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What’s Wrong With These People? #2 – Research in Motion (BlackBerry)

  • Rapid ascent, more rapid decline
  • BlackBerry currently below 5% of world smartphone market
  • RIM remains debt free, but out of ideas
Written by Adam Wajnberg
05/06/2012

Excuse the drool. Like most technology writers, I relish the opportunity to lambast Research in Motion, the makers of the BlackBerry mobile phone and all-round media punching-bag. What is it about this former mobile champion that makes it such a fascinating, exciting subject for ridicule?

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Research in Motion (RIM)has followed a classic narrative in their rise. The company emerged in the 1980’s as the architects of radio networks, and later as the manufacturer of pagers. They sought to be the Canadian equivalent of Motorola or Ericsson, and when they went public in the mid 90’s, they attracted enough cash to begin an assault on mobiles, which were quickly making pager networks redundant.

blackberry fail

Along the way, RIM garnered a reputation for innovation. They expanded their know-how to the movie business,  where they developed the DigiSync keycode reader, which won them technical Emmys and Oscars. They built modems. They designed and manufactured Point-of-Sale devices and networks. Most importantly, they were the first to work out how to make a pager work as a two-way communication device, sending messages BACK to the person who paged you. It’s hard to overestimate what a breakthrough this was.

They were a secondary economy firm-of-note: they didn’t sell to the public, they sold to the people who sold to the public. But they knew that in order to grow big enough to match their ambition, they would need to put something in the hands of end-users who could spread the word.

The first big consumer release of a device that could be called a proto-BlackBerry was the RIM 950. This  personal digital assistant (PDA) and pager was one of the first to introduce syncing, allowing firms to keep tabs on its employees and maximize their ability to work and communicate away from the office. Intellisync allowed calendars, contacts, messages and more to immediately update on both work terminals and handheld devices. It also played Super Mario Bros. It was open to software development, came in a durable and friendly casing, and gave corporate IT departments (still a burgeoning field in 1998) something real to work with for mobile employees.

The following year, in 1999, RIM introduced the BlackBerry Wireless Email Solution. It played nice with Microsoft Exchange, which was (and still is) the gold standard of inter-corporate communications. You didn’t have to change anything – BlackBerry devices could be easily configured to your existing e-mail network, and would sync up all by themselves. It was an almost perfect marriage of device and network – RIM secured wireless data syncing over their own military grade servers, making them more secure than similar products from Palm and Nokia, and played nice with Microsoft, which was killing Apple and Lotus in the business world. And what’s more, their handsome devices were being put in the hands of tech-hungry business people – that is, people who have money, like to buy the latest thing, and pass on the old things to their kids and partners. Soon, BlackBerries were ending up in the hands of teenagers, the ultimate salespeople.

At this point, RIM started to form strategic alliances with North American networks, who were looking for popular devices to entice people to mobile. They started winning a slew of awards for innovation, for fast growth, for everything. But they still didn’t have a BlackBerry device yet; they had BlackBerry as a system, and they had the RIM 950 line of pagers.

In the early 2000’s, RIM signed on to support Lotus Notes, cornering the last bit of the corporate communications market, and expanded into the UK, Ireland, Italy and the Netherlands. It was in 2002 when they finally revealed a BlackBerry device, the BlackBerry 5810. It was distinct from mobiles: it was a BlackBerry. Just like Apple doesn’t make mobiles – they make iPhones. RIM didn’t make mobiles – they made the BlackBerry.

          original blackberry

Besides the focus on email, the BlackBerry maintained a different form factor to other mobiles. While Nokia, Motorola and Ericsson (later Sony-Ericsson) relied on making mobiles smaller and cuter, the BlackBerry remained a portable computer that made calls. It was a mobile communicator. It was a PDA. It had applications! Calculators, conversion tools, games – the BlackBerry platform was so far ahead of the pack that it made everything else look redundant. Nokia’s attempts to expand Symbian (the most popular operating system on most mobiles) into a similar platform with its Communicator series of ugly bricks fell through. Palm, though well loved, didn’t have the same sort of compatibility with the Microsoft Office suite. And the less said about Samsung (Blackjack) and Sony Ericsson attempts at office-grade communicators, the better. The term ‘CrackBerry’ was born, to illustrate the addictive nature of using BlackBerry and its services.

BlackBerry reached its zenith in 2003 – 2004. The 6000 series of devices went technicolour, launched in Australia on the Telstra network, and started offering international access for email. They cemented their place as a Canadian Champion, flying the flag for canuck innovation worldwide, shoulder-to-shoulder with United Syrup, Beaver Industries and Moose Incorporated (note: I did not research this part of the article).

In 2006, CEOs Jim Balsillie and Mike Lazaridis (the co-founders of RIM) reached the height of their influence, cementing places in the TIME Magazine 100 Most Influential People, and generally being declared the greatest technological innovators since Edison. They had 5 million subscribers worldwide, almost all of them powerful and well connected. They had no debt. They were massively profitable. They added new features with BlackBerry OS7 – the ability to use your device while also using it as a mobile broadband modem; BlackBerry Messenger, an SMS alternative that allowed group chat, media messaging and more, and a host of partnerships that allowed certain BlackBerry elements to be used on other phones.

Then came 2007. In the same year that RIM became Canada’s most profitable company ($68bn market cap) and connected its 10 millionth customer, they also started showing cracks. Accounting debacles. Share buyback investigations. Balsillie and Lazaridis escaped with fines, and laughed off the introduction of the Apple iPhone. Who would want a smartphone with no physical keyboard?

Decline

The top brass at RIM may not have been too worried about the iPhone, but the engineers were. Throughout 2007, as details of the ‘Jesus Phone’ leaked from Cupertino, RIM engineers declared that such a thing was impossible, that a touch screen phone would require a massive processor and run out of battery inside of an hour. They hadn’t counted on the amount of optimization iOS boasted (ie. the degree to which Apple refined their software to avoid taxing the processor), and the size of the battery – which took up more than half the volume of the phone.

At this point, RIM’s roadmap was a bit shaky. Their devices were starting to look pale next to improving devices from Samsung and LG, and downright ancient next to the iPhone. The BlackBerry’s status as a corporate workhorse was waning, as mobile employees started to resent the phone ‘that work made them carry around’. Other phones could play music. The iPhone did full internet (without Flash, of course) and featured a fully immersive touchscreen interface. BlackBerry users had to make do with a trackball.

By now, RIM had grown comfortable. They weren’t a dynamic company with fresh new ideas; they were part of the norm, a business tool as fundamental as a stapler. This translated into great sales – RIM sold nearly twice as many devices (11 million) in 2009 as it did in 2008 (6 million), and in 2011 sold 19 million, nearly as much as they’d sold in all years 2002 – 2010. But these are fulfillment orders. Upgrades. Corporate fleet overhauls. No-one new was buying a BlackBerry. Corporate types were carrying two phones – their work BlackBerry and their private iPhone. Once iOS incorporated Microsoft Exchange capabilities, many of those people left the BlackBerry at work.
Shareholders started abandoning the brand, despite its sound profits. BlackBerry was declared a walking dead man, with its market value skydiving from $83 billion in 2008 to $10 bn by mid 2012. They’ve slashed a quarter of their 20,000 strong workforce in that time.

Coffin. Nails.

The surge in Android handsets between 2009 and now has further stamped down their market share. While the sales of BlackBerries has slightly increased, the sale in smartphones has boomed, to the point where even RIMs steady sales can’t rescue them from near oblivion. They once WERE the smartphone market; now they’re less than 5% worldwide.

So why, with all the innovation they offered, with their integral role in making mobile computing a viable proposition, would tech journalists enjoy savaging such a sadly struggling firm?

Few companies have better demonstrated the foolishness of getting comfortable than RIM have. Apple’s fall from grace (and ridiculous turn around) is the stuff of business school legend; RIM’s collapse is more a cautionary tale. The turnaround in their fortunes was so fast, and so visible, and tied in to such monstrous arrogance on RIMs part that it would have made bad fiction. Instead it reads like a textbook collapse of an empire:

                                         ***********************

 

1.    April 2011 – RIM release the BlackBerry Playbook, a nice looking 7-inch tablet computer that has barely any apps, an inscrutable operating system and no email or messaging client. Not even a calendar.

2.    August 2011 – BlackBerry Bold 9900 and BlackBerry Torch 9860 are released. The Bold still sports a keyboard and a 2 inch touchscreen, making it both redundant AND frustrating.

                 current blackberry lineup

3.    Dec 2011 – RIM's two CEOs retire board positions, and are replaced by Thorsten Heins, a bland and largely unknown mid-level executive.

4.    Jan 2012 – RIM release their “Bold Team” ad campaign, a team of clip-art tweenage superheroes that somehow embody the qualities of a BlackBerry device. Like Max Storm, who is described as “Able to jump out of a plane”. Breathe deep. There’s more.

5.    May 2, 2012 – Heins reveals BlackBerry’s new operating system, OS10, based on QNX architecture. It’s ok. Not available yet. Everyone at the press conference got a phone-like development device that looked neat, but probably won’t be the final design released to the public in…the future?

6.    May 4, 2012 – Mysterious WAKE UP billboards start popping up in cities across Australia and NZ. It leads to a website, which also says WAKE UP and nothing more. Flash mobs appear in front of Apple stores across Australia and NZ, bearing t-shirts and miniature blackboards with WAKE UP scrawled on them. It’s easily traced back to RIM, who cop to it and tell everyone to get ready for something big.

8.    May 7 – The Wake Up page now has this bizarre manifesto on it.

Wake Up.
It’s time to mean business. Now before you go looking for your suit and briefcase, we’re not talking about that kind of business.
Business is no longer just a suit wearing, cubicle sitting, card carrying kind of pursuit.
These days being ‘in business’ means you’re the kind of person who takes action and makes things happen.
You don’t just think different. You do different.
It’s a simple choice:
You’re either here to leave your mark and eat opportunity for breakfast
OR
You’re satisfied to just float through life like a cork in the stream.
Now, we know some people will choose to float on by and that’s fine.
Being in business is not for everyone
But unfortunately…there is no middle ground.
You’re either in business or you’re not.
For those of us with our eyes wide open, we need to realize there’s only one device for people who mean business…the brand that’s been in business from the very beginning.
Wake Up. Be Bold. BlackBerry.

The site then offers a link to BlackBerry’s lineup. Same year-old phones. Nothing new. The campaign WAS the campaign – there was nothing new behind it.

9. June 2012 – RIM lays off 2000 more employees. Proposes that another 6000 layoffs are in the works. Announce to investors that banks and consultants will be called in to discuss options.

                                           ****************************

This all adds up to a frustrating record of a company being caught flat-footed, and trying to finesse their way around it rather than innovate past it.

The closest comparison is to Nokia, which was similarly dumbstruck in the face of Apple and Samsung’s meteoric rise. Nokia was once synonymous with mobile – BlackBerry had corporate high-flyers and their families; Nokia had everyone else. Nokia built indestructible, cheerful phones and sold them in the hundreds of millions for next to nothing. Like RIM, they were the National Champion of a small, technologically advanced economy (Finland).

When Nokia saw their imminent demise, they got to work. They went back to the drawing board on design. They partnered up with Microsoft and Windows Phone, seeking to avoid becoming another Android manufacturer. They scrapped things that weren’t working, like their Ovi Music Store. They’re still struggling, but they’re trying dammit – and they’re trying by making newer, better phones. They’re not proud. They know they’ve lost something and they’re eager to get it back, by winning over you, the consumer.

RIM, on the other hand, seems to be operating in a fantasy land where they can directly attack the competition with inscrutable marketing, or fire employees until they’re profitable again, or simply ignore the reality and declare everything is fine. Their next operating system won’t be compatible with older handsets – this may seem like a strategy to force people into buying new gear, but it will probably just get people on the fence to say ‘to hell with it’ – and abandon the brand forever.

What can they do?

If RIM were being run by another group of executives, it’s conceivable that they could turn it all around. Apple was in worse shape in 2000. They’re now the world’s largest company, with a stock price that might reach $1000 per share before the end of the decade. BlackBerry need a drastic new direction.

The problem is that RIM is run by non-charismatic insiders, who seem intent on running the business into the ground and then selling it off for scrap. RIM would need to think well outside the box here. Someone has to create wearable computers soon. Smartphones that are just a watch and an earpiece. New wireless standards. New materials engineering. These are all things we’re expecting from Apple and Samsung. RIM would need to leap ahead to stay in place, but they don’t seem to have the heart.

Is RIM bad?

 

                    blackberry bold team

Yeah, they are. The current management have taken the hard work of brilliant engineers (the ones they haven’t fired) and made their firm the laughing stock of the tech world. And instead of leading a spirited turnaround, they appear to be giving up. Their fall from grace has been dizzying, and shouldn’t be possible, even in the supersonic fast world of telecommunications. A company with no debt and some profit can’t be this doomed, unless there’s some serious rot at the top.

Seeing RIM crash and burn will prove fascinating, but it takes a special brand of arrogance and short-sightedness to illicit so much glee in the people watching.

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