Rise and Fall of BlackBerry

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FADY RIAD

RISE AND FALL OF BLACKBERRY

Introduction BlackBerry went from being a small startup ran by a few students to controlling 50% of the world smartphone market and providing the US army with secure phones to barely selling any physical products. The story of RIM, now BlackBerry, is a complex but fascinating one. From visionary leaders to corporate culture to cutting-throat competition, many factors impacted and defined the fate of BlackBerry. This book provides a concise narration and analysis of how this revolutionary company changed over the years.

Rise and Fall of BlackBerry – Fady Riad

Chapter 1 Mike (born Mihal) Lazaridis was born to Greek parents in 1961 in Istanbul, Turkey. Nick and Dorothy Lazaridis moved in 1966 with 5 yearold Mike to Canada and settled in Windsor, Ontario. As a child, Mike had a deep fascination for science, especially physics. He would spend countless hours with his friends in his basement building different mechanical devices, from radios to rockets. Mike was undoubtedly gifted, in 1972 he received an award for reading every single science book in the Windsor Public Library. Following his passion and capitalizing on his skills, he had his mind set on a career in engineering. He first attended Ada C. Richards grade school and then Herman High School. He took all the science classes in high school necessary to join engineering school while at the same time never missing a shop class. In 1979, Mike was accepted to the University of Waterloo’s electrical engineering program with a focus on computer science. He financed his studies using money he made by selling a novel buzzer system to popular TV quiz show Reach for the Top. 2

Rise and Fall of BlackBerry – Fady Riad

Mike’s close friend Douglas Fregnin, was also an electrical engineering student but at a different school, the University of Windsor. Mike and Douglas worked together on a variety of side projects and in 1983 they developed the Budgie, a wireless TV display system. In order to launch the Budgie, the two friends officially cofounded Research In Motion (RIM) in March 1984 after taking a loan of $15,000. The Budgie was not a commercial success but the technology was impressive enough to put RIM on General Motors’ (GM) radar.

Mike Lazaridis (left) and Douglas Fregnin (right, sitting) pictured next to a prototype of the Budgie in 1984.

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In 1986, GM awarded RIM a $600,000 contract to develop a LED display system to use in its automobile manufacturing plants. This was RIM’s first big break, and they needed all hands on deck. Mike Barnstijn, an engineering student had joined RIM a few months before the Budgie launch but now Mike Lazaridis needed to focus his attention on RIM. Just a few weeks before graduation, Mike Lazaridis decided to drop out of college in order to become a full-time entrepreneur.

Mike Lazaridis in RIM’s first HQ in 1985.

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RIM’s next venture was the Digi-Sync Film KeyKode reader. Simply put, KeyKode is an alphanumeric barcode system developed by Kodak to allow the identification of frames on 35- and 16-mm films. The device developed by RIM allows for a fast and user-friendly reading of the KeyKode and thus significantly cutting the time and complexity of the editing and postproduction process for movies. RIM was awarded the Emmy award for the development of the Digi-Sync Film KeyKode reader in 1994. After the development of the Digi-Sync Film KeyKode reader, Mike Lazaridis made the decision to steer RIM in the direction that made the small company one day control 50% of the US smartphone market.

A Digi-Sync Film KeyKode reader 5

Rise and Fall of BlackBerry – Fady Riad

Chapter 2 Mike Lazaridis knew that providing secure communication solutions was in high demand and it was the market to be in. RIM’s journey into the world of secure and wireless communication began in 1987 when it signed a contract with Rogers Communications Inc. to conduct research on innovative wireless network systems developed by Swedish company LM Ericsson. The knowledge RIM acquired from their time researching Ericsson’s technology enabled them to start the small-scale manufacturing of wireless radio modems that were used by different companies in a multitude of electronic products ranging from personal computers to washing machines. In 1991, RIM entered a partnership with Delaware-based Ericsson GE Mobile Data Inc. (a joint venture between General Electric and LM Ericsson) and California-based Anterior Technology to develop a software for a wireless email system.

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In 1992, the partnership came to fruition with the introduction of the first portable radio modem to be installed in Hewlett-Packard Co. (HP) computers. Ericsson GE Mobile Data Inc. developed the hardware while Anterior Technology provided the email servers infrastructure and RIM developed the application program interface. Mobitex is a radio-based wireless packet data network developed by Swedish telecom giant Televerket Radio. Mobitex was revolutionary in many ways, it had a well-founded reputation for being one of the most secure and robust communication networks on the market with police, military, and ambulance organizations using it all around the world. Mike Lazaridis and Douglas Fregnin were engineering geniuses, and they were also smart enough to know that they needed someone with more business acumen and experience than them. James Balsillie, who was 33 at the time, was an accountant with an MBA from Harvard, joined RIM in 1992 as co-CEO. Balsillie was so impressed by RIM that he took a mortgage on his house to be able to invest $250,000 in the company.

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Soon after its very successful venture with Ericsson GE and Anterior, RIM produced a software developer’s kit (SDK) that aimed at establishing wireless communication between all Windows applications and the Mobitex network. RIM kept on optimizing its SDK to fit it on laptops and to allow users to access in real time data and emails without relying on telephone landlines. Revolutionary at the time, these novel communication technologies that RIM was progressively mastering catalyzed the development and launch in partnership with Intel Corporation of the Inter@ctive pager, the first two-way pager with a keyboard that could send and receive emails through the use of Mobitex. The Inter@ctive use of Mobitex was made possible thanks to a collaboration between RIM, RAM mobile data, and Ericsson. With time, RIM optimized the size and functionalities of its Inter@ctive pager to reach a point where it was able to compete with Motorola’s Skytel two-way pager. RIM’s pager, released in 1997, was a huge commercial success by all standards. In 1998, RIM signed a deal with IBM to supply all of its field representatives with the pager. 8

Rise and Fall of BlackBerry – Fady Riad

Mike Lazaridis received reports that customers were not using the email feature of the pager. Lazaridis was surprised because, for him, it was the main quality of the device. So, in order to differentiate the product, he hired Californiabased marketing agency Lexicon Branding to put more emphasis on the keyboard, the other main differentiating factor of RIM’s pager.

RIM’s Inter@ctive Pager

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Motorola’s Skytel

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Chapter 3 Having dealt with behemoths like GM, Ericsson, HP, and IBM, RIM had become a force to be reckoned with. The next logical step was to take the company public. RIM’s IPO was in 1998 with the company listed at the Toronto Stock Exchange and raising $115 million and with a reported revenue of $21 million. RIM was doing very well. In 1999, RIM introduced its newest pager, the BlackBerry 850. The BlackBerry was officially born. Many people at RIM noticed that the new pager’s keyboard looked like blackberry druplets, hence the iconic name of the device. The most innovative aspect of RIM’s newest device was the push email feature. Users could now continuously receive emails directly on their BlackBerry without having to dial in thanks to RIM’s BlackBerry Enterprise Servers.

RIM’s BlackBerry 850

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With time, more and more ISP (Internet Service Providers) started offering BlackBerry’s wireless email solutions not only in North America but all over the world. Towards the end of 1998, RIM released an upgraded version of its pager, the BlackBerry 950. The 950 model had many interesting features: in addition to sending and receiving emails and pages, it could also send faxes and text-to voices messages. RIM’s revenue had increased in 1999 by 80% from the previous year and had now reached $85 million and was listed in the same year on the NASDAQ raising $250 million. But things were not always rosy for RIM. In 1999, Glenayre Technologies Inc. filed an infringement lawsuit against RIM concerning its use of a patented battery design in its Inter@ctive pager. The lawsuit badly hurt the sales of the pagers which greatly impact RIM since pagers accounted for 70% of its total sales. But in the end, and even after a bad year, RIM was able to land on its feet by signing a distribution agreement with Dell.

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RIM and Canadian telecom giant Nortel signed a deal in January 2000 to market RIM’s pagers and BlackBerry in Europe. The Nortel deal was followed by another one with Compaq Computer in which the latter would distribute the BlackBerry to its corporate clients. In 2000, BlackBerry was named product of the year by prestigious magazine InfoWorld. Later that year, RIM released the BlackBerry 957. It featured a larger screen than the 950 model, more memory and processor capacity, and an embedded wireless modem.

RIM’s BlackBerry 957

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Chapter 4 In mid-2000, RIM and America Online (AOL) signed a deal to provide BlackBerry users with AOL Mail and AOL Instant Messenger. The year 2001 marked the beginning of RIM’s expansion into the European market through the UK, Ireland, and the Netherlands. Things between RIM and Glenayre Technologies Inc. got even more heated when the former sued the latter for infringing on its technologies and marketing. Interestingly enough though, both companies not only settled the dispute outside of court, but also agreed to work together to develop a new BlackBerry device that would incorporate Glenayre’s email technology. Later in 2001, RIM signed a deal to provide the US military with an updated secure communication network, further cementing RIM’s legendary reputation as the undisputed champion of secure communications.

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The 9/11 terrorist attacks truly showcased to what extent RIM was the leader of secure communication when all cell networks failed in DC and New York except RIM. In the aftermath of the attacks, all members of congress were provided with BlackBerry devices to ensure continuity of communications in case of any event. Law enforcement followed shortly after with all the security officers at Boston’s Logan Airport equipped with BlackBerry devices. In 2002, RIM partnered with numerous companies such as Motorola, AT&T, and Nextel Communications to develop a new generation of BlackBerry devices that would be able to run on GSM/GPRS (Global System for Mobile Communications/General Packet Radio Service). The Blackberry “5000” and “6000” series devices were first introduced in 2002. They were the first RIM devices to be Java-based and to have an integrated speaker/microphone. Other variants of the series were used as walkie-talkies while another model was co-developed with Nokia.

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Later in 2002, Good Technology, a company that developed email software used by BlackBerry users sued RIM for patent infringement to which RIM reacted by countersuing. RIM was also entangled in infringement lawsuits against Handspring and NTP.

RIM’s BlackBerry 5810

RIM’s BlackBerry 6200 16

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Chapter 5 The “5000” and “6000” series were followed in 2003 by the ‘’7000’’ and the “8000” series. RIM’s newest BlackBerry phones had now a color screen and unlike earlier models did not require headphones for calls because they had built-in sound hardware.

RIM’s BlackBerry 8700

RIM’s market research showed that the “7000” and “8000” series devices were widely popular with non-corporate consumers, marking the beginning of a new approach for RIM. But the relatively young consumer smartphone market started to become crowded with Nokia, Microsoft, Palm, Motorola, and others racing to provide consumers with the latest technology possible. 17

Rise and Fall of BlackBerry – Fady Riad

In 2006, RIM executives rolled-out the first BlackBerry purely for the consumer market, the BlackBerry Pearl. The BlackBerry Pearl had many interesting features that made it a huge success: a camera and media playback.

The BlackBerry Pearl The BlackBerry had become a symbol of status and power in an almost addictive way, leading to the popular term “CrackBerry’’. Celebrities ranging from Barack Obama to Kim Kardashian were using BlackBerry smartphones, making RIM’s products even more desirable.

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A very important factor that contributed to BlackBerry’s image was RIM’s flagship messenger application BlackBerry Messenger (BBM). BBM was the first-ever instant messaging application and service for wireless devices. BBM was revolutionary because it allowed users to send messages with no limitations and no cost. Each user had a unique BBM pin (personal identification number) that allowed him to connect with other users. People wanted to buy the BlackBerry to feel “cool”, to feel connected. RIM’s reputation for secure communications was turning it into a legend with even the US Department of Justice itself intervening to side with RIM in a copyright infringement case involving Virginia-based company NTP. The Department of Justice had stated that it was categorically against any action that would hinder or in any way affect RIM’s network. BlackBerry fans appreciated the continuous and progressive iterations to the devices that, at the same time, did not dramatically change the core design and functionalities of the product.

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By the end of 2006, RIM was worth $26 billion. It had $2 billion in sales, a phenomenal 4000% increase from its 1999 sales number, $47 million. The number of active users also skyrocketed, climbing from 534,000 in 2003 to almost 5,000,000 in 2006, a whopping ten-fold increase in just 3 years. But, 2007 had in store for RIM something that would change the BlackBerry’s fate forever.

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Chapter 6 On the 9th of January 2007, Apple CEO Steve Jobs unveiled Apple’s first smartphone, the iPhone. The iPhone concept was born in 2005. The idea was to have a smartphone that did not require a stylus or a keyboard and a mouse but rely solely on a touch screen for input.

Apple’s iPhone 1

The keynote address to introduce the iPhone held at the Macworld Conference & Expo in San Francisco was a historic event by all standards.

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Positioning the iPhone as a “revolutionary mobile phone”, a “widescreen iPod with touch controls'' and a “breakthrough Internet communicator”, Steve Jobs proudly stated what would become one of the iPhone’s main marketing slogans; ‘’ "today, Apple is going to reinvent the phone.".

Apple CEO Steve Jobs introducing the iPhone 1 in 2007

Jobs compared the iPhone to other smartphones, including the BlackBerry Pearl, emphasizing the difference in screen space and how the iPhone provided a larger screen with a dynamic virtual keyboard.

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The iPhone introduction was a marketing event of epic proportions. Even prior to the actual launch of the product in June 2007, a staggering six out of ten Americans knew about the iPhone before its release. Apple signed a deal with AT&T to only sell the iPhone with the carrier’s contracts. On the day the iPhone was released, thousands of people were waiting in front of Apple and AT&T stores, hoping to get lucky and take back home Apple’s newest gadget. The iPhone was dubbed “the BlackBerry killer’’. The iPhone launch took RIM executives by surprise. Steve Jobs had stated that the iPhone was years ahead of time, and much to RIM’s dismay, he was right. The iPhone’s operating system used 700 MB of space while the BlackBerry only run on 32 MB. Before the iPhone’s release, the technical experts at RIM were confident that a phone with such specifications was simply “impossible”.

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A more important “killer” feature that the iPhone had was the ability to browse the Internet without limits using the carrier’s data (AT&T here). Mike Lazaridis was surprised by the fact that AT&T had given Apple this unprecedented unlimited “access” to its network for internet browsing. In contrast, the BlackBerry had limitations on data usage. Lazaridis firmly believed that the BlackBerry was superior to the iPhone thanks to its hardware and features: longer battery life, better security, and email capabilities. He was always vocal of his opinions and made no secret of it. Publicly, RIM downplayed the threat. RIM coCEO Jim Balsillie publicly stated that the iPhone was “one more entrant into an already very busy space”. Jim Balsillie truly believed that the iPhone will not be a problem. During the early years of the iPhone, Balsillie was allegedly too busy with trying to purchase a hockey team and not focusing enough on the threat at hand. Microsoft CEO Steve Ballmer even said that he thought that the iPhone won’t be a success because of its price point.

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Apple did not initially release the iPhone in Canada and waited for 6 months after the US launch to do so. It is believed that this could have contributed to RIM’s executive not seeing the iPhone as an immediate threat. But what Mike Lazaridis was not so vocal about was that he genuinely thought that the iPhone could be a significant threat to the BlackBerry.

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Chapter 7 In June 2007, executives from Verizon, AT&T’s main competitor, met with RIM’s people. They asked RIM if they could develop an “iPhone killer” with purely a touchscreen and no keyboard. RIM would develop the product and Verizon would handle the marketing. Seeing the strategic advantage this could confer to the company, RIM executives immediately agreed. The BlackBerry Storm was RIM’s version of the iPhone. It was the most complex project RIM ever undertook at the time. Despite its strategic importance and its complexity, RIM rushed the project and released the Storm in November 2008.

RIM’s BlackBerry Storm 26

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The results were not pleasant. The BlackBerry Storm was not half as successful as RIM and Verizon hoped it would be. It was too slow, the touch screen wasn’t optimal and the phone would frequently freeze. One word in particular comes to mind when thinking of the BlackBerry Storm, “laggy”. Trying to respond to Apple, RIM rushed the BlackBerry Storm to the market and lost even more ground. Another issue RIM was facing were the frequent network outages BlackBerry users had to endure. Despite the BlackBerry Storm fiasco and the technical problems, RIM’s overall market position was good for now. RIM’s sales had grown from $2 billion to $6 billion in 2 years and the number of active users went from 5,000,000 to 14,000,000 in the same period, from 2006 to 2008. Initially, the iPhone was still lagging behind the BlackBerry due to RIM’s head start and customer base.

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The iPhone was gaining more market share. In October 2008, it was announced that the iPhone’s sales surpassed the sales of Blackberry, both products having quarterly sales of respectively 6.9 million and 6.1 million units. The BlackBerry Storm did not “kill” the iPhone like Verizon had hoped it would. Verizon wasted no time in getting into talks with the newest entrant to the smartphone market, Google Inc. Verizon had high hopes for Google’s Android operating system, and it offered the same deal it offered RIM. Motorola would develop a new product, the Droid phone that would run on Google’s Android while Verizon would handle the market side of things. Unfortunately for RIM, the Motorola Droid released in 2009 did not steal market share from the iPhone but from the BlackBerry. The BlackBerry market share that was at 41.6% by the end of 2009 was at the end of 2010 at 31.6% while Android phones share had grown from 5.2% to 23.5%.

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Chapter 8 Mike Lazaridis was a brilliant engineering figure, but he was not a businessman. Even with Jim Balsillie, who has a typical business background, serving as co-CEO, Lazaridis was setting the tone for RIM’s strategy. Unlike Mike Lazaridis, Steve Jobs was a marketing genius. Although he was laserfocused on the product, he knew exactly what the consumer wanted. While RIM was taking a product-centric approach, Apple was taking a consumer-centric approach. RIM was focused on hardware-related issues like the battery life and the size of the device, and was still maintaining the limits on browsing not to saturate the networks. Apple, on the other hand, was more focused on the consumer experience, providing the ability to surf the web unrestrained and creating a fertile environment for thousands of applications to “grow”.

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RIM’s approach was more tailored to the corporate market where efficiency, security, and robustness were more valued than having bigger screens, a huge variety of applications, and unlimited surfing. RIM was using the corporate approach on the consumer market, but it did not know it back then. The introduction of the iPhone to the market completely changed the dynamics. Phone carriers who would traditionally try to put a cap on consumers’ usage of internet data were now offering different packages to make consumers use more and more data on their iPhones. Apple had set a new reality and RIM had to adapt quickly. In 2008, Mike Lazaridis brought Torch Mobile, a software company that developed internet browsers for smartphones. Lazaridis was hoping to integrate Torch Mobile’s modern browsing applications to the BlackBerry to gain a slight competitive advantage and to appeal more to consumers.

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Unfortunately for RIM, Lazaridis could not achieve his browser revolution. BlackBerry phones’ operating system was not developerfriendly and was based on Java code, an outdated platform in comparison to Android phones and the iPhone. RIM developers were not able to install the Torch internet browser on the BlackBerry phones. Lazaridis knew that had to change in order for RIM to survive. RIM executives agreed with him but took their time in executing the necessary changes. As the iPhone and Android phones grew more user-friendly with every new model and with what seemed like an unlimited supply of new applications every day, BlackBerry users were feeling more and more alienated with RIM’s phones who were more suited for corporate and government clients.

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Chapter 9 “The key to failure is trying to please everyone.” This popular saying shows very precisely how RIM’s strategy led to the fall of BlackBerry. RIM was convinced that consumers wanted similar smartphones to the ones they sold to corporate clients. They were convinced that consumers would rather have secure communications and a long battery life rather than innovative applications or reactive touchscreens. Not only BlackBerry’s operating system made the development of new applications an extremely daunting and complex task, but also RIM wanted to exercise tight control over outside application developers, which made companies like Instagram avoid working with RIM. Not only was RIM offering consumers smartphones designed for corporate use that did not match what Apple or other companies were offering, but it also did the deadly mistake of using a consumer market approach to the phones sold to big corporations.

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Introducing new consumer-friendly features like cameras, music applications, and games on corporate products was poorly received by RIM’s business clients. With time, RIM started losing its main corporate clients. For example, the US army opted for Android-phones whereas Halliburton chose iPhone. RIM was in free fall because it was not changing its core operating system fast enough. After reaching 22 million US users in 2010, the highest number RIM ever achieved, the numbers started decreasing. In April 2011, for the first time, the number of iPhone users in the States surpassed the number of BlackBerry users. In September 2011, RIM laid-off 11% of its workforce, almost 2,000 staff.

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Chapter 10 RIM was one of the very few companies that had 2 CEOs at the same time. Some view RIM’s corporate structure as the source of RIM’s early success while others see it as one of the reasons the company fell so spectacularly. Mike Lazaridis and Jim Balsillie never had any problems getting along. The division of labor was crystal clear. Mike Lazaridis would handle all operations related to products, from product development to supply chain management to manufacturing while Jim Balsillie would manage all business operations such as sales, marketing, and finances. The problem with the dual CEO structure was not the working relationship between the two co-CEOs but the chain of command that it entailed. As the company grew, the dual structure became frailer and less agile, the flow of information became scattered, decisionmaking became flawed and accountability became a far-away island.

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In 2010, Mike Lazaridis knew RIM desperately needed a technology break that would tip the scales. He had decided on something new though, the innovation had to come from outside the company. In April, RIM acquired Canadian company QNX Software. QNX had the necessary technology to develop an innovative and modern operating system for the newest BlackBerry model at the time, the BlackBerry 10. Mike Lazaridis was a business book amateur. He had read Clayton Christensen’s “The Innovator’s Dilemma” and decided to follow the book’s advice on how to catalyze innovation in case of steep competition. The book recommends isolating teams so they can independently develop disruptive products. And this is what Mike Lazaridis did with the new QNX team, they were given isolated premises so they can focus on BlackBerry’s new operating system.

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A discussion was had at the top levels of RIM’s management concerning the operating system: should the company abandon Java or not? Both alternatives had different repercussions. But this was a very important time-sensitive question, one that RIM’s top management, unfortunately, took too long to address. After more than a year, RIM’s management decided that they will abandon Java and that the BlackBerry 10 operating system will be built from scratch. The QNX team will thus work on the BlackBerry 10 project while other teams work on the preceding model, the BlackBerry 7, which was still running on a Java-based operating system. But conflict would soon arise. The two teams who were working on two completely separate and independent projects were fighting over more human and financial resources. The BlackBerry 7 release was behind schedule and at the same time, the BlackBerry 10 was supposed to be RIM’s comeback. RIM’s management was in a tough position and had to make choices to allocate its finite resources.

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Chapter 11 The QNX team had to slightly change course. Apple had announced their first tablet computer, the iPad in 2010, and RIM was responding with the PlayBook. Mike Lazaridis believed the PlayBook should be a precursor to the BlackBerry 10, so designing an operating system for the PlayBook was the QNX team’s first real project. Mike Lazaridis was truly impressed by what the QNX team was bringing to the table. But, the QNX team, joining the RIM family only recently, understandably required more resources than other traditional RIM teams would normally need. The PlayBook was a commercial disaster. Launched almost a year late, consumers just did not want it. Unlike the iPad, the PlayBook was not a standalone device, it had no apps and no emails on its own and required a BlackBerry smartphone for those. Once again, RIM had misread what the consumers wanted. RIM had still not developed a product that could properly compete with Apple and Android, and was losing market share at an alarming rate.

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RIM’s BlackBerry PlayBook In 2010, Verizon announced the launching of the first 4G network. Naturally, Apple and Android were racing to develop smartphones that could work on 4G. RIM, on the other hand, knew that their only 4G hope, the BlackBerry 10, was far from ready. Mobile carriers needed smartphones that could work on 4G networks, and unlike Apple and Android, RIM was just not delivering. Instead, RIM executives were trying to convince the carriers that the 3G was not different than the 4G. It was, as RIM would soon find out, a losing and pointless tactic. Now, with Apple and Android phones in all of the wireless carriers’ promotional 4G channels, RIM was officially in a very bad position. 38

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To make things even worse, the BlackBerry 10 was way behind schedule. RIM was losing at all fronts, from stock prices to market position to relationship with phone carriers. In 2011, an open letter from an anonymous highlevel RIM executive went viral. The anonymous executive was lashing out at RIM’s management. He was calling the working environment chaotic and saying that the workforce was demotivated. He called out top management for not taking the iPhone threat seriously and for being too slow to react to change. RIM had a true cultural problem. Alastair Sweeny in his book BlackBerry Planet described RIM’s bureaucracy problem perfectly: "It's like the Soviet Union. Everyone's pretending to work". In 2012, Thorsten Heins replaced Mike Lazaridis and Jim Balsillie as CEO. Both Mike Lazaridis and Jim Balsillie would remain on the board with Lazaridis serving as the deputy chairman though. Heins installed his people in key positions at RIM. The new management’s first task was to discuss the fate of the BlackBerry 10.

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Management was initially strongly in favor of rolling out a touchscreen version of the BlackBerry 10 while the BlackBerry 7, a keyboard phone, was selling well. The idea was to launch the keyboard version of the BlackBerry 10 once the sales of the BlackBerry 7 had lost some steam. RIM had made a tactical mistake. Commonly referred to as the “Osborne effect”, RIM was hypping the BlackBerry 10 while the BlackBerry 7 was still selling, which made consumers not want to buy the BlackBerry 7 since all they had to do was wait a few months for a more up-todate version of the BlackBerry 7. The same logic could apply to the developers working on the BlackBerry 7. They knew that what they were working on would be obsolete in a matter of months. It was undoubtedly hard to stay motivated with this in mind. Mike Lazaridis, now deputy chairman, was pushing in a different direction. He believed that BlackBerry’s core customer base was only interested in keyboard products and that priority should be given to the keyboard version of the BlackBerry 10. He felt that betting on touchscreen products was too risky and risked alienating what was left of the BlackBerry customer base. 40

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Thorsten Heins and his team were firm believers in touchscreen and disagreed with Lazaridis’ views. After a lot of discussions and boardroom politics, Heins decided to continue developing the keyboard version of the BlackBerry 10 but to launch the touchscreen version first.

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Chapter 12 Mike Lazaridis and Jim Balsillie, even if they had two very different styles and mindsets, always saw eye-to-eye in terms of strategy and company direction. They never had any notable disagreement until the birth of the BlackBerry 10 concept. Mike Lazaridis was convinced that the BlackBerry 10 would be the Hail Mary RIM so desperately needed. Jim Balsillie was skeptical. Balsillie had another idea. RIM’s service division was charging mobile carriers a monthly fee for every BlackBerry user they had. The service division was making RIM almost $3 billion per year. Phone carriers were not particularly happy with their arrangement with RIM since Apple and Google were not charging them for their users. Phone carriers tried multiple times to negotiate better terms but Jim Balsillie always aggressively resisted. Balsillie was initially able to maintain his position thanks to BlackBerry’s market share. But as RIM’s market share shrunk, Balsillie started having less and less leverage.

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BBM, the first-ever instant messaging app, was exclusively on BlackBerry. Soon enough, BBM alternatives that were not exclusive to a specific brand started appearing on the market, the most notable one being WhatsApp. Aaron Brown, the head of RIM’s services department, pitched to Jim Balsillie at the end of 2010 an idea he thought was revolutionary. Brown wanted RIM to explore the idea of offering BBM on other types of devices. Balsillie immediately liked the idea. He and Brown came up with a possibly brilliant idea, they would lower the monthly fees wireless carriers had to pay RIM on BlackBerry subscribers if the carriers agreed to offer BBM to all their customers regardless of what device they had. Carriers had a problem with instant messaging applications and perceived them as a threat. Balsillie and Brown believed that their idea, which they dubbed SMS 2.0., could interest wireless carriers since it protected them against the perceived dangers of instant messaging and gave them an extra revenue stream.

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Jim Balsillie was betting on his idea to help to put RIM back on the right track and wasted no time to start engaging in talks with phone carriers. Much to his delight, Balsillie was getting positive feedback from carriers concerning his SMS 2.0. concept. The co-CEO announced internally that SMS 2.0. was now the company’s top priority. Bringing Balsillie’s vision one step closer to reality, RIM acquired in 2011 LiveProfile, an instant messaging app that had 15 million users on Apple and Android phones. LiveProfile would act as RIM’s “trojan horse” on the different platforms. RIM was divided concerning the SMS 2.0 plan. Some felt that it was a good idea but it needed to wait until the BlackBerry 10 while others were worried at the prospect of having BlackBerry’s main feature available on competitor's devices. Many inside RIM were actively working to sabotage Jim Balsillie’s SMS 2.0., mostly because they were worried about it affecting the BlackBerry sales.

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Mike Lazaridis liked the concept of SMS 2.0. but felt it was too big a risk, especially given RIM’s situation. After getting more positive signals from AT&T concerning the SMS 2.0., Jim Balsillie decided that the SMS 2.0. would be introduced to the public in February 2013. But Jim Balsillie did not stay in his position long enough to see his plan come to fruition. Thorsten Heins, his successor, who was an avid opponent to the SMS 2.0., scrapped the plan a few weeks after assuming office. Heins and other RIM executives felt that SMS 2.0. was not differentiated enough in a market with many similar applications and that focusing on the BlackBerry 10 made more sense. Jim Balsillie who was at the time a board member did not take it well and decided to resign and sell all of his RIM stocks. Interestingly enough, the BBM application was released as a free stand-alone application on Android and Apple devices in 2013.

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Chapter 13 The BlackBerry 10 launch event, held in January, in an attempt to create media buzz, featured singer Alicia Keys. The event also featured the announcement that RIM’s new name was now BlackBerry Limited. The touchscreen version of the BlackBerry 10, officially called the BlackBerry Z10, had initially received rather positive reviews but its market performance was weak.

RIM’s BlackBerry Z10

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Rise and Fall of BlackBerry – Fady Riad

BlackBerry Limited’s marketing strategy for the Z10 was ambiguous. For example, the Super Bowl ad did not convey a clear message or a value proposition. Many BlackBerry Limited insiders agreed that Mike Lazaridis was right, BlackBerry core customer base liked the product mostly for its keyboard and would not be as receptive to a touchscreen product like the BlackBerry Z10. Another possible explanation for the Z10’s poor market performance was the fact many users found the new BlackBerry 10 system developed by QNX very different than what they were used to. In short, Blackberry Limited had once again managed to alienate their user base by offering them products they did not want. Another mistake BlackBerry Limited had committed was that it failed to support its external application developers to help transition their apps to the new operating system environment. This led to a sharp decrease in an already limited supply of BlackBerry apps.

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Finally, many analysts agree that Z10 could have been a solid success if it was launched a few years earlier, not in 2013. They also agreed that RIM did the right thing by acquiring QNX and leveraging its competencies to design the BlackBerry 10 operating system, but that RIM was too slow in doing so.

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Chapter 14 BlackBerry Limited announced in August 2013 in an official statement that they were open to being acquired. Canada Pension Plan Investment Board told BlackBerry executives that they were open to inject cash into the company if it became private. In September 2013, BlackBerry Limited announced that they were laying-off 4,500 employees. A few days later, a consortium led by Fairfax Financial Holdings, owned by former BlackBerry board member Prem Wasta, entered discussions to acquire BlackBerry for $9 per share. The acquisition deal was replaced by a $1 billion cash injection by Fairfax on the condition that BlackBerry’s CEO Thorsten Heins be replaced by Silicon Valley veteran John Chen. Mike Lazaridis also resigned from his position as vice-chairman. John Chen, an engineer by training, had served as the CEO of Sybase, a software company. He had a reputation for being “a turnaround artist”. Many were hoping that he could be BlackBerry’s savior. 49

Rise and Fall of BlackBerry – Fady Riad

Highly methodological, John Chen knew exactly what was wrong with BlackBerry and had a precise vision and strategy in mind to save the company. Chen knew that the company had a culture problem, “overpromising and underdelivering” was in BlackBerry’s DNA. The new CEO’s first move was to write an open letter. He addressed the accountability and deadlines problems at the company. He announced that they will not be seeking any buyout or cash injections. BlackBerry was a divided company with two competing schools of thought. The conflict was concerning if the company should focus on the consumer market or its corporate clients John Chen was a strong believer that for BlackBerry to stay afloat, it needed to strengthen its ties with the corporate clients and shift focus from the B2C market to the B2B market. His opinion was backed by a very telling number: 80% of BlackBerry’s revenues were from corporate clients.

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The problem is that when Chen inherited the BlackBerry throne, the company had become so focused on defeating Android and Apple on the consumer market that it almost forgot that it had a very significant corporate client base to service. BlackBerry needed to provide its business clients with more tailored applications that would actually bring value to the companies. Chen’s vision was to transition from “a mobile technology company” to “a mobile solution company”. He knew that BlackBerry was only differentiated in the B2B market and could leverage its existing relationships with the big corporations to sell them more and more solutions. But he also believed that the consumer segment should not be completely abandoned, at least not for now. The BlackBerry CEO formulated a new sales strategy for the company’s corporate clients. A direct salesforce would focus on specific customers that would need BlackBerry’s products and services: government agencies and regulated industries like banking, insurance, and healthcare. Chen’s strategy concerning consumer smartphones was based on two steps.

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First, the next smartphones would run on the new operating system developed by QNX but would have more “vintage” features that diehard BlackBerry customers did not find in the BlackBerry 10. The second step was the signing of a deal with Taiwanese giant Foxconn to outsource the design and manufacturing of the smartphones but also manage inventory, thus mitigating the financial risk. John Chen was confident. He had a short-term strategy for the consumer business and a longterm one for the corporate business.

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Chapter 15 The BlackBerry Z3 was the first Blackberry produced after the Foxconn deal. Market research had shown that BlackBerry had a very strong position in the Indonesian market with a very large customer base. BlackBerry’s top management was told that any product would sell there. So it was decided to only rollout the Z3 model only in Indonesia in May 2014. The device had the word “Jakarta” (the capital of Indonesia) engraved on the back panel. The Z3’s main problem was its price, it was simply too expensive for the Indonesian market.

The BlackBerry Z3 53

Rise and Fall of BlackBerry – Fady Riad

John Chen never provided sales numbers for the Z3 in Indonesia and the project was scrapped. In September 2015, the BlackBerry Priv was announced. The BlackBerry Priv was the first BlackBerry to not run on the original BlackBerry operating system or the BlackBerry 10 operating system but on Android. The rationale for using Android was to give users access to a larger selection of applications. The BlackBerry Priv had a slide-out keyboard that was supposed to be one of its differentiating features, but critics say that the keyboard was less functional than for earlier versions.

The BlackBerry Priv 54

Rise and Fall of BlackBerry – Fady Riad

The BlackBerry Priv had mixed reviews overall. Out of the 800,000 unit target, 650,000 units were sold. AT&T sources were saying that a lot of the customers were unhappy with the phone and were returning it. Even after the introduction of the iPhone in 2007, the number of BlackBerry users kept growing steadily, from 8,000,000 users in 2007 to 79,000,000 in 2013. BlackBerry’s revenue almost quadrupled in the same period, from almost $6 billion in 2007 to $11 billion in 2013. BlackBerry’s true position in the consumer’s mind started showing on the company’s numbers in 2013. BlackBerry announced for the first time since 2004 that it was operating at a loss for the first quarter of 2013, and this trend was consistent until 2018. The number of BlackBerry users decreased from 79,000,000 in 2013 to 11,000,000 in 2017. BlackBerry had annual sales of almost $20 billion in 2011 but now they were barely reaching $1 billion.

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The BlackBerry consumer strategy was now based on licensing partnerships, mostly with TLC for the Asian market. BlackBerry would no longer develop smartphones in-house. It was time for John Chen to shift his focus to BlackBerry corporate clients.

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Chapter 16 John Chen saw the future of BlackBerry Limited as a solutions provider. The company had a large base of corporate clients, it just needed more solutions to provide. The BlackBerry CEO knew that the company needed to be able to provide new offerings as soon as possible and that developing new innovative software and applications internally was not a viable option. Acquisitions were the best tool BlackBerry had at its disposal. BlackBerry acquired security company WatchDox, crisis communication company AtHoc, software company Good Technologies, cybersecurity consulting company Encription and security company Cylance. All the new technologies BlackBerry had now acquired were supposed to beef up the company’s offering mostly for corporate clients but also for what was left of the consumer segment. The acquisitions strategy was mirrored by a partnership strategy that served the same purpose. 57

Rise and Fall of BlackBerry – Fady Riad

BlackBerry was trying to capitalize on its reputation and image as the leader of secure communications. The company’s new offerings were ranging from the BlackBerry SHIELD, a cybersecurity risk assessment program, to BlackBerry Secure, a corporate data encryption software, to BlackBerry Radar, an asset tracking device. BlackBerry was now offering a very large portfolio of security-related solutions. BlackBerry had found a niche, it had become a big fish in a small pond instead of being a very small fish in a gigantic pond where the competition was cut-throat.

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Chapter 17 BlackBerry was now surely a radically different company than what it was at its peak in 2007 2011. With different customers and products and a new vision and strategy, John Chen managed to redefine the company. Although BlackBerry’s financials look modest in 2020, analysts believe that if the company had not radically changed course as it did, it would probably not exist today. Gone are the days where BlackBerry was at war with Apple and Android products. BlackBerry had lost the consumer battle. But that is what it was, a battle. BlackBerry failed consistently to deliver what Apple and Android could not, it failed to understand how the market was evolving and what consumers wanted. But BlackBerry is learning from its past mistakes and is developing long-lasting relationships with its corporate clients. Comparing the present of BlackBerry today to its past is simply pointless, 59

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Only time will tell if the company will prosper and possibly dominate its security niche. One thing to contemplate is how BlackBerry the company has now almost no relationship with the product it was named after, the BlackBerry smartphone.

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References *The Globe and Mail *The Canadian Encyclopedia *Global News *Business Insider * BlackBerry Planet: The Story of Research in Motion and the Little Device that Took the World by Storm, Alastair Sweeny * International Directory of Company Histories

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