Over the past few years, there has been no shortage of commentary and analysis on the modern-day Titanic known as BlackBerry.
The Waterloo, Ont.-based company that arguably invented the smartphone grew from virtual nothing to one of the most important technology operations in the world with startling speed. Its fall from grace came almost as blindingly fast.
In their new book, Losing the Signal: The Spectacular Rise and Fall of BlackBerry, Globe and Mail reporters Sean Silcoff and Jacquie McNish document the fascinating story through unprecedented access to company co-founders Mike Lazaridis and Jim Balsillie, as well as numerous other important characters.
Silcoff joined me for a chat about the book and the lessons it can provide to other companies, especially Canadian ones. Here’s a condensed version of that conversation.
There have been other books on BlackBerry? Why did the two of you want to do this one?
It’s probably the most interesting and compelling business story, not just in Canada, but I think globally in the last couple of decades when you factor out the big scandal stories like Tyco or Enron or Arthur Andersen.
These were conventional narratives of companies gone bad and there were issues of corporate malfeasance and such, but that’s not what happened in the story of BlackBerry. It’s a classic rise-and-fall story about a small company that came from out of nowhere against very long odds and really changed the world.
Just as it was reaching its highest heights, the disruptor got disrupted and its downfall wasn’t pretty. We felt like the story hadn’t been fully told. There were a couple books before, but they captured the company at the height of its power and I don’t think reflected what was going on inside the company.
Timing worked out really well for us because both Mike and Jim were prepared to speak and reflect. They saw a lot of value in opening up about the rise and the fall. They were supportive of sharing the lessons they had learned both on the way up and on the way down.
Getting Mike and Jim to speak meant we were able to get a lot of other people to speak as well, who hadn’t before.
How did you get that access? Who approached who?
It came out of a story that ran in The Globe and Mail that ran in September, 2013. It was a big piece, about 6,000 words, and we really felt like it was the first story of what led to BlackBerry’s decline. It was about a year-and-a-half in the making.
Once Jim and Mike had stepped down as CEOs just about every business medium was chasing them and no one was able to get them. Some people had bits and pieces, but no one had the full story.
I was able to get a fairly senior source to quite unexpectedly help out on that story and that opened up some doors with people.
That piece established something more than the conventional or lazy narrative of the company’s decline. There are still people today on Bay Street earning very good salaries who will tell you that BlackBerry went down because Jim was too busy trying to buy a hockey team and Mike was distracted by the physics institute he was trying to build. We tried to get much deeper than that.
When I ploughed into the numbers, I realized you could draw a straight line from the appearance and abandonment of the [BlackBerry] Storm by Verizon and the appearance of Android. It showed us the right questions to start asking. RIM insiders really appreciated that we were going to that depth and asking those questions.
How straight do you feel the sources were with you? Jim in particular comes off as a manipulator in the book, so how conscious of that were you?
From the outset, Jim told us he wasn’t interested in myth-making. He didn’t want to participate in a book that made them out to be legendary characters.
As a storyteller, you want to talk to enough people and triangulate things enough to know that you’re getting the straight goods. After a while you can sense when some people are sort of burnishing their own recollections and making themselves look good.
I’d say that wasn’t really the case for the central characters. There are a handful of people more on the margins that you could tell had an agenda, but we knew how to steer clear of that. Or I think we did.
There are some outcomes and conclusions in the book that remain fairly controversial. There are points in there where Jim and Mike have differing recollections or points of view and we try to air those and let them speak for themselves as opposed to drawing our conclusions.
Also, when you spend a lot of time with people you tend to notice patterns in how they tell stories and what was reassuring to us was to hear a source tell the same story the same way months later, as opposed to the facts always changing.
There was a real consistency to stories, so that told us we were getting an honest reflection from people the overwhelming majority of the time.
The impression I got from the entire story is that this was a company that was always flying by the seat of its pants and so it was inevitably going to go wrong. Did you have that sense as well?
They were always moving really fast and it was a company that was always growing by leaps and bounds. Even when the iPhone appeared [in 2007], two years later they were still the fastest-growing company in the world.
It’s one thing if you’re selling software and scaling up means hiring another person, but when you get to a certain level – and they hit that level right around the time the iPhone came out – they had to go from one factory to five and they had to globalize their supply chain.
Growing a goods-making company at such a pace when you’re starting from such a small base is an extraordinary challenge.
When you’re a pioneer and you’ve beaten everybody and nobody’s efforts to unseat you have worked at all, it gives you a bit of a comfort zone. Not that they were comfortable, but they were always the leaders, never the followers.
The moment that switched they really became quite lost. The line that sticks with me, and it’s interesting to hear Jim speak about it so matter of factly, is this period of strategic confusion that they were in. You really sympathize and empathize with them.
They built this amazing company and were so successful where they created a category that Silicon Valley’s biggest, baddest and most well-financed and smartly run companies want to get into and dominate. That’s a bit of a curse. Mobile data became this amazingly valuable market that Apple and Google wanted to come to.
It’s one thing for Google, with a bunch of guys working on a secret project, to pivot on their smartphone plans and tear up the blueprint and start over again. It’s another thing for a company that’s running at full steam and that’s what BlackBerry was forced to do.
I’d challenge anyone to put themselves in that position and try to figure out the best way forward, especially when it’s a two-headed organization where the tension points are starting to open all through the company.
I look back at it and think what could BlackBerry have done differently at the time? They hadn’t gone back to raise money in a few years, so maybe that would have been a good time to go to market and raise a war chest and set aside a bunch of people to try and do the full innovator’s dilemma salvation plan.
But you also have to remember that BlackBerry thought it had its competitive response to the iPhone in the Storm. The Storm was a failed product in a number of ways. It was buggy, but it also took a pre-iPhone approach to the phone. It was a much more mechanical thing where the screen actually pressed down.
Mike thought people wanted that clickable screen. So the company effectively came to market with the wrong kind of product and then it tried to fix that product a couple of times.
That was the best that they made and you see it in retrospect so clearly now but nobody at the time realized that the Storm’s failure really opened up that rare opportunity for Google to come in. It was a golden opening.
When you think about it, the iPhone appears in 2007 and the company’s first truly competitive response to that that takes it into the modern era really doesn’t come till early 2013. That’s a very, very long time in technology and by then BlackBerry was so far down and the trend was so well developed that it was really hard for them to come back.
The book is very much straight reportage. Why you didn’t do more of your own analysis?
There is some analysis in there but I think we want people to get to the end of this book and be entertained, informed, feel like they’ve read a great book. If they have other questions, if they want the scholarly analysis, that’s available elsewhere, I guess. We just wanted to tell a really great story.
Have you heard from Mike or Jim on what their thoughts are?
We have heard back from Jim. We were on stage with him at the Empire Club a few weeks ago and the feedback was fairly positive. I think it’s difficult for RIM insiders to read this book because there was a lot of trauma there and a lot of things that people didn’t want to read.
What’s the biggest lesson that anyone reading the book should take away from it?
Technology is a brutally competitive business where only the paranoid survive. These are well-worn views about technology and you can’t repeat them enough. It’s an interesting business where your customers, partners and suppliers can all become your enemies at a certain point.
It’s a danger for a startup to say about big, giant companies like a Microsoft or a Google, “Oh, we don’t compete in their space.” The way technology or innovation works is you never know when you’re going to veer directly into the path of a giant because that’s where the business takes you. Nobody can take for granted that even their best friends can become their biggest enemies in business.
One lesson that’s really important for Canadian companies is we don’t have any shortage of great innovators and engineering talent in this country, but we seem to have this pervasive problem with salesmanship and commercialization.
That’s an issue Jim really likes to hammer on a lot. If you read his piece in the Globe a couple of months ago, Jim really goes on about that. Commercialization is really a skill that runs in short supply in Canada. It’s not good enough to build the coolest, most innovative technology, you really have to go out and sell it. You see that in the story of BlackBerry.
What’s the future hold for the company?
Some kind of rebound is possible, the question is: from what point? If you look at the numbers, in the most recent quarter BlackBerry made 40 per cent of its revenue selling smartphones and almost as much from service fees for its older phones that are gradually coming out of service.
Their smartphones sales were $1.3 billion in the most recent quarter, they were $1.6 billion in the quarter before, $1.9 billion a quarter before that, so the trend isn’t good for smartphones. The service access fees were $1.6 billion last year and that’s going to be $800 million this year. Eventually that’s going to be zero.
So we’re talking about a company whose two biggest sources of revenue appear to be on a steady downward clip. There’s some good news on software and licensing and certainly they’ve got tens of thousands of patents and that’s obviously worth something.
They’ve got $2 billion in cash in the bank, so it’s a company that has time, options and assets, but what it doesn’t yet have is a demonstrable, positive upward trend to give anyone reason to believe it’ll be bigger than it is now any time soon.
I think it’s going to be a much smaller company before we know how bright a future it’s going to have, but it may well continue to flourish. They have an awfully long runway and [current CEO] John Chen is a skilled turnaround guy. We certainly weren’t writing the eulogy for this company by any stretch.
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