Why BlackBerry's Bold Pivot is the Right Move

By ditching its handset line, the Canadian smartphone maker shows it has a mindset for success—rather like a successful startup

Written by Deborah Aarts

Earlier today, BlackBerry finally did what many have expected for almost five years and announced it would stop making its own handsets. There hasn’t been a Canadian business strategy so heavily scrutinized since Avro scrapped the Arrow.

According to CEO John Chen, the move positions the company for growth and removes a significant burden on its balance sheet. “We are reaching an inflection point with our strategy,” he said in a statement. “Our financial foundation is strong, and our pivot to software is taking hold.”

“Pivot” is the key word here. No one is surprised to hear it used—it is the buzziest of buzzwords—but the word is a bit startling coming from the CEO of a $3-billion company with more than 4,500 employees. Businesses as big as BlackBerry aren’t generally known for making major shifts in their strategies. Chen’s willingness to do it now suggests the company is a lot more forward-thinking than skeptics might give it credit for.

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The idea of rapidly changing course is a central tenet of the so-called Fourth Industrial Revolution. If you’re not familiar with that phrase—or its more grating synonym, “Industry 4.0″—it describes the economic shift spurred by the merging of digital and physical systems. As World Economic Forum founder Klaus Schwab put it in a much-discussed piece published in January, “The speed of current breakthroughs has no historical precedent. When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace.” He went on to state that, for business leaders, “the acceleration of innovation and the velocity of disruption are hard to comprehend or anticipate, and these drivers constitute a source of constant surprise, even for the best connected and most well informed.” In non-wonk terms, that means things are changing crazy fast; companies better be able to adapt on the fly.

It’s a notion that also forms the bedrock of Eric Ries’s entire Lean Startup movement. “When we discover that our experiments have stopped being productive, let us pivot to a new, fundamental strategy that can allow us to do better experiments,” Ries told a rapt audience at South by Southwest a few years back. “That’s what a pivot is.” He and his devotees believe in the mantra of “build something, test it, adjust, repeat.” It all makes perfect sense for a scrappy young digital outfit whose fixed assets amount to little more than a few laptops and a latte machine.

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But it’s a concept bigger businesses—those with growing head counts and tangible assets—have had difficulty adjusting to. Pivoting doesn’t look quite so sweet when you’ve just sunk $500,000 into a machine for a tool and die shop or hired 30 new employees to staff your restaurant or signed a five-year lease on a warehouse. For all the hoopla surrounding the digital economy and virtual businesses, the success of many ventures still hinges on serious capital outlay; indeed, a recent benchmark report by the Business Development Bank of Canada identifies “significant” investment in fixed assets as a key variable that helps mid-size companies grow into large ones.

Business functions differently when your work necessitates a lot of tangible things, yes. The problem is that it’s too easy for the leaders of these companies to conflate “we have a lot of stuff” with “we have to do things a certain way.” This is dangerous thinking that can obscure opportunities to pursue new processes or revenue streams—or to respond to indelible market indicators.

Which brings us back to BlackBerry. The company is a few decades and several billion dollars removed from being a nimble disrupter, and it’s certainly carrying around some baggage. And, to be fair, even the most ardent Priv-toting superfan would have a hard time describing the company’s reinvention as a software outfit as overly progressive. But the move does suggest that Chen and his leadership team aren’t wed to using the strategies and successes of its storied path as the tools to keep it going in the future. It’s a reminder to any business interested in surviving in the economy of tomorrow that you don’t necessarily have to be ahead of the game, but you do have to be willing to adapt while playing it.

Deborah Aarts is a senior editor at PROFIT and Canadian Business. This article is from the November 2016 issue of Canadian BusinessSubscribe now!


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