How BlackBerry’s early genius failed to beat rise of smartphones

The rise of RIM, the firm behind Blackberry, from tiny upstart Canadian company to a $20 billion corporation, employing about 20,000 staff and owning one of the most recognised devices in the IT world, has elements of a modern-day Greek tragedy. There are alliances forged between visionary young men, battles conquered against mightier opponents, deceptions, betrayals and ultimately falls from grace.

It makes for an interesting narrative for authors Jacquie McNish and Sean Silcoff, whose book has been shortlisted for the upcoming FT-McKinsey Business Book of the Year Awards.

Redemption of sorts may even be on the cards for RIM as its new management led by Kristian Tear steers a tentative recovery route but McNish is convinced that the boat has sailed.

The defining moment, McNish tells The Irish Times, was when Steve Jobs incentivised AT&T to spend billions upgrading its networks to support the feature rich iPhone in 2007.

“RIM operated in a world of dealing with limited bandwidth and the BlackBerry relied on simplicity. It simply didn’t understand how the iPhone, with all its features could be supported by the networks. RIM was right for a while as we had a period of high dropped calls as the networks upgraded but the battle was soon won,” she says. RIM and the BlackBerry, once kingpins in this sector, were reduced to bit-players with a 1 per cent share of the smartphone market.

Former joint chief executives Jim Balsillie and Mike Lazaridis lie at the centre of BlackBerry story. Both had a keen sense of being outsiders from Canada's business and professional establishment, a factor that drove their determination. Balsillie was the business brain with a ruthless streak, while Lazaridis was the technical genius.

Together they transformed RIM, a minnow and niche player in the telecom sector into a global corporation employing thousands, based on a simple premise: build a secure device that allows executives read their emails on the road, limiting the bells and whistles.

For a time this proved a dream formula. Corporate America loved it. Even the most non-techie of chief executives found it easy to use and its secure nature made it the device of choice for president Barack Obama, who famously refused to offer up his device when requested to do by the secret service on his election in 2008.

Efficiency vs complexity

The basis of the Blackberry’s simplicity was RIM’s background of working with telecom providers on the Ericsson-owned Mobitex platform, a wireless packet-switched data network. “Networks carriers were so primitive that you had to create a device that was that was very efficient and lacked complexity,” McNish explains.

Scaling the business involved some audacious moves by Balsillie, who proved adept at negotiating favourable deals with bigger and ostensibly much more powerful players. Feeling the effects of the so called "tall poppy syndrome" in Canada, the business floated successfully on Nasdaq, making the partners hugely wealthy.

The success of the BlackBerry was relatively short-lived as Apple and later Samsung came to dominate the market with phones that had mass appeal.

By the time RIM reacted, it was too late. Attempts to fight back by competing with Apple’s iPad proved disastrous. A rushed-to-market PlayBook tablet had only a fraction of its rival’s function and crucially failed to offer Blackberry’s signature email service.

A recurring theme in the book is the chaotic nature of the RIM organisation during those years. Behind the scenes the company scrambled to sort out technical and business difficulties, often operating on the fly.

McNish says that a working subtitle for the book was “The start-up that never grew up” – “There was an absence of adults and seasoned professionals at the company. While the board was composed of very good and earnest people, they simply didn’t understand enough about the technology to ask the right questions or challenge what Jim was doing,” she observes.

Seeds of destruction

In this lack of rigour, seeds of destruction were sown. Accounting irregularities involving the backdating of share options led to investigations by Canadian regulators and hefty fines from 2007 to 2009 and an equally seriously breakdown in trust between Balsillie and Lazaridis. A long court battle about patent infringement led to another crippling fine and took a heavy toll on the health of Lazaridis.

RIM’s private technology platform – often seen as one of its key assets – also proved to be a doubled-edge sword.

The book opens with Balsillie flying to Dubai for a major technology exhibition in 2011 and discovering when he lands that he cannot access his email. Technical problems involving a bug in a router at its server centre in Slough cause a three-day global outage. The gold-plated special edition new devices he hands out to selected dignitaries look impressive but function as little more than paperweights.

The reputational damage is hard to recover from and, if there had been any doubt before, the battle for dominance of the smartphone market is now well and truly over.

Losing the Signal - the Untold Story behind the Extraordinary Rise and Spectacular Fall of Blackberry by Jacquie McNish and Sean Silcoff is published by Flatiron Books