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Facebook Dumps BlackBerry: The Key Lessons

As if longtime tech struggler BlackBerry Ltd. (BBRY) weren’t basically dead already, Facebook Inc. (FB) hammered another nail into its coffin on Monday.

The social media giant announced that it won’t continue to support BlackBerry’s operating system on its platform.

It follows a similar announcement from Facebook-owned messaging service, WhatsApp.

For BlackBerry, it’s a monumental decline, given that the company essentially invented the precursor to today’s ubiquitous smartphone.

Between 1998 and 2008, BlackBerry owned this nascent market, as corporate warriors, tech engineers, Wall Street traders, and eventually other “connected” customers all had BlackBerry phones. The phones were invaluable for conducting business and keeping in touch when they were out of the office.

BlackBerry’s market dominance brought untold riches for investors, too. Adjusted for splits, BlackBerry shares catapulted from under $4 to nearly $150 in less than six years.

Today? A wasteland.

And the lessons for other companies – and investors – are clear…

BlackBerry: The Poster Child for a Fallen Giant

When Apple Inc. (AAPL) and Alphabet Inc. (GOOGL) came along with their respective phones and operating systems, the game was up for BlackBerry.

Complacency, new competition, and a single disastrous product launch (the ill-fated BlackBerry Storm) combined to put BlackBerry on the ropes. And the punches haven’t stopped since.

Facebook’s decision is obvious – BlackBerry’s once-mighty operating system is now less than an also-ran.

It has a market share of under 1%, down from nearly 50% less than a decade ago.

Heck, many of the few phones that BlackBerry still ships don’t even carry its own operating system. And, of course, the stock has made a round trip from the stratosphere to the basement.

A forthcoming book, Losing the Signal, promises to lay out BlackBerry’s rise and fall in excruciating detail. And the arguments over what killed BlackBerry – whether it was Apple, Android, or self-inflicted wounds – will continue. As will the debate about whether the company can somehow come back.

(Hint: It won’t.)

The lesson is clear: Every company, no matter how strong, is vulnerable.

There’s no market share so high, no competitive advantage so long-lasting, no reservoir of customer goodwill so deep, that just a few changes here and there can cause an incredible success story to falter quickly and permanently.

Even as Facebook bins BlackBerry, the social media firm is a good example in itself.

Facebook: Bulletproof, Right?

On the one hand, everything is going Facebook’s way. It emerged from a sea of social media options – including one-time juggernaut, MySpace – to dominate the industry.

And its early advantage continues to be the most important edge. With many people on Facebook, if you want to reach your family and friends, you have to use Facebook.

The company overcame an early challenge – how to monetize posts about Grandma’s birthday and cute kittens. And it overcame another challenge – embracing the mobile era and beefing up its mobile prowess when people started posting more from their cellphones.

Facebook would seem to be invulnerable, right? But it’s not.

To be clear, there’s no visible challenger to Facebook right now. MySpace is still moribund… Google+ flamed out… and “alternative” social media networks like Ello struggle to find new customers.

But flash back to 2005: There was also no visible challenger to BlackBerry then, either. Not until Google signaled its intention to enter the mobile market by buying a little-known company called Android.

And even in 2007, when the iPhone was released, many people thought BlackBerry’s position was secure because it was so dominant and corporate customers would never abandon a system that worked so well for them.

What Corporate America – and Investors – Can Learn From BlackBerry’s Demise

I’m not saying Facebook will go the way of BlackBerry. The seemingly impenetrable competitive advantage it has now is simply the best example of a massive bulwark against competition.

Rather, the point is that the companies we regard as dominant and impervious to competition – Facebook, Google, Amazon.com Inc. (AMZN) – are, in fact, still vulnerable. If they get lazy, complacent, or incompetent, not only could they get hammered, they could fail faster and more spectacularly than you might imagine.

The lesson for companies is clear: Innovate or die. The goal is for them to always innovate, always add layers, and always “replace themselves.” If they don’t, some other company will do it for them.

For investors, the lesson is to avoid complacency. You must constantly monitor and reevaluate every company in your portfolio to adjust for the possibility of some force out there that will render them obsolete.

And if a company ever tells you that its competitive advantage can’t possibly be overcome… sell!

To living and investing in the future,

Greg Miller

Greg Miller

, Senior Analyst

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