Losing the Signal: The Spectacular Rise and Fall of BlackBerry (13 page)

Nearly three hundred RIM engineers were on the move. A caravan of buses, cars, and bikes were traveling northeast from the company’s offices to the Waterloo Inn on the edge of town. Filing into a large conference room just before 4:00 p.m. on March 1, 2001, engineers spied Larry Conlee at the podium. He was hard to miss. The imposing Texan stood six feet tall and weighed more than three hundred pounds. Until two months earlier, Conlee had been an enemy commander, overseeing Motorola’s paging division. While working for BlackBerry’s chief competitor, he wanted to turn Motorola’s big guns on the Waterloo upstart. But when Motorola sidelined its paging business, Conlee decided he’d rather switch than fight.

Lazaridis and Balsillie hired Conlee as one of two chief operating officers they hoped might bring order to RIM’s chaotic growth. Their first hire, Don Morrison, joined the company in late 2000 to oversee sales and marketing. He reported to Balsillie. Morrison brought years of experience as an AT&T and Bell Canada executive. A soothing, nurturing executive, he also carried a passion for religious studies. Balsillie took to calling Morrison, eight years his senior, “Father Time.” If Morrison was the good-cop hire, that left Conlee with an obvious role to fill. It wouldn’t be hard for the Texan to play the bad cop. At Motorola, his nickname was “Silent Thunder.”

Rumbling in a deep southern drawl, Conlee made it clear to the room of engineers that RIM’s new product sheriff wasn’t happy. He’d been hired by Lazaridis to keep RIM’s products on schedule, and the company was late. RIM was gearing up to ship a big order to a British carrier, BT Cellnet, for a new
BlackBerry model, called 5820, adding voice-calling to the device’s signature e-mail service for the first time. The code name for the new phone was Project Tachyon. Like many confidential RIM projects the name came from the world of subatomic particles: tachyon is the hypothetical particle scientists believe can travel faster than the speed of light. RIM’s Tachyon was not breaking any speed records, unfortunately. The already-delayed June shipping deadline had recently been pushed out to August. RIM couldn’t risk further delays, Conlee warned. The dot-com bubble had imploded, sales were down, and new players were entering the mobile data device business. “If we don’t deliver on time, there is no need to deliver,” he told the room. Conlee’s oft-repeated mantra was “Today’s peacock is tomorrow’s feather duster.”

The son of a sweet potato farmer from Clyde, Texas, Conlee quickly grasped that success at Motorola involved hard work and a relentless attention to designing, making, and marketing products. Product management was an iron discipline at the Chicago company. Accountability was an absolute priority. Managers and engineers signed their names to product books listing delivery schedules and budgets and faced tough questions if they didn’t meet projections. Nor were product demonstrations for the fainthearted. Conlee once watched a senior Motorola executive impale a Phillips screwdriver into a walkie-talkie prototype after a manager bragged that it was indestructible. “It’s not that perfect,” the executive said as the device exploded across the table.

“That’s what I grew up with,” said Conlee. “I did not expect any less of myself.”

Overambitious expansion had eroded Motorola’s once formidable culture of discipline and accountability by the time Conlee resigned after twenty-eight years with the company. Product failures and division rivalries opened such deep rifts within Motorola that employees called it a “loose confederation of warring tribes.”
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He was determined to prevent the same fate at RIM. When he arrived in Waterloo, Conlee found a technically advanced company made vulnerable by poor discipline and coordination. Despite BlackBerry’s success, RIM was managed like a small start-up, with one executive hub coordinating an expanding circle of spokes. By 2001, the company was adding so many spokes, doubling staff annually, while management remained unchanged. Lazaridis and Balsillie drove most decisions, which is why both agreed to select their own chief operating officers. “They could not take care of everybody,” says Conlee.

Conlee and Morrison were astonished to find a company devoid of the
practices that shaped modern corporate life. Forget about a five-year plan. The company with $221 million of revenues in its 2001 fiscal year didn’t even have a one-year goal. When Conlee requested a report on the company’s strategic objectives, all he got was a forecast of the next quarter’s sales and expenses. He was told there were no profit-and-loss projections for the next year, no budgets for the company’s divisions. Lazaridis or Balsillie signed off on spending. When Conlee asked for a manufacturing cost breakdown, he got a blank stare. When he asked engineers to estimate delivery times for Project Tachyon phones, the answers ranged from six months to two years. In fact, RIM did have a corporate strategy, but as the new senior executives discovered, it was a loose collection of short-term plans discussed privately between Balsillie and Lazaridis. “There were things that Mike and Jim got involved with that they didn’t share,” says Morrison. “It took me eighteen months to get RIM.”

One thing Morrison didn’t get was Balsillie’s objections to talking about the company’s stock price, a ritual in most executive suites. Anyone caught talking about RIM’s share value was penalized. Balsillie didn’t want staff becoming complacent or distracted about company or personal fortunes. When Morrison sent Balsillie a congratulatory e-mail about RIM’s soaring stock price, he had to buy hundreds of donuts for RIM employees. Stock prices and quarterly results were precisely what Conlee believed needed more attention. He’d been hired to expand RIM “from millions to billions.” The company wasn’t going to get there unless it paid more respect to commercial details. That, the Texan knew, called for “a different culture.” Conlee invited RIM’s engineers to the Waterloo Inn to explain new marching orders. He introduced a detailed schedule of product milestones for Project Tachyon’s 5820 BlackBerrys, goals that would be enforced by a new product management office. Going forward, deadlines would be short and inflexible. All software features on the 5820 had to be completed within two weeks; for hardware design and beta-testing, the deadline was six weeks.

RIM’s engineers listened to Conlee in shocked silence. Software and hardware teams were working flat out to solve reliability issues with the 5820, struggling to adapt BlackBerry’s first voice-and-e-mail device to BT Cellnet’s more powerful cellular network. The smartphone was far from ready. Conlee’s deadlines were unrealistic, radio software designer Matthias Wandel would later vent in a private journal entry about the meeting: “The whole idea was probably to change RIM’s culture to be something more along the line of something stable, like Motorola, instead of the wild and unstable entrepreneurial
company. This could alienate the people that helped create the company…. RIM could no longer rely on star performers. Instead, the company would rely on procedures and policies to get things done.” Many engineers, Wandel wrote, were asking the same question:
How could Mike let him do this?

RIM had arrived at the bridge every high-tech start-up must cross in the pursuit of long-term success. It’s the point at which a product triumph forces a fledgling company to shift from unfettered free-form innovation to the steely commercial discipline required to foster sustainable growth. In Silicon Valley, founders often fall by the wayside after innovations take off. Creative entrepreneurs are often poorly suited to managing business success. Venture capitalists have the upper hand because they typically demand major or controlling stakes when betting on risky start-ups. This wasn’t the case in Waterloo. Balsillie had rebuffed venture capitalists, carefully raising cash through public stock offerings that did not overly dilute its founders’ clout. Lazaridis was the company’s largest shareholder, with an 11.2 percent holding in 2001, followed by Balsillie, with 9.3 percent, and Lazaridis’s childhood friend Doug Fregin, with 3.5 percent. Combined, their stakes would make hostile advances difficult.

RIM had another advantage: unlike many competitors in the high-risk technology sector, Balsillie and Lazaridis had forged a highly functioning partnership between an audacious and outgoing businessman and a trailblazing engineer. The unlikely duo had balanced the competing motives of profit and invention for a decade. At first they were braided together by a desire to keep RIM alive in the face of assaults. By 2001, their shared ambition was to grab a large piece of the competitive global market. The partnership was founded on the understanding the company would make no major decision unless both agreed. They also committed to present a united face to staff and customers. “We didn’t contradict each other in front of anybody. It was pretty much the understanding we had. We could close the door and talk, but we made sure we were a unified force in the organization,” says Lazaridis.

The two CEOs were so aligned that they often sketched out each other’s roles before meetings. They had secret signals, including an under-the-table nudge when a private chat was needed and crinkling of paper to indicate it was time to stop talking. Nudges were seldom necessary, however, because
each anticipated where the other was headed. “They were in such amazing synch,” says Patrick Spence, RIM’s U.S. salesman. “It was absolutely incredible to watch them work in that kind of an environment, sitting right beside each other, where you think they’re almost connected in their brains.”

Paradoxically, the two had little in common other than RIM and the fact that they both drove black Eagle Vision sedans. Lazaridis was the chief innovator who drove software and hardware advances; Balsillie was the in-house financier who wielded products like hammers to pound more favorable terms from powerful carrier clients. Lazaridis found financial and corporate confrontations so stressful he often left the room when Balsillie was in full Sun Tzu mode. Balsillie, meanwhile, never set foot in RIM’s product labs and deferred entirely to his partner on technology decisions.

Outside business, their differences were profound. When Lazaridis left the office late at night, he headed home to Ophelia and their son and daughter, with armloads of patent filings, product manuals, and textbooks. His hobbies included music, movies, and collecting vintage editions of
Scientific American.
One of his favorite pastimes was driving to Cape Canaveral with his childhood friend Doug Fregin to watch spaceship launches. Another was religious study. He frequently hosted groups to discuss the Bible and other spiritual readings.

Lazaridis was an admirer of the writings of Emmet Fox, the popular Depression-era New York minister who drew thousands to his church with sermons about the mystic powers people possess to transform lives of misery and despair. His book
Sermon on the Mount
was a staple for Alcoholics Anonymous members. Lazaridis was also a follower of the religious writings of Mary Baker Eddy, the flinty American journalist who founded the Christian Science movement in the late 1800s. “He has a deep spirituality and deep belief in the eternity of the spirit…. There is a constancy of his belief, he generally marvels at the wonders of the planet,” says his friend and former Rogers executive David Neale.

When Balsillie left the office, it was often to get on an airplane with an entourage of RIM staffers and suppliers to meet clients. Some of Balsillie’s fellow travelers, like their boss, carried pocket-sized copies of Sun Tzu’s
The Art of War.
When not working, Balsillie chased victories on golf courses, hockey arenas, basketball courts, and cycling trips. During the 2002 Olympics, he bought tickets for a large crew that included veteran Canadian hockey players from the 1950s to watch Canada’s hockey team seize the gold medal in
Salt Lake City. When Canada’s captain Mario Lemieux skated triumphantly around the arena after the game, he waved a Canadian flag tossed over the glass by Balsillie. “What Jim is trying to do is squeeze as much electricity from every living moment that he possibly can,” said Morrison, who joined the Olympic pilgrimage.

Off the corporate battleground Balsillie seemed incapable of relaxing, even for a leisurely game of basketball. “He was the most competitive person on the court, bar none,” says Patrick Spence of their weekly pickup basketball games. When others goofed around, Balsillie called time-out to plot winning moves. “Jim has one gear, which is the full on gear of ‘We’re going to win this,’ “ Spence says.

Balsillie also sought the company of business legends who bucked the system. One close friend was George Soros, the New York speculator who made a fortune betting against the British currency in the 1990s. Another role model companion was the Quebec billionaire Paul Desmarais, the scrappy founder of the global financial conglomerate Power Corporation of Canada, a man who overcame humble beginnings in the small Ontario city of Sudbury.
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As the demands of managing RIM’s growth intensified, Balsillie spent more time away from the modest suburban Waterloo home he shared with his wife Heidi and their son and daughter.

Morrison, a fan of workplace socializing, sought to pull RIM’s diverse senior executives closer with outside activities. Before RIM, he was one of many AT&T executives who resided in Basking Ridge, a leafy New Jersey suburb. There, coworkers belonged to the same clubs and churches. Morrison wanted to duplicate the experience in Waterloo. Several days after he made overtures to socialize with the families of other RIM executives, Balsillie appeared in his office. He was agitated.

“Cut it out,” Balsillie warned.

“What do you mean?”

“We don’t do that here. We don’t hang out together.”

Morrison was shocked by his boss’s abrupt warning. As a newcomer, he assumed Balsillie and Lazaridis were inseparable. The two CEOs were in constant touch, e-mailing and meeting constantly to feed each other product, market, and sales news. There were no harsh words, only mutual enthusiasm for RIM’s successes. Eventually, Morrison realized that work was the only language the two men shared. When he wasn’t talking about RIM, Lazaridis was rhapsodic about technology breakthroughs and quantum physics. Balsillie’s
enthusiasms were sports, traveling, and business celebrities who were starting to pay attention to BlackBerry’s founders. They were a poor match for any social outing.