A couple of months ago, I met a recruiter from University of Waterloo at a graduate school fair. One thing led to another, we inevitably started discussing the fate of Research in Motion (RIM). At that time, I asked her if she wanted to hear a Canadian answer or an honest answer. Without hesitation, she said honest answer, so we ended up having a frank decision about how there was no realistic path for RIM to come back as an independent company, and we both somewhat agreed that the destination of RIM’s current route is bankruptcy.
Fast forward to the present, RIM announced another earning stinker; the new CEO finally “realized” that the company is actually in massive trouble (Dude, where’s my burning platform memo?) and announced sweeping changes at the executive level, including the resignation of former co-CEO Jim Balsille as a board member of RIM. RIM also seemed pretty confused with its public relation / messaging. Is it planning to give up on the consumer market? Is it just focusing on enterprise? Of course, it shouldn’t. With the consumerization of IT, that would be a definite Plan A to accelerate the company’s already rapid decline.
If you had read my very first post, I hinted that RIM as a whole really has no idea what it is doing, mostly because it has the wrong strategy based on an overestimation of its ability and a slight (charitably speaking) misunderstanding of the competitive landscape. And if you had read my last post, you probably thought I would write about Nokia next (seriously, I have about 200 words!)… After all, this is mostly a blog about the potential of a Windows comeback. (But fear not! I will discuss the Microsoft angle below.) However, as a Canadian and a fan of University of Waterloo, there is a certain sense of patriotic duty to post my thoughts on RIM, especially now that there is less of a gap between the Canadian answer of RIM’s fate and the honest answer of RIM’s fate. I feel that a few more intelligentsias in Canada are finally starting to write RIM’s obituary instead of laughing off the risks that RIM faces. Though I must say, reality might have yet to hit some Canadians with respect to RIM’s fate. I was listening to a talk show on the radio Thursday afternoon (right after RIM announced its latest earning) and there were quite a few callers arguing that RIM is only hitting a rough patch and suggesting that RIM would be fine if Canadians were more patriotic with their smartphone choices.
I will not be doing any write-up on why it failed and its current failings as you, my dear readers, will find plenty of material if you seek. (Click here for an excellent article on RIM!) Instead, I want to move the conversation to “what’s next”. Am I saying that I have the solution/strategy to turn RIM around? Not even remotely. I distinctly remembered myself saying to the recruiter that I had no clue how to fix RIM in 2012. Indeed, the time to fix RIM was perhaps two to three years ago, when RIM was mulling over its strategic options and decided to become the owner of QNX to save the company. For most, in hindsight, it was a fatally bad move given the performance of the Playbook and the delays of Blackberry superphones due to battery life concerns (right…). For me, I just wish I had the courage of my conviction and made better/bolder investment decisions.
The most important thing for RIM to realize today is that end users (e.g., smartphone consumers) will derive value and utility from only be a handful consumer-driven digital ecosystems that deliver apps, content, and services tomorrow, and RIM’s ecosystem would likely not be one of them (sad to think that that was once possible because RIM was a major mobile phone device manufacturer and an OS-builder). As soon as RIM’s management team could map out what the future major ecosystems are and where all of the values are added, one would hope that RIM could, at that point, take an honest look at its business and reorganize it in a way that would both reflect the future opportunities and minimize its current woes based on its resources, technologies, and current market position. However, needless to say, hard choices will have to be made, businesses might have to be jettisoned/rethought (e.g., BBM Music), and unfortunately, the Waterloo region might be very hard-hit.
The above definitely requires a lot of work, but more likely than not, a few of the following options will bubble up:
1) License Blackberry 10 OS – Goal: Build a digital ecosystem
- This is likely the fastest route to bankruptcy. Blackberry 10 (BB10) might be ready for primetime this year, but how ready? After witnessing RIM shipping the Playbook without native email for a year, I am not confident with RIM’s QNX-based salvation. Even if BB10 is competitive and competent when compared to current contenders on day one, it is hard to see how RIM could work effectively with other device manufacturers and figure out how intra-ecosystem competition would go. Moreover, I am quite pessimistic that RIM could build out an actual ecosystem quickly. Though there is certainly another opinion on this matter.
2) Sell the company – Goal: Extract as much market value as possible now
- It is hard to see how this one could end well unless RIM could magically manage to stir up interests among companies and create a bidding war. RIM’s market influence is waning daily, which means it would be nearly impossible to convince buyers to pay a healthy premium for the company. Moreover, there is actually a strong incentive for interested companies to wait, even as each might have perfectly rational reasons to buy RIM. (Hey! Who wouldn’t want to pick up a treasure trove of patents, engineering talents, and enterprise contracts on a discount?) I suppose the one good news is that the Canadian government said they would let a sale of RIM go through if it were to happen. (Interestingly enough, I remember having a conversation with someone at CSIS a few years ago and she cited protecting RIM’s intellectual properties and products as the equivalent of protecting Canadian national interests. Such is probably no longer the case.)
3) Join a digital ecosystem and differentiate – Goal: Use existing assets differently
- A lot of tech companies might not be desperate to buy RIM, but it does not mean RIM does not have valuable assets that might allow it to throw its weight around for a bit, and this option might even facilitate the point above eventually. (For example, many are hoping that Microsoft will one day buy Nokia due to Nokia’s 100% commitment to the Windows digital ecosystem.) Through licensing Google’s Android OS and Microsoft’s Windows Phone OS, RIM could add value to either the Android or Windows Phone digital ecosystem as a device maker and a value-added service provider. The key question is whether it would make sense to favour one ecosystem over another, as both Google and Microsoft would undoubtedly welcome another player into their respective fold. The trickiest part is sorting out which ecosystem would provide the most for a company like RIM at this stage of the game.
The Microsoft+Nokia Alliance… with RIM?
As a Windows 8 blog, we, of course, have to discuss the scenario where RIM joins forces with Microsoft and Nokia in ensuring that Windows could transition well in the post-PC era (briefly only, because this is post is getting too long!). Fundamentally, if RIM is willing to move its assets into the Windows ecosystem, it would undoubtedly receive a huge boost. However, just as Blackberry 10 is unproven, the Windows Phone is unproven as far as it being an OS for QWERTY-based devices that RIM is famous for. The model that RIM could obviously try to replicate is the Nokia deal. Though it is hard to say whether Microsoft would be willing to provide platform payments to RIM (similar to what Nokia’s negotiated). I am no technology expert, but it is also hard to see how RIM’s core technology and innovation could be effectively integrated into Microsoft’s technology stack (think of the trouble RIM itself has moving its secured, best-in-class messaging services to the QNX-based OS). And what can RIM keep to itself for differentiation purposes even if it is willing to adopt the Windows Phone OS? Can RIM immediately angle itself and secure a seat as a premier Windows 8 tablet maker? (That should be the most interesting play.) What will happen to QNX and how does Microsoft views the OS since it did (perhaps still does?) compete with Windows CE in the embedded system market?
In the end, sadly, there are only bad options available for RIM, as a Canadian, I surely hope that RIM could figure out the least bad option and change course now.
P.S. Funny… my longest post to date on my Windows 8 blog is on RIM. Hmm… a sign?