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BlackBerry CEO John Chen gestures as he speaks during the company's annual general meeting for shareholders. (MARK BLINCH/REUTERS)
BlackBerry CEO John Chen gestures as he speaks during the company's annual general meeting for shareholders. (MARK BLINCH/REUTERS)

Rebuilding BlackBerry: CEO’s enterprise focus starts to pay dividends Add to ...

Shortly after his appointment as BlackBerry Ltd.’s new CEO in November of last year, John Chen began making the rounds. At the time, the company was in a state of virtual freefall, its future a matter of debate. As a result, consumers and enterprise customers were bailing.

Looking to stop the bleeding, Mr. Chen targeted BlackBerry’s most lucrative and strategically important demographic – the big corporate customers.

“I personally spoke to a lot of people and have met a lot of customers, some very big names,” Mr. Chen said during an earnings call on Thursday. “When we have a chance to lay out our plan and visions, the majority of the time we get them to support us.

“What I have found is people who would like to stay with Blackberry, who were concerned a little while back, and I need to try to regain that confidence.”

This week, BlackBerry surprised many investors and analysts by posting better-than-expected results for its fiscal first quarter. Even though the company still lost money on an adjusted basis, the loss was far less severe than most analysts expected, and gross margins much higher. The smartphone maker’s shares jumped more than 10 per cent on the news.

For years, BlackBerry couldn’t quite figure out how to treat the vastly different worlds of consumer and enterprise mobility. Even as companies such as Apple and Samsung were creating the devices that eventually came to dominate the industry, BlackBerry executives hardly even recognized that a consumer smartphone market existed. When the Canadian tech giant finally got around to targeting consumers, it tried to build all-in-one solutions such as the PlayBook tablet, designed to appeal to both enterprise and everyday retail customers. For the most part, the strategy flopped.

In early 2012, Thorsten Heins replaced Jim Balsillie and Mike Lazaridis as CEO – part of a plan to change BlackBerry’s sagging fortunes. However the company continued to lose money and market share, and in less than two years, Mr. Heins also stepped down. His replacement, Mr. Chen, is now under even more pressure to accomplish the turnaround his predecessors could not.

“I think if BlackBerry was a little more humble, they would do a lot better,” said Joe Compeau, an expert in information systems at the Ivey School of Business, adding that the company’s strong suit has never really included more consumer-oriented areas such as apps, but rather data and network management.

“That’s where they get their relevance.”

So far in Mr. Chen’s tenure as CEO, that message seems to be resonating. The old company line of focusing equal time and effort on consumers and enterprise customers is all but gone. Instead, Mr. Chen has turned his company’s attention squarely on retaining and winning over corporate clients, while simultaneously signing myriad deals and licensing agreements that effectively outsource much of the heavy lifting in the consumer smartphone market over to third parties.

It is, in many ways, a radical departure for a company that used to do almost everything in-house. It’s too soon to tell whether the new strategy will put BlackBerry on a path back to its glory days, but in the short term, at least, the early signs are that it’s working.

Playing to its strengths

The first signs of a shift in direction at BlackBerry came in December of last year, when the company announced a major deal with Taiwanese handset manufacturer Foxconn. Most smartphone makers have similar deals with outside manufacturers to build phones, but in a first for the company, BlackBerry also had Foxconn do the designing (albeit under BlackBerry’s watchful eye). The result was a device called the Z3 – an inexpensive consumer smartphone initially aimed at emerging markets, such as BlackBerry’s loyal Indonesian customer base.

Not only did the deal allow BlackBerry to become more nimble with its hardware (bringing the total design and manufacturing down from a matter of a year or more to just a few months), it also freed up some of the company’s precious resources – especially since BlackBerry went through some of the largest job cuts in its history over the past year.

Soon, the same strategy began popping up across the board. Consider BlackBerry Messenger, for example: The chat app is one of the company’s most important assets. At a time when BlackBerry is struggling to retain its consumer smartphone customers, BBM is thriving, with some 85 million monthly active users – a number that is expected to climb to near 100 million by the end of the year, as the company prepares to make the service available on the Windows Phone platform next month. For the most part, BBM is used and loved most by everyday consumers.

But when it comes to making money off the software, BlackBerry takes two very different approaches. Traditionally, many consumer chat apps generate revenue by running ads. But BlackBerry outsources such functionality to third-party ad companies, and doesn’t expect to make a huge sum of money off ads regardless. Instead, BlackBerry staff have worked tirelessly on building BBM’s capacity to generate revenue in the enterprise market. Earlier this year, the company announced eBBM, a suite of tools tailored specifically to businesses. The suite is made up of three applications – an ultra-secure messaging service called BBM Protected, a collaboration and scheduling tool called BBM Meetings, and a mobile payments tool designed in collaboration with myriad banking and telecom partners.

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  • BlackBerry Ltd
  • Updated August 18 4:18 PM EDT. Delayed by at least 15 minutes.

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