BlackBerry Turn-Around Must Leverage Customer Trust in Secure Network

By Wayne Rash  |  Posted 2013-11-06

BlackBerry Turn-Around Must Leverage Customer Trust in Secure Network

BlackBerry's last chance to sell itself to a bigger company has evaporated now that the Canadian government has announced that Chinese company Lenovo would not get approval to buy the mobile company because of national security concerns.

This comes as no surprise considering BlackBerry's status as a secure communications platform used by companies and governments worldwide.

And this isn't the first time that Lenovo has met with rejection on security grounds. U.S. government users, for example, may not use Lenovo computers for any sensitive data. Similarly, contractors that handle classified data may not use the company's computers for that type of work. Lenovo has been implicated in the past with designing in back doors for Chinese hackers intent of stealing information for use by the Chinese government, although such activities have never been conclusively proven.

But a quiet word to BlackBerry's management was all it took to chase that opportunity away, leaving BlackBerry with a billion-dollar investment by a consortium headed by Fairfax Financial Holdings. A previous $4.7 billion leveraged buy-out by Fairfax Holdings has been abandoned, replaced by the investment. Fairfax CEO Prem Watsa is spearheading the investment and will return to BlackBerry's board, allowing BlackBerry to remain a public company.

Meanwhile, a number of wanna-be investors are crying foul, saying that they really wanted to buy BlackBerry, if only...

But it's been pretty clear all along that BlackBerry's management was never interested in selling the company piecemeal, as was being proposed by former Apple CEO John Sculley, who suggested that BlackBerry could base itself on Android, and abandon the device business by selling that part to the Chinese. No word on what Sculley planned to do with BlackBerry's secure network.

So now BlackBerry finds it must continue to fend for itself facing diminishing prospects in a highly competitive mobile phone industry with a current device business that never caught fire. But it still has plenty of cash, which it's burning through steadily. The billion dollar investment is intended to give BlackBerry time to work through its problems, and time for newly-named CEO John Chen to work his turn-around magic.

The good news is that Chen has done this before. His turn-around chops are some of the best in the industry. He has the experience to handle a struggling mobile company and he seems to believe he can make it happen. But the question is what can Chen or anyone else do to take this once-great company that has squandered its birthright? It can't just be more of the same thing, because that's what now-ousted CEO Thorsten Heins was doing.

BlackBerry Turn-Around Must Leverage Customer Trust in Secure Network

About the only thing that BlackBerry has left is an appreciation among its business and government customers for its security systems. It was, after all, BlackBerry that stood up to NSA spying in Germany and BlackBerry that provided the secure communications necessary for the beginnings of democracy in the Middle East. As a result, BlackBerry is a favored platform for organizations that value security more than they value any possible level of coolness.

But to accomplish this focus on enterprise security, BlackBerry has to appear truly interested in the enterprise. This means developing an application ecosystem that plays to its strengths, but the apps that seem to emerge from BlackBerry don't do that. Instead all that seems to show up is a trickle of games and entertainment packages that don't do anything for BlackBerry's loyal customer base.

So what Chen must do is convince corporate and government users that BlackBerry is serious about serving them. This means offering an infrastructure that remains secure, an ecosystem that offers business and government users value they can't find elsewhere. The obvious question is how he plans to go about accomplishing that.

So far, Chen and Watsa appear to be on the right track, which is to keep BlackBerry intact for the time being. BlackBerry's customers, the big ones especially, depend on the company and its services being in place to offer a complete solution. If part of the company were to get sold off, it would mean that the parts that remain in the hands of customers would become less valuable and that's not the way to retain the customers that BlackBerry needs so badly.

Likewise, selling the company to any organization where its security might be in question such as Lenovo, would become an immediate problem for BlackBerry's existing customers. And one way or another, it's those existing enterprise customers that are the backbone of BlackBerry's future. It's those customers that will provide the proof that the company needs to convince future customers that as long as BlackBerry remains intact, their communications are secure. But if that belief fails, then BlackBerry is essentially toast.

The problem is how you translate something as ephemeral as customers' trust in BlackBerry's security services into a business plan. But here, at least BlackBerry has some experience. After all, it has done this once before and did it so well that belief in the company remains strong to this day. But it won't last forever, and that belief is the one thing that BlackBerry can't mortgage because without it the company will surely fail.

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