Disruption and woulda, coulda, shoulda
With the latest pivot for Blackberry much has been said about disruption and what it can do to companies. The story, Inside the fall of BlackBerry: How the smartphone inventor failed to adapt, by Sean Silcoff, Jacquie Mcnish and Steve Ladurantaye in The Globe and Mail is a wonderful account.
Disruption has a couple of characteristics that make it fun to talk about. While it is happening even with a chorus of people claiming it is happening, it is actually very difficult to see. After it has happened the chorus of “told you so” grows even louder and more matter of fact. After the fact, everyone has a view of what could have been done to “prevent” disruption. Finally, the description of disruption tends to lose all of the details leading up to the failure as things get characterized at the broad company level or a simple characteristic (keyboard v. touch) when the situation is far more complex. Those nuances are what product folks deal with day to day and where all the learning can be found.
Like many challenges in business, there’s no easy solution and no pattern to follow. The decision moments, technology changes, and business realities are all happening to people that have the same skills and backgrounds as the chorus, but the real-world constraints of actually doing something about them.
The case of Blackberry is interesting because the breadth of disruptive forces is so great. It is not likely that a case like this will be seen again for a while—a case where a company has such an incredible position of strength in technology and business gained over a relatively short time and then essentially erased in a short time.
I loved my Blackberry. The first time I used one was before they were released (because there was integration with Outlook I was lucky enough to be using one some time in 1998—I even read the entire DOJ filing against Microsoft on one while stopped on the tarmac at JFK). Using the original 850 was a moment when you immediately felt propelled into the future. Using one felt like the first time I saw a graphical interface (Alto) or a GPS. Upon using one you just knew our technology lives would be different.
What went wrong is almost exactly the opposite of what went right and that’s what makes this such an interesting story and unbelievably difficult challenge for those involved. Even today I look at what went on and think of how galactic the challenges were for that amazing group of people that transported us all to the future with one product.
When you build a product you make a lot of assumptions about the state of the art of technology, the best business practices, and potential customer usage/behavior. Any new product that is even little bit revolutionary makes these choices at an instinctual level—no matter what news stories you read about research or surveys or whatever, I think we all know that there’s a certain gut feeling that comes into play.
This is especially the case for products that change our collective world view.
Whether made deliberately or not these assumptions play a crucial role in how a product evolves over time. I’ve never seen a new product developed where the folks wrote down a long list of assumptions. I wouldn’t even know where to start—so many of them are not even thought through and represent just an engineer or product manager “state of the art”, “best practice”, or “this is what I know”.
It turns out these assumptions, implicit or explicit, become your competitive advantage and allow you to take the market by storm.
But then along come technology advances, business model changes, or new customer behaviors and seemingly overnight your assumptions are invalidated.
In a relatively simple product (note, no product is simple to the folks making it) these assumptions might all be within the domain. Christensen famously studied the early days of the disk drive industry. To many of us these assumptions are all contained within one system or component and it is hard to see how disruption could take hold. Fast forward and we just assume solid-state storage, yet even this transition as obvious as it is to us, requires a whole new world view for people who engineer spinning disks.
In a complex product like the entirety of the Blackberry experience there are assumptions that cross hardware, software, communications networks, channel relationships, business models and more. When you bring all these together into a single picture one realizes the enormity of what was accomplished.
It is instructive to consider the many assumptions or ingredients of Blackberry success that go beyond the popular “keyboard v. touch”. In thinking about my own experience with the product, the following list just a few things that were essentially revisited by the iPhone from the perspective of the Blackberry device/team:
- Keyboard to touch. The most visible difference and most easily debated is this change. From crackberry thumbs to contests over who could type faster, your keyboard was clearly a major innovation. The move to touch would challenge you in technology, behavior, and more.
- Small (b&w) screens to large color. Closely connected with the shift to touch was a change in perspective that consuming information on a bigger screen would trump the use of the real estate for (arguably) more efficient input. Your whole notion of industrial design, supply chain, OS, and more would be challenged. As an aside, the power consumption of large screens immediately seemed like a non-starter to a team insanely focused on battery life.
- GPRS to 3G then LTE. Your heritage in radios, starting with the pager network, placed a premium on using the lowest power/bandwidth radio and focusing on efficiency therein. The iPhone, while 2G early, quickly turned around a game changing 3G device. You had been almost dragged into using the newer higher powered radios because your focus had been to treat radio usage as a premium resource.
- Minimize bandwidth to assume bandwidth is free. Your focus on reducing bytes over the wire was met with a device that just assumed bytes would be “free” or at least easily purchased. Many of the early comments on the iPhone focused on this but few assumed the way the communications companies would respond to an appetite for bandwidth. Imagine thinking how sloppy the iPhone was with bandwidth usage and how fast the battery would drain. Assuming a specific resource is high cost is often a path to disruption when someone makes a different assumption.
- No general web support v. general web support. Despite demand, the Blackberry avoided offered generalized web browsing support. The partnership with carriers also precluded this given their concern about network responsiveness and capacity. Again, few would have assumed a network buildout that would support mobile browsing the way it does today. The disruptor had the advantage of growing slowly (relatively) compared to flipping a switch on a giant installed base.
- WiFi as “present” to nearly ubiquitous. The physics of WiFi coverage (along with power consumption, chip surface area and more) assumed WiFi would be expensive and hard to find. Even with whole city WiFi projects in early 2000’s people didn’t see WiFi as a big part of the solution. Few thought about the presence of WiFi at home and new usage scenarios or that every urban setting, hotel, airport, and more would have WiFi. Even the carriers built out WiFi to offload traffic and include it for free in their plans. The elegant and seamless integration of WiFi on the iPhone became a quick advantage.
- Device update/mgmt by tethering to off air. Blackberry required tethering for some routine operations and for many the only way to integrate corporate mail was to keep a PC running all the time. The PC was an integral part of the Blackberry experience for many. While the iPhone was tethered for music and videos, the presence of WiFi and march towards PC-free experiences was an early assumption in the architecture that just took time to play out.
- Business to consumer. Your Blackberry was clearly a business device. Through much of the period of high success consumers flocked to devices like the SideKick. While there was some consumer success, you anchored in business scenarios from Exchange and Notes integration to network security. The iPhone comes along and out of the gate is aimed at consumers with a camera, MMS, and more. This disruption hits at the hardware, the software, the service integration, and even how the device is sold at carriers.
- Data center based service to broad set of cloud based services. Your connection to the enterprise was anchored in a server that business operated. This was a significant business upside as well as a key part of the value proposition for business. This server became a source for valuable business information propagated to the Blackberry (rather than use the web). The absence of an iPhone server seemed like a huge opportunity yet in fact it turned into an asset in terms of spreading the device. Instead the iPhone relied on the web (and subsequently apps) to deliver services rather than programmed and curated services.
- Deep channel partnership/revenue sharing to somewhat tense relationship. By most accounts, your Blackberry business was an incredible win-win with telcos around the world. Story after story talked of the amazing partnerships between carriers and Blackberry. At the same time, stories (and blame game) between Apple and AT&T in the US became somewhat legendary. Yet even with this tension, the iPhone was bringing very valuable customers to AT&T and unseating Blackberry customers.
- Ubiquitous channel presence to exclusives. Your global partnership strength was unmatched and yet disrupted. The iPhone launched with single carriers in limited markets, on purpose. Many viewed that as a liability, including Blackberry. Yet in hindsight this only increased the value to the selected partners and created demand from other potential partners (even with the tension).
- Revenue sharing to data plan. One of the main assets that was mostly invisible to consumers was the revenue to Blackberry for each device on the network. This was because Blackberry was running a secure email service as a major anchor of the offering. Most thought no one was going to give up this revenue, including the carrier ability to up-charge for your Blackberry. Few saw a transition to a heavily subsidized business model with high priced data plans purchased by consumers.
These are just a few and any one of these is probably debatable. The point is really the breadth of changes the iPhone introduced to the Blackberry offering and roadmap. Some of these are assumptions about the technology, some about the business model, some about the ecosystem, some about physics even!
Imagine you’ve just changed the world and everything you did to change the world—your entire world view—has been changed by a new product. Now imagine that the new product is not universally applauded and many folks not only say your product is better and more useful, but that the new product is simply inferior.
Put yourself in those shoes…
Disruption happens when a new product comes along and changes the underlying assumptions of the incumbent, as we all know.
Incumbent products and businesses respond by often downplaying the impact of a particular feature or offering. And more often than folks might notice, disruption doesn’t happen so easily. In practice, established businesses and products can withstand a few perturbations to their offering. Products can be rearchitected. Prices can be changed. Features can be added.
What happens though when nearly every assumption is challenged? What you see is a complete redefinition of your entire company. And seeing this happen in real time is both hard to see and even harder to acknowledge. Even in the case of Blackberry there was a time window of perhaps 2 years to respond—is that really enough time to re-engineer everything about your product, company, and business?
One way to look at this case is that disruption rarely happens from a single vector or attribute, even though the chorus might claim X disrupts Y because of price or a single feature, for example. We can see this in the case of something like desktop Linux—being lower priced/open source are interesting attributes but it is fair to say that disruption never really happened to the degree that might have been claimed early on.
However, if you look at Linux in the data center the combination of using Linux for proprietary data center architectures and services combined with the benefit of open source/low price brought with it a much more powerful disruptive capability.
One might take away from this case and other examples, that the disruption to watch out for the most would be the one that combined multiple elements of the traditional marketing mix of product, price, place, promotion. When considering these dimensions it is also worth understanding the full breadth of assumptions, both implicit and explicit, in your product and business when defending against disruption. Likewise, if you’re intending to disrupt you want to consider the multiple dimensions of your approach in order to bypass the intrinsic defenses of incumbents.
It is not difficult to talk about disruption in our industry. As product and business leaders it is instructive to dive into a case of disruption and consider not just all the factors that contributed but how would you respond personally. Could you really lead a team through the process of creating a product that literally inverted almost every business and technology assumption that created $80B or so in market cap over a 10 year period?
In The Sun Also Rises, Hemingway wrote:
How did you go bankrupt? Two ways. Gradually, then suddenly.
That is how disruption happens.