What retailers can learn from the fall of BlackBerry and the ‘Wile E Coyote effect’

Perhaps the most memorable quote from the recent remake of The Magnificent Seven comes from charming cowboy Josh Faraday (played by the equally charming Chris Pratt). Reflecting on the huge test his group of ‘wild west’ outlaws are about to face, he quips:

“Reminds me of this fella I used to know. Fell off a five-story building. Passed each floor on the way down, people inside heard him say : ‘So far, so good!’ He's dead now.”

In present day California, Benedict Evans, a leading silicon valley analyst and investor, recently argued that companies can be guilty of the same thinking. Take BlackBerry, which saw unit sales increase for four years following the unveiling of the iPhone. And we all know what happened after that...

Evans dubs this the ‘Wile E Coyote effect’ - “you ran off the cliff nice and fast and everything still seems OK.”

Our ‘iPhone moment’ in retail arguably happened even earlier on with the birth of Amazon and e-commerce. Thankfully for the industry, the fallout so far has been nowhere near as severe.

However, with Brexit still to come and legitimate concerns about a new financial crisis looming, the cliff edge is now on the horizon. I believe there are a number of strategic lessons we can learn from the collapse of BlackBerry if we want to avoid a similar fate.

Avoid short-termism

Research in Motion (RIM), BlackBerry’s parent company, was too concerned with protecting its market position in business devices that it failed to realise the potential of consumer smartphones. By focusing on short term trends, RIM failed to turn its first mover advantage into long term success, and by the time it realised the mistake it was too late.

With such a seasonal focus and the obligation of most companies to report on a quarterly basis, retailers are also at risk of adopting short-termist thinking. A common symptom is that firms needing to control operational costs will often cut budget lines that will produce in-year savings (e.g. staff hours, headcount) rather than choosing to invest in products and services (new IT systems, training) that will make them more efficient in future.

Of course, difficult decisions have to be made. Technologies such as AI and automation mean that the industry will employ fewer staff in future. But those who remain in the industry must be given the tools and skills they need for the British Retail Consortium’s vision of “fewer, but more productive” jobs to come true.

Always listen to your customers

Once the world’s media started doing their own post-mortems, it turned out that BlackBerry users had been asking RIM to add the kinds of features that are mainstays of the iPhone, like faster web browsing and more applications.

Thinking it knew better, the company either ignored customer feedback or was slow to implement it. So as soon as products that better suited their needs hit the market, previous BlackBerry users left in droves.

Retail is more customer-centric than any other sector of the economy. If you fall into the trap of trying to provide consumers with what you think they want, not what they really desire, they won’t remain loyal to you for long.

Finally, high quality customer feedback is essential to making the right strategic decisions for the long term. Companies can only create trends if people are ready to follow them.

Don’t be afraid to think differently

Who remembers BlackBerry Messenger (BBM for short)? It was one of the brand’s biggest selling points - the ability to send instant, encrypted messages to other BlackBerries. Fast forward to today and what does almost every single smartphone user have on their device? An instant messaging app with end-to-end encryption!

RIM was so focused on its hardware business that it didn’t fully exploit the opportunity it had to branch into software and apps. Who knows, WhatsApp might not have ever been invented if it had.

By contrast, many leading retailers are investing in their futures by thinking differently about who they are and what they can offer. For example, John Lewis is considering installing co-working spaces in some stores to make better use of its physical estate. Continued success means constantly questioning what ‘shopping’ as a concept will actually mean, not tomorrow but in five or ten years.

Businesses that do these things will be the Roadrunners of retail, zipping happily into the distance safe from the clutches of Mr Coyote.

Personally, I feel pretty confident about the future…well...so far, so good!



Yapster Admin