How a famous company failed to spot strategic upheaval

by Sunny Bindra on June 11, 2012 · 12 comments

in Business Daily

“RIM’s woebegone story is the stuff of science-fiction epic. A technology juggernaut that emerged from a sleepy Canadian backwater, RIM came to dominate the smartphone industry in a few years. Its BlackBerry managed to become an indispensable tool of the global elite in Davos and Washington D.C. as well as a status symbol to tweens shopping Tokyo’s Ginza and San Francisco hipsters alike. Just three years ago, Fortune named RIM the world’s fastest growing company, as it expanded profits at a monster rate of 84%. But after months of increasingly dire struggle, RIM announced this week that it had engaged JPMorgan (JPM) and RBC Capital to “review” its strategic options, all but confirming that the end of RIM as we know it is finally at hand. The behemoth appears to be wasting away at time-lapse speed. What happened?”

MICHAL LEV-RAM Fortune (May 30, 2012)

Even as corporate meltdowns go, this one is pretty spectacular.

A year ago I wrote on this page predicting trouble ahead for RIM, the Canadian company behind the iconic BlackBerry phone. At the beginning of 2012, I doubted that the company would see out this year in its present form.

That turned out to be optimistic. RIM has just announced that is it asking investment bankers to consider its “strategic options.” The end is nigh, as Michal Lev-Ram pointed out in Fortune last week. Charles Arthur in The Guardian was even more scathing: “Here’s what I think: RIM is heading for the breakers’ yard, as surely as a ship that has reached the end of its life.”

Analysts are outdoing themselves in their attempts to describe the RIM downfall. One even used two metaphors simultaneously: “This is a train that’s left the station;” and “you just can’t put that genie back in the bottle.”

Overheated hyperbole aside, the facts are clear. RIM is now trading at 10% of its peak share value; it is valued at a hundredth the market capitalization of Apple. After the latest gloomy announcement, trading in its shares had to be halted. Some estimate that only one in every ten new BlackBerries sold actually goes to a new customer.

“What the hell happened?” is a legitimate question for students of business to ask here. After all, BlackBerry has been one of the most successful products in history. As the excerpt reveals, RIM was the world’s fastest growing company just 3 years ago. It was the darling of the world’s CIOs, who placed big orders on behalf of their organizations because they loved the control features BlackBerries gave them: email encryption; website blocking; remote wiping of stolen devices. So what went wrong?

In 2007, Apple’s iPhone arrived. RIM immediately dismissed it as an overpriced toy, gimmicky and having no appeal for the enterprise market. It was followed rapidly by a slew of devices using Google’s new Android mobile operating system. These also began selling rapidly. But RIM was unmoved.

Mobile applications started taking off in 2009, with Apple and Google opening online “app” stores. Suddenly, the smartphone became a multifaceted, powerful mobile computing device – not just a phone with email. Consumers – including enterprise consumers – began demanding the slick new interfaces. CIOs lost procurement power. Still RIM did nothing.

Finally tablet computers appeared, with Apple’s iPad taking an early lead. Now RIM did react – disastrously. It tried to do a belated me-too, introducing a flawed Playbook that sank like a stone. A year after that experiment, it may be too late. It is hard to see what RIM will do next, save for selling the underlying assets. Mr Arthur put it bluntly: “It doesn’t have any rabbits. It barely has a hat.”

In short, RIM’s leaders had multiple opportunities to spot upheavals in their markets. They looked away smugly every time. Their fame now will be as a business-school case study, for the wrong reasons.

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  4. Consumers, not corporates, are now driving tech innovation
  5. Why are tech companies falling like flies?

{ 7 comments… read them below or add one }

1 Prit June 11, 2012 at 12:31 pm

RIMs problem stemmed from a denial of reality and a lack of focus on where the market was moving. They dismissed powerful and beautiful products as expensive toys and over estimated the value that enterprises pinned on blackberries. Had they acknowledged their competitors and the fact that they could run into trouble, they would have innovated and produced good products and still been strong in the market.
Even while on the way down, they dismissed the iPad and boasted about how much better the Playbook was.. Well this is all history. The present is a sudden thumping of reality and the sinking feeling you have when faced with complete failure..

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2 Kimenyi Waruhiu June 11, 2012 at 6:58 pm

Mr Bindra

Well said – RIM couldn’t see the forest for all the trees. As you say, theirs will be a business case in how not to ignore reality when it’s staring you in the face.

In the tech world, the other guys who aren’t seeing the writing on the wall (.. okay, enough with the metaphors) are Microsoft. Their new Windows 8 OS with the ‘METRO’ interface is already being touted as a great OS for mobile Windows devices (tablets and phones), but a terrible product for laptop and PC products.

Once again – as was the case with RIM – this is borne on an ignorance of knowing how to address the consumer market with your enterprise customers. Microsoft is betting that its enterprise customers will adopt Windows mobile gadgets, while forgetting that all those laptop and PC users will want an OS upgrade that works for them too.

And who’s to blame for these blunders? Why, Apple of-course, who you point out introduced the (consumer focused) iPhone and iPad that caused all the tech giants to react and throw innovation out the door (in the process becoming ‘me-too’ reactionaries). In doing so (becoming reactionary), Microsoft is doing everything to prove Steve Jobs right in declaring, “the PC is dead!”

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Sunny Bindra Reply:

Kimenyi:

I can’t disagree with any of that.

BUT: Will Microsoft really lose this battle that easily? With all their marketing bucks, long relationship with customers, etc? It would be astonishing if they too were unseated. But then, RIM, Nokia, Kodak, Sony have all come unstuck…

Remarkable times!

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3 Brian June 12, 2012 at 1:36 pm

Great piece Sunny, interesting to also note that RIM *did* try out a tablet running Android (the Xoom), before the Playbook, but despite the rave reviews, decided to scrap it – and focus on their own OS for their devices. Methinks that another nail in the RIM/Blackberry coffin was their very proprietary (and costly) approach towards ongoing app development for their platform. If they had opened up their platform to developers much earlier….. Same thing (unfortunately) happened to Symbian (too little too late)….

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Sunny Bindra Reply:

Brian:

The interesting point is how being so dominant (RIM, Nokia, Microsoft, Kodak, Sony) is perhaps what makes companies unwilling to even accept the need for change, or entertain the thought that some upstart might be better…something for all of us to watch in ourselves.

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4 Ahmad June 12, 2012 at 6:33 pm

Remember that night SJ unveiled the iPhone? I can bet you all ‘techies’ on planet earth (including the two PhDs at RIM) were awed, look up the video & see the reaction! Trust me the hall was awash with tech-enthusiasts, and they could not believe the tech at work right before their eyes. Unfortunately, Apple had invested so much in talent, money and most importantly time to develop touch UI and iOS. I can bet you Gates and the Doctors at RIM saw ‘Holy Grail’. (Google cheated. Schmidt sat in the board at Apple n the Doctors at Google had Apple access cards). Point is those two – UI n iOS – cannot be xeroxed overnight, evidence? Look at the iPad’s lead todate. There’s little RIM could do then save downplay the iPhone (Gates, Balmer did too). Long-term RIM had alot to do, but fumbled again and again. I guess they are now paying for all the fumbles.

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Sunny Bindra Reply:

Ahmad:

Certainly, you have to invest huge money and effort to create great products. But RIM’s response was not just weak in PR terms; they seemed to downplay the significance in their own minds too. The founder CEOs had a very successful past, and a money making machine that they had created. Indeed, RIM continued to grow rapidly even for 3 years after the iPhone arrived. However, the air had been let out of its tyres, and that is now apparent.

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5 K. Shah June 17, 2012 at 12:03 am

My friends work there, in simpler terms RIM has always been focusing on the business niche, and they are now working on developing a new model that may bring them up slowly. Motorolla did it, RIM can do it too.

It’ll take a while but it shall happen nevertheless.

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Sunny Bindra Reply:

K:

I’m afraid it’s not as simple as that. You are repeating RIM’s failed excuse: that they are a “business” market firm. The distinction between enterprise and consumer markets in smartphones disappeared long ago. The business market wants phones that do it all, and have thronged to Apple and Samsung as a result.

And it will take far more than a new model for RIM to come back. RIM would have to do what Apple did to it – revolutionize the industry with a dramatically different product. I don’t see any evidence that RIM possesses an innovation engine of that sort.

When your founder CEOs have been forced to step down, and when investment banks have been called in to advise, the writing is on the wall. Those folks don’t come in to advise on products and strategies.

However, surprises have happened before in this turbulent industry – I’m happy to be proved wrong.

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Moses Otieno Reply:

I wonder what K. Shah thinks of this comment now. Blackberry as we knew it is now past tense.

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6 Peter pierre June 17, 2012 at 6:05 pm

Sunny,
Thanks for the great article, in my opinion I think all the tech companys are doing it wrong you do not beat goliath by his rules rather you pull off a david and play to won by your rules. The only reason why apple became big is because thing did not try to compete with rim in doing what rim were good at, they focused on what they were as apple at good as long people try to immitate apple and try to come up with the so called ipad killers, apple will always dominate, so in conclusion rim should try and come up with something unique to them and stop trying what everybody else in the industry is doing : following apple’s lead and trying to immitate them

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7 javanp June 24, 2012 at 11:39 am

Ballamer is at with surface tablet no specs no price just shody work.and that ms and nokia partnership windows phone 8 may suffer osbourne effect or now elop effect

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