Innovation, Research and Industry in Canada

Blackberry and the Failure of Corporate Culture by Ron Burnett

Richard Florida has written an excellent piece in a recent issue of The Atlantic. It is entitled, “The Boom Towns and Ghost Towns of the New Economy.” (October 2013) Aside from pointing out that cities like New York and San Francisco have not only survived the financial crisis of 2008, but have also prospered, Florida explores the rich diversity of urban areas that focus on startup activity and knowledge-based industries. It is pretty obvious that places where venture capital takes risks (Austin, Seattle, San Diego) have been able to recover and recover quickly from the crisis. He points out that the economic corridor from Washington in the South to Boston in the North has an economic output of 2.5 trillion dollars more than all of the UK and also, Brazil. More than half of that output is based on innovations in technology including research into new materials like Graphene which has the potential to revolutionize not only how we make things, but their size and strength.

I am continuously puzzled as to why policymakers in Canada ignore the evidence writers like Florida point out and don’t invest more in research and the knowledge economy. Policymakers know for instance, that the Waterloo area has boomed because of venture capital and a fast-paced startup culture. Notwithstanding the failure of Blackberry (and I will come back to that in a moment), there are over a thousand startups in the region. There are even more in Toronto, which has a booming cultural sector and knowledge industry. For all of its problems, Montreal remains a hub of economic activity including companies making video games, which employ thousands of people and without which the Quebec economy would be in even worse shape. There are fifty-four professional, scientific and technical services in the Design profession and this along with companies innovating in web-based technologies and digital production signals the extent to which the Canadian economy has changed since the crisis of 2008.

Yet, we lag in Research and Development with most of our large corporations spending far less than their peers in Australia, Europe and the US. Ironically, the resource industries have responded to the economic downturn by shifting to the use of high technologies to solve everything from extraction to supply chain management. The mining and forest industries are now among the most important innovators in their use of new technologies both in the field and in the ways in which they export their raw materials. The resource industries have understood something that many of our larger corporations have not. The fluidity and rapidity of economic change cannot be left solely to immediate market forces. Companies have to anticipate more quickly, be fast and nimble in recognizing and taking on new opportunities. 

So, why has Blackberry been brought to its knees? Its new phones are high quality. Its corporate culture is devoted to innovation. It has a strong relationship with the local community and attracted the best and brightest. Yes, it was late into the consumer market. It also misunderstood the speed of change in the smartphone area. Like Nokia, it recognized far too late that innovation is also about testing new ideas in the marketplace and taking risks.

I was an early adopter of Blackberry. Its operating system was built on a set of assumptions that had little to do with how users interacted with it. It was focused on the immediate uses people would make of the phone, but not on how they could customize their relationship to it. It was difficult if not impossible to change some of its key functions and the menu system was layered and difficult to navigate. Not even the wonderful keyboard overcame the frustration of having to navigate through many menus to change simple functions.

Still, people loved their Blackberries and stuck with them. Even when Apple introduced its first iPhone, Blackberry, with Apple’s innovation visible to everyone, refused to move with the changes. Users still stayed with them. The company had a captive audience and that was the problem.

Innovation economies and the companies that succeed, thrive in a culture of critique and self-reflection. Blackberry, like Nokia should have developed company areas devoted to pure research, that is research that may not lead to immediate outcomes, but attracts people who have the ability to wonder about the future and test their concepts and designs. In other words, they needed to introduce and sustain the mentality of a startup while also creating safe places to explore new ideas. There may not be a direct productive outcome, but corporate culture needs to be tested all of the time by the unintended consequences of speculation and exploration. You do that by introducing and sustaining diverse people from many different backgrounds and by allowing your employees to challenge the very essence of a company’s direction. Canada needs a new model of corporate innovation, a topic to which I will return in another column.

Above, I discussed the various ways in which Blackberry failed to recognize the importance of innovation and transformative change in its business model, two characteristics that entrepreneurs and Canadian industries need to internalize and understand if they are to survive in a global economy. Unfortunately, there is no algorithm for innovation. Anticipating the future, especially future markets is at best a guessing game and at worst can lead to everything from poor product design to marketing failures. Short-term visions will not work in the 21st century and Blackberry was overwhelmingly short sighted when it became aware of Apple’s efforts to create a phone. This is in large measure part of the explanation for their present crisis. However, it is important to understand how a culture of complacency can be sustained when all the signs point in a different direction.

Nortel tried to avoid what is happening to Blackberry when it created the position of VP for Disruptive Technology. I participated in a two-day workshop (in 2001) organized by the VP, Claudine Simson to examine the implications of mobility and cultural change on the telephone industry and can honestly say that although it was a terrific meeting, no one anticipated what was on the horizon. It is always easy to make retrospective claims that companies and the people running them should have been more prepared. It is far harder to engage in futurist thinking that will lead to products that will not only respond to market forces, but also create new markets.

Complacency is often the result of uninspired leadership. The scariest thing for leaders is to contradict themselves or to honestly acknowledge that their plans and their hunches may have been wrong. Blackberry and Nortel before it, needed more than disruption, they needed weeks if not months of brainstorming, workshops and analysis. The focus of planning should have been software, ease of use and design standards. Blackberry was in love with its hardware, something it reproduced in its latest designs. But, their software and with it, their operating system never changed even when Apple showed them not only simplicity but a range of new and diverse functions. The new phones they produced over the last year are indistinguishable from the clutter of products now being produced all over the world.

Why did they end up with the same form factor and the same shape and look of the iPhone? Even Samsung experiments with shape and size and tests the consumer’s appetite for new ways of using their phones. The result is that they are “seen” to be innovative even when they are not doing something new. And for those who suggest that the phones we have today are the phones we will have in five years, look back no further than five years ago. The first iPhone seems clunky and archaic, not unlike the phones that Blackberry produced in 2013. Cultures of innovation have to be nurtured throughout an organization. Every company should be into research and development and ready to shift when the conditions are ripe. Sadly, Canada’s R&D culture is at best derivative and at worst does not have the hungry need to reinvent not only products but also the very process of innovation itself.