corporate communication tool, and more of a marketing
instrument.
The Wilderness Years: How Did Blackberry Survive?

BlackBerry survived the darkest years in its history (2011 to 2016) because of geographic and technology peculiarity: its
devices were extremely popular in the developing world. While the market share declined significantly in the Western world,
demand for BlackBerry phones remained strong in developing countries, particularly in Sub-Saharan Africa and Indonesia.
As recently as 2014, Africa and the Middle East accounted for 40% of BlackBerry’s total revenue. The phone maker owned
48% of the mobile market in South Africa and 70% of the smartphone market. Three percent of BlackBerry users worldwide
are Nigerian. This was because of technology and access price: BlackBerry’s low data usage made it more accessible,
while 3 and 4G technologies had not penetrated developing countries yet at the time.

This sustained the company while it tried to retool its strategy and return to viability. According to research by Vodacom,
BlackBerry had more customers in Africa than Android and iOS combined. In fact, BlackBerry said at the time that its
devices account for half the smartphones in Nigeria. In Indonesia, on the other hand, the company retained market share to
some extent, particularly through BBM users. Despite healthy sales in emerging countries, which effectively held the
company afloat, in 2013 BlackBerry was desperately trying to find a solution for its problems, reducing its workforce by 40%
and going as far as putting itself on the market and trying to find an acquirer, attracting interest from the likes of Lenovo and
its large shareholder Fairfax Financial, the Canadian Berkshire Hathaway in a move that was ultimately unsuccessful.

The hardware part of the businesses, however, was consistently loss making, reflecting the changes in consumer
preferences and the very thin margin on the sector, particularly when compared with software. Not only, but the total
contribution of hardware sales on revenues was steadily declining: from 80% in 2011 to less than 45% in 2015.

What was the company to do? It had survived so far in the absence of a clear and simple strategy purely because of a
historical fluke. A clear strategic refocus was absolutely necessary, as, effectively, by failing to find a buyer, the company
was as good as dead.

The Software Years: Transitioning Away from Zombieland

In 2013, after the CEO was ousted for failing to sell the company, BlackBerry nominated John Chen to be its new CEO in a
very strategic appointment. Mr. Chen, in fact, had a long history in the world of software, having served as the CEO
of Sybase, a company that was then acquired by SAP and that he had been instrumental in turning around. This move was
a clear signal that the company was seriously intending in trying to right the ship and refocus, going back to its roots of
services and security rather than trying to compete for a market it had already effectively lost.

The choice of John Chen as the top executive appeared to be an inspired one, and probably what had the greatest impact
on the course of BlackBerry’s history: he was able during the course of his tenure there to, at least partially, reverse the
fortunes of the ailing company. Firstly, he vowed to refocus the company on its core customer base (and strength),
enterprise. Then, he announced that the company would cease to make mobile phones - an announcement that was met
with considerable nostalgia. Instead of producing its own hardware, the company would design phones, some of which
would use Android OS, and then licence their production to local companies in the markets where it still had some traction:
India, with Optiemus, TCL, in the US and globally, and Merah Putih for Indonesia.

BlackBerry Revenues by Quarter and Source Up to 2015, $Million

Under Chen’s leadership, the company started focusing more and more heavily on software, particularly in the security
space and in what is also dubbed “Enterprise of Things”, effectively an evolution in the concept of Internet of Things,
referring to all those smart objects that are connected to each other and to the Internet, and thus require securing and are
vulnerable to cyber-attacks. Under this strategy, the acquisition of Cylance made perfect sense for BlackBerry.

Cylance Acquisition: A Strategic Change

Cylance has been the largest acquisition by BlackBerry to date. BB acquired the company for $1.4 billion, utilising its cash
resources. It was not the first acquisition in the sector, but a useful one: BlackBerry had extensive expertise in secure
communications and tended to work with large enterprise clients. Cylance, on the other hand, provides threat preventative
software to SMEs, complementing the existing offering. It is clear from the latest earnings releases that the company will be
heavily reliant on the recently acquired company for growth: ESS (enterprise software and services) has been
underperforming for 3 consecutive quarters, while growth at Cylance was up 31% in Q1 and 24% in Q2.
What Next?

So why was BlackBerry so battered by investors, despite still showing growth in the double digits? Investors have lost
patience with the speed of change and are acutely aware of how difficult it is to pivot such a large business (and for the
second time, at that: BlackBerry started out as Research in Motion, making software for secure communications, and briefly
became the most valuable company in Canada).

Pivoting a company is notoriously hard, and while there are illustrious examples of companies that have done so
successfully, like YouTube or Slack, there are similarly many, like Fred Wilson, that do not see pivoting as a strategy that is
always sound.

After what happened to BlackBerry over the years, now seems like a better time for recovery than it has been in many
years. There are certainly a lot of strengths in the strategy pursued by BlackBerry, such as understanding the client base
that it is best positioned to serve, as well as where those strengths could play in the future, such as the IoT and EoT space.
The sheer size of BlackBerry, however, certainly makes it even tougher to execute a reinvention of this magnitude
successfully. We will be watching alongside market participants.

Source: https://www.toptal.com/finance/management-consultants/what-happened-to-blackberry

Answer ALL the questions in this section.

Question 1 (25 Marks)

Drawing from the case of BlackBerry, critically discuss the application and limitations of the Systems theory in determining
the interdependent relationship which exists between the organisation and the external environment. Examine how external
forces impacted the business strategy of BlackBerry.

Question 2 (25 Marks)

“Mr. Chen, in fact, had a long history in the world of software, having served as the CEO of Sybase, a company that was
then acquired by SAP and that he had been instrumental in turning around. This move was a clear signal that the company
was seriously intending in trying to right the ship and refocus, going back to its roots of services and security rather than
trying to compete for a market it had already effectively lost.”
Strategic analysts often use Porter’s five forces to understand whether new products or services are potentially profitable.
By understanding where power lies, the theory can also be used to identify areas of strength, to improve weaknesses and to
avoid mistakes. Learning from the challenges faced by Blackberry, critically discuss Porter’s Five Forces model to enlighten
BlackBerry on the significance of task environment in determining business strategy. Apply relevant examples to strengthen
the discussion.

Question 3 (25 Marks)

“The choice of John Chen as the top executive appeared to be an inspired one, and probably what had the greatest impact
on the course of BlackBerry’s history: he was able during the course of his tenure there to, at least partially, reverse the
fortunes of the ailing company.” In order for John Chen to excel in reversing the fortunes of the ailing company, he needs to
manage different personalities. Understanding personality traits is the key to predicting behaviour and understanding how
situations can influence individuals. Advise John Chen on the significance of understanding personality in managerial work,
by providing a detailed discussion of the Big Five Model and numerous traits which influence personality.

Question 4 (25 Marks)

Managing change at BlackBerry requires the implementation of systematic approaches in order to achieve a smooth
transition with minimum resistance. Critically evaluate how Mr. Chen, should implement Lewin’s Three-Step Model at
BlackBerry to strategically manage planned change. The discussion should include an assessment of drawback associated
with the model.