Internal strife and opposing strategies lead to BlackBerry’s downfall: report

Daniel Bader

September 28, 2013 1:00 pm

An extensive report in today’s The Globe & Mail reveals the many fissures in RIM’s product strategy, and the deep gulf between then co-CEO’s Balsillie and Lazaridis, and later between Balsillie and current CEO Thorsten Heins, on how the tech giant should stay competitive.

Though the company is on the brink of going private, its hubris was apparent when it united with carriers in 2009 to oppose the bandwidth- and data-prolific iPhone, which was beginning to eat into BlackBerry’s market share in the U.S. despite being available only on AT&T. Verizon asked RIM to develop a touchscreen competitor to the iPhone, which turned out to be the company’s worst-ever product, the BlackBerry Storm 9530. After dismal sales, Verizon, BlackBerry’s key partner at the time in the U.S., teamed with Motorola and Android, releasing the ultra-hit Droid series.

Moreover, division within the company emerged when it was clear BlackBerry’s legacy Java-based OS was not going to compete in the long-term against iOS and Android. While Lazaridis believed that the QNX-powered product that became BlackBerry 10 was necessary for the company’s longevity, Balsillie knew that the quickly-commoditizing smartphone market, lead by Google’s free Android OS, was going to make it difficult to release a profitable touchscreen product. This has clearly come to pass, as BlackBerry wrote down nearly $1 billion worth of Z10 inventory earlier this month.

Balsillie’s exit from the company in 2012 was a direct result of other executives and the board of directors not supporting his vision for BBM Everywhere, a product he called “SMS 2.0.” According to the Globe report, SMS 2.0 was to be based on BBM’s infrastructure, but would be available on all platforms and offered directly by carriers. How it would have been integrated with iOS remains to be seen, but it could have become the iMessage for Android and BlackBerry. Instead, CEO Thorsten Heins undermined the strategy, forging ahead with their BB10 product line. While BBM is coming to Android and iOS, it is believed to be far too late to make a serious dent in a messaging market owned by Kik, WhatsApp and others.

Lazaridis also had issues with the company promoting an all-touch device, citing the iconic QWERTY keyboard as a key differentiator. While we don’t know the sales breakdown between Z10 and Q10, the latter is certainly more attractive to enterprise customers.

The report includes candid conversations with current and former RIM employees, including Lazaridis, who admits that Apple’s iPhone scared his and his team. “If that thing catches on, we’re competing with a Mac, not a Nokia,” he told his staff in 2007. At the time, BlackBerry was one of the fastest-growing tech companies in the world, and Nokia was the world’s biggest cellphone maker. Lazaridis also believes the BlackBerry story is not over, but is in a period of severe transformation, and could bounce back.

How it plans to do that — and whether it will do so as a private entity — remains to be seen.

Read the full report at The Globe & Mail.

  • Lukeiphone

    If internal strife is the problem to blackberry’s downfall then I really feel sorry about the entire company and it’s culture. Where is the unity in these tough times?

  • Rich

    If I’m not mistaken, Lazaridis wanted to swap things over to the services sector once he realized that BB was falling behind. Realistically, if BB went that route they’d likely be in a much better position financially than they are today — they’d still have to cut a lot of employees though.

  • PT

    The good old day when carriers charge you each sms is long gone, that where BBM seem to be a cheaper alternatives. In today, unlimited sms cost next to nothings.
    People want apps. The fact that only iOS and Android can delivers that.

    What is so hard for Rim not to understand that? Same with Windows.

    • Yvon Amesse

      Typical american reply, I guess you don’t have any contacts from a different country…

    • Akera

      What’s the point ? International SMS are included with almost any kind of set up here… How is a Blackberry better ?

  • TomsDisqusted

    I don’t think it was discord that killed them. Passionate disagreement can be valuable, as long as it leafs you towards the right decision. What killed them was not listening to Balsillie. Bbm could have been huge. Qnx, with its years of delays, was their biggest mistake.

    • Taylor Bolin

      i agree with you to an extent, but what would BBM4ALL or SMS2.0 have done for the company, it doesnt generate revenue, so to say it would have been a big thing for them, but bigger or better than QNX/BB10 is absolute crazy talk

    • TomsDisqusted

      Balsillie had plans for how to make money with BBM. Companies are now fighting hard to control that market because it had lots of potential for revenue.

    • erterte

      ya all those messaging apps certainly are useless and make no money, which is why there’s about a million of them out there. they all love losing money!

  • jeff

    Few users on BB10, no developers want to make apps…no one wants to use BB10 because there are no apps…if you get a BB10 device for work when you already have an iPhone or android phone are you going to buy apps for your work phone? Android was behind Apple in apps and did not have as refined of an OS but they sold devices. They sold inexpensive phones to build up the user base which lead to more apps being made for the OS. Now arguably android has caught up to the iPhone. What did blackberry do? They brought out their new OS on dated hardware (it may not have affected the performance but specs are looked at more these days) and priced it at a premium. Had they priced them at $400 outright and/or free on contract, more people would have picked them up. New BB10 device with no apps or a new iPhone/android? What should you choose? Limited budget…no BB in your price range. I think BB10 should have come out in 2009 and the new devices should have been priced accordingly. Now everyone knows BB is done, they can’t sell their phones cheap now. Too bad, it would have been really good to have some more competition. (I use both android and ios devices and have used bb in the past)

    • 01011001001

      They can’t even give the z10 or q10 away for free. Whether or not the bb10 was released on 2009, 10, or 11 I think blackberry would’ve still suffered from declining user based. The world wanted iPhones and android simply because of what it offered and will offer to its customers – those companies actually has leaders that has vision of how technology fits into people’s lives and how people used technology and interact today.

      Blackberry has no vision to this day while Heins talked about mobile computing and tablets being obsolete in 5 years and offers no solution or what’s coming. BB is still is about email, keyboard, bbm and nothing else. That’s all they really are, pretending to matter.

      If a blackberry turnaround is in the works, they need someone that’s actually done something in tech. I’m talking about Forstall, Sinofsky and the like, those two are unemployed and looking to matter again in tech. That’ll give blackberry a chance and draw up excitement with devs, users etc.

    • hyperhyper

      I’ve also heard rumblings that Blackberry was not very friendly with developers who wanted to develop for their platform. Just ask the Apple who a lack of developers relegate your platform to the fringe (see the Mac before Microsoft committed to making Officer available on the Mac). Valve really helped Apple as well since they made Steam available on the platform thus finally giving it more than a handful of games. If what I heard is true, Blackberry’s dismissal of the app markets played strongly into their downfall.

  • selonmoi

    What’s hilarious/sad about the Globe is that, on all of these big divisions, both sides were right. And wrong.

    Balsillie was right that there was no room in the market for BB10. Even if there had been at some point, it came way too late to capitalize.

    And Lazaridis was right about Balsillie’s ridiculous BBM/SMS 2.0 scheme. It was trying to solve the problems of BlackBerry and the carriers, not customers. No one is looking for new ways to pay their carrier for a service that could be delivered for free over IP. And it would never, ever happen on iOS, anyway.

    In the end, it was a major case of rearranging the chairs on the deck of the Titanic.

    • barrist

      the SMS 2.0 would have been risky, but back when BBM was king, and before iMessage, there could have been an opening to make BBM the standard messaging service. unfortunately that opportunity passed them too quickly, and they didn’t act fast enough.

  • SteveDiPaola

    one issue only – needed to go Android OS or die – I told them this, years back – they laughed at me. I told them watch nokia in front of you. again apple OS or android OS or die. why repeat history ( apple OS or Windows or die). sad – it would have been so simple.

  • G.P.

    Anyone else heard anything about the so called imposed contracts Apple forced providers into? like Verizon or AT & T had to sell like 75 million a year in Iphones or else be charged a fee or many billion $$’s? Is that even legal and 2nd is that even true?

    • Netguru

      Yes it is true. Verizon made huge contractual commitments to Apple to get iPhones into their lineup. When the sale levels didn’t materialize, Verizon doubled down. As of this summer, Verizon and Apple were reported to be negotiating what penalties would be applicable. You can search online. It was widely reported in July by ATD, WSJ and other news agencies.

    • Sweet

      Sprint is in the same situation. I read one analyst say that the penalty could put Sprint into bankruptcy.

    • G.P.

      this really doesn’t help the competition… no wonder providers in the usa stopped carrying/selling bb :(

  • andy c

    Sounds like a lack of execution when it came to hitting deadlines. If bb10 is released on time then it’s competing with the s2 instead of the s4 and blackberry might have stood a chance

  • Noah Roesler

    Honestly I think BlackBerry should just give up on their OS. They should just take Android on their devices I bet more people would be willing to buy them then. Then maybe later, they can release a new OS that is vastly improved.