Critical Analysis Paper 2

EXECUTIVE SUITE

INNOVATION

• BY TRAVIS HESSMAN

A Long Fail from the Top Blackberry's epic slide from mobile business ubiquity to the auction block underscores the importance of keeping inno- vation alive. Especially when you're on top.

I n January, Blackberry (IW 1000/412)II released its long awaited, long delayed ZIO smartphone and operat- ing system—a combination that was supposed to offset the fallen mobile king's disastrous performance these past two years and return it to its former "crackberry" glory alongside Apple (IW 500/4) and Samsung (IW 1000/14).

But that didn't exactly work out.

Greeted with a lukewarm reception by a jaded market, last quarter sales of the ZIO fell nearly a mil- lion units short of esti- mates, sending stocks tumbling some 90% fi-om its 2008 high. And that follows a nearly 40% drop in revenue last year, which sank the company 172 spots on the 2013 IW 1000 list.

Things are so bleak at Blackberry right now that the company has formed a special committee to explore "strategic alternatives" to help bring in some cash—alternatives that in- cluded putting the whole company up for sale.

This is a stunning turn of fortune. The company that defined the smart- phone market just a few short years ago—the company that gave the world enterprise mobility and its first taste of anytime, anywhere connectiv- ity—has fallen firom an unshakeable

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throne at the top down to the auction block in less than five years.

A crash that big that fast begs a couple of questions. First, what hap-

pened, exactly? And, how do you keep it fiom happen- ing to you?

Looking for Answers "The story at Black-

berry unfortunately isn't that rare," explains Peter Sheahan, CEO of Chan- geLabs, a Sydney-based large-scale behavioral change consultancy firm.

"It's the same thing that happened to MySpace and to Nokia (IW 1000/109) and, to some degree, to Sony (IW 1000/48)," he says. "Sometimes this is the price of being on top."

The problem, he says, isn't necessarily with the products these companies offer. In Blackberry's case, the fall doesn't suggest any defect with the ZIO or its software; it doesn't mean that there was necessarily any- thing wrong with any of its products, in fact.

It's a problem, Sheahan explains, with innovation.

In the beginning, he says. Black- berry—then Research in Motion— was young and agile enough to make important "leapfi'Og innovations" that disrupted and redefined the market. But when the iPhone was released in 2007 and the public began to turn more toward consumer-focused

smartphones, the company was too involved with its leading technolo- gies and too big as an organization to make the change in time.

"They couldn't re-orient the whole company because they had such a dominant market position that was so profitable that they were just too scared to kill that profit center or otherwise undermine it," Sheahan explains. "They believed that their monopolistic position would carry them through."

As a result. Blackberry stuck to its buttons too dearly for too long and has been lagging behind the market on ev- ery move since, unable to recreate the energy or momentum of its youth.

And like MySpace fell to Facebook and Sony to Apple, like Nokia fell to Blackberry at the very beginning, so too has Blackberry fallen.

Lessons Learned Avoiding this fate, Sheahan says,

requires a diflerent way of thinking about innovation.

"Executives at the senior level have got to ask their R&D folks if they are investing in something new or just keeping the company up on the rails," he says. "That can be a really power- ful set of questions."

It's powerñil, he says, because at a certain point it becomes impossible to shift the trajectories of a successful enterprise.

"It's not that these companies don't spend money on innovation, it's that the politics of those places just kills the new ideas before they go anywhere," he explains. "Everyone already knows what's best and you can't convince them otherwise."

To stay relevant, he says, top com- panies need to maintain an entrepre-

INDUSTRYWEEK ONUNE Read Peter Sheahan's advice tor innova- tors in his IW Take 5 Q&A at iw.com/take5- sheahan.

neurial drive at the leadership level. "If you want to stay ahead, you

need leaders with an appetite for risk," he says. "You need leaders willing to say, 'screw the market, if we make great stuff we'll do just fine.'" M̂

I W I SEPTEMBER 2013 I WWW.INDUSTRYWEEK.COM

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