How BlackBerry blew it: The inside story

“Late last year, Research In Motion Ltd. chief executive officer Thorsten Heins sat down with the board of directors at the company’s Waterloo, Ont., headquarters to review plans for the launch of a new phone [Z10] designed to turn around the company’s fortunes,” Sean Silcoff, Jacquie Mcnish and Steve Ladurantaye reports for The Globe and Mail.

MacDailyNews Take:

Waterloo, indeed.MacDailyNews, June 21, 2011

“Once the giant of the smartphone business, RIM, which was renamed BlackBerry Ltd. in the summer, is now on its knees. The company reported a $965-million (U.S.) fiscal second-quarter loss Friday, primarily because of a massive writedown of Z10 phones that sit, unsold and unwanted, about eight months after they first hit the market. The company is cutting 4,500 jobs, 40 per cent of its work force, in a desperate bid to bring costs in line with plummeting revenue,” Silcoff, Mcnish and Ladurantaye reports. “Investors, who have lived through the destruction of more than $75-billion of the company’s market value over the past five years, are still wondering how BlackBerry managed to blow its runaway lead and became a bit player in the smartphone market it invented.”

“An investigation by The Globe and Mail, which included interviews with two dozen past and present company insiders, exposes a series of deep rifts at the executive and boardroom levels,” Silcoff, Mcnish and Ladurantaye reports. “Those divisions hurt the company’s ability to develop products just as it faced its greatest challenge from more nimble and creative rivals – and contributed to the downfall of Canada’s biggest technology company.”

To Mr. Lazaridis, a life-long tinkerer who had built an oscilloscope and computer while in high school, the iPhone was a device that broke all the rules. The operating system alone took up 700 megabytes of memory, and the device used two processors. The entire BlackBerry ran on one processor and used 32 MB. Unlike the BlackBerry, the iPhone had a fully Internet-capable browser. That meant it would strain the networks of wireless companies like AT&T Inc., something those carriers hadn’t previously allowed. RIM by contrast used a rudimentary browser that limited data usage.

“I said, ‘How did they get AT&T to allow [that]?’ Mr. Lazaridis recalled in the interview at his Waterloo office. “ ‘It’s going to collapse the network.’ And in fact, some time later it did.”

Publicly, Mr. Lazaridis and Mr. Balsillie belittled the iPhone and its shortcomings, including its short battery life, weaker security and initial lack of e-mail. That earned them a reputation for being cocky and, eventually, out of touch. “That’s marketing,” Mr. Lazaridis explained. “You position your strengths against their weaknesses.”

Internally, he had a very different message. “If that thing catches on, we’re competing with a Mac, not a Nokia,” he recalled telling his staff.

Tons more in the full sordid story – highly recommended – here.

MacDailyNews Take:

RIM. Dead Company Walking.MacDailyNews, August 5, 2010

[Thanks to MacDailyNews Reader “Edward W.” for the heads up.]

31 Comments

  1. This is the genius of iOS:

    “It was like Apple had stuffed a Mac computer into a cellphone, he thought.

    To Mr. Lazaridis, a life-long tinkerer who had built an oscilloscope and computer while in high school, the iPhone was a device that broke all the rules. The operating system alone took up 700 megabytes of memory, and the device used two processors. The entire BlackBerry ran on one processor and used 32 MB. Unlike the BlackBerry, the iPhone had a fully Internet-capable browser. That meant it would strain the networks of wireless companies like AT&T Inc., something those carriers hadn’t previously allowed. RIM by contrast used a rudimentary browser that limited data usage.

    “I said, ‘How did they get AT&T to allow [that]?’ Mr. Lazaridis recalled in the interview at his Waterloo office. “ ‘It’s going to collapse the network.’ And in fact, some time later it did.” ”

    Of course, to stay competitive AT&T rapidly upgraded their network. This would not have happened without the iPhone.

    Remember the iPhone 5s and all preceding iPhones are very powerful computers with an incredibly stable OS. Pure genius.

  2. I still remember that open letter a RIM employee sent out a few years back. It was too passionate to be fake. There were intractable problems all throughout the system. There was no way they were going to pull out of it.

    What happened to Blackberry? Well kids, let me tell you about natural selection and the unexpected rise and fall of species competing for finite resources.

      1. The thing is though, had they had a decent OS, apps and hardware, to compete with Apple straight away the keyboard would probably have been a selling factor at first and staved off a lot of people abandoning blackberry, for long enough for them to put up a proper fight and transition to touchscreens. Sadly they thought that a keyboard is all people wanted and died.

  3. If RIM believed in their product design, they should have emphasized the key strengths by making their product (with a physical keyboard) even BETTER at what it did best, text-based communication and power efficiency. And making actual phone calls (not a strength of early iPhones).

    So, even as iPhone was making strides, RIM should have continued to evolve their vision of a smartphone. It wasn’t a “bad” vision; BlackBerry was #1 when iPhone was released. The RIM smartphone could have become smaller, slimmer, lighter, great at texting, with extraordinary battery life per charge. And there “were” plenty of loyal BlackBerry users to carry that vision forward, who would have gleefully ridiculed iPhone owners (and later Android owners) with their fat, lazy, power-hungry smartphones.

    Instead, RIM tried to play it both ways. They made ridiculous products that no one wanted, like that one model with a touch screen, where the whole screen clicked down to provide a tactile sensation. And their PDA-class OS did not scale up very well to a large touchscreen. If RIM wanted to be a touchscreen smartphone player, that product should have been a separate line (not called “BlackBerry”), and it could have been an Android-based phone (or later a Windows Phone 7 phone).

    Once RIM abandoned their concept of a smartphone, and started copying Apple, there was no reason for their loyal customers to remain loyal. RIM was admitting Apple’s vision was better, so why should RIM’s customers stay loyal?

  4. This article has some facts wrong. When the first iPhone debuted, the OS was only 65mb. It’s grown a lot since then, but when it was released it was just better not bigger.

  5. This is where all the haters and trolls fails. They run around saying, “yes we had browsing before, we had email before, we had icons before, we can text before, we can scroll before, we had cameras before, yeah we had this and that 20 years ago….” Gosh I’m so sick of hearing those turds… I can tell them Fred Flinstone had wheels already on his car… its not the same as a wheel on a Bugatti! These people are so stupid!!!

    1. I don’t think the article gave Android/Google much credit at all, besides stating that the fact handset makers could get Android for free helped to commoditize the smartphone market. That is true — so many handset makers can now sell their devices because Google made Android available for free. Without free or cheap Android, many companies would not have even bothered to jump into the smartphone business. Certainly most OSes would be far, far less than what iOS or Android are today.

      That said, RIM was amazingly stupid and indecisive for years. They knew they needed a new OS because their OS was built on old Java tech, and couldn’t compete. They knew their strength was BBM, secure corporate email, and physical keyboards, yet they kept pushing touch screen smartphones. They could have spread BBM to all devices and, like Microsoft, been a powerhouse software company in the corporate world, but they couldn’t make a decision to do anything.

      In the end, Blackberry will fall not due to a lack of understanding or recognition, but a lack of decision making. Sounds like the road Microsoft is headed down . . . .

  6. Interesting article. Put aside the passions about Apple and BB, it is interesting to see how companies fail. The mantra you get from the conventional wisdom is that private business is efficient and smart. Yet we very often see the opposite. I think in cases like this you had a small business that got lucky and suddenly became a large business because they had little competition, but they still had the small business leaders so they couldn’t respond to a competitive threat. It is not that they didn’t see the threat posed by the iPhone, they couldn’t organize themselves to respond intelligently and in a timely fashion.

    I’ve seen one or two successful companies and my observation is that they are not the smartest people but they somehow get a long. They have their Monday morning meeting, decide what to do then go do it and meet back again next Monday. Failing companies have arguments, prima donnas and endless meetings.

  7. The comment about stuffing a Mac into a phone made by one of the executives was very insightful. The truth is that Apple fundamentally changed the game from mechanical to software based phones. Software is Apple’s game not RIM’s.

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