On the Cover
Wednesday, 22 August 2012 05:48
Written by Bonnie Tubbs
New local boss upbeat about future
“A company like Research in Motion (RIM) can’t just go away - it changes, and it evolves. RIM is a solid going concern and it is going through a change.”
These are the words of Alexandra Zagury, RIM’s MD for SA and southern Africa. The 37-year-old Brazilian-born executive, who took the position just over a month ago, says the end is far from nigh for the company and its star, the BlackBerry smartphone.
Zagury joins RIM at its offices in Johannesburg, from Istanbul, Turkey – where she was the first regional MD appointed for RIM. Prior to that she was based in the UK, and responsible for regional strategic planning and business operations for Europe, the Middle East and Africa.
Before joining RIM in 2008, Zagury worked in the world of the Internet – at Yahoo Europe. The London School of Economics graduate headed the UK and Pan-Euro Business Operations and Intelligence teams there. She says she moved from the Internet sector to mobile, because she firmly believes that the future of anything online is in mobile.
Zagury’s experience traverses a wide compass, including the financial, property, leisure, and media industries in the UK and US, Tunisia, Argentina, Korea and Poland.
The well-travelled exec will now oversee all of RIM’s operations, sales and marketing efforts for the region from its local city offices, in Fourways.
Contrary to prevalent belief and industry speculation, Zagury says the Canada-based company is not on the brink of collapse. Quite the reverse, she says, particularly in the local market where the BlackBerry brand still enjoys a substantial following.
RISE TO RENOWN
BlackBerry, as we know it today, was born out of RIM’s progressive wireless communication efforts in 1999, when the 1984-founded company introduced its first BlackBerry – a wireless handheld computer. The device, which syndicated e-mail, wireless data networks and a traditional QWERTY keyboard, saw mammoth uptake due to its networking capability. At the time, RIM was ranked as one of Canada’s fastest-growing technology companies.
In 2002, the modern-day smartphone started taking shape when RIM upgraded the BlackBerry to include voice and data transmission, while e-mail capabilities were improved - allowing access to multiple e-mail accounts.
When the company celebrated its 20th birthday, in 2004, its user base had surpassed one million worldwide. By 2007, the BlackBerry subscriber base had topped the 10 million mark. That same year, at the height of its fame, BlackBerry had to make room for new entrants. Apple’s iPhone swaggered onto the smartphone stage in January, followed, about 20 months later, by the first Android handset, in October 2008. And so the smartphone war began.
Simon Leps, CEO of Fontera Digital Works, says what he refers to as “RIM’s slow motion car crash” will impact South African BlackBerry users in the long term. Leps cites the delay of BlackBerry’s “white knight”, the BlackBerry 10 operating system (OS), preceded by the poor execution and uptake of RIM’s tablet the BlackBerry PlayBook released last year, as nails in the company’s coffin.
“Adding to this, during the first quarter of 2012, RIM reported a loss of $518 million and a 43% decline in revenue. These dismal figures resulted in the company laying off 30% of its labour force, that is, 5 000 employees.”
He says the company has been on a steady decline globally since 2007, with its US market share plummeting from 41.1% to 3.7%.
BlackBerry’s descent, says Leps, is in part due to strong competitive market pressures, specifically from iPhone and Android smartphones. “[RIM’s] lack of an innovative products and services pipeline means it cannot currently compete on the same scale as other players in the market.”
While Leps concedes BlackBerry remains a viable choice among higher-end consumers in SA – and a practical choice for lower-end consumers – he says the smartphone is slowly falling behind in the country as its competitors continue to innovate, offering consistently better products.
“BlackBerry is also swiftly losing its competitive advantages, namely its BlackBerry Messenger (BBM) service and all-inclusive data package, to similar services being offered by competitors, such as the popular messaging application, WhatsApp.”
Zagury acknowledges RIM has gone and is going through some “tough times”, but says it is really just the name of the game – a game in which things vacillate. “BlackBerry is over 10 years old and things go up and down. SA is a different market now. When BlackBerry started, we were the only ones on the block. You can’t retain 100% market share forever.”
She welcomes competition, branding it as inevitable and healthy. “It allows you to find your own place in the market and that is basically what we are going through right now. I think there is space for more than one competitor and we very quickly found that out. For me it’s not about market share – it’s about making sure that we retain our customer base and making sure we are a profitable and sustainable business with a sustainable competitive advantage. That is good business practice.”
Having said that, Zagury says the technology industry is extremely volatile. “Just like in the Olympics – you are only as good as your last race.” Confident that the company is in for its second wind, she says it is focused on transitioning the mobile experience with the evolution of mobile computing and the BlackBerry 10 OS, under way and due to be introduced at the onset of next year.
MD of World Wide Worx, Arthur Goldstuck says the South African view that the door is about to close on BlackBerry is more one of media perception than it is about market reality. “[This perception] is largely a function of media being slavish followers of American opinion. That opinion, in turn, is driven by the tech and analyst elite in the US, who have an extremely narrow view of the world.”
The result, says Goldstuck, is an assumption, in certain circles, that “everyone” has embraced the iPhone. “In SA, it turns out, that ‘everyone’ makes up 1% of adult cellphone users living in cities and towns. Our Mobile Consumer in South Africa 2012 study shows that BlackBerry now has 18% of that market, drawing level with Samsung, while Nokia retains 50% of the market. That is a dramatically different picture to what is happening in North America, and as a result does not make sense to American analysts or a South African elite that sees the world through American eyes.”
He says the value proposition of BlackBerry’s low-cost Internet use remains the siren song for smartphone users in emerging markets. “And, as much as this confounds the American - and some local - elite, BlackBerry remains an aspirational brand in emerging markets. It is seen as a high-end business phone that denotes success - as opposed to the iPhone merely denoting how much you can spend on a toy.
“It is especially appealing in the younger market, because of low-end versions, like the Curve range, that are accessible to so much wider a market than all brands’ flagship phones, yet looks and feels very similar to the top of the range.”
Mike Sharman, owner of digital communications agency Retroviral, says it is understandable how a device can survive in the African context and be discontinued in other markets. He cites the local popularity of the Samsung E250 as a case in point. According to World Wide Worx, there are approximately 4.5 million of these devices in SA - which equates to a similar number of BlackBerry devices sold in the country.
He says, however, that there is a fundamental difference between Samsung and Blackberry from an international point of view. “Samsung is thriving and can continue manufacturing devices per market, based on demand. If BlackBerry capitulates on an international level, then BlackBerry users in Africa are left crippled with a device that may no longer be able to access the services that made it attractive in the first place.”
Sharman says that, as long as BlackBerry is seen as a status symbol it will continue to survive in Africa. “But I will be watching the global developments keenly.”
TAILORING FOR TIERS
Speaking of status – with particular reference to the youth market in SA - Zagury says the fact that BlackBerry was voted as the “coolest brand” in SA for the second year running in the Sunday Times Generation Next 2012 Brand Survey Awards, is testament to the smartphone’s staying power. Announced at an event in May, BlackBerry also took top honours in the “coolest cellphone” and “coolest high-tech gadget” categories.
Zagury says, in addition to the youth in SA’s apparent affection for BlackBerry, RIM SA has a strong marketing team that knows how to pander to the market’s needs through the segmentation of the brand. “It is always about how to become more creative and do better and new things. I think our marketing segmentation is very developed here – we are able to talk to the aspirational part of the brand and we are able to talk to our business base, but at the same time we also know how to communicate with the youth base.”
She says South Africans place value on an aspirational brand. “They like to be associated with a brand that is ‘cool’ and trendy and so the Sunday Times award is important. I think the key is to focus on segmentation and market requirements. You will always have different parts of the market that have different price sensitivities and different product requirements – you can’t expect to have a phone with full specs at an entry level price. So BlackBerry tries to work like that – we have Curve and the Bold portfolio, but for us it’s more about tiering the brand with the experience. Our engineers are really focused on not compromising the experience of our portfolio as you go down the tier to the low-end.”
For the cost to the consumer, Zagury says the smartphone has a lot to offer. As far as the African market goes, she says the FM radio functionality is of utmost importance. “That was a particular requirement from this market. When we went out and spoke to consumers they told us: ‘FM radio here in Africa is important to us, especially when we buy our first smartphones’, and so the team took the feedback to the engineers and, as a result, we now have FM radio in our Curve portfolio.”
Goldstuck says high-end users tend to miss the fact that the most popular application on a phone across Africa is FM radio. “The cheapest cellphone available in Africa today, a $7 device from ZTE, includes FM. BlackBerry just introduced a Curve model, the 9320, that incorporates FM radio.” He says, while this move by RIM drew sniggers from the elite, it in fact meets a very real market demand.
“On most high-end smartphones, you can only listen to FM by downloading an app and incurring data charges for every minute of listening time. Guess what? Low-end users are smart enough to figure out that data apps don’t make sense for local radio.”
Often positioned as BlackBerry’s original crowd-puller and, more recently, its saving grace – BBM remains a strong force among smartphone consumers in SA. The country has one of the highest penetration rates in the world, at 98%.
While this is one of the company’s foremost strengths and main value proposition in certain segments of the consumer section, Zagury says the instant messaging (IM) platform is not the only lodestone. “We also have the e-mail platform and [BlackBerry] is the ultimate device for social networking.”
But while BBM is still one of the largest social mobile networks, the rise of other IM platforms, most notably relative newcomer - cross-platform instant messaging application WhatsApp – has been said to pose a threat to this virtue.
Sharman says BBM was, and still is, a huge drawcard – providing BlackBerry with “major street cred”, especially for the youth market. However, he points out that WhatsApp has allowed different manufacturer devices to “talk to each other”, in turn making a closed network open.
“Sometimes ‘closed’ works, as it has with Apple, but from a reach point of view history has shown how the open approach used by Microsoft and is currently championed by Google/ Android is embraced and spread by a larger market.”
According to World Wide Worx’s latest mobility study, WhatsApp came from nowhere to take 26% of the IM market. BBM, revealed the report, has risen from 3% to 17% in an 18-month period. Goldstuck says, however, that in the short to medium term, WhatsApp represents a greater threat to Mxit than to BBM.
While Facebook remains the biggest social media tool on phones, at 38% penetration, Goldstuck says it is not viewed as an effective IM tool in the way that the other three (BBM, WhatsApp and Mxit) are – so it is more likely to coexist than it is to compete with BBM.
He says BBM will continue to grow because of the brand momentum that is still driving sales upward in SA.
Amid the criticism, scepticism and downbeat opinion, Zagury says the Southern African landscape is poles apart from one of doom and gloom for RIM. “Everybody at RIM feels very excited about the future of BlackBerry in SA.”
She says she has been taken aback by comments that paint the African continent in a less than flattering light in terms of business pursuits. “Many journalists have said that companies don’t take Africa seriously, and I was surprised by this because I have read in international press that there is a lot of focus on the continent, given the fact that the BRICS countries haven’t performed as they were supposed to.”
According to Zagury, a number of prominent figures in the business world are of the opinion that the next 10 years belong to Africa – “in the same way that the former 10 years belonged to Asia”.
Africa is a vital market for BlackBerry, she says. “RIM is a company that has globalised and Africa is one of the priority markets as we move forward.”
She says the company is “very proud” of the business they have built here – in SA, as well as in other African countries – and that demand for BlackBerry products remains unstinted.
“The challenge is going to be keeping up with the demand, to be honest.”
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