WIRED:LAST WEEK, following the announcement of a failed sales forecast for the fifth quarter running, Research In Motion's (RIM) new chief executive Thorsten Heins announced the company would be refocusing on business users of its BlackBerry phones.
While he added that RIM would still be serving “targeted consumer segments”, most read this as a full-blown retreat by the company from a mobile phone market now dominated by Android and Apple.
RIM has only been in the consumer sector since 2005, when it launched a consumer version of its smartphones, after seven years of dominating integrated email and mobile phones in the enterprise market.
The company is sitting on $2 billion of cash. Is a tactical retreat to their core area of expertise really that much of a defeat? It’s certainly a defeat against almost every standard by which RIM compared itself. The company was slow to react to the iPhone’s launch in 2007, but went head-to-head with Apple in launching a tablet competitor to the iPad, the PlayBook, which failed comprehensively in the marketplace.
Almost all of RIM’s growth in the past few years has come from its consumer sales. And while the design of RIM’s enterprise services mean it will be hard for corporate customers to disentangle themselves from RIM, its consumer market competitors are making inroads into the business world. And that’s before Microsoft has really begun the revamp of its mobile phone operating systems, with Windows 8, in league with Nokia.
There’s nothing that RIM can do to fight off all of these assaults if it pulls back to its primary enterprise customers. The smartphone has moved from being a tool with just a limited set of embedded functions – telephone, email, a primitive web browser – to a general platform for applications. No new developer, even those developing exclusively for enterprise customers, will make the strategic decision to write exclusively for RIM’s devices, even with a new release of the RIM operating system, BlackBerry 10.
And the successful growth of any smartphone relies on new developers. The smartphone market now depends on network effects; and by withdrawing from the biggest network of mobile phone users RIM has consigned itself to inevitable death.
On the other hand, there aren’t that many other good options for the new chief executive to consider. When Heins first took the helm in January, he said that “no drastic changes” were needed at RIM. Last week he admitted that he was wrong: “The facts I know after being 10 weeks [as] the CEO” were different from the impression he had days into the job. He also did not reject outright a sale of RIM.
What would be a reasonable route for RIM now? The most precious asset it has right now is its email and messaging infrastructure. It’s relied on by many companies, and it’s the reason for RIM’s global rise as a consumer item for teenagers. RIM’s messaging has a reputation for resilience and security for business, and low price for consumers accustomed to paying per text message.
It also has network effects of its own – users buy BlackBerries because their friends use its messaging system. Companies buy BlackBerries for all their staff because their enterprise messaging systems rely on it. RIM could potentially open up that network to other systems. They could produce software on other platforms, including Android and Windows, and broaden its adoption out. That would be the “open” solution – but it’d also be a solution without an obvious revenue stream. RIM would survive the collapse of its hardware, but only by cannibalising it.
Or RIM could divide itself along the fault line that the viability of that service, against the collapse of hardware sales, presents. A services-oriented company like IBM could make use of the messaging side. There’s an incredible amount of RIM intellectual property that would make a fine prize for any corporation taking part in the ongoing patents war in the mobile market. And RIM’s hardware knowledge is an incredible asset on its own. The Canadian company QNX, bought by RIM in 2010, and whose operating system underlies BlackBerry’s Tablet OS, was a major force in embedded systems when independent of RIM, and could be again.
Retire to a niche. Sell the company to the highest bidder. Open up their infrastructure. Hawk off the best bits. Sell off the IP. All of these are not so much solutions as end-games for RIM. But if Heims is looking for inspiration as to how to dodge all of these finales he could look to another CEO, one who was provided with them all as options by bystanders at an imminent corporate wake.
Back in June 1997, 100 commenters, from Richard Stallman to Roger Ebert, said similar things in a Wired article aimed at Apple’s new adviser Steve Jobs. A few months later he was CEO, and went about ignoring almost all of it. Could Heims pivot RIM in the same way as Jobs did with Apple? He’d have to start by ignoring all the mediocre options open to him, and instead concentrate on the one that might save the company as it stands. That means producing a BlackBerry device that people want to use in preference to Android, the iPhone and Microsoft.
That goal is unlikely to begin with withdrawing to markets where the buyer is purchasing out of inertia for their shackled employees. RIM needs to build a device that people buy because they want it.
