Free is Not Just Another Price: Storm may be the first device with iPhone potential – John Sviokla & Caroline Calkins

The iPhone is not just a device, it is an entire business design combining the device, price, and application innovation market.  If BlackBerry wants to capture share in this fast-growing market (smart phones are growing at about four times the rate of regular phones), they need to combat iPhone at each level of the business design.  So far, they have a cool device, they are talking about price, and their applications store has a long way to go. 

BlackBerry needs to enter with, 1) a radically better device, which they seem to have created by having a touch screen that really does work like a keyboard too;  2) a radically better price -- $0 comes to mind; and 3) a fluid market for innovation - the way that Apple does with its App Store.  

The early reviews say that the Blackberry Storm has a touch screen that mimics a keyboard in feel, sound, and performance.  We have not had the chance to use it ourselves, but if the reports are right - check off their first Challenge. 

On the price–Challenge number two –our Diamond Fellow colleague Professor Dan Ariely has a wonderful research paper, Zero as a Special Price: The True Value of Free Products in which he and his co-authors show that if you decrease price from 1 cent to zero you can radically change the uptake of one product over another.  If BlackBerry's Storm enters the US with a zero price for the device, it is our prediction that it will gain significant adoption.  This zero price should be made available to both new customers and as an upgrade for existing ones.   When people are considering smart phones, they will easily choose free products of equal or better value to all other options, encouraging adoption. 

The third leg of Blackberry's business design challenge is to create a facile market for innovation which unlocks the creativity of end users, and has an interface that is as easy to use as the Apple App Store, which I have written about before.  Creating a market in innovation lowers cost of creation, lowers risk for the manufacturer, and drives participation and commitment of users.  What's not to like? They have begun this process, but the quality and depth of their user generated applications has a long way to go, and their store pales by comparison to the Apple App Store.  

We think the most interesting potential of the Storm is that BlackBerry may have finally looked at the entire business system - device, price and market - instead of simply painting their old device pink, giving it a new name, and hoping for growth (see the Curve strategy).  The useful lesson for us all is that it is at times like these, when the blood flows through a veins a bit faster, and the fear of gyrating markets disturbs our sleep, that it is easier - for the bold - to look at the entire business design, and capture the high ground while others are busy dodging financial bullets.

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