Losing the Signal: The Spectacular Rise and Fall of BlackBerry (27 page)

It was a departure for a leader who was more comfortable at a chalkboard talking network physics to be reciting marketing-speak from a teleprompter. But by early 2010, RIM was in the midst of an effort to establish itself as one of the world’s leading brands—with Lazaridis leading the charge. The RIM chief, who had recently starred in an American Express commercial, had long seen himself as the company’s leading brand aficionado—a role Balsillie, who had little interest and no training in marketing, was more than happy to leave to his partner. Lazaridis diligently tracked the company’s standing in global brand rankings and was elated when BlackBerry rose nine spots in Interbrand’s annual ranking of best global brands to reach fifty-fourth in 2010, with an implied brand value of $6.8 billion, ahead of MTV, Nestlé, and Adidas.
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In the early years, BlackBerry was marketed virally: the company relied on the efforts of evangelists and CEOs who showed off the device to colleagues and sent messages with the tagline “Sent from My BlackBerry Handheld.” For years Lazaridis led a collective of executives known as the “chief marketing office,” which oversaw the company’s marketing efforts, largely centered on leveraging the rich marketing budgets of wireless carriers and ensuring BlackBerrys were well represented and promoted in retail stores.

But now that consumers made up the majority of BlackBerry buyers, Lazaridis and other top executives felt the company needed something more: a high-concept brand campaign that captured and promoted the abstract elements of what made BlackBerry distinctive. Efforts started in earnest with the Pearl launch in late 2006. In 2009 RIM hired Keith Pardy, a veteran marketing executive who had spent most of his career at Coca-Cola, to head the BlackBerry maker’s marketing efforts. “I was looking at it, saying, we need to become a lifestyle brand,” says Lazaridis.

Pardy defined the essence of BlackBerry as a product people loved and one that made people love their work more because the device made them more efficient. Lazaridis fell in love with the ensuing campaign, defined by its slogan, Love What You Do. But something was strangely wrong about the campaign, and several of the company’s marketing executives knew it. Selling
soft drinks that were little different from the competition required a different marketing approach than pushing technology: it wasn’t enough to speak in abstract terms about the brand; the advertising also needed to speak about product features and capabilities. There was none of that in the Love What You Do campaign that ran through 2009 and 2010. As portrayed in the global campaign created by the agency Leo Burnett, BlackBerry was no longer a tool for making buttoned-down businesspeople more efficient, but a lifestyle accessory used by texting teenagers, fashion designers, and musicians—accompanied by the Beatles’ “All You Need Is Love.” The ads said little about the features or “value proposition” of the device, and some barely even showed the devices at all, instead presenting a montage of people break dancing, kissing, rock climbing, and playing soccer.

As part of the campaign, BlackBerry snagged one of the biggest names in rock and roll, U2, by sponsoring its world tour. Like the Black Eyed Peas, U2 was no stranger to corporate sponsorships: it had loaned its name, music, and images to Apple to sell iPods and would in 2014 return to Apple to endorse its newest iPhone. Lazaridis flew to Dublin and spent a day hanging out with frontman Bono. They talked about quantum physics at a pub and walked along the beach, trying to hash out ideas for BlackBerry commercials featuring U2. As they strolled side by side, Lazaridis said, “This is all about love, and love what you do….” The RIM chief was struck by an idea. “Why don’t we turn it on its head?” he told the Irish superstar. “We love you guys, and a lot of people do. Why can’t we say, ‘BlackBerry Loves U2’? It was a nice pun too.” Lazaridis says Bono “loved it right away.” The ensuing ad featured nothing more than shots of the band in concert, followed by the tagline “BlackBerry loves U2.”

Many, including carriers and RIM’s own marketing executives, saw the brand campaign as puzzling, vague, ineffectual, and out of touch and questioned why RIM wasn’t using its marketing dollars to offer a rundown of the features that set the devices apart. In trying to strike a balance between advertising to its core enterprise users and to consumers, it did not effectively reach either. Instead, the campaign presumed the world’s smartphone users were in love with BlackBerry—at the very moment Apple and Android were establishing themselves as the new standard-bearers of telecommunications. The target audience for the campaign was the smartphone user who saw no need to use anything else for any of life’s mobile communications needs than BlackBerry, whether at work or play. “We were marketing to ourselves. And
more importantly, we were marketing to Mike Lazaridis,” says Brian Wallace, then VP of global digital marketing and media with RIM. “Mike liked our advertising because our advertising was made for him.”

A company that was at war with itself and, in some quarters, overly enamored with an aging product line, was about to address the critics with one of its biggest product gambles ever.

Mike Lazaridis was getting exasperated. As he outlined plans for RIM’s latest top-secret device to a dozen executives at a meeting in Ottawa in April 2010, one person pushed back. Ian Simpson, RIM’s vice president of platform and product software, said there was no way the company could meet Lazaridis’s deadline and have product ready to ship by September. The RIM boss had imposed tight deadlines before; this was different. RIM wasn’t building another smartphone, but a handheld tablet computer. It was a new type of product for RIM. It would run on a new operating system made by newly acquired QNX with features that had never appeared on any BlackBerry. Simpson was adamant: a project of this scope couldn’t be done in five months.

Lazaridis didn’t appreciate being openly challenged. QNX, he was sure, could get the system done quickly. He became visibly upset as Simpson held firm. “Mike was definitely at the boiling point,” says David Yach, who wasn’t at the meeting but heard about it soon after. After the meeting, a British firm that had signed on to develop the user interface on the device quit the assignment. Lazaridis blamed Simpson and had him removed from the project—he didn’t need a “Dr. No” standing in the way, he told Yach. “I don’t mind being called Dr. No,” Simpson said upon learning of Lazaridis’s rebuke, “as long as it’s spelled K-N-O-W.”

In spring 2010, Lazaridis was swept up with a sense of urgency to produce a tablet—a handheld computer larger than a PDA but smaller than a laptop—as soon as possible. A mass market tablet had been the holy grail of
the computing industry for decades, but previous attempts had been unreliable, clunky, or difficult to operate. Goaded by its enterprise customers to develop a large-screen BlackBerry, RIM had tinkered with spin-off projects, including a digital book reader, a digital picture viewer, and a program to project the contents of smartphones onto computer screens. None had made it to market. But as millions of people adjusted to browsing the Internet and reading books on handheld screens and as the cost of LCD screens dropped, the tablet’s time seemed at hand. By early 2010, RIM had a plan to produce a tablet with a seven-inch-long screen—small enough to fit in a coat pocket or purse—with a high-quality, high-definition screen, a fast browser, a sharp camera, and great sound. The device would be called PlayBook.

But Apple once again set the agenda when Steve Jobs unveiled its tablet in late January 2010. With its ten-inch multitouch screen, familiar features including iTunes, a full browser, and lots of apps, plus an electronic reader, all wrapped in an elegant and accessible design, the Apple iPad would become one of the fastest-selling electronic devices ever when it hit the market that April. One of the iPad’s strengths was that it looked like a larger iPod or iPhone, complete with the all-glass screen and a single home button, but it was better suited to applications that called for a larger screen, including games, watching movies, and reading. By offering an instantly accessible and familiar user experience, Apple broke the computing industry’s decades-old tablet curse.

Lazaridis and Balsillie immediately recognized the threat posed by the iPad. Apple was making inroads into its “enterprise” base of business and government users with the iPhone. Recession-racked companies let employees use their own smartphones for work rather than issuing them with expensive BlackBerrys. The iPad was a bigger worry: it was the first handheld device that could threaten RIM’s dominance of the enterprise wireless handheld market: the iPad was perfectly sized for reading work documents and easier to use in meetings than a laptop. Within ninety days of its release, half of the top one hundred corporations in the United States were testing iPads, and executives weren’t giving them back.
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“This terrified me the most,” says Balsillie. The two CEOs agreed RIM had no choice: it had to get its tablet to market as soon as possible.

As Lazaridis examined the iPad for weaknesses, he found several. It didn’t have a camera or a connection port to link to high-definition media devices. It didn’t run Adobe Flash, a software and multimedia platform that supported sophisticated graphics, videos, games, and online magazines; Steve Jobs hated
Adobe for slighting Apple a decade earlier.
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Most of all, it didn’t have RIM’s secret weapon: QNX and its elegant operating system. Lazaridis was convinced RIM could build a better machine that delivered what Apple didn’t—in less than half a year. Simpson wasn’t alone in his skepticism. Software head Yach had his doubts as well. He was one of the first to realize that if RIM was going to get PlayBook out by fall, the company would have to make compromises.

RIM was in a tough position. It was essentially a one-product company whose one product was starting to look vulnerable. It had never made a personal computer and was in the early stages of figuring out how to make a smarter smartphone. It could ill afford to make any mistakes after Storm and turning down Verizon on 4G. Not only was RIM developing a new type of product; it was once again being forced to react rapidly and defensively to a powerful competitor that had defined the market. As Lazaridis’s engineers scrambled to keep up, their boss was about to spark further turmoil among their ranks.

With the purchase of QNX, Lazaridis had a grand scheme in mind. Over the past decade, RIM had upended the wireless market and changed the way people communicated. The arrival of Apple and Google to mobile data meant RIM had to up its game.

His plan was to first see what QNX could do with a tablet. He likened it to giving QNX “training wheels” before taking on the task of overhauling his beloved BlackBerry from the inside—as well as the entire software organization that provided its digital core—to build RIM’s smartphone of the future. “I was basically putting the company through the biggest transformation they had ever experienced,” he says.

Lazaridis had a blueprint inspired by Clayton Christensen’s acclaimed 1997 management book,
The Innovator’s Dilemma
.
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The Harvard professor argued that for established companies to succeed against disruptive competitors, they had to empower small, cloistered teams. These autonomous groups, unsullied by the parent company’s set ways, would develop disruptive technologies of their own and could eventually subsume other parts of the organization. It was tumultuous but necessary to stay at the forefront of innovation.

Lazaridis became convinced RIM’s software organization needed to be
upended from within after Dodge and Torch Mobile founder George Staikos convinced him BlackBerry’s Java system was unsuitable for future RIM products. Java “was great for what it was back in the day, but the world moved on,” says Staikos. “BlackBerry should have moved on a lot earlier. Mike is not particularly a software guy, so he doesn’t understand the design and architecture of the software as well, and wasn’t fully aware what had evolved over time.”
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Staikos says Lazaridis became alarmed in early 2010 when a group of legacy engineers unfolded a huge, complicated diagram showing how the Java system would handle the touch-screen capabilities of the Torch browser. “When he saw that, he said, ‘Wow, we have a real problem,’ “ says Staikos. “Things were going up and down through the Java [system], back and forth,” resulting in longer processing times that slowed the device’s responsiveness. “What it really showed me,” Lazaridis recalls, “was that we had to downsize the company to the new reality.”

Lazaridis came to see the Java-based BlackBerry operating system, Yach, and much of his software organization as the main obstacles holding the company back. When Yach’s software group complained about deadlines, Lazaridis saw an organization that was always demanding more time and resources to work on a complex legacy system that required too much of both. With its use of C++ code and efficient design, QNX could build the next generation of BlackBerry software with a fraction of the people that Yach oversaw. As Lazaridis increasingly turned to Dodge for technology advice, “you could see [the credibility] of David and his team plummet,” says an engineer who was close to the key players.

Lazaridis charged Dodge and his team, sequestered in their Ottawa offices, with developing the PlayBook operating system and reporting directly to him. “We embraced [
The Innovator’s Dilemma
] and did our best to reinvent the company,” says Lazaridis. “Everything would have to change.” As for Yach’s staff, “A lot of those people weren’t going to be there by the time we got to the next equilibrium.”

Lazaridis’s special treatment of QNX deepened fault lines in a company that was already descending into dysfunctionality. “Interdepartmental politics became really bad,” says RIM’s former architecture systems vice president, Allan Lewis. “The old guard was reluctant to leave behind all their previous work and didn’t feel it was appropriate for Dan and the QNX team, who didn’t understand the BlackBerry history, to make decisions.” Old-guard engineers were upset as the company turned away from its collaborative culture,
and frustrated that they weren’t invited to help build a core part of the future. Instead, they were asked to clean up the code on RIM’s legacy operating system to power one more round of Java-based BlackBerry smartphones.

The concerns extended beyond bruised egos. Many senior engineers, including Yach, worried about QNX’s ability to hit the September deadline. QNX’s speciality was creating microkernels—building blocks—not full operating systems. It hadn’t built a self-contained consumer device system. The QNX technology also wasn’t efficient at using battery power—given the size of systems QNX ran, that had never been a concern. RIM engineers joked that the only battery-powered systems that used QNX technology were systems inside cars, running on the vehicles’ massive batteries under the hood.

Lazaridis’s deadline presented a challenge: there wasn’t enough time to get BlackBerry e-mail on PlayBook. Not only would the e-mail application have to be rewritten—an enormous undertaking—but if RIM wanted to provide access to one corporate e-mail account from two devices, it would also have to update its BlackBerry enterprise server software deployed with 250,000 large customers, since the software only supported one device per account. That would take a year. If the device was to be out by fall, it couldn’t have its own native BlackBerry e-mail.

Lazaridis had another idea. Using technology RIM had previously developed, it could wirelessly tether, or “bridge,” BlackBerry customers between their smartphones and PlayBooks so the tablet could emulate the smartphone’s e-mail box on its screen. “Bridge was the plan from the beginning,” says Lazaridis. It allowed RIM to offer BlackBerry e-mail on the PlayBook without the time-consuming work needed to make it native to the device. And since it only had to communicate wirelessly with a local BlackBerry device, and not a cellular network, it wouldn’t have to be submitted for lengthy testing and approval by wireless carriers. It also meant PlayBook users wouldn’t need a second account to get Internet service. But PlayBook customers would have to own BlackBerrys if they wanted to access e-mail, making the device an accessory to RIM’s flagship rather than a stand-alone device. “We opted to just go for Bridge because it was one less thing on a long list of things to be done,” says Yach. “Part of it was expediency. I think I would have pushed a different decision” without such an aggressive deadline.

The solution was clever but flawed. By adopting Bridge, Lazaridis was solving a RIM problem, not a customer problem. The iPad came with e-mail native on the device. If iPad users opened their e-mail box, their messages were
there. To get BlackBerry e-mail on the PlayBook required a series of steps. First, users would have to download the Bridge app to their devices, then set it up to “pair” the smartphone with the PlayBook. Finally, users would have to wait several minutes for the bridged e-mail box on their PlayBook to fill up with e-mail from their BlackBerry. They would have to repeat the final step each time they used it, since the e-mail box vanished from the PlayBook once the connection was cut. If they kept the two devices bridged for long, the wireless activity would drain both batteries quickly.

As a user experience, it was at odds with Lazaridis’s original guiding principle for the BlackBerry: that RIM should “remove think points” and make the device easy and intuitive to use. “This was pretty much the exact opposite,” says Jeff McDowell, senior vice president of enterprise marketing. “You were
adding
think points”—and immediately disadvantaging PlayBook compared to the iPad. Even more perplexing, RIM could have easily provided access to consumer e-mail services on PlayBook such as Hotmail and Yahoo Mail, but Lazaridis was so enamored of Bridge that RIM didn’t bother to develop that capability in time for launch.

Throughout RIM, the decision to launch PlayBook without native e-mail was greeted with disbelief. How could the company that popularized wireless e-mail do such a thing? Balsillie says he was “hugely disappointed” the PlayBook didn’t have native e-mail, but backed his partner; Bridge “had my full support,” Balsillie says. The idea of bridging also made some RIM executives nervous: how would carriers react to a device hitched onto a BlackBerry’s wireless Internet access? This was a service carriers provided for $10 a month. Lazaridis instead spoke openly about how PlayBook users could avoid paying extra, which their big customers did not appreciate. RIM no longer seemed “constructively aligned” with them. “Mike was persuasive and thought PlayBook paired with a BlackBerry was a valid market proposition,” says Yach.

Lazaridis’s desire to break from the past led to another difficult choice. Because the iPad shared an operating system with the iPhone and iPod, the new platform quickly had tens of thousands of apps available for customers. BlackBerry Java apps were dowdier, but there were thousands of them used by millions of enterprise customers. None would work on the new operating system for PlayBook. Lazaridis was effectively turning his back on developers and enterprise customers who built and used the programs, negating the “ecosystem” effect RIM could benefit from if it had adapted its Java operating system to the tablet. Lazaridis felt he had no choice—RIM couldn’t survive
by prolonging the life of an outdated operating system, and he needed QNX to start building RIM’s future.