The BlackBerry Revolution: What Went Wrong?

Note: the following article is based on extensive research that I undertook prior to the recording of our episode on Blackberry. The following links are well worth looking at and are the ones that we reference at the start of the episode. All other sources are linked at the bottom of the article and we are grateful to all of our sources.

Book: Losing the Signal: https://us.macmillan.com/books/9781250096067/losingthesignal

Video of Steve Jobs introducing the iPhone, Jan. 2007: https://www.youtube.com/watch?v=OLenSrOsWLc

Blackberry revenue 2004-2024: https://www.statista.com/statistics/266240/global-revenue-of-rim-since-2004/

Deep dive article on the NPT patent case: https://web.archive.org/web/20090116071908/http://www.theglobeandmail.com/servlet/story/RTGAM.20060221.wpatentlyabsured-rim21/BNStory/RIM2006/home?pageRequested=all&print=true

Deep dive article on what went wrong at Blackberry: https://www.theverge.com/2012/2/21/2789676/rim-blackberry-mike-lazaridis-jim-balsillie-lost-empire

This is a story of enormous success and dramatic decline, centred on a tech company named Research In Motion (RIM) but better known as Blackberry. Based near Ontario, Canada, RIM was founded by a visionary electronics wunderkind who aimed to dominate the wireless technology sector. Alongside his co-CEO, they took on industry giants and powerful network carriers, ultimately transforming the mobile industry. At its peak between 2008 and 2011, RIM’s BlackBerry devices held nearly 20% of the global smartphone market and over 50% of the US market and reached revenues of $20 billion.

But then the iPhone happened, revolutionising the tech industry and signalling the beginning of the end for RIM. The co-CEOs were caught off guard, unable to respond effectively. Their fall from grace, marked by missteps and leadership shortcomings, is a compelling tale of hard work, grit, huge success, and ultimately being blindsided by Steve Jobs.

The story begins with Mike Lazaridis, born in 1961, whose Greek parents moved to Turkey and then to Canada in 1966. Lazaridis excelled in computers and electronics, influenced by a teacher who warned him about getting too involved in computers, predicting the future lay in the combination of computers and wireless technology. This advice stuck with Lazaridis, driving him to focus on combining wireless with computer technologies.

Lazaridis studied at the University of Waterloo but left a month before graduation in 1984. Together with his childhood friend Doug Fregin, he developed a technology for text advertising on TV screens. Believing it was the next big thing, they founded RIM with a $15,000 loan from Lazaridis' parents. Although the advertising idea didn’t take off, the company survived by making digital components and circuit boards for various companies, including General Motors.

In the late 1980s, Cantel, a Canadian wireless company owned by Ted Rogers, began building a Mobitex network, an emerging wireless technology designed by Ericsson. Unsure of the network’s potential, Cantel enlisted RIM’s expertise. Similarly, BellSouth in the US was developing a Mobitex network and sought RIM’s consultation. These projects honed RIM’s expertise in wireless technology.

A significant turning point for RIM was hiring Jim Balsillie as co-CEO. Born in Seaforth, Ontario, also in 1961, Balsillie was ambitious and planned his path to success meticulously. He excelled academically and in sports, and after graduating from the University of Toronto (where his roommate was Malcolm Gladwell), he joined Canada’s top accounting firm. He realised quickly that accounting wasn’t for him, so he shifted his focus to data analysis, and became an expert in this field.

2 years later Balsillie attended Harvard for his MBA, and while his original master plan had always been to work on Wall Street, he pivoted to technology after meeting a Canadian businessman who, impressed with Balsillies drive and ambition, offered him a senior executive role at a mid-sized electronic equipment maker near Ontario. Balsillie accepted the role despite the lower pay. His 2 years spent analysing data convinced him that the tech sector was the place to be and the executive role gave him the opportunity for rapid advancement rather than spending his first few years on Wall Street jockeying for position against equally talented and ambitious MBA graduates.

Influenced by Sun Tzu’s "The Art of War," Balsillie adopted a warrior-like approach to business, focusing on maintaining a strong appearance, keeping competitors, customers and employees off balance, and pushing hard in negotiations. While effective in the short term, this approach strained his relationships with colleagues and collaborators.

When the company he worked for was sold, the new owners didn’t want Balsillie, marking the first instance where his aggressive management style worked against him.

RIM had been a supplier to Balsillie’s company, and he knew Lazaradis was looking for investment. Balsillie was impressed by Lazaridis's unwavering confidence in RIM's potential to lead in wireless communication. Equally, Lazaridis saw in Balsillie the drive, confidence, and expertise in banking, deal-making, and sales that RIM desperately needed.

Balsillie remortgaged his house, investing $125,000 for a 33% stake in RIM- this was a real ballsy move. With his record and resume, he could have easily walked into a high paying executive job, but he didn’t- he took a huge risk and has to be credited for that.

In 1992 he joined RIM as co-CEO and while this is unusual, the arrangement worked well for RIM—at least initially.

Lazaradis and Balsillle were poles apart.

Balsillie is tall, sinewy, bald and aggressive. In his free time, he did triathlons and cycled the toughest mountain climbs of the Tour de France. Lazaridis was stout and unathletic with a thick shock of white hair and was a devoted Christian. Outside of work, his main interest remained within the sciences as well as philanthropy.

While they didn’t socialise at all, they had a close partnership and were very aligned in terms of strategy- the company never made a major decision unless both agreed. They were in sync and even had secret signals that they would use when in meetings.

The company grew modestly- one of their more high profile products was the DigiSync Film Barcode Reader, a time-saving device for film editors that won RIM both Emmy and Academy awards.

But most of their focus was in wireless technology- this is where Lazaradis and I’m guessing Fregin thrived (there is very little information on Fregin). They developed radio modems on the Mobitext platform but they were still a very small operator with revenue in 1995 of $8.4 million.

In 1996, RIM faced a severe blow when US Robotics, the company behind the Palm Pilot, reneged on a $16 million order for modems. This could have been disastrous for RIM, as they had taken out a massive loan to cover the costs of parts and production for this order.

Balsillie perceived this move as a strategic tactic by US Robotics, which was in the process of acquiring other modem manufacturers. By crippling RIM financially, US Robotics aimed to buy the company at a bargain. However, Balsillie and his sales team managed to find a buyer for the modems in Korea, thereby saving RIM from potential ruin.

Lazaridis' growing expertise in the wireless sector combined with Balsillie tenacity soon opened a very lucrative door that would become the foundation for RIM’s huge success. During the early 90s, pagers had become a significant communication tool, and by 1996, there were over 40 million pager subscribers in the US. RAM Mobile, BellSouth’s mobile arm, tasked RIM with developing a two-way pager, a significant advancement as existing pagers were only one-way communicators.

Their first attempt, launched in 1996 nicknamed the "Bullfrog," was functional but bulky and impractical. Learning from this, Lazaridis insisted on in-house design for their second pager, leading to the successful 950 model launched in 1998.

BellSouth was impressed and placed a $50 million order, RIM's largest contract to date, prompting Balsillie to float the company on the Canadian Stock Exchange and raise $115 million.

While Bellsouth had a verbal agreement from Ballsillie that they would have exclusivity for the pager, Balsillie went behind their backs and made a deal with one of Bellsouths arch rivals.

Balsillie felt he needed a second customer to protect RIM’s interests- these types of cutthroat tactics were typical of Balsillie. Words like alliance, collaboration or partnership just didn’t seem to be in his vocabulary or thought process.

Bellsouth nearly cancelled the contract but eventually stuck with the deal but it severely damaged the relationship.

Lazaridis had incorporated limited email features into the 950 and believed wireless email was the future. However, BellSouth disagreed, thinking it was still far off.

So RIM decided to push forward independently and developed a new device, identical in many ways to the 950 but they were going to promote it solely on the basis that it could send and receive email.

They had the technology but needed bandwidth. Since carriers were reluctant to allow email on their networks and charged exorbitant fees for such data, RIM devised an audacious plan. They offered RAM Mobile $5 million upfront and Canada’s Rogers $1 million upfront to use their Mobitex network for two years. This was unprecedented as carriers never leased their networks, but RAM Mobile, running a $10 million deficit, accepted the cash for their underutilised network and Rogers followed suit.

Despite having no experience handling customers directly, RIM took on B2C sales, billing, and customer service. They sold the device for $500 and charged $50 per month in fees. It was a bold, risky and forward-thinking move. As Steve Jobs would say, they skated to where the puck was going to be, not where it had been.

The device featured a patented full Qwerty keyboard that allowed typing with both thumbs- this is important to point out because for our younger listeners out there because prior to this all mobile devices had numerical keyboards, and there was no predictive text so you had to press each key a certain amount of times to scroll through to the right letter. RIM also designed the keyboard in a way that when you pressed the keys they produced a satisfying click, unlike the squishy feel of standard plastic keys that you get when pressing a button on a TV remote control.

For the launch, RIM needed a fresh name, distinct from pagers. They hired Lexicon Branding, the same company that helped Apple name the "Powerbook" and Intel name the "Pentium," to create a new name. They’re focus was to come up with something fresh and that had no reference to email as any reference to email had a very negative impact on consumers (I believe Mega Mail was one of RIM’s proposed names).

After considering "Strawberry," they settled on "BlackBerry," which resonated with the device’s black colour and the drupelet-like keys. Lazaridis loved it immediately, although RIM engineers preferred "PocketLink."

Launched in January 1999 with a modest $5 million budget, Balsillie had a clear strategy for success. He believed that once users experienced the device, they’d be hooked, and he was right. They targeted professionals who needed timely information and communication—bankers, traders, legal professionals. RIM’s sales team demonstrated the device at computer shows, airports, and business office lobbies, employing a "puppy dog sale" tactic: try it for a few days and return it if unsatisfied. No one returned their BlackBerry.

CEOs and senior executives, seeing their lawyers and bankers with BlackBerrys, wanted one for themselves and their staff. This top-down approach bypassed the usual lengthy approval processes that most corporations had whereby any devices used by its staff had to first be approved by the CIO’s/CTO’s. However the Blackberry had extremely robust encryption software, it was a very secure device so CTO’s had no issues approving it anyway—a crucial selling point as their initial core customers were enterprises.

It’s no exaggeration to say that the Blackberry transformed people's work lives- it allowed them to manage office communications on their terms- they didn’t have to be at their desk to receive and send emails- they could be travelling, on the golf course, at a meeting, in a taxi - it revolutionised how business was conducted.

And while other competitors emerged, none of them could match the Blackberry for its ease of use, its tactile design, its security and its ubiquity as it quickly gained iconic status becoming the device of choice for celebrities and business titans. Bill Gates, Jack Welch, Madonna and Justin Timberlake were just a few of the very visible Blackberry users. It even developed its own lexicon—a person hunched over their device typing furiously was doing the "BlackBerry prayer," overuse could lead to injury called Blackberry Thumb and it earned the nickname "CrackBerry" due to its addictive nature.

Within two years of its release, RIM's revenues soared to $221 million and the company floated on the Nasdaq, raising $225 million in 1999 and another $900 million in a second round in 2000.

The BlackBerry's reputation was further enhanced during the 9/11 attacks when phone systems failed in New York and DC and its network provided backup communication, leading to collaborations with government agencies and the creation of the Cryptoberry- a Blackberry with enhanced security.

In 2003, the BlackBerry reached mainstream popularity when Oprah Winfrey placed it at the top of her annual "Favourite Things" show. While corporate and enterprise customers remained their core base, the device quickly became a favourite among non-business consumers.

RIM also started launching BlackBerry phones, beginning in 2002 with the 5810, which retailed for $200 and cost $60 per month. Though it wasn't the most attractive phone, the slimmer and more attractive Charm, released in 2004, marked their entrance in the smartphone market.

As their popularity rocketed, RIM realised they weren’t suited to manage customers directly (i.e. billing, sales, customer service), so they handed this function back to the carriers. However, due to their strong position in the market, they had leverage and negotiated a monthly fee of $10 per customer that the carriers reluctantly had to pay RIM.

Over the next 5 years between 2002 and 2007, RIM grew at an astounding rate. They partnered with 300 carriers in 120 countries, with quarterly revenues exceeding $1 billion and a market cap of $42 billion. Lazaridis, with an 11.4% stake, Balsillie with 9.3%, and Doug Fregin with 3.5% were all billionaires.

However, this period of growth was overshadowed by an existential threat: a patent case brought against RIM by NTP. NTP, an operation consisting of an inventor and a lawyer, claimed RIM had infringed upon their patent for sending email via wireless technology.

There's debate over whether NTP was a "patent troll"—a company that develops or simply acquires vague or overly broad patents, waits in the long grass until a company develops a product that is similar to the patent and then sues for infringement. Experts are split on this, but most agree that the case should have been settled quickly and should never have gone to trial. Whether RIM received bad advice or ignored good advice is unclear, but they decided to fight it in court, which turned into a disaster.

In court RIM claimed they had replied to NTP's legal correspondences but couldn't provide evidence. On the stand, Lazaridis tried to portray RIM as a small struggling company, at a time when the company was taking off and doubling revenues. This didn't sit well with the jury.

The situation worsened when RIM brought in a witness who claimed to have developed a system to send emails over wireless technology four years before NTP. Although the courtroom demonstration appeared successful, NTP's legal team proved that RIM had secretly installed newer software on the laptops to ensure that the demo worked.

This act of courtroom fraud infuriated the judge. The jury quickly ruled in favour of NTP, and the judge ordered RIM to pay $53 million and an 8.5% royalty fee on all North American sales—this was a disastrous outcome from RIM- the fine they could pay no problem, but the royalty fee would have imposed a huge and ongoing cost to their operating margins.

RIM exhausted all avenues to appeal and reverse the decision, but none were successful. The Patent Office, under pressure for granting overly broad patents, eventually ruled that NTP's patent wasn't valid. However, for reasons that I couldn't find, and don’t understand, this ruling had no jurisdiction in the courts, so the original verdict stood.

In 2006, after six years of legal battles, RIM agreed to pay NTP $612 million but avoided paying royalties. This bruising encounter was draining for the company and especially for Lazaridis, a spiritual and religious man who felt personally affronted by the accusations of cheating.

Backdating Scandal and iPhone's Disruption

Soon after the NTP case, RIM faced another major issue due to backdating stock options for key employees. Publicly traded companies often compensate employees with stock options, allowing them to buy shares at a fixed price over time. During the volatile tech boom and bust, stock prices fluctuated widely, leaving many options worthless. To counter this, some companies backdated option grants to when stock prices were lower.

Backdating options is legal if disclosed to shareholders, but RIM failed to do this, leading to significant accounting and regulatory issues. Balsillie admitted his direct involvement, forcing the company to restate $250 million in earnings and resulting in $77 million in fines for Lazaridis, Balsillie, and other executives. While the financial impact was manageable, the scandal severely strained the relationship between the two CEOs. Lazaridis, already stung by the NTP case, blamed Balsillie, driving a wedge between them.

Despite these setbacks, RIM continued to thrive. If you had bought RIM stock in 1999, its value would have increased fortyfold by 2006. That year saw the launch of the BlackBerry Pearl. Retailing at $199 the Pearl was the first Blackberry with a camera and media player and was acclaimed by technology critics. Computerworld called it groundbreaking, closing their review with the premature line: "Welcome to the future."

But before we get into why those words were premature and jump into the second part of this story, let’s just just pause and reflect for a moment and appreciate what Lazaradis and Balsillie had achieved.

They built a small wireless technology company into one of the biggest and most revered companies in the world. Lazaradis designed a device that changed people's lives, that revolutionised the way people work. But more than that, people actually loved their Blackberry.

And over the years, right up until 2007, he continued to evolve and incrementally improve the device- so big kudos to him.

At the same time, Balsillie managed this huge growth, went toe to toe with the big carriers and more than held his own. He took advantage of Blackberry’s growing popularity to raise money when they needed it. So a lot of credit has to go to both of them because up until 2007, you’d have to say that the 2 co-CEOs played their hand brilliantly.

But then the rug was pulled out from underneath RIM and a lot of other businesses, because the future wasn’t going to be the Blackberry Pearl, the future was announced on January 9, 2007, when Steve Jobs introduced the iPhone at Macworld (this was also the date that Apple dropped the word “computer" from its name and would now be known as Apple Inc). Remember this:”An iPod, a phone and an internet communicator, an iPod, a phone and an internet communicator- are you getting it. Today Apple is going to reinvent the phone”

The event marked a seismic shift in modern technology. The iPhone disrupted not only the mobile phone and entire telecoms industry but also the news/newspaper business, PC/laptop, TV & movie, gaming, satellite mapping, and taxi sectors to name just a few of the main ones.

Initially, RIM, Nokia and other handset manufacturers didn’t see the iPhone as a threat. It cost $500, over twice the price of RIM's popular Pearl. Its battery life was very limited, a significant drawback in a market where most users prioritized longevity. Additionally, the carrier's ability to handle the increased data usage posed questions.

The iPhone's touchscreen technology was also met with scepticism. Critics doubted its practicality, arguing that the fixed keyboards of devices like the BlackBerry were superior. Lazaridis himself was critical, disliking typing on glass and believing BlackBerry's superior security would protect its primarily corporate customer base from the more consumer-friendly iPhone.

There’s a great video of Microsoft's Steve Balmer, and I’m sure he’s sick of it being thrown back at him hundreds of times since it was recorded, where he more or less laughs at the threat the iPhone posed to the mobile phone business.

Indeed most analysts initially didn’t see the threat that the iPhone posed to RIM. In the first 2 earning calls between RIM and analysts in April and July 2007, none of the analysts even mentioned the iPhone.

What critics failed to foresee was the iPhone's revolutionary impact. It put the full internet in users' pockets, with a large screen for watching videos and browsing proper web pages. Jobs knew that once people experienced this, they wouldn't go back. The touchscreen, initially criticized, turned out to be a joyful innovation, allowing users to manipulate data physically—flipping through album covers, clicking links, stretching, and shrinking photos with their fingers.

It was also extremely powerful, using 700 MB of memory—more than 22 times that of a BlackBerry. This wasn’t just a phone, it was a mini pc that you carried with you.

Unlike RIM and all other handset companies who were forced to design devices within carrier-imposed limitations, because up to this point the carriers called the shots, Jobs removed these constraints. His deal with AT&T, giving Apple unprecedented freedom to build the iPhone, proved pivotal and it turned the tables. The iPhone increased consumer demand for internet access on the go and that forced carriers to invest billions in their networks over the coming years. Indeed, data usage on AT&T's network increased by 20,000% in the first five years after the iPhone's launch. And Apple and AT&T were initially sued by customers for dropped calls that were a result of the carrier's inability to meet the demands.

Jobs' initial goal was modest: to sell 10 million iPhones and capture 1% of the smartphone market in 2008- its first full year.

He achieved this by selling 13 million iPhones in 2008. The iPhone itself didn't kill RIM or Nokia; afterall it captured just over 1% of the market. However, the iPhone lay groundwork for RIM's downfall in 3 ways:

Different Architecture

Companies like RIM and Nokia produced high-quality, affordable phones that performed a limited number of functions exceptionally well.

But the iPhone didn't compete on those functions. Instead, it offered new capabilities like desktop-like web pages, a large screen, a new touch-based user interface, and an internal system more comparable to a laptop than a mobile phone. Essentially, the iPhone used completely different architecture, and replacing it required starting from scratch.

Starting from scratch isn’t easy for an established company to do. Lazaradis had built a company from nothing into a multi-billion dollar success story, all of it founded on his inventions, his judgement. And he loved his product. One of articles I read referred to it as the “inventor's dilemma” and it describes the reluctance to discard a successful business model to pursue something entirely new.

Steve Jobs, not being an engineer, wasn't tied to any specific technology, unlike Lazaridis, who was deeply attached to the BlackBerry and believed that its four pillars of success—good battery life, efficient use of carrier’s spectrum, security, and typing ability—still provided a competitive advantage in the new smartphone world.

Also RIM’s workforce and resources had been honed over the previous 8 years in the development of technology that was specific to their handsets- they didn’t have the inhouse expertise to suddenly pivot and start producing software and hardware that could compete directly with the iPhone.

Android forced back to the drawing board

While difficult, it was definitely easier for Google’s Android team to go back to the drawing board after the iPhone launch- after all, they hadn’t launched any products when the iPhone was released, there wasn’t a history of success that would have emboldened them and given them a false sense of confidence in their previous work.

So Android went back to the drawing board and worked on developing an operating system that would directly compete with the iPhone.

The Launch of Apple’s App Store

2008 saw the launch of the App Store which had a massive impact- anyone wanting to compete with the iPhone would now also need to focus on developing a huge app ecosystem.

As a side note, but very interesting because of the timing, in May 2007, shortly after the iPhone's introduction, Doug Fregin, RIM’s co-founder and Lazaradis’ childhood friend, retired and sold his 2.7% stake in RIM for roughly $1.3 billion. Despite my best efforts, I couldn’t find out why Fregin retired, but you gotta admire his timing.

But it would take more time for these seismic changes in mobile technology to impact BlackBerry noticeably. Initially, Android's response to the iPhone didn’t yield great results. Working with HTC, Google launched the first Android device, the Dream, in October 2008. It got mixed reviews, sales were poor, with only 1 million units sold in the next year. It felt more like an experiment than a serious attempt to compete with the iPhone.

BlackBerry, on the other hand, continued to thrive. The iPhone's launch raised the profile of the smartphone sector, and the Blackberry was a cheaper, reliable option with a longer battery life and it had BBM (BlackBerry Messenger), a precursor to WhatsApp that was popular with budget-conscious teens and young adults. BlackBerry’s core business market also remained loyal, still viewing it as the best device for email communications.

In 2008, a year after the iPhone's introduction, BlackBerry’s revenue doubled to $6 billion (check that- I thought they’re revenue was just $1 billion per quarter) as its subscribers also doubled to 21 million. The iPhone was only the second-best selling smartphone at Christmas 2008; the top spot went to BlackBerry’s Curve, with three BlackBerry models in the top six.

Despite BlackBerry's strong sales, the spectre of the iPhone dominated the industry’s future. Carriers recognized the shift. As part of their agreement with Apple, AT&T had exclusivity to sell the iPhone for a few years. This exclusivity, while not precisely clear due to several opt out clauses as well as changes to the original agreement, initially lasted two years.

Other carriers were desperate for an iPhone competitor, presenting an opportunity for any company that could deliver. Verizon approached RIM to develop such a device. Lazaridis had been working on a touchscreen alternative called the Storm. Disliking typing on glass, he designed a raised, clickable screen to replicate the tactile pleasure of BlackBerry’s physical keyboard.

Verizon executives loved it and committed to a $100 million marketing campaign but insisted on a tight deadline: spring 2008, giving RIM just nine months. RIM’s engineers, accustomed to 18-month development cycles, faced an uphill task. They lacked experience in touchscreen technology and had to incorporate features to rival the iPhone.

They missed the spring deadline. Fearing Verizon would cancel the contract if the Storm wasn’t ready by October 2008, Lazaridis pushed hard and while RIM’s in-house prototypes worked seamlessly and received positive feedback, there were huge quality issues related to the devices that were mass produced by RIM’s manufacturers in Mexico and Europe.

The Storm was eventually shipped in November 2008, riven with flaws. Reviews were harsh. Stephen Fry, the prominent British humorist and BlackBerry fan, called it “the Edsel of smartphones,” and Computerworld said it had “more bugs than a summer picnic.” The screen frequently froze and reset, the OS was slow, and dust got trapped under the screen, impairing functionality.

Despite poor reviews, BlackBerry’s strong reputation meant customers still bought the Storm. It sold 1 million units in the first two months and became the third-best selling smartphone in 2009. However, the technical problems led to most devices being returned to Verizon by dissatisfied customers. Replacement units were no better. Verizon demanded Balsillie rectify the situation at a cost of $500 million.

Balsillie refused. Verizon, locked into a “take-or-pay” contract, had little recourse. RIM agreed to a repair and upgrade program costing $100 million, but the incident severely damaged the relationship between Verizon and RIM.

Far more significant than deteriorating partnerships or repair bills was the missed opportunity, which had long term consequences. BlackBerry not only failed to become the iPhone's main competitor, but also opened the door for Android, giving it a second chance.

It's impossible to say definitively that if RIM had succeeded with the Storm, Android wouldn't have emerged. Google bought Android in 2005 and had invested significant resources into its development. Given this investment and the importance of Android to Google’s long-term strategy, Android likely would have still emerged as the iPhone's main competitor. Additionally, RIM hadn’t even started to develop a new operating system, which was essential to challenge Apple and compete in the post-iPhone world.

However, what’s not in doubt is that Verizon, burned by the Storm fiasco and Balsillie's confrontational tactics, didn’t offer RIM a second chance and instead approached Google who then partnered with Motorola to develop the Droid.

The Droid, supported by a $100 million marketing campaign from Verizon was explicitly promoted as an iPhone alternative.

Despite not having a touchscreen keyboard (the Droid featured a slide-out keyboard) it had full touchscreen, a beautiful display, fast web browsing, Google Maps and retailed for $199. Reviewers loved it and the Droid surpassed even the initial iPhone's sales in its first two months.

Its success opened the floodgates for dozens of handset manufacturers to adopt the now proven and popular Android system. Instead of just facing Apple, RIM now had numerous Android competitors, all using superior software compared to the ageing BlackBerry OS.

Google further incentivized carriers to sell Android devices by sharing advertising revenue generated from mobile devices.

The app stores for Android and iPhone compounded RIM’s struggles.

By the time BlackBerry launched its App World in spring 2009 with just 2,000 apps, the iPhone had 65,000 apps and had reached a billion downloads. The number of apps grew to 300,000 in 2010. It took Adnroid a few years to catch up- but they did. By 2011, app downloads had surged to 25 billion, with Apple accounting for 15 billion and Android 10 billion

BlackBerry failed to recognize the opportunities the App Store could bring—a major strategic mistake, as Balsillie himself admits.

Due to this misstep, it became a significant challenge for RIM to create a competitive platform and convince developers to build apps for a third platform after iOS and Android.

RIM found itself in a difficult situation as Balsillie explained “The Storm failure made it clear we were not the dominant smartphone company anymore.”

Lazaridis however didn’t see it this way. Ever the optimist, he viewed the Storm as a stepping stone to their next great product. He was overly confident in their technology, too in love with his creation and too set in his ways. A telling moment came during a meeting with Verizon in January 2010 where the carrier had invited RIM to present device ideas for the upcoming launch of 4G. Yet Lazaridis instead used the meeting to lecture Verizon on the drawbacks of 4G, advising them against proceeding with 4G. 4G adoption was inevitable, and Verizon was looking for innovative product ideas, not a physics lesson. In sports parlance, Lazaradis lost the dressing room and the story serves to highlight how RIM’s chief innovator was out of touch.

At the same time, Balsillie's attention seemed divided. Between 2006 and 2009, he made three unsuccessful attempts to buy a major league hockey team. These very public failures suggested his focus was elsewhere and his failure to buy a team for the third time highlighted a significant flaw in his approach. His aggressive, "Art of War" tactics were counterproductive in both hockey acquisitions and business.

And while the strategic and device disasters would have significant long term consequences, in the short term, RIM’s sales continued to grow.

In a glowing profile from 2009, RIM was named the fastest-growing company in the world by Fortune magazine. Its share of the smartphone market had grown to 56%, and its sales were still accelerating, with revenues of over $11 billion (up from $6 billion the previous year), but a storm was brewing in the form of Android and iPhone adoption.

Paradoxically, with revenues now up at $15 billion, 2010 marked the beginning of the end for RIM as BlackBerry’s U.S. sales began to plummet. Android sales soared from 1 million units in 2009 to 80 million in 2010. RIM's share of Verizon's smartphone sales fell from 96% in 2009 to 40% in 2010.

Moreover, the enterprise market, once RIM's stronghold, began to shift. As a result of the financial crisis of 2007/2008 companies gradually stopped providing BlackBerrys to their employees, instead allowing them to use personal devices for work.

RIM’s big 2010 release, the Torch, a hybrid touchscreen with a physical keyboard, was poorly reviewed and plagued by quality issues. Quality, once a hallmark of BlackBerry, was now a major problem. Lazaridis seemed unconcerned about these issues, claiming all tech devices had bugs. This complacency forced Balsillie to intervene in quality control, increasing tensions between the co-CEOs.

Another significant issue was RIM's service fee- the $10 monthly fee that they charged the carriers per customer and that was generating almost $2 billion in profits for RIM. This fee was always resented by the carriers but even more so now as Apple and Android didn't charge any fees. By 2010 RIM's leverage had weakened, and these fees would come under threat when contracts had to be renegotiated.

2011 was the year everything unravelled for RIM. While their sales peaked at 85 million subscribers worldwide in 2011 and revenue reached a high of $20 billion, their share price was falling rapidly and was down more than 50%.

All of their growth was coming from overseas markets where carriers were a few years behind the USA in terms of their networks and business models. But the writing was on the wall- as these overseas carriers inevitably evolved, Blackberry’s numbers would eventually decline, mirroring the sharp drop in the U.S. market.

Four years after the iPhone’s launch, RIM had not produced a single competitive phone. Their announcement that they were to develop a new operating system in 2010, three years after the iPhone's debut, was too little, too late, and the wrong strategy.

As previously mentioned, apps were now central to the smartphone ecosystem and convincing developers to create apps for a fading brand would be nearly impossible.

Their big product launch in 2011 was the PlayBook, intended to compete with the iPad. By then, Apple had already released the iPad 2, and several Android manufacturers had launched well-received tablets. RIM was clearly playing catch-up.

Lazaridis and Balsillie put a lot of faith in the PlayBook, but it was underwhelming. If proof was needed that RIM had lost its way, it was evident in their launch of the PlayBook without an email feature. This omission was baffling for a company synonymous with email, akin to Tesla releasing a diesel-powered car. Unsurprisingly, sales of the PlayBook were poor, leading to a $485 million write-down on unsold inventory.

Adding to their woes was a worldwide four-day outage in October 2011 caused by a router issue in the UK, which blacked out their entire system. Businesses and government officials couldn't use their BlackBerrys for four days. RIM's handling of the crisis was shambolic, with no public announcement until two days in, when Lazaridis released a video apologising but unable to confirm when the issue would be resolved.

RIM was floundering and in desperate need of a clear and radical strategy and after years of tension and division, the 2 CEO’s were now pursuing different paths. Lazaridis still believed that they had a chance in the handheld sector and pinned all his hopes on upcoming devices that would run on their new, but yet to be completed BlackBerry 10 OS.

Balsillie, having lost faith in Lazaridis, saw the writing on the wall. He knew they had lost the handset battle and needed to pivot. He proposed a two-pronged strategy: licensing the BlackBerry 10 OS to manufacturers in China and other emerging markets, and leveraging BlackBerry Messaging (BBM).

BBM was a precursor to WhatsApp and posed a significant threat to the carriers' lucrative SMS revenues. By 2010, carriers were earning over $100 billion per year from SMS, charging $10 to $20 per month for SMS plans. It was an extremely profitable part of the carrier's business. Messaging services like BBM, which allowed unlimited messages at no additional cost provided customers stayed within the limits of their data plans, threatened this revenue stream. By 2011, 4.4 billion BBM messages were sent daily (was it just BBM messages or their ilk), about a quarter of daily SMS texts, with potential to overtake SMS.

Carriers had attempted to develop their own messaging services, but these never gained traction. BBM, however, only worked on BlackBerrys, making it an integral part of their offering.

Balsillie’s strategy was to approach carriers with a plan to make BBM their solution. Carriers could offer instant messaging via BBM as part of their monthly talk and text plans, regardless of the brand of smartphone customers used. Balsillie called it SMS 2.0. In exchange, BlackBerry would forgo the contentious service fee carriers were likely to force them to reduce or eliminate. Instead, BlackBerry would charge carriers $1 per customer per month for BBM usage.

It was a daring plan—sacrificing the lucrative service fees for a smaller fee but a potentially vast customer base, including Android and Apple users. Lazaridis and other RIM executives worried this strategy could threaten their handheld business, as BBM would no longer be a key differentiator. However, Balsillie rightly recognized that their handheld market was already in terminal decline.

When Balsillie initially proposed the BBM strategy to AT&T, they loved it. While Balsillie’s BBM strategy was undoubtedly better than Lazaridis' delusional hope for a hardware comeback, it’s questionable if he could have executed it. His confrontational managerial style was more suited to battles than partnerships.

All of the missteps from 2007 onwards, combined with the confluence of disasters that snowballed in 2011 saw the share price collapse to just $14, down from a high of $137. By the end of 2011 the usually overly-compliant board eventually lost confidence in Lazaridis and Balsillie and in January 2012 both resigned as CEOs.

The company needed a new leader with a new vision, but incredibly the board agreed to Lazaridis’ recommendation (seconded by Balsillie) to make Thorsten Heins, an insider who was directly involved in most of their recent product failures, as CEO. Blackberry had missed it’s last chance at survival

Heins’ first actions were to scrap Balsillie’s Chinese licensing deal and the BBM strategy. Enraged, Balsillie sold his stock, once worth $3 billion, for $317 million.

Heins strategy was to bet everything on the new OS, BlackBerry 10, and its accompanying phones. Launched in January 2013, 6 years after the iPhone, these received mixed reviews and failed to save the company. Within months, BlackBerry was bought by Fairfax Financial for $4.7 billion.

It lingered in the mobile sector for a few more years, but decline continued. It stopped designing its own devices in 2016, instead licensing the brand and then in 2022 it announced it would discontinue service on its smartphones entirely.

Today, BlackBerry is an enterprise software and cybersecurity company, with annual revenues of $850 million and a market cap of $1.3 billion.

Balsillie effectively retired from business after leaving Blackberry, at the young age of 50. He donated a lot of money to some universities and set up an international think tank while he’s also actively involved in mentoring Canadian entrepreneurs.

After leaving Blackberry Mike Lazaradis founded an investment company and has been involved in philanthropy and supporting researchers in the industry.

I feel sympathy for them in that they had worked so hard, had created a fantastic product that changed how people worked and it was loved by its customers. And they were just getting into their stride when they had the rug pulled from underneath them. And then they painfully stumbled for 5 years, before eventually falling.

Critics will say that they should have adopted the android OS straight away, or that they should have pivoted more quickly, gotten out of the handheld business and leveraged the BBM system to take them in a totally different direction.

But it’s so easy being an armchair critic. It’s really difficult to have that level of clarity when you’re in the thick of it and especially when you’ve had the level of success that Blackberry had. And it also has to be noted that Blackberry wasn’t the only company to experience the shockwaves that emanated from the launch of the iPhone.

For example in 2007 Nokia sold 430 million phones, capturing almost 40% of the global mobile phone market and had a market cap of over $150 billion, 3 times the size of Blackberry. Nokia ended up selling their handset business to Microsoft in 2014 for just $7.2 billion, and Microsoft subsequently had to write it off just 2 years later.

While the co-CEO structure served Blackberry well for their first 15 years, when the shit hit the fan after the launch of the iPhone, they desperately needed clarity in terms of their vision for the future- their world had changed and they needed to respond to it, but instead they muddled on with 2 CEOs pulling in different directions.

With the privilege of hindsight (and hypocritically taking on the role of the armchair critic), I believe that they should have adopted the Android OS, which would have allowed Lazaradis to focus on their strengths- i.e. producing great hardware.

Yes, they would become just another handheld manufacturer using Android, but they had a significant advantage- they had millions of very loyal customers and a lot of these users also loved the physical, tactile keyboard.

They could have leaned into this and continued to develop Android phones with full display touch screens but also with the distinctive Blackberry keyboard by utilising a slide out keyboard.

While there may have been pushback from the carriers and tech journalists, I believe that having a different keyboard, a physical one with Blackberrys distinctive tactile keys, would have been a vital differentiator from all of the touchscreen keyboards, and this would have garnered them a loyal and relatively sizable market. They may not have dominated the market but the simple truth is that they were never going to dominate the smartphone sector once Google released Android as a free software.

Then, on top of this, they could have implemented Balsillie’s BBM strategy- AT&T loved the idea- all they needed was another 1 or 2 carriers to come on board and this would have given them a new and very lucrative revenue stream.

But as mentioned, that’s with the privilege of hindsight. Overall I think we have to give a lot of praise to Lazaradis and Balsillie for their achievements and for the impact they had on the mobile tech sector- very few people get to achieve what they did.

Sources

Book: Losing the Signal: https://us.macmillan.com/books/9781250096067/losingthesignal

https://www.statista.com/statistics/266240/global-revenue-of-rim-since-2004/

Interview with Jim Balsillie in 2022

https://www.youtube.com/watch?v=chYuPHcXn0s

https://www.newyorker.com/magazine/2011/10/03/famous-names

https://www.wsj.com/articles/behind-the-rise-and-fall-of-blackberry-1432311912

https://www.bbc.com/news/technology-37493566

https://web.archive.org/web/20090116071908/http://www.theglobeandmail.com/servlet/story/RTGAM.20060221.wpatentlyabsured-rim21/BNStory/RIM2006/home?pageRequested=all&print=true

https://archive.ph/20121206040337/http://www.msnbc.msn.com/id/6448213/did/11659304?GT1=7935

https://www.thestreet.com/investing/blackberry-settles-patent-lawsuit-filed-against-facebook

https://fortune.com/2011/11/10/blackberrys-business-problem/