We all know companies have cycles the best time to buy is when the price is low and as the price goes up, you can sell some of your holdings and the rest are essentially free. How long you hold them afterwards is dependent on how the company is doing. Ideally the company is growing, and when companies are growing, they will have and do have many different issues around the growth. The company will have to internally restructure, bring in new people and sometimes they work out sometimes they do not. Somewhere in the growth are signs of a decline which if you see and they are not corrected, it is time to find alternatives.
Before everyone had either an iPhone or Google android such as Samsung, there was the Blackberry, the most famous user was President Obama. The phone was often called crackberry because everyone who had one was on the phone all the time, now days it is normal.
In an article by Marc Gingras who wrote an opinion piece for the Globe and Mail, he sold a calendar service to Blackberry and was asked to lead the product management team. Mr. Gingras wrote the article for readers to learn, sometimes hubris and the inability to change mindsets can sometimes be the kiss of death, even for once great companies.
When Mr. Gingras joined Blackberry, the product management team reported to one SVP and the R&D team reported to another SVP. This created an adversarial environment because the product team wanted to more features to its customers, while the R&D team want to make sure they could deliver on their produces to reduce the scope of what features were needed, which lead to many compromises.
Mr. Gringras wanted a change that both departments would report to him. The SVP of Product was good with it, the SVP of R&D had reservations. He asked why do you want to change the way we have been doing things? Mr. Gingras said because from my perspective we are failing. The other person said, failing? we have managed to ship our releases on time, they are good quality, we have things under control. I said, but Apple (the competition) is kicking our butt. We are failing users, we are failing in the marketplace.
The perspective was the SVP of R&D saw the measure of success was whether our products were being delivered on time. For me, it was whether we were delivering a product that delighted our customers.
Eventually, Blackberry changed their phone to look like an Apple iphone, but why choose Blackberry if it looked like an iphone. Customers began to leave Blackberry and although it still exists, it does not have the market share it did. Could it have remained a dominant market player? no one really knows.
Linking to dividend paying stocks, there are many companies that come from the “garage” and become a dominant company and then slowly go lose market share. There are a wide variety of reasons for the downturn, but often it can be seen in retrospect how they did not adapt to the changing marketplace. There will be parts of the company that worked wonderfully when it was smaller, then okay as the size grew and behind the scenes was not really working behind the scenes. People in the company will see different aspects of the company. For example, in the cellphone business, who sells smartphones – it is the big communication companies, a buyer goes to Verizon or someone similar. Do the carriers worry what brand they sell, as long as they make a profit from it? maybe the carriers changed their policy but the company still thought it was number one. There are many reasons that are possible but often delivering a product that delights your customers is rarely a reason why a company would fail. Does it?
There are more questions than answers, till the next time – to raising questions.