Blackberry is preparing itself for a second quarter announcement on 27 September, which will likely see the company losing up to US$1b in operating loss, alongside with a further shedding of 4,500 jobs or about 40% of the company as CEO Heins rushes to stem the haemorrage by cutting operating expenses by at least 50%.
The company has come to a point where its struggle for survival hinges on bailing out human resources to right the boat from sinking, and on the market’s trust of the CEO to provide a clear direction on how he is going to reorganise Blackberry. Applying game theory, he has to convince the market (and his board) to give him time (t + 1) to bring results in the next financial year. In short, he is asking for the grace of time, something that the market is unable to afford since it always looks for short-term gains.
Assuming that it plays along with him and grants him one last bid to turnaround the sinking ship, he has now the option of returning the company to a smaller-sized firm focusing on key products which seems to be his move. Heins has cut the product line from 6 to 4, two in the higher end and two on the lower register of the market offering. The other thing that he and his board will be doing as a dual-pronged approach is to quickly confirm the sale of the company to a more stable company that is aligned with its technological strengths, and which is also willing to make that purchase.
How did the renowned giant come to this state?
All the while from inception to the early 2000s, Blackberry was in blue ocean territory. And that was perhaps one of the greatest dangers for Blackberry as its key leaders rested on their laurels. The operating system that made them famous became their roadmap to decline. Numerous amounts of problems came about with the operating system, and despite the security that they promised, the newer software technologies that came along quickly eroded that advantage and stole its thunder.
Their new CEO Heins was right in his direction in introducing its new operating system, recognising the need for novelty and something fresh in the market. However, it was a tad too late as such changes needed momentum and a following to ramp up efforts. Its branding suffered major hits after years of complains, which saw it go from a hero in the eyes of executives to a zero in the market. Its retainer customers which included banks and corporations that relied heavily on its security features for emails swapped over to Apple’s iPhone, which has recently launched its 5S and a slightly lower price range 5C.
Blackberry should have realised that its blue ocean was slowly turning red early on in the late 1990s and turned the game around then. But it didn’t. The advent of the first iPhone iPhone 2G) was perhaps the clearest signal that the red ocean was about to turn blood red, but that too did not cause Blackberry to catch itself quickly enough. The inertia has now left it in a position that no CEO wants to be in – asking the market for grace, being unable to find a buyer for the company, cutting jobs and definitely having sleepless nights.
Well, at the end of the day, while Heins is likely to receive a payout for his dismissal, the fate of once brightly shining star of a company ends up in business school case studies so that future generation of leaders and board members know what they ought to do before their blue ocean turns red.
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