Research in Motion: Is the damage done?

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2011 was not the best year Research in Motion has had.

The hometown success story that was only two years ago named the fastest growing company in the world and had quadrupled its workforce in the four years prior, faced a variety of challenges, foremost to many the emergence of tremendous competition from Apple’s iPhone and Google’s Android operating system.

In the U.S. market, the BlackBerry, the device that effectively began the smartphone industry, slipped to 16.6 per cent market share by year’s end – dwarfed by Android and Apple’s 46.9 and 28.7 per cent.
Any technology analyst or blogger can offer a dozen reasons why this happened and how RIM is either damned to fall to the wayside or recover to preeminence in years to come.

A new favourite target of ridicule and speculation, RIM garnered outrageous amounts of media coverage last year as its market share shrunk, a major service outage dogged it in October and investors and observers wondered where the dysfunction lay and whether the company may be taken over.
“RIM, because it’s been a very strong company and a very interesting company in good ways in the past, when they fail, when someone really good fails or faces challenges it’s a good media story,” said Sofy Carayannopoulos, a professor of business policy at Wilfrid Laurier University.

Carayannopoulos has been watching RIM, as many at the twin universities that channel graduates to the firm’s doors have, for much of its history.
“That’s perhaps why they’ve been getting so much coverage,” she continued, “Not that they don’t deserve it, mistakes are mistakes.”
“When Apple missteps would they get the same kind of coverage?”

For the most part, RIM has clammed up and soldiered on it seems, with most coverage of late consisting of hearsay and assorted technology and investment analysts.

“Some people are trying to keep their head up through everything but some days it’s really hard because we’re not really told anything,” said a RIM employee that spoke on the condition of anonymity. “A lot of the time it’s just management buzzwords we get and not really giving us information about whether we’ll have a job in a few months.” Employed for the last several years at one of RIM’s Waterloo facilities, he experienced firsthand the rounds of layoffs that saw the firm let go up to 2,000 people beginning last summer.

Carayannopoulos explained that RIM’s explosive growth may just be playing itself out. “What we have to acknowledge is that RIM is to a certain degree suffering from what every company that grows quickly suffers from,” she said.
“They were small and then grew really, really fast. Honestly, I think they were hiring faster than they knew who they were hiring.”

The RIM employee explained some of the internal issues he has been privy to as RIM has been scrambling recently.

He noted communication has not necessarily been the best internally. “There’s a big lack of communication constantly, things will go days without being touched because people either forgot about them or it’s in the back of their mind — ‘it’s not as important as this new one is’.”

He also mentioned part shortages as resources are being devoted to handsets already in large-scale production elsewhere rather than new products being assembled in smaller numbers ahead of launch.

“From my area it would take a lot of changes for them to turn things around, and they are trying to implement them,” he continued. “The pace that they are doing these things, I don’t necessarily think it’s fast enough.”

Regarding the layoffs and other difficulties, Carayannopoulos explained that effectively, it’s just a pattern of business.

“This happens to every company, you grow fast, stuff sort of falls apart and you have recognize that you went too far and regroup,” she continued. “They’ve had the shakeup that comes with any company in RIM’s position at RIM’s stage of life.”
Asked to prognosticate about the firm’s future as observers and perhaps everyone in Waterloo in particular have done since the first signs of trouble emerged, Carayannopoulos replied, “If anything challenges them aside from getting their act together marketing-wise […] for me the big question is whether they can take on Apple. Not even take on Apple, but can they respond to Apple? That’s what is challenging them more than any mistakes that they’re making, they’re now David facing Goliath — do they have the resources to survive that?”

Moving beyond the embarrassing service outage incident is important, Carayannopoulos said, though frustrating as that was, she said that the high standard of reliability RIM had built for a decade and retained to that point should be considered.

“Customers need to know when a product fails on us, we know nothing is infallible, and while we might be angry about it, we don’t expect 100 per cent performance, nothing is 100 per cent reliable. If you acknowledge it, you apologize, we’ll get over it.”

Perception is everything and if the company’s products or service loses the crucial reputation of reliability, the battle back to being a contender in the market may be more uphill.

As with the exceptional growth catching up to them, she explained that it was only a matter of time before some other firm, in this case Apple, wanted in on the action and to build off of what RIM began.

“IBM did the same thing to Apple,” she said, recalling the platform war among personal computers in that segment’s early years. “Apple came in with the first PC and then IBM kind of went ‘oh, okay.’”

Though there have been setbacks, the tide may be turning. A lot of RIM’s future is being staked on the its acquisition of the QNX operating system from the firm Harman International in 2010 and the future implementation of BlackBerry 10, now slated to be launched on the company’s smartphones in the second half of 2012.

The hope is that if the applications available for this platform draw users based on what they’re able to do with their phone or tablet, RIM may recover some of that lost market share.

“It’s no secret that the market has shifted fairly significantly in the last five years and applications are now the thing that is pulling the sale of handsets through the channel, through carriers and everywhere else,” said RIM VP of developer relations and ecosystem development Alec Saunders.

Saunders was in Las Vegas this week, where he was attending the Consumer Electronics Show along with more than 140,000 other attendees from hundreds of firms and a media circus of its own. He has been tasked with drawing application developers to RIM platforms, with the emphasis being placed on the QNX/BlackBerry 10 platform which was launched with the initially slow-selling PlayBook tablet in April.

The second iteration of the PlayBook’s operating system was introduced at the show Jan. 9.

“It was something that was logically going to happen, if you look at any other software platform business, the PC business or anything else, there’s a tipping point where the number of applications available on a platform are the thing that is going to start to drive success of that platform.”

Saunders spent much of the 1990s working at Microsoft throughout its launch of successive Windows operating systems and credits RIM’s potential to draw a broad base of applications and application developers for wanting to work at the firm.

With tens of millions of BlackBerries in the hands of consumers and the fact that it initiated the smartphone sector, he feels that although eclipsed by Apple and Android in terms of market share and available applications at the moment, RIM holds potential.

While the last year has not been kind, Saunders noted that the perceptions about the firm’s actual position and potential may be off base.
“They’ve been beating the tar out of the company,” he said, “In the marketplace, in the world of analysts, the things they’re saying are kind of crazy. RIM is a company that is profitable every quarter, has no debt, a huge group of customers, 75 million subscribers use these devices every day, it has relationships with 600-odd carriers around the world. Something is wrong.”
One widely held perception is that app developers will not devote resources to creating tools for RIM platforms when they could just as easily spend time making apps for Apple and Android.

“I think it’s a big perception problem, the story isn’t well known enough yet for developers about the opportunity that’s here,” Saunders said.
“What does a developer care about? They care about making money at the end of the day. Even the people that are building applications that are free are trying to find ways to monetize that through advertising.”

He cited recent studies that applications for RIM products on average net more paid downloads and more money for those that create them. Applications in BlackBerry’s App World catalogue are second among the three major players in profitability, ahead of Android offerings.

“A lot of noise gets made about Android but at the end of the day, the people that target BlackBerry are making money.”
He said that the developer conventions RIM hosts have seen surges in attendance and despite a last minute change in location due to flooding in Thailand recently, the DevCon Asia event in Singapore had more than double the attendees of the year prior.

“The financial press says one thing, but developers are coming out in larger and larger numbers to all of our events. There’s a disconnect somewhere there.”
“The kinds of things we hear from developers are they come to us and say that they need a modern operating system, one that can do slick multitasking because they want to be able to build games for the platform, [they] want to be able to run media really well on the platform and that’s what QNX does for them,” he continued.

Saunders said that in recent months many more apps have been released for the PlayBook in particular as developers have devoted resources to working on QNX.

The consensus from everyone observing RIM in past months seems to be that whatever happens, the company cannot falter if it wants to regain its position in the segment it created.

Public perception being as important as it is, RIM also needs to bolster its image through appropriate marketing, though Carayannopoulos said that in this case the cult of Apple is stacked against it.

“They have what it takes in terms of product,” she said. “Unfortunately, when it comes to success in a market, particularly with technology, it’s not necessarily the best product that wins, it’s the best marketing machine that wins. I guess that’s the question: does RIM have the resources to market the product the way it should be?”

“It’s not just what RIM does, it’s what Apple does as well that affects RIM’s future.”

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