As Mikayla3 has mentioned in her post, Blackberry Ltd. has decided to terminate production on hardware and to invest its capital on software development. Instead, Blackbery will outsource hardware from an Indonesian firm, BB Merah Putih.2 Mikayla his indicated that this pivot is related to Blackberry’s strategy on the playing field. She claims Blackberry’s past strategy has been based off of Michael Porter’s5 concept of sustaining competitive advantage; however, Blackberry is beginning to shift to strategies based on Rita McGrath’s4 transient advantage.
Mikayla does have a point on Blackberry’s change in strategy as the company has disengaged with hardware and is beginning to launch and ramp up advantages in its improved line of software.3 However, Blackberry’s transition from a mix of hardware and software products to just software products seems more than just a strategy changing from sustaining competitive advantage to transient advantage. Blackberry’s decision is also a financial and accounting decision. As their income statement1 indicates a decline in revenue for hardware and an incline in revenue for software, it would be wise for Blackberry to invest all its capital into software. Since managers are supposed to create value through their decisions6, it seems that Blackberry is pivoting to a solely software based company because Blackberry is losing the value created in their hardware and that it is too late to invest into more research and design in their hardware.
Mikayla states that the switch over will improve the operational effectiveness of Blackberry because it will help Blackberry with its “forward movement towards the productivity frontier curve” as Blackberry will be able to demonstrate “inherently reliable, controlled, and secured” applications.3 However this is not the only factor that will improve the operation effectiveness of Blackberry. Because Blackberry is in a state of decline, specializing in one area will help the company simplify itself so that it will be able to know which direction to head off for the future for potential growth. Staying in one field seems to enable Blackberry to reduce costs and save resources as the company will not have to worry as much for the hardware.
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References
1 Blackberry. “Investor_presentation_Q2_FY16_(Sep).” PDF file, Sept. 2015.
2 Evans, Pete. “Blackberry to Outsource Smartphone Manufacturing from Now On.” CBC News, CBC, 28 Sept. 2016, www.cbc.ca/news/business/blackberry-hardware-loss-1.3781876. Accessed 29 Oct. 2016.
3 Mikayla Trang. “Blackberry – Transition from Hardware to Software.” Mikayla Le’s Blog, UBC Blogs, 1 Oct. 2016, blogs.ubc.ca/mikaylatrangle/. Accessed 29 Oct. 2016.
4 McGrath, Rita Gunther. “Transient Advantage.” Harvard Business Review, PDF ed., 2013, pp. 62-70.
5 Porter, Michael E. “What Is Strategy?” Harvard Business Review, PDF ed., 1996, pp. 61-78.
6 Walther, Larry. “Planning, Directing, and Controlling.” PrinciplesofAccounting.com, 2016, www.principlesofaccounting.com/chapter-17/planning/. Accessed 29 Oct. 2016.
Image Source
McDermid, Brendan. “The New Blackberry Classic Smartphone Is Shown during a Display at the Launch Event in New York, December 17, 2014.” Reuters, 5 June 2016, www.reuters.com/article/uk-blackberry-strategy-idUSKCN0ZL1JF. Accessed 29 Oct. 2016.