IT, Mobile, marketing

Why BlackBerry Needs Real

Innovation, and How Boston Can
Help
Jonathan Michaeli 3/1/10

Heads up, stodgy bankers and business road warriors: in case you haven’t noticed the
blatant signs over the past 12 months or so, your trusty BlackBerry is no longer cool.
Yeah, I know you think that because you recently traded in your old-school model
with scroll wheel for the sleek black Tour or Bold 2, you’re on top of the latest trends.
Sorry to burst your bubble, but your BlackBerry is the equivalent of a Motorola
RAZR in late 2007.

I’m almost ashamed to write about it, being a closet BlackBerry user who’s anxiously
awaiting the day I am eligible for an upgrade. That puts me squarely within the ultra
un-hip “late majority” consumer segment. The only way I can muster the courage to
use my BlackBerry in public is that the choice becomes less clear with each passing
day which device should be my next. Today if I buy an iPhone 3GS (still my favorite
from a pure hardware standpoint), I’m stuck with AT&T, best known for dropped
calls and clogged data pipes. Not to be ignored are the host of new Android-based
devices that have started coming online. So, I’m waiting to see how things shake out
over the next few months, and whether a clear winner emerges. That’s my story and
I’m sticking to it.

So you’re not convinced you, too, are behind the times and need some proof. Here
goes:

It’s an app world—There’s no denying we are in the beginning of a mobile and social
revolution. Whether your goal is to stay plugged into pop culture or keep your
business skills honed, you had better embrace this brave new world or risk being left
behind. Mobile apps have become an integral part of our culture, and almost all
companies—from mobile pure plays and social media upstarts to large e-tailers
starting to execute a mobile strategy—build for the iPhone first. That has translated to
100,000 apps in the iTunes store and over 2 billion total downloads as of November
2009, compared to just 5,000 applications in BlackBerry App World.

Wired vs. wireless—If your employer doesn’t “sponsor” your BlackBerry (if you
work for a small company this may also apply to you), you likely connect to a BIS
server to receive e-mail and connect to the Internet. That means keeping your
schedule and contacts up to date between your BlackBerry and computer requires
syncing the two via BlackBerry Desktop software, which despite having reached v5.x,
constantly requires removal and reinstallation. But I digress. The main point is that
like the RAZR, USB is so 2007. Apple has wireless syncing and backup options for
all iPhone users. And, as industry experts expected, Apple is making inroads in the
enterprise market. After all, if the necessary security measures are in place, IT
managers will simply strive to meet the needs and wants of their customers (i.e.
company employees).

Brand perception—In late December, the BlackBerry e-mail network suffered two
outages over a two-week period. RIM’s service disruption was an aberration, but
users were outraged and analysts criticized the company for not having adequate
server backup measures. Following the outages, BlackBerry’s Buzz score fell to +28
(positive brand perception scores range from +1 to +100), a number I’d classify as
mildly positive. Contrast RIM’s normally reliable service with that of the iPhone;
especially in urban areas people are plagued with dropped calls and poor bandwidth
on a daily basis. You could argue AT&T’s network, and not the iPhone itself, is
largely to blame. But at the end of the day, you’d expect people to associate their
frustrating experiences with all brands. That is not what happened. In 2009, iPhone
gained the top spot on Vitrue’s Top Social Brands list and Apple moved up 4 notches
to #20 on Interbrand’s Best Global Brands list.

The Web is our lifeline—Can you imagine life without Google? Americans have
become dependent on the Internet, with 253 million of us (74 percent) using it, 48
percent more than one hour per day. As a nation constantly on the go, it’s only natural
mobile Web browsing eventually would take hold. What we lacked until the late
2000s was a mobile experience resembling that on the PC. Together with prevalent
3G access, iPhone’s clean, user friendly interface is largely credited with accelerating
adoption of mobile Web browsing. Early last year, the Pew Research Center’s Internet
& American Life Project reported 56 percent of American adults had accessed the
Internet wirelessly, and this number has surely increased since. Today, despite a
global recession, smartphone shipments are projected to grow by 18 percent in 2010,
totaling 235 million units worldwide. Virtually all of these phones have GPS, pegging
your whereabouts and enabling a whole new class of valuable content and services,
appropriately labeled location-based services (LBS). With approximately 50 percent
of US smartphone traffic, iPhone is uniquely poised to capture the lion’s share of the
benefit. Android is the only other operating system gaining share over the preceding 6
month period. BlackBerry is among the losers, dropping 11 percent.

Let the market be our guide—You bankers still not buying it? Well, let me speak in a
language you understand. While BlackBerry’s stock (NASDAQ: RIMM) is up 80
percent since the Nasdaq market low in early March 2009, Apple’s stock (NASDAQ:
AAPL) is up 130 percent during the same period. Granted, Apple also makes and sells
Macs, not just smartphones. But as the mobile device market is growing faster than
the PC market, you might expect that would have had a dilutionary effect, curbing
otherwise greater growth in Apple’s share price.

Synergies for Apple loyalists—Like all Apple software, the iPhone platform is
proprietary, leaving the door open for Google to enter the market and gain share with
open source Android. That said, there are many benefits, ranging from software
compatibility to a seamless user experience, for Mac users choosing the iPhone.

The Perfect Storm

By now, hopefully I have most of you on board, but what does it all mean? How bad
is it for RIM? Well, on paper today the picture doesn’t look bad. BlackBerry is in the
lead at 42 percent of the US smartphone market with Apple climbing to 25 percent.
But the future holds a very different picture. In Q409, when BlackBerry had 13
smartphone models for sale, iPhone and Android were the only two operating systems
that gained market share. IDC predicts that by 2013 Android will displace RIM as the
number two operating system globally, shipping an estimated 68 million units. With
such scale, Android will join Apple in making serious inroads into RIM’s base of
enterprise customers. If the long-rumored agreement between Apple and Verizon
Wireless were ever to come about, the result would be a crushing blow to BlackBerry.

But RIM still has time to reposition itself. How?

Focus, Focus, Focus

I’ll start with what I believe is a fundamental flaw in RIM’s strategy. The company
treats the market as very fragmented and hence develops multiple devices (Pearl,
Pearl Flip, Bold, Tour, Curve) to cover the entire landscape. For all intents and
purposes, Apple has a single phone with options for additional memory, a faster
processor, etc. While RIM prices its higher end phones for the corporate jetsetter,
Apple makes its one phone affordable for the masses. BlackBerry would do better to
save R&D costs and channel its resources toward fewer phones while obsessing over
user experience. Being a purely mobile company without the distractions of other
business lines has its advantages.

Don’t Be a Copycat

While BlackBerry has much to learn from Apple in terms of focus, I’ve never been a
fan of mimicking your most successful competitor’s design and feature set. This holds
especially true against a formidable brand like Apple, which will trump you in
aesthetic and marketing savvy nine times out of 10. Sure, there is room for some
manufacturers (a la Samsung Mythic and Palm Pre) to siphon off price sensitive
market segments. But RIM is in a different category—it’s a smartphone industry
pioneer capable of doing far more than developing cheap iPhone imitations like the
Blackberry 9500 (aka the Storm).

Now in its second generation, the Storm was an unsuccessful attempt to steal Apple
evangelists and wannabes. Despite a $100 million marketing effort and availability on
a far superior network, the buggy Storm shipped about half of iPhone 3G‘s 2.4
million units in the first three months post-launch. The second generation Storm (aka
Storm 2) launch in Q409 was a non-event, because Verizon (and partner Motorola)
placed its $100 million bet on The Droid, the first Android 2.0 -based phone, which
debuted around the same time. I don’t have Storm 2 shipment figures handy, but my
best guess is they are far less impressive than the original Storm. After its failed
attempt and given the huge lead Apple has garnered, BlackBerry should leave the
touchscreen to others.

Go Back to Your Roots

Shifting gears from what not to do, BlackBerry should return to its core strengths,
developing devices that boost productivity, while considering changes in the market
and technology. Favoring BlackBerry, which is perhaps best known for having a
QWERTY keyword front and center on almost all devices, is the fact that entering
text on a mobile device is only increasing in importance. Uses have expanded beyond
dialing their phones and typing e-mails to include SMS, Web searches, social
networking profile updates, completing Web forms, and more. The problem for
BlackBerry arises when its function-centric devices compromise the user experience
for other emerging consumer needs like multimedia entertainment and mobile
gaming, which are forecast to yield $77 billion in combined revenues by 2012.
Devices like the Palm Pre and Motorola Droid seemed to have this solved for now,
albeit with a slightly thicker form factor. Now you can have the best of both worlds, a
viewable screen that extends the length of the device and an accessible QWERTY
keyboard hidden underneath.

How Boston Can Help

So is the solution as simple as that? Not quite. First, this is a short-term “patch.”
Second, BlackBerry has plenty of catch up to do in its user interface. In the medium to
longer term, these efforts will fall far short in a head-to-head battle with Apple +
Google. No, BlackBerry needs iPhonesque disruption. Where better to look than a
city quickly becoming a mecca for mobile?

Boston is home to two best-of-breed speech recognition technology companies,

Nuance Communications (NASDAQ: NUAN), a publicly traded company whose
market cap is greater than $4 billion and whose roots date back to 1992, and Vlingo
Corporation, a Cambridge-based startup backed by Yahoo!, AT&T, Charles River
Ventures and Sigma Partners, among others. Until now, the term “hands-free” was
really a misnomer; you couldn’t accomplish much without your device in hand. But
with advances in both text-to-speech and speech-to-text technology, these companies
have developed commercially viable services that allow you to speak commands to
your mobile device, have them spoken back to you for validation, and in some cases,
receive responses and updates by voice.

Currently Nuance offers Dragon Dictation & Search for iPhone, but the company will
undoubtedly come out with Android and BlackBerry apps before long. Vlingo is
already available for BlackBerry, iPhone, Nokia S60 and Windows Mobile devices,
with specific functionality varying by platform. The most feature-rich app is Vlingo
Plus for BlackBerry, which allows customers to use voice for any task where they’d
normally have to type. Both Dragon and Vlingo are shockingly accurate in
deciphering speech even with a moderate level of background or ambient noise. Even
as third-party apps, there’s a whole lot of value to the user. Now imagine if
BlackBerry deeply integrated the technology into its operating system and invested in
its continued advancement.

Will physical and/or virtual keyboards disappear any time soon? Not likely. But in my
view the Nuance and Vlingo apps are the types of productivity applications that could
serve as catalysts for BlackBerry to re-emerge as an innovator, charting its own path
to success.
Jonathan Michaeli is former vice president of marketing for Boston-area startups
Gather.com and Panraven and Israel-based WorldMate.