In the episode we look at how 2 very different, diametrically opposed men came together and built a tiny Canadian wireless company into a huge success, and in doing so transformed the way people did business.
And Blackberrys weren’t just transformative, they were loved.
The company was just hitting its stride when the rug was pulled from underneath them by Steve Jobs with the launch of the iPhone in 2007.
But as always, what’s really interesting here are the main characters involved, how they built up the company, the pitfalls they encountered but also the nuances- it’s not as straightforward as you’d think- for example did you know that the iPhone captured just 1% of the smartphone market in its first full year, and that the iPhone wasn’t even the best selling phone at Christmas 2008, it was outsold by a Blackberry. And indeed Blackberry kept growing and reached its peak 4 years after the launch of the iPhone- this is a cracking story and I hope you enjoy it.
[00:00:20] Welcome to Great Business Stories and today's episode is titled The BlackBerry Revolution, What Went Wrong.
[00:00:26] It's a brilliant story about the rise and fall of what was one of the greatest technological success stories of the early 2000s.
[00:00:35] In the episode we look at how two very different diametrically opposed men came together and built a tiny Canadian wireless company into huge success and in doing so transformed the way people did business.
[00:00:48] And BlackBerry's weren't just transformative, they were loved.
[00:00:52] The company was just hitting its stride when the rug was pulled from underneath them by Steve Jobs with the launch of the iPhone in 2007.
[00:01:01] But as always, what's really interesting here are the main characters involved, how they built up the company, the pitfalls they encountered, but also the nuances.
[00:01:10] It's not as straightforward as you'd think. For example, did you know that the iPhone captured just 1% of the smartphone market in its first full year?
[00:01:18] And that the iPhone wasn't even the best selling phone at Christmas 2008. It was outsold by a BlackBerry.
[00:01:26] And indeed BlackBerry kept growing and reached its peak four years after the launch of the iPhone. This is a cracking story and I hope you enjoy it.
[00:01:37] Good morning, Keith.
[00:01:39] Good morning, Kei Man. How are you?
[00:01:41] Good, good, good. And today we're going to be talking about the rise and fall of BlackBerry. And this was your story. What made you choose this?
[00:01:51] Yeah, well, I used to work in the telecoms industry. Um, as you may know, it's one of the companies are actually mentioned here quite prominently Ericsson.
[00:02:00] Um, so I would have had firsthand experience of encountering the BlackBerry devices and service offering and positioning in the market.
[00:02:09] And then, as you probably remember as well, um, we had the devices in our, in our startup, the BlackBerry Perl, I think it was.
[00:02:18] And I guess the world changed when, when two sort of very disruptive forces came in on, on one end, it's Apple and the other end, it's Google.
[00:02:30] And, um, it was, it was just a remarkable sort of story of, of rise and fall. And I thought it's something that we should probably discuss.
[00:02:38] Yeah, it is a fantastic story, a rise and fall story. I remember one time I was looking at Nokia as a story and I do have all my notes from it.
[00:02:47] And very much the same trajectory as BlackBerry and very much the same disruptive forces as what happened to BlackBerry.
[00:02:55] And yeah, I love the story.
[00:02:56] No, no Steve Barmer though.
[00:02:58] No Steve Barmer. We'd be doing Steve Barmer in one stage. We have to, actually, yeah, he didn't feature any of, oh, he does feature in this episode very quickly.
[00:03:06] I've got a nice little video tip that I'll put in the show notes of Steve Barmer, um, going off on one, which he usually does.
[00:03:14] And, uh, he's been trying to do the show notes. But, uh, I think that, uh, I'm going to do a lot of work.
[00:03:14] And, uh, in terms of sources, I know both of us read the book, um, Losing the Signal by, uh, Jackie McGriff and Sean Silkoff.
[00:03:21] Good book. Good book. Yeah.
[00:03:23] Yeah. And then as well as that, of course I went on loads of different sources, but two in particular.
[00:03:32] So I'm going to, um, and then the Globe and Mail had a really good article on the patent case that was brought against BlackBerry.
[00:03:36] Um, and it was at 2012.
[00:03:38] So just really when it all fell apart for them all.
[00:03:41] It hadn't fallen apart for years prior to that as we go into it.
[00:03:44] And then the Globe and Mail had a really good article on the patent case that was brought against BlackBerry.
[00:03:50] And then we'll have a really deep dive into that as well.
[00:03:53] And, um, again, they'll be in the show notes.
[00:03:56] So, um, yeah, great story.
[00:03:58] Um, and I suppose for our listeners who mightn't be aware of BlackBerry, uh, because you really, you don't hear about them anymore.
[00:04:08] Do you?
[00:04:09] No, you don't.
[00:04:10] And they really were remarkable.
[00:04:12] I suppose the thing that really stood out was the experience with the keyboard.
[00:04:15] So what we're talking about is sort of the BlackBerry that I suppose would resonate with us is a smartphone with a, with a full-time permanent hardware based keyboard.
[00:04:26] Um, yeah, that was, had really smart software, which meant auto complete work really well.
[00:04:33] Um, and the experience was fast and it was ergonomically designed.
[00:04:38] So it sat nicely in two hands and you could type like crazy, type like a teenager.
[00:04:43] With your thumbs and, and for our younger listeners who wouldn't be aware of what's so good about having a full QWERTY keyboard up to this stage, you might have a, a Palm Pilot or a Nokia mobile phone.
[00:04:55] And there wasn't predictive text.
[00:04:56] So if you wanted to say, type my name, you'd have to type the number one key four times to get to C.
[00:05:02] And then you'd have to type it twice to get to E.
[00:05:04] So each single letter you had to type maybe three or four times to get that single letter.
[00:05:09] Whereas with the BlackBerry, um, you had the QWERTY keyboard and you had this, um, all the letters of the alpha there, and you could just type furiously and get it done really quick.
[00:05:19] And our younger listeners might go big deal, but that was a big deal back then.
[00:05:23] Yeah.
[00:05:24] It made it so much easier.
[00:05:25] Um, well, okay.
[00:05:27] We'll dig into it.
[00:05:28] We'll dig into the background behind this.
[00:05:30] Um, how they grew, how it all came crumbling down, um, and the main characters involved.
[00:05:37] So, the founder of what was initially called RIM research in motion, what I think, you know, I'm going to refer to it as BlackBerry really, because most people knew it.
[00:05:47] There's a guy called Mike Lazaridis, who was of Greek origin.
[00:05:50] His parents came from Greece, they moved to Turkey and then they settled in Canada in 1966.
[00:05:56] And Lazaridis was very much a, uh, tech and electronics wonderkin.
[00:06:01] And at a very young age when he was at school, their electronics teacher told him that the future lay in the combination between computers and wireless.
[00:06:09] And this had a huge impact on Lazaridis.
[00:06:12] And he had a boyhood friend, a childhood friend called Doug Reagan.
[00:06:16] And Doug Reagan is an unusual character in that there's nothing about him.
[00:06:21] No, nothing.
[00:06:21] There is.
[00:06:22] Not Keith.
[00:06:23] I, you know, we, I did so much searching on Doug Reagan who went on to become a billionaire.
[00:06:30] You know, we'll get into that.
[00:06:32] Founded RIM or BlackBerry with Mike Lazaridis.
[00:06:35] And everything about him is just in the movie.
[00:06:40] I watched the BlackBerry movie.
[00:06:42] Oh, I didn't watch it.
[00:06:43] Is it good?
[00:06:44] It's, it's, it's good fun.
[00:06:46] It's not a very, it gives a good overall impression of the growth and then the downfall.
[00:06:54] But it's, it's not a true reflection.
[00:06:56] It's a very much Hollywoodized version, but it's a good movie.
[00:06:58] It's a good movie.
[00:07:07] Yeah.
[00:07:07] It's, I don't know.
[00:07:09] It's a good movie.
[00:07:11] It's a good movie and it's a good movie.
[00:07:13] The movie is that I could say.
[00:07:13] I can tell you about this.
[00:07:13] But, um, I know, a lot of books are great.
[00:07:17] And they, you know, like all of my books.
[00:07:19] And I know I have been reading the book.
[00:07:20] And I'll be reading the book.
[00:07:20] And I don't know, like, all of our books are going to be a little bit.
[00:07:26] But I was just reading the book.
[00:07:27] I'm pretty sure.
[00:07:28] And I've been reading the book.
[00:07:29] with this idea for using text on TV screens that they thought was going to be the future
[00:07:35] for advertising businesses.
[00:07:37] And so you got a $15,000 loaned in the cell phone for you can set up what was called RIM
[00:07:42] Research in Motion.
[00:07:44] We should say that that wasn't necessarily a crazy idea.
[00:07:47] A lot of people saw the TV as sort of a gateway device like Microsoft were talking about
[00:07:54] the TV has been the gateway to the internet at one stage as well.
[00:07:57] So I guess at this remove, you might be saying to yourself, that's nuts.
[00:08:02] Well, I mean, look at it now, Keith, when you go into any shopping center or mall, as they
[00:08:07] might call it in America, you will see digital screens with advertising on it.
[00:08:10] You know, this is a very basic precursor to that where basically just a text coming across,
[00:08:16] but they thought it would be an idea for retailers that they could put in their shop windows or
[00:08:20] to put into shopping malls to advertise.
[00:08:22] It didn't work out.
[00:08:23] But the company survived by making digital components and circuit boards for various
[00:08:29] companies, including General Motors.
[00:08:31] So they were going along, doing okay.
[00:08:35] Then they got involved with Cantel in Canada and Bell South in North America, because this
[00:08:41] is the network you were talking about.
[00:08:44] They were developing what was called the Mobitex Network, which is emerging and wired
[00:08:48] as technology designed by Ericsson.
[00:08:50] And they didn't really know what to do with it.
[00:08:53] Lazaridis was this tech quiz.
[00:08:55] So they got in contact with Lazaridis and he worked with them on it.
[00:08:57] And this really honed Lazaridis expertise in wireless technology.
[00:09:03] And so they kept along there during the late 80s.
[00:09:07] But the big change for them came when Jim Balsillie came on board as co-CEO.
[00:09:13] Yeah.
[00:09:14] And Balsillie is an interesting character.
[00:09:17] He was born in 1961 in Ontario as well.
[00:09:21] Very, very, very ambitious guy.
[00:09:23] Very, very driven.
[00:09:25] Planned his future meticulously.
[00:09:27] Like he had a plan for his life where he went to college.
[00:09:30] He'd excel academically and in sports.
[00:09:33] Went to one of the top colleges in Canada.
[00:09:37] Graduated.
[00:09:38] Then went to the top accountancy firm in Canada.
[00:09:42] Quickly found out that accountancy wasn't for him.
[00:09:44] And got into data analysis.
[00:09:46] Then went and did his MBA in Harvard.
[00:09:49] And his plan really was to go onto Wall Street.
[00:09:51] But his work in data analysis pointed him towards technology.
[00:09:55] And he thought, you know, the future is in technology really.
[00:09:58] So when he was finishing his MBA, a Canadian entrepreneur who had a technology company
[00:10:03] offered him a senior role.
[00:10:05] And Balsillie rightly decided, you know what?
[00:10:07] I'd rather go there than go into Wall Street and try and battle it out with other very,
[00:10:13] very talented and highly ambitious MBA graduates.
[00:10:17] And so, well, what do you think of Balsillie from the book?
[00:10:21] Yeah, I mean, he's pretty hard charging, hard nose negotiator.
[00:10:29] But the salespeople I would have been reasonably charming.
[00:10:34] And yeah, I don't get that impression.
[00:10:37] I mean, he's ballsy.
[00:10:39] He's aggressive.
[00:10:40] He's paranoid.
[00:10:42] But you don't see that charismatic salesperson comes very well.
[00:10:46] And certainly that's not the impression I got of them.
[00:10:49] Now, maybe in the other material you read, you saw sort of a more charismatic figure there.
[00:10:55] But I didn't see any evidence of it.
[00:10:57] And no, I didn't see any charisma from what I read.
[00:11:01] But I also then watched some interviews with him, which were interesting.
[00:11:04] But even in the interviews, he doesn't come across as charismatic either.
[00:11:08] He's very Canadian in that he's nearly humble in a way.
[00:11:12] And he's also very self-deprecating.
[00:11:15] In the interview I saw with him, which is actually, he goes on stage with the two authors
[00:11:19] of the book that we read.
[00:11:20] Really?
[00:11:21] Yeah, and he's very funny.
[00:11:23] He kind of says, you know, you didn't portray me as really aggressive enough, I didn't think.
[00:11:27] You know, and he was just, he was very open about the fact that he comes across as very
[00:11:32] aggressive.
[00:11:33] But he wasn't charming.
[00:11:34] He was kind of a very low-key kind of guy in those.
[00:11:38] Yeah, and you get the input.
[00:11:40] And one theme that comes to the book is every potential partner or customer is a potential
[00:11:46] future competitor.
[00:11:48] So it's really fascinating.
[00:11:50] Sort of inside a deeply paranoid sort of skeptical individual.
[00:11:55] It's very interesting that you should say that because in that video I watched with
[00:12:00] the two authors, he mentions the word predatory about six or seven times in the interview.
[00:12:06] He keeps saying it's a predatory world out there.
[00:12:08] So he had this idea.
[00:12:10] And in the book, actually, they do mention that he was very much influenced by Sun Tzu's
[00:12:14] book, The Iron of War.
[00:12:15] Yeah.
[00:12:16] So he took on this warrior-like approach.
[00:12:18] And like, it's like he went into work every day as if he was going into battle, you know,
[00:12:23] which must have been a really draining thing to do.
[00:12:26] I'd imagine working for him.
[00:12:28] Yes.
[00:12:29] Well, yeah.
[00:12:29] I mean, they do say that.
[00:12:30] He kept on using these art of war tactics to knock employees and knock customers and knock
[00:12:37] everybody off balance and knock employees and knock employees and knock employees and knock
[00:12:40] So, yeah, obviously it worked for a long time.
[00:12:44] You have to say like they had, they enjoyed huge success, but yeah, it was hard to get
[00:12:48] a feeling for exactly what made Balsillie.
[00:12:51] You know, but anyway, you work for this electronics company and the electronics company then was being
[00:12:57] sold.
[00:12:58] And even though the entrepreneur who owned the electronics company in the book spoke very
[00:13:02] highly of Balsillie's effectiveness, you know, he said very effective marketing wise, business
[00:13:07] development wise.
[00:13:08] He was full of praise.
[00:13:09] He did say that there were issues with employees, the way he treated employees, the way he treated
[00:13:13] customers as well.
[00:13:14] And obviously the new buyer didn't see that Balsillie would fit into their, the new regime.
[00:13:20] And so Balsillie had dealt with Lazardus when he was with this company.
[00:13:25] And so he knew Lazardus was looking for an investor.
[00:13:28] And so he remortgaged his house, which was, again, this was a real ballsy move.
[00:13:34] He could have walked into a high powered executive role with any technology company, but he remortgaged
[00:13:40] his house, uh, he became co-CEO of BlackBerry with Lazardus.
[00:13:46] And, um, they both had around a 33% stake.
[00:13:49] Doug Fagan had a much smaller stake.
[00:13:52] And this, the co-CEO is very interesting.
[00:13:55] I mean, that's, that's not to be maybe brushed over if we could just take that for a minute,
[00:14:00] because it's a very significant structural difference for a lot of companies you would
[00:14:05] see.
[00:14:05] And ultimately at the end of the story, you will see that this very different vision that
[00:14:12] they had sowed the seeds of, of destruction there as well, but it is very unusual to have
[00:14:16] co-CEOs.
[00:14:18] It's very unusual.
[00:14:20] And, uh, they make, they do point that out in the book.
[00:14:23] And I remember reading a Fortune article from 2009 where they talk about how unusual it is
[00:14:28] for such a large company as they grew into such a large company to have these two co-CEOs.
[00:14:33] Looking back on this, I mean, you must say it worked really well for them for the first
[00:14:37] 15 years.
[00:14:37] They grew massively.
[00:14:38] They very much had their distinctive roles.
[00:14:41] Valcilia looked after all the financial and marketing business development.
[00:14:45] And Lazardus could just focus on the technology side.
[00:14:49] Personally, I think that Lazardus being the co-CEO was ultimately, I think what novel them, because
[00:14:56] I don't think your CTO should be involved to that degree.
[00:15:03] Um, but you know, who knows, who knows?
[00:15:07] Um, worked out, worked out, worked out all right for, for Zook, I suppose, you know, the co-founder,
[00:15:12] technical CEO.
[00:15:12] But I think somebody ultimately has to be sort of accountable.
[00:15:18] I, you know, I think this is this, there's plenty, we can debate that as we get to the
[00:15:23] end of the story, but there's plenty of blame to go around.
[00:15:25] I think.
[00:15:26] There is, there is, but it did work very well for them.
[00:15:29] But as the book points out, they were so different in every way.
[00:15:32] Like, well, he was this tall, bold, aggressive guy who did triathlons in his spare time and
[00:15:38] did Tour de France mountain climb.
[00:15:41] Lazardus was this stocky, white-haired, devoted Christian who was very spiritual and did Bible
[00:15:47] readings in his spare time and a lot of philanthropy.
[00:15:50] So totally different, but it did work really well for them.
[00:15:53] The book talks about how they didn't make any decision without both of them agreeing to
[00:15:58] it, how they had all these little signals that they'd use in meetings to sort of let
[00:16:03] each other know when to jump in and when to stop.
[00:16:05] So they really did work well.
[00:16:09] Yeah.
[00:16:09] You can't fault, you can't fault the co-CEO thing for the first 15 years anyway.
[00:16:14] So it worked until it didn't, so I guess.
[00:16:17] Yeah.
[00:16:17] Yeah.
[00:16:18] Yeah.
[00:16:18] You know what?
[00:16:19] That's the one question that when over the last few weeks while I was researching
[00:16:23] this, I kept on asking myself, where do I stand on the co-CEO role?
[00:16:26] And I couldn't make up my mind because at the end of it, you kind of think, well, both
[00:16:30] of them weren't up to us, but I think that's a bit harsh.
[00:16:32] But anyway, look, we'll talk eventually.
[00:16:34] We'll get to it.
[00:16:35] Yeah.
[00:16:35] So the first commercial success was in the pager business then.
[00:16:39] So, so they had customers and then they moved into pagers and we should probably
[00:16:45] explain again to younger listeners, what the hell is a pager?
[00:16:49] I know.
[00:16:50] I know.
[00:16:51] Because up to this stage, they were not going along like in 1995, the revenues would be
[00:16:54] 8.4 million, but then you're right in 1996, um, Lazardus had developed a way to do two-way
[00:17:01] communication in the pager.
[00:17:03] Now, pagers up to this stage by 1996, they were becoming a real popular technology in America.
[00:17:10] Those over 40 million pagers sold in 2006.
[00:17:13] Now I remember Keith, when I just left college, which is around this time, a few of my friends
[00:17:18] used pagers.
[00:17:19] Some of them were doctors.
[00:17:20] Some of them were the legal profession and some of them were drug dealers.
[00:17:24] So what pagers were at the time was that you had this little device that they hooked on
[00:17:30] to their hip.
[00:17:31] And it was usually for people who needed to be on call quite a lot.
[00:17:34] So the likes of your doctors, the likes of your lawyers or the likes of your drug dealers,
[00:17:38] they'd get a little message kind of saying, ring me at this number.
[00:17:40] And then you have to go to your pay phone and make your call or else it might be, you know,
[00:17:44] we need you in straight away.
[00:17:46] You know, that kind of thing.
[00:17:47] But it was one way communication.
[00:17:49] So it happened in a different display device like you would.
[00:17:52] Yeah.
[00:17:53] An old school, um, mobile, but no keyboard.
[00:17:57] No keyboards.
[00:17:58] And so they were becoming really huge.
[00:18:00] And so Mran Mobile, which is the mobile arm of Bell South, they commissioned BlackBerry
[00:18:06] to develop a pager.
[00:18:08] They developed one person called the Bullfrog, which is very functional, but was a bit bulky
[00:18:12] and impractical.
[00:18:13] So then BlackBerry decided, you know what, we're going to take the design in house, which
[00:18:17] had a significant impact on their future success.
[00:18:21] And so they developed...
[00:18:23] Go on.
[00:18:24] All the words that sort of behemoth and the pager market at that point, I think are ever
[00:18:28] good.
[00:18:28] Yeah, I think they were.
[00:18:30] I think they were.
[00:18:30] I didn't dig too much into the pager market now in fairness, top line figures.
[00:18:35] But as a result of their 950, which is their in-house pager, Ram Mobile, they put in a
[00:18:41] $50 million order on the back, which is, you know, for BlackBerry, this was the biggest
[00:18:46] deal they'd ever done.
[00:18:47] So on the back of this, Bell City floated them on the Canadian Stock Exchange and raised
[00:18:52] $115 million.
[00:18:54] Um, so this is a big, big deal for them.
[00:18:57] Um, but Balsilli, even though he had verbally agreed with Ram Mobile that they would get
[00:19:02] exclusive use of the 950 pager, he went behind our backs and did a deal with one of Ram
[00:19:07] Mobile's biggest competitors and also agreed to give them the pager, which caused consternation.
[00:19:13] And Ram Mobile nearly canceled the deal.
[00:19:15] Uh, but eventually they went through with it.
[00:19:18] And Balsilli did say in the interview that I saw, it's always better to, uh, ask for forgiveness
[00:19:23] and for permission.
[00:19:25] And that was his style of doing business.
[00:19:27] Um,
[00:19:29] and in business, there was a strong sort of subscription model for the carrier here, as well as subsidizing
[00:19:36] the hardware.
[00:19:37] They've got a really nice sort of subscription model.
[00:19:40] So they, they really wanted us to work in this primarily business customers or sales
[00:19:44] people or people on the road or, or those.
[00:19:47] Exactly.
[00:19:48] Exactly.
[00:19:48] But the 950 also incorporated some email functionality and Lizardis and, uh, and
[00:19:55] that's really, really wanted, uh, Ram Mobile to highlight their customers.
[00:20:00] Like there's email function on this, but Ram Mobile didn't want to push the email.
[00:20:03] They thought pages was the future.
[00:20:05] They thought email was years down the line.
[00:20:07] So then, um, Lizardis and I'll say, you know what, we're gonna, we're gonna develop our
[00:20:12] own email system.
[00:20:14] So they use really the 950 technology.
[00:20:17] Um, and they developed their first ever BlackBerry device.
[00:20:22] And it was very, very, um, unusual the way they went about how they, um, got it onto the
[00:20:29] market because of course the networks weren't gonna sell it for them.
[00:20:33] They thought there's no future in this, or at least it's too, too early to do this.
[00:20:38] So they weren't gonna give them the bandwidth.
[00:20:40] So what BlackBerry did was on the base of the 115 million that they raised in the flotation,
[00:20:45] they offered Ram Mobile 5 million upfront to have two years access to their mobile techs,
[00:20:51] um, uh, network, which wasn't really being used.
[00:20:54] They did the same with Cantil in Canada, gave them 1 million upfront.
[00:20:57] And so they had their own bandwidth, really their own network for two years.
[00:21:02] And BlackBerry also then handles their own B2C sales.
[00:21:06] They handled the whole B2C side of it.
[00:21:08] In other words, the billing, the customer service.
[00:21:10] So this was really pretty revolutionary.
[00:21:13] As Steve Jobs might say, they were skating to where the puck was going.
[00:21:15] Now where it was, or had been, um, so very audacious plan.
[00:21:20] They also went to a big branding company because by this stage they didn't have a
[00:21:24] name for the device and the company, as we said earlier, was called Rim.
[00:21:29] But this branding company came up with a name for the device and they called the
[00:21:33] bl the device, the BlackBerry because it was, the device was black.
[00:21:37] And because that keys that you used to type in were like the, the drooplets on a BlackBerry.
[00:21:41] So that was this they launched in January, 1999 with a tiny budget of just 5 million.
[00:21:49] But again, I think this is where Balsilli really comes to the fore tactically or strategically.
[00:21:54] He knew exactly how to sell this.
[00:21:57] They had a tiny budget.
[00:21:58] They're up against the likes of the Palm Pilots, which had, I think at a budget about 10 times
[00:22:02] the amount they were using Claudia Schiffer, one of the super models on TV.
[00:22:06] But Balsilli had a far more, uh, strategic, um, uh, marketing plan.
[00:22:13] He basically sent these young salespeople out to get bankers, traders, legal professionals,
[00:22:20] people who needed information really quickly.
[00:22:22] And he sent them to conventions, to airports, business lobbies, and wherever they saw these
[00:22:28] people on their handheld device, these, what are pagers or whatever device they were using.
[00:22:32] And they went up to them and they did what Balsilli called the puppy dog sale.
[00:22:37] And that's where you give them the device and say, keep it for a few days.
[00:22:41] And if you don't like it, you can give it back to it.
[00:22:43] And Balsilli.
[00:22:44] Yeah.
[00:22:45] They got hooked.
[00:22:47] They got hooked.
[00:22:48] They got hooked.
[00:22:48] I think it was, it was nicknamed.
[00:22:50] I think.
[00:22:51] This is it because the device was transformative.
[00:22:54] It was changed the way people worked.
[00:22:57] Like people now could do business while they're on the golf course.
[00:23:01] People could now do business while they're on holidays.
[00:23:03] They could do business on their way to work.
[00:23:05] It really changed everything.
[00:23:08] And I think that's hard.
[00:23:09] It's hard to get that across to the younger people as to how to transform.
[00:23:12] And it changed email as well.
[00:23:14] I mean, it, it used to be a case that you turn on your, we're sort of aging ourselves here,
[00:23:20] but you turn on your, your PC and your email will be waiting for you in the morning.
[00:23:25] You turn off your PC and near a bit of bother until the next morning.
[00:23:30] It was a weekend.
[00:23:31] I was this.
[00:23:32] And they, they are responsible for, for good or for real, for putting instant email and instant
[00:23:39] availability in your pocket.
[00:23:41] Um, the other interesting thing I thought that came true from the marketing and sales
[00:23:46] perspectives, they, and in the direct sales, they targeted people at a very senior level
[00:23:51] in the organization if they could.
[00:23:54] And then these were the people that the people, the folks who reported them will be inspired
[00:24:00] by, and these guys might have budgetary discretion to buy them for their teams of staff.
[00:24:05] So it was very clever sort of guerrilla marketing in some respects.
[00:24:10] Insofar as they went for very influential people with discrete budget or that more junior
[00:24:16] people will be inspired by very, very type of stuff.
[00:24:19] It was.
[00:24:20] And that had a big impact as well because, um, prior to this, I mean, now we all just bring
[00:24:24] our phones into work and it's no problem.
[00:24:26] But back then, if you were bringing a new technology into work, the CTO had to approve it and that
[00:24:31] could take months, but because it was a top down sale, as you said, because it was the
[00:24:35] CEOs and the top people who were saying we're using this, they're going to the CTO and said,
[00:24:39] we're using it.
[00:24:41] But luckily are not really luckily when the CTO did look at the BlackBerry device, they
[00:24:45] were very, very secure device.
[00:24:47] So it was very easy for the CTO to go back to the CEO and say, yeah, okay, no problem.
[00:24:51] I mean, they wouldn't have had a choice anyway.
[00:24:53] So I think the CEOs and all the senior users were so addicted to their BlackBerrys.
[00:24:56] It was going to happen one way or the other, but the BlackBerry was the, the mobile techs
[00:25:01] and, and, and, and sort of, um, reserving the bandwidth meant that they could be very secure.
[00:25:08] Yeah.
[00:25:08] Yeah.
[00:25:09] Yeah.
[00:25:09] Which is a key selling point because their customers were mainly at the very start
[00:25:13] enterprise customers.
[00:25:14] So it took off like wildfire and while competitors did enter the market, they just
[00:25:19] couldn't match the BlackBerry's ease of use, the tactile design, as you mentioned, its
[00:25:23] security, and then also its ubiquity because everybody was seen with BlackBerrys, Bill Gates,
[00:25:30] um, Madonna, Justin Timberlake.
[00:25:32] They were all using it.
[00:25:33] And as you mentioned there, it even had its own lexicon.
[00:25:35] It was called the Crackberry.
[00:25:36] And then, uh, people that were seen bent over their BlackBerry typing furiously were doing
[00:25:41] the BlackBerry prayer.
[00:25:43] So it really became very popular within two years.
[00:25:46] They had revenues of 221 million.
[00:25:48] And on the back of that, Balcili raised 225 million in the NASDAQ in 1999.
[00:25:54] And then in 2000, he raised 900 million.
[00:25:57] So they really were, um, on their way.
[00:26:00] And now it must be said that initially these were just email devices, but in 2002, they
[00:26:05] launched our first smartphone, which wasn't the best phone in the world.
[00:26:09] But in 2004, they launched the Charm, which is a really good smartphone retailed for $200.
[00:26:16] But by this stage, because they were becoming so big, they just couldn't handle the B2C side
[00:26:22] of it, the sales, the marketing, the billing, the customer service.
[00:26:25] So they handed that back to the carriers, but because they were so popular and they were in
[00:26:30] such demand, they had a lot of leverage.
[00:26:32] So they negotiated a fee with the carriers, whereby the carriers had to give BlackBerry
[00:26:38] $10 per month for every new subscriber that they signed.
[00:26:42] And that will become a, uh, a crucial point going forward when things start going south
[00:26:47] for BlackBerry.
[00:26:48] Uh, and also in 2005, they launched BlackBerry messenger BBM, which is really a precursor
[00:26:55] to WhatsApp and that allowed, it was huge.
[00:26:59] It allowed BlackBerry customers to send texts to each other, but they weren't part of their
[00:27:04] SMS plans or anything like that.
[00:27:05] It was, I suppose, is it an in-app text is what you'd call it?
[00:27:08] Yeah.
[00:27:09] Yeah.
[00:27:09] So it's like, um, pay well into messenger or, you know, really showing my age here, but,
[00:27:15] uh, and the, the Microsoft one, it's, it's just chat basically.
[00:27:20] I think WhatsApp would have used the same technology, but it feels and looks a lot more like an SMS.
[00:27:25] But this thing was more like a chat interface on, on the desktop.
[00:27:31] Yeah.
[00:27:32] So they were growing massively.
[00:27:34] Now they were one of the biggest technology companies at the time.
[00:27:38] They had partnered with 300 carriers in 120 countries.
[00:27:42] By this stage, 2005, 2006, they had a market cap of 42 billion.
[00:27:46] So Lazardus, Bald City, and even Fragan were all billionaires by this stage.
[00:27:51] But in the background, there were some, uh, big issues that they had to deal with.
[00:27:56] The first one was this, uh, patent infringement from a company called NTP and NTP basically
[00:28:03] wasn't a company.
[00:28:03] It was just a lawyer and this, uh, engineer or tech guy who, uh, had developed a, um, a way
[00:28:12] of sending email via wireless technology and they had a patent for this.
[00:28:16] Now, I don't know.
[00:28:18] Some people said that NTP were a troll.
[00:28:21] Like a troll is somebody who develops or acquires very vague or overly broad patents,
[00:28:26] then waits in the long grass for a company to actually develop the page, to develop the
[00:28:30] technology, and then they come in and sue them for infringement.
[00:28:33] Yeah.
[00:28:34] And typically you do it around a significant fundraiser flotation.
[00:28:38] Yeah.
[00:28:38] You got an irritant that's cheaper.
[00:28:40] Yeah.
[00:28:40] Just make a way really.
[00:28:42] Yeah.
[00:28:42] I mean, NTP, it did seem like a very broad patent.
[00:28:46] Um, but whether black, uh, whether Blackberry got bad advice or whether Lazardas and Bald City,
[00:28:52] um, just didn't follow good advice.
[00:28:55] I don't know, but all the experts agrees that it shouldn't have gone to court.
[00:28:59] It should have been settled well before it went to court because when it did go to court,
[00:29:04] Blackberry performed really, really badly did court.
[00:29:08] First of all, Lazardas, um, went on the stand and tried to play the poor mouth saying that,
[00:29:12] oh, we're just a small struggling company at a time where their revenues were doubling.
[00:29:15] And they were like one of the fastest growing companies in Canada and North America.
[00:29:19] So that didn't pay well with the jury.
[00:29:20] Yeah.
[00:29:21] But more importantly, they brought on a witness who claimed to had developed the same technology
[00:29:27] four years before NTP and they brought in two old laptops and this guy's technology,
[00:29:32] and they were able to do a demo and show, look, this guy's technology worked.
[00:29:35] And he developed this four years before NTP.
[00:29:38] But BlackBerry's engineers had installed new software into those laptops
[00:29:44] to ensure that the demo had worked.
[00:29:46] And this was found out by NTP's lawyers.
[00:29:49] They appointed it to the judge.
[00:29:51] The judge went ape.
[00:29:52] Um, the jury quickly came back with a verdict finding an NTP's favor.
[00:29:57] And the judge saddled in BlackBerry with a judgment of a fine of 53 million.
[00:30:02] More importantly, they had a royalty fee of 8.5% on all historical sales and sales going forward.
[00:30:11] So this is something that BlackBerry just, they couldn't live with.
[00:30:14] Um, because it was just, it was too, too high.
[00:30:17] Um, so they continue to appeal and appeal.
[00:30:20] It went on until 2006.
[00:30:22] Even the patent office, they appealed to.
[00:30:25] And the patent office did come back and say, yeah, the NTP patents.
[00:30:28] We're not standing over us.
[00:30:30] We're throwing us out.
[00:30:31] But that still, for some reason, didn't apply to the judgment.
[00:30:34] And so eventually BlackBerry had to settle in 2006.
[00:30:38] They paid 612 million to NTP, but there was no royalty fee.
[00:30:43] So that was a big case.
[00:30:45] And it really was very draining.
[00:30:46] And the feeling you got from it, especially from the book, was that it really impacted Lazardus
[00:30:53] because he was a very spiritual and religious person.
[00:30:57] And for him to be, you know, accused of cheating was really an affront to him.
[00:31:01] Because, you know, like having read all the research and the history of it, he didn't cheat.
[00:31:06] You know, loads of people were dabbling in this kind of technology.
[00:31:09] And he had decades of experience.
[00:31:11] Yeah.
[00:31:12] I felt bad for him in that.
[00:31:14] And do you think it was that fundamental sort of sense of, you know, I didn't do anything wrong here that prevented an earlier settlement?
[00:31:24] I think it was, I think maybe their emotions got ahead of them and they should have just settled.
[00:31:31] And it would have been over and done within a few months.
[00:31:34] Yeah, they might have had to pay out a few million, but they went through five years of hell to try and prove a point.
[00:31:39] And eventually they end up, you know, having to throw in the towel and settle for 600 million.
[00:31:44] All experts would have said that should be on court.
[00:31:47] Yeah.
[00:31:48] But anyway, that was one thing.
[00:31:50] And another big thing that affected them during this time was they had a big backdated scandal.
[00:31:56] Granted share options.
[00:31:58] Yeah, yeah, yeah.
[00:31:59] It seemed like very trivial at the time, but again, it drove a big wedge between Lazardus and Balsillis.
[00:32:04] It's where they granted share options to key employees and they backed these to them, which in itself isn't illegal.
[00:32:09] But if you do that, you have to tell shareholders about it.
[00:32:14] And they didn't tell their shareholders about it.
[00:32:16] And Balsillis held up his hands and said, that was my fault.
[00:32:19] But Lazardus was again drawn into this.
[00:32:22] And as this kind of religious guy, if he felt very bad about it, they had to restate $250 million in earnings and they had to make personal fines of $77 million.
[00:32:32] And Lazardus did blame Balsillis for this.
[00:32:35] And in the book, it says it drove a bit of a wedge.
[00:32:37] Yeah, yeah.
[00:32:39] And I think the other thing is, I think personally, they were prohibited from discussing the case.
[00:32:46] Is that correct?
[00:32:47] While it was still in train.
[00:32:49] So they couldn't actually kind of sit down and clear the air, I think.
[00:32:53] Yes, yes, yes.
[00:32:55] They couldn't talk to each other about the case while it was ongoing.
[00:32:58] But they could talk about everything else.
[00:32:59] And yet there's probably this mutual simmering resentment kind of hanging around there, which was still in kind of interesting.
[00:33:06] Yeah.
[00:33:07] And Lazardus comes across as so principled.
[00:33:09] They probably, even in the private room, probably didn't discuss it.
[00:33:13] I would say so.
[00:33:14] I would say so, because he does come across as that kind of character.
[00:33:16] You know, if you, like, if the law says you can't do this, then he won't do this, you know.
[00:33:21] Yeah.
[00:33:22] But I would say, yeah, when you mentioned simmering there, you get the impression that the resentments between them did simmer.
[00:33:29] Now, having said that, Keith, the interview that I saw with Balsillis, which was in, I think, 2022, he speaks very highly of Mike Lazardus.
[00:33:39] I think there was a genuine, I don't know, affection, but as if they'd been in a battle together and there was a lot of respect from Balsillis to Lazardus.
[00:33:50] Lazardus has never been interviewed about BlackBerry.
[00:33:54] When he does come out, he's just talking always about universities and philanthropy.
[00:33:58] So it's very hard to get an idea of what Lazardus' take on all this is.
[00:34:05] Yeah.
[00:34:05] Maybe we'll touch it at the end, but you know, the end of the book is reasonably sad, I suppose, in terms of the relationship they had.
[00:34:13] But, but anyway, I've only, no spoilers.
[00:34:16] Yeah.
[00:34:16] So anyway, they're thriving anyway.
[00:34:19] Despite all this backdating and the patents, these are all issues that most companies that are going have to deal with.
[00:34:26] You know, they're battle scars that you get as you grow the company.
[00:34:29] But the company was thriving.
[00:34:30] I mean, it's between 1999 and 2006, the share price, um, went to 40 fold.
[00:34:37] And 2006 is when they then brought out the Pearl.
[00:34:41] And this was really considered at the time, the pinnacle of mobile phones.
[00:34:46] It retailed for $199.
[00:34:48] It was their first phone to have a camera and a media player.
[00:34:52] And Computer World, uh, gave it a slowing review.
[00:34:56] And they ended the review with welcome to the future.
[00:34:59] Okay.
[00:34:59] So this is 2006.
[00:35:00] And I thought I'd highlight that because as we'll soon find out, the Pearl wasn't the future.
[00:35:07] The future was just around the corner.
[00:35:09] But before we get to, that's really where we get to the break in the story, because now we had 15 years of BlackBerry growing, of BlackBerry thriving.
[00:35:18] And I think before we get to the second part of the story, where we probably would be trashing BlackBerry in a way it's worth noting that, you know, here was a company that came from nowhere with Mike Lazardus who developed this technology that transformed the business world and transformed communication.
[00:35:35] And not only did he create one product, he kept on creating good products.
[00:35:39] He kept on creating good services like BBM and they really grew and built this great company.
[00:35:45] And at the same time, Bell City for all the falls, we talk about him, you know, he went toe to toe with the carriers and came out on top.
[00:35:53] He raised money when they needed it, took advantage of the situation and grew the company.
[00:35:59] So I think a lot of kudos has to go to them before she took apart the story.
[00:36:04] You know, they played their hand really well for the first 15 years.
[00:36:08] They did.
[00:36:09] Yes.
[00:36:09] I guess the only sort of question I would have, and I've mulled it over in my head quite a bit, is that the choice of fundamental software architecture.
[00:36:19] I wonder, Lazardus kind of seems to be for hardware, right?
[00:36:24] And that's old sky.
[00:36:26] And I think we'd see it as we, as we dig into the future.
[00:36:30] The second part of the story, they were stranded on a platform that was creaking at the seams that evidently from a software perspective clearly was creaking at the seams.
[00:36:41] Yeah.
[00:36:42] And they kind of, I wouldn't say they neglected it, but it doesn't seem like much of this investment was focused on kind of detaching themselves from Java.
[00:36:52] They had a fundamental dependency on the Java platform.
[00:36:55] And that was one of the contributors to their lack of agility, I think, but they didn't do anything about it.
[00:37:02] They didn't.
[00:37:03] And you'd know more about the tech side of it definitely than I would.
[00:37:06] But as we have seen, I think that was one of the key problems that prevented them from pivoting when the future actually arrived.
[00:37:16] Because the future of the phone market came in January 9th, 2007, when Steve Jobs took to the stage in Macworld and gave his now famous speech or talk in launching the iPhone where he goes, it's a phone.
[00:37:33] It's an iPod.
[00:37:34] It's an internet communicator.
[00:37:35] He repeats this over and then he says, are you getting this?
[00:37:38] And all the geeks in Macworld are going nuts and clapping.
[00:37:42] And that's because in 2007, January 2007, Steve Jobs introduces the iPhone.
[00:37:49] And like, it must be said, people think, oh, the iPhone, it was launched 2007.
[00:37:53] It took over the world.
[00:37:55] It didn't initially.
[00:37:57] And the iPhone itself wasn't what kills BlackBerry or Nokia or an awful lot of other businesses.
[00:38:05] But its launch and what is brought with us and what happened as a result of its launch is what killed them.
[00:38:13] So I'll go into that a little bit.
[00:38:14] Yeah.
[00:38:17] I can remember having one of the early, not the early, but a touchscreen, iPod touch.
[00:38:23] Yeah.
[00:38:24] And it had some of the same apps and it had the beginnings of an app store.
[00:38:29] And we're looking at this thing going, this is just an amazing sort of interface.
[00:38:35] Yes.
[00:38:36] So the seeds, the evidence of the direction of travel for Apple were there before the iPhone.
[00:38:43] And so arguably, you know, this should have served as early inspiration.
[00:38:50] The moment to kind of realize that the future you had banked on was gone was before this.
[00:38:57] It's just, it's just a little bit puzzling that they, they didn't start considering this earlier.
[00:39:04] Was it our hubris?
[00:39:06] Yes.
[00:39:06] I don't know really.
[00:39:08] I, I, I don't know.
[00:39:10] Or I don't know.
[00:39:10] But see, you're more techie and maybe you were looking at the iPod kind of going, this is the future.
[00:39:14] But obviously an awful lot of people in the business didn't see it as the future because when it initially came out, the likes of Lazardus, the likes of Steve Ballmer.
[00:39:22] And there's a famous video of Steve Ballmer where he more or less is laughing at the iPhone because he's saying it's a $500 product.
[00:39:30] You've got most smartphones are retailing for $200.
[00:39:33] It's got a poor battery.
[00:39:34] And this is at a time where people who had mobile phones prized the longevity of the battery as one of the main things.
[00:39:41] And it's still something I look for in a device.
[00:39:44] I want a long battery, but the iPhone had a really poor battery when it was launched.
[00:39:48] It consumed a huge amount of data at a time where the carriers didn't carry a lot of data or charge a huge amount for data.
[00:39:58] Yeah.
[00:39:58] Yeah.
[00:39:59] Yeah.
[00:40:00] Yeah.
[00:40:01] I mean, I think the other thing is it was targeted towards a very different market as well.
[00:40:07] Right.
[00:40:07] So what targeted at the executive or the C-suite, whatever way you want to kind of describe those guys.
[00:40:14] It was targeted at sort of a middle class product.
[00:40:18] Yeah.
[00:40:20] So they drove an influence market from a completely different direction as well.
[00:40:25] You know?
[00:40:25] It did.
[00:40:26] It did.
[00:40:26] And we'll see that in the sales.
[00:40:28] Like, as the Bammer and Lazardus point out, like, it's too expensive.
[00:40:32] The battery's too poor.
[00:40:33] And the touchscreen.
[00:40:34] An awful lot of people weren't impressed with the touchscreen.
[00:40:37] Apparently, the touchscreen in the first iPhone wasn't that great.
[00:40:41] But they were quite dismissive of it.
[00:40:43] An awful lot of experts were saying, oh, no, most people would much rather the tactile nature of the BlackBerry and have a physical keyboard.
[00:40:49] And Lazardus was also saying the security.
[00:40:51] His product was better.
[00:40:54] And an interesting point that I found, I don't know if it was in the book or in an article that I read.
[00:40:59] Like, in the first, the iPhone was announced in January 2007.
[00:41:03] BlackBerry had two calls with their analysts over the course of that year.
[00:41:07] And none of the analysts in the phone calls even mentioned the iPhone.
[00:41:10] So people weren't looking at the iPhone as this big revolutionary thing at the time, except, of course, the Apple devotees who really saw it.
[00:41:19] And Steve Jobs, who could see that once you gave people the full internet in their pockets, that, you know, it would be very hard to go back.
[00:41:28] And the touchscreen that other people were starting to say were dismissive about, they didn't understand that the touchscreen was this joyful thing.
[00:41:35] It allowed you to click on web links.
[00:41:38] The iPhone had full web pages with no other mobile device.
[00:41:42] You could click on links.
[00:41:43] You could zoom into pictures.
[00:41:45] You could move stuff around the street.
[00:41:47] They just didn't understand how consumers would get this and would kind of go, this is brilliant.
[00:41:52] Yeah, I think back to the, to the, to the Java point earlier on there as well.
[00:41:57] I think the other parts of the proposition that really resonated was the idea of the app store.
[00:42:03] They're working with third party developers that can build additional value into device.
[00:42:10] Um, that really enhanced its usability and the value it had for the user.
[00:42:15] So, you know, I can remember, you know, he had an application for, you know, it looked like you were having a beer.
[00:42:23] You just tip up the salt.
[00:42:25] It's a gyroscope.
[00:42:26] Completely useless.
[00:42:28] But BlackBerry had no way of, of really no, no patch of launching an app store either.
[00:42:34] And as users, you did ecosystem of developers who are marketing their applications.
[00:42:40] You had Apple promoting some of them and suddenly you had this multi-purpose device, like a Swiss army knife in your pocket rather than just something for emails and occasional browsing.
[00:42:52] You had something that could solve a lot of your problems.
[00:42:54] It had a torch.
[00:42:55] You had a compass.
[00:42:57] All sorts of weird and wonderful stuff that even if a niche user wanted to use, there's still enough niches out there that appeal to everyone.
[00:43:05] Yeah.
[00:43:06] Well, a few very vital points on what you said there.
[00:43:08] It was a different product really.
[00:43:11] And this is something now that people will say, you know, why didn't the other mobile operators develop something similar?
[00:43:17] Well, first of all, the iPhone had 700 megabits of memory.
[00:43:21] That was 22 times more powerful than a BlackBerry.
[00:43:24] So the iPhone was different architecture.
[00:43:27] It was like a mini computer in your pocket.
[00:43:30] And people, and as people say, well, why didn't the others develop it?
[00:43:33] One of the reasons why BlackBerry and Nokia hadn't developed a phone like that is that up to this stage, the carriers dictated to the handset manufacturers what they could and couldn't put into their devices because they were so restrictive on the amount of data that they were willing to carry for mobile phones.
[00:43:53] Whereas Steve Jobs managed to convince AT&T to give him carte blanche to develop a phone that would use huge amounts of data.
[00:44:02] And it did keep in the five years between the iPhone launch and 2007, 2012, AT&T's data, the amount of data that was used on its network, went up by 20,000%.
[00:44:16] So what Steve Jobs did was up to this stage, the carriers called the shots.
[00:44:20] But Steve Jobs, by launching the iPhone, turned it around.
[00:44:23] And all of a sudden, consumers were telling carriers, you need to get up to speed because we'll go up to using a whole load of data.
[00:44:29] And over the coming years, the carriers had to invest billions and billions to create 4G networks, all that kind of stuff.
[00:44:36] And that was all as a result of the launch of the iPhone.
[00:44:40] And again, people would say, okay, but why couldn't BlackBerry and Nokia just pivot?
[00:44:47] This isn't, it's not that easy.
[00:44:49] And as you mentioned, like, first of all, there's this thing called inventor syndrome.
[00:44:55] BlackBerry had spent the last eight or nine years developing a certain type of handsets, a certain type of technology.
[00:45:01] And as you said, they were more focused really on the hardware than the software.
[00:45:05] And that was their key expertise.
[00:45:07] And Lazardus was in love with his product.
[00:45:09] And why would they be?
[00:45:10] They had millions of fans who loved the BlackBerry as well.
[00:45:13] It's not that easy just to turn around and start saying, well, let's just ditch everything that has built our success and just follow this guy.
[00:45:21] Okay.
[00:45:21] And there's a reason as well.
[00:45:23] The numbers weren't that impressive at the start either for the iPhone, but also not just mentally was there an issue.
[00:45:29] Organizationally, BlackBerry had a skill set and they had all these engineers working on a particular product and particular technology.
[00:45:37] They couldn't just all of a sudden turn around and become experts in what the one was because it was a totally different architecture.
[00:45:44] And also the numbers were surprising to you as well.
[00:45:46] Steve Jobs only predicted that the iPhone would get 1% of the smartphone market in its first full year, which was 2008.
[00:45:57] So they were only looking to sell 10 million phones in 2008.
[00:46:00] And in 2008, they sold 13 million phones.
[00:46:03] So just a bit above the 1%.
[00:46:05] Wow.
[00:46:05] Wow.
[00:46:05] So it wasn't like the iPhone came out and just took over the market.
[00:46:09] It didn't.
[00:46:10] But crucially, what it did do was it forced Android to go back to the drone world.
[00:46:16] Whereas the likes of BlackBerry and Nokia couldn't just go back to the drone world and scrap everything and overnight compete with the iPhone.
[00:46:24] Android didn't have the history of success because they had released a product by now.
[00:46:29] Now they have, you know, on the operating system.
[00:46:31] But they didn't have, you know, eight years of launching devices and being hugely successful.
[00:46:36] So it was much easier for Android to go back to the drone world and develop an operating system that could compete directly with the iPhone.
[00:46:44] And also that would incorporate the app infrastructure that would allow them to have an app store that could compete with Apple App Store.
[00:46:52] And that was one of the key elements that led to the downfall of that.
[00:46:58] And it's interesting, where would they have gone?
[00:47:01] They had two directions.
[00:47:02] You had ubiquitous sort of hardware agnostic Android phones at the bottom of the market.
[00:47:09] And you had premium hardware exclusive top of the market.
[00:47:16] Where could they have gone?
[00:47:19] Well, I think that's the problem with what happened with them.
[00:47:22] Because at the time, and before we can answer that, just a very quick aside.
[00:47:27] In 2007, after the iPhone launched, this mysterious Doug Fragan left BlackBerry and sold all the shares for $1.3 billion.
[00:47:35] And never heard from him again.
[00:47:38] And I couldn't find out why.
[00:47:40] But getting back to where could they have gone?
[00:47:42] What happened was Verizon and all other carriers were desperate to come in and get a competitor for the iPhone.
[00:47:50] So they approached BlackBerry and said, we want an iPhone killer, an iPhone competitor.
[00:47:56] I thought AT&T had the exclusive.
[00:47:58] They had exclusivity.
[00:48:00] Yeah.
[00:48:00] Yeah.
[00:48:01] For the iPhone.
[00:48:01] So Verizon approached them and Lazardus had been working on a prototype for this product called The Storm.
[00:48:11] And so they developed The Storm.
[00:48:13] They were under huge pressure from Verizon to get it done by Christmas 2008.
[00:48:18] They had the expertise.
[00:48:19] They were under really tight deadline.
[00:48:22] Balsillie talked about The Storm that all of a sudden they created this high-end phone.
[00:48:26] Whereas before they were a low-end carrier.
[00:48:28] And he said they really didn't know where they were at by this stage.
[00:48:32] They were very, very, I suppose, confused organizationally and structurally and device-wise.
[00:48:41] They seemed to have been thrown a curveball and they didn't know how to react.
[00:48:44] And they developed this product called The Storm.
[00:48:47] And it was just riven with flaws.
[00:48:51] It was the first really bad product that they had come out with.
[00:48:56] I mean, Stephen Fry, the famous British humorist, compared it to the Ford Edson, which is another product launch we're going to have to cover at some stage.
[00:49:05] Computer World said it had more bugs than a summer picnic.
[00:49:09] It was disastrous.
[00:49:12] Yeah, and I never understand the approach to the keyboard.
[00:49:15] So it seemed as if it was sort of a virtual permanent hardware keyboard, if you know what I mean.
[00:49:24] So it sort of tried to straddle the old world and the new world.
[00:49:27] It did.
[00:49:28] It was a touchscreen, but it was on this kind of...
[00:49:31] It was, again, on a sort of domed thing that allowed...
[00:49:35] When people clicked on it, they still got the same tactile click that they got from the BlackBerry, but it was still meant to be a touchscreen.
[00:49:41] And because it was raised, apparently dust got in underneath the touchscreen, which made it just malfunctioned.
[00:49:48] It was disastrous.
[00:49:49] And now Verizon had put a 100 million marketing campaign behind it.
[00:49:53] And even though the reviews were disastrous, it sold really well because people and fans of BlackBerry trusted BlackBerry.
[00:50:01] And so they sold millions.
[00:50:03] Nearly 100% of all the devices had to be returned.
[00:50:06] And the replacements that they got were no better.
[00:50:10] So Verizon were furious.
[00:50:11] They called Balsillian.
[00:50:12] They demanded that he pay them 500 million to compensate them for this disaster.
[00:50:18] He refused contractually.
[00:50:20] He was in the rice, but of course, relationship-wise.
[00:50:22] He said, it was disastrous for them.
[00:50:24] Yeah.
[00:50:25] And instead, BlackBerry put in a repair and replacement program that cost them $100 million.
[00:50:30] So it was a disaster in many ways because, first of all, this was their opportunity to come up with a phone that could take on the iPhone.
[00:50:37] But of course, they couldn't because, as you said, they really wore more hardware.
[00:50:42] They didn't have the software expertise to develop it.
[00:50:46] So it was a disaster.
[00:50:48] But it should be pointed out that things were still going well for BlackBerry.
[00:50:52] If you look at 2008, the revenues had doubled from the previous year.
[00:50:57] So this is the year the iPhone had its first full year.
[00:51:00] BlackBerry's revenues doubled to $6 billion.
[00:51:02] And in the 2008 Christmas sales, the iPhone was only the second biggest seller.
[00:51:06] The BlackBerry Curl was the biggest seller.
[00:51:09] And BlackBerry had three phones in the top six selling phones that year.
[00:51:14] So, but they were screwing up.
[00:51:17] The storm was a big black mark.
[00:51:19] They were playing catch up with the iPhone.
[00:51:21] And as we mentioned, because they screwed up with the storm and because Android were forced back to the drawing board,
[00:51:28] they created a new operating system.
[00:51:31] And so Verizon wanted, were still looking for their iPhone killer.
[00:51:36] And so they went to Google and Android.
[00:51:41] And they developed, they developed first of all a phone called, I think, the Dream.
[00:51:44] That didn't do too well.
[00:51:45] But by 2009, they partnered with Motorola and they developed the Droid.
[00:51:50] And this was, this was the first proper, really successful Android phone.
[00:51:57] Now it didn't have a touch keypad, but it did, it had a lovely kind of slide out keyboard,
[00:52:02] but it did have a full touchscreen.
[00:52:04] Is it Google Maps?
[00:52:05] It got fantastic reviews.
[00:52:07] Yeah.
[00:52:07] And on the success of the Droid, dozens of handheld manufacturers got in, took up the Android
[00:52:16] operating system.
[00:52:17] So now BlackBerry didn't just have Apple as a competitor.
[00:52:20] It had all these other really big editors.
[00:52:24] And that was the beauty of the offering from Android.
[00:52:29] It was free for the hardware manufacturers to use the software from Google.
[00:52:34] Yeah.
[00:52:35] Yeah.
[00:52:35] That was a stroke of genius, really.
[00:52:38] You'd kind of think, could BlackBerry have just kind of go, you know what?
[00:52:41] Let's just take on the Android operating system because we have no software background at all.
[00:52:46] Like this is the time.
[00:52:47] They should have adopted this, isn't it?
[00:52:49] Yeah, it is.
[00:52:50] It is.
[00:52:51] And actually I can remember there was a hack because they launched a Playbook.
[00:52:58] Yeah.
[00:52:59] Which is the equivalent of an iPad.
[00:53:01] And the first thing developers went, loved the hardware.
[00:53:04] It's really, really good.
[00:53:05] I'm just going to put Android on it.
[00:53:07] And there was loads of ways you could kind of sideload Android in and use the apps.
[00:53:10] And I think eventually they did move to allow the apps to be localed up.
[00:53:14] So they sort of abandoned themselves to that.
[00:53:17] But interestingly enough, didn't BlackBerry enter into quite a similar journey where they
[00:53:27] were talking, at least talking about allowing other manufacturers to license their software
[00:53:32] and manufacturing devices.
[00:53:34] But this was just a ruse to kind of keep them at bay as opposed to taking the Android journey
[00:53:42] and actually collaborating.
[00:53:44] They did.
[00:53:44] They did that with Nokia and they led Nokia down the garden path for about two years.
[00:53:50] And it stopped Nokia from developing their own operating system.
[00:53:54] It was just a ply by Balsillie.
[00:53:55] Another one of his little ways of, you know, knocking a competitor off balance.
[00:54:00] I remember that from the book All Rights.
[00:54:01] That was around 2005, 2006.
[00:54:06] And Nokia were really pissed off with the way Balsillie treated them.
[00:54:10] But that could have been their Android moment, really, if they had it figured out, you know.
[00:54:16] If they had it figured out.
[00:54:17] But I think you're right, though.
[00:54:17] I think Lazardus was never a software guy anyway.
[00:54:21] He was more an electronics guy and that was his forte.
[00:54:24] And they should have gone down the software route earlier and they didn't.
[00:54:29] And then when Android came out, they really should have just adopted.
[00:54:32] In my opinion, they should have adopted Android.
[00:54:35] But they didn't.
[00:54:35] But at the same time, what the iPhone did initially was it made people more aware of smartphones
[00:54:41] and people who didn't want to buy the high-end iPhone.
[00:54:44] Initially, they were still buying the BlackBerry.
[00:54:46] And in 2009, Fortune Magazine had BlackBerry on the front cover.
[00:54:51] They were the fastest growing company in the world.
[00:54:53] Remember, this is two years now after the iPhone.
[00:54:55] Their sales were up $11 billion from $6 billion the previous year.
[00:54:59] In 2010, their revenues were up to $15 billion.
[00:55:02] So they were still growing financially.
[00:55:05] But it was nearly as if they were reaching the top of the cliff, but knowing that they were about to topple over.
[00:55:11] Because in 2010, Android sales in North America was 80 million units.
[00:55:17] Whereas in 2009, the Android was just $1 million.
[00:55:20] So they'd increased massively.
[00:55:22] BlackBerry sales with Verizon had gone from 96% in 2009 down to 40% in 2010.
[00:55:29] So most of their growth now was coming from overseas, where the carriers were a few years behind.
[00:55:34] But their share price was starting to tank because people could see that the writing was on the wall for BlackBerry.
[00:55:40] Android and iPhone was the future.
[00:55:42] And they really, really needed to pivot.
[00:55:47] They needed to do something.
[00:55:48] And this is where I think the role of the co-CEO comes into play.
[00:55:52] Because you have the two CEOs, both with different strategies.
[00:55:57] Lazardus still believes that they're a player in the handheld market.
[00:56:02] Whereas Balsillie, by this stage, realizes, you know what?
[00:56:05] We're out of the handheld market.
[00:56:06] We can't stay in this because Android and iPhone have this really wrapped up.
[00:56:11] And so this is really the beginning of the end for them.
[00:56:14] So in 2010, three years after the launch of the iPhone, BlackBerry announced that they're going to develop their own new operating system.
[00:56:23] Because usually they're using a creaky operating system.
[00:56:26] Balsillie also realizes that the $10 fee that they're getting from carriers, that's going to be under $1 fee.
[00:56:32] Because they don't have any leverage now.
[00:56:34] The carriers aren't paying Android developers or aren't paying iPhone $10 a month.
[00:56:39] So when these contracts come up for negotiation, he realized that he is going to more or less go.
[00:56:45] But having said that, 2011 is still their peak.
[00:56:48] They have $20 billion in revenue.
[00:56:50] But as I said, their shares are dropping.
[00:56:52] They drop 50%.
[00:56:53] They have a disaster.
[00:56:55] 2011 really is where it all goes wrong.
[00:56:57] They bring out the tablets called the Playbook.
[00:57:00] In 2011, by this stage, the iPad is on its second generation.
[00:57:05] Other Android manufacturers have released tablets.
[00:57:08] And what's really amazing, I mean, if there's ever a sign that BlackBerry had lost its weight, it launches the Playbook without any email.
[00:57:16] Yeah.
[00:57:16] Like, BlackBerry made its name.
[00:57:19] It's synonymous with email.
[00:57:20] It's like, I likened it to Tesla launching a diesel-powered car.
[00:57:25] Like, it really shows how out of touch they were and how they were just trying to catch up.
[00:57:30] And there was a week of arrogance there as well.
[00:57:32] They said, well, this isn't a tablet on its own, really.
[00:57:35] It's a mirroring device.
[00:57:37] It needs to be tethered to your black.
[00:57:39] Yeah.
[00:57:41] What the hell is going to do that?
[00:57:42] Yes, I know.
[00:57:44] It was, I really, I felt, I felt kind of sad for them at this stage because they just seemed to have really lost their way.
[00:57:52] Like, they didn't know who they really were and where they fit it into the new world order.
[00:57:58] And then they had a four-day outage, you know, after over 2011.
[00:58:02] And they're just fantastic.
[00:58:04] The road of trust in the platform.
[00:58:07] Yeah.
[00:58:08] I mean, they were known for quality, for security.
[00:58:12] Those bedrocks that they had built their business on had just crumbled, you know.
[00:58:16] And there was a video of Lazard just coming out two days after the outage, which was their first announcement.
[00:58:22] Kind of say, yeah, it's happened.
[00:58:23] And he wasn't even able to see the video when they were going to be able to fix it.
[00:58:27] Yeah.
[00:58:28] And he wasn't particularly controlled either.
[00:58:30] I mean, you have this, you know, okay.
[00:58:34] On one hand, he's obviously hugely successful and wealthy, but what you see is sort of a detachment from reality as well.
[00:58:43] There's that anecdote about him coming out and lecturing people about why 4G won't work from a technical perspective.
[00:58:50] And you're like, what?
[00:58:52] Yeah, that's a story I actually forgot to not quickly mention.
[00:58:55] Verizon gave him a second chance and asked them to come back and give them ideas for the launch of the 4G network, which was happening that year.
[00:59:03] And Lazard just went in and gave them a lecture really as to why they shouldn't go to 4G.
[00:59:09] Now, every carrier in the world was moving to 4G.
[00:59:13] Data, not minutes, were the future of the mobile business.
[00:59:17] And instead of going into that meeting, which was a great opportunity for them, if they had any ideas, to show them what they were going to do with 4G.
[00:59:24] Lazard just went in and basically told them that they shouldn't go 4G at all and gave them a physics lesson on to why they shouldn't go into 4G.
[00:59:31] So it was really, it was quite, it was quite sad.
[00:59:34] And so by this stage, they needed a new strategy.
[00:59:38] As said, Lazard was still tethered to the idea that they were going to be a force in the handheld sector.
[00:59:45] Balsilli, I like Balsilli's idea a bit more.
[00:59:49] Balsilli thought, yeah, he thought he had a two-pronged idea.
[00:59:52] He was first of all, okay, we're developing a new operating system.
[00:59:56] Let's license that out to China and other developing markets.
[00:59:58] And the second option, second part of his strategy, which I thought was very good, was they had BBM, their BlackBerry messenger, precursor to WhatsApp.
[01:00:07] Now at this stage, carriers were making about 100 billion a year from SMS messaging.
[01:00:12] It was a very profitable service.
[01:00:13] But in-app services like BBM were eating into this revenue.
[01:00:18] They were accounting for about a quarter of all text messages that were being sent by this stage.
[01:00:23] And the carriers had tried to develop their own systems, but it wasn't working.
[01:00:26] And so what Balsilli was proposing to them was, okay, why don't we open up BBM to all mobile phones?
[01:00:35] Okay.
[01:00:36] And we're going to drop the $10 charge that you're paying us at the moment and which they were going to, you know, not pay them anyway when it came up to renegotiations.
[01:00:44] And instead you can use our BBM system and we will charge you $1 per customer to use the system.
[01:00:52] It was already a wildly popular service.
[01:00:53] He took this to AT&T.
[01:00:55] AT&T loved the idea.
[01:00:57] And he knew all he needed to do was get two or three big carriers on board and the others would follow suit.
[01:01:02] So it was a very, very nice idea.
[01:01:04] But Lazaridis and the boards thought that, no, this, this will affect our hands on market.
[01:01:09] We got to keep BBM within BlackBerry.
[01:01:11] Uh, we can't license it out.
[01:01:13] That would be ruinous to us.
[01:01:15] Yeah.
[01:01:16] So it's like the famous letter from the Nokia CEO about the burning platform that we're standing on a, on a burning platform at this stage.
[01:01:24] And it's gradually.
[01:01:25] Yeah.
[01:01:26] And smaller.
[01:01:27] Yeah.
[01:01:27] By this stage now, because the two co-CEOs were on different strategies, because their share price had gone down to $14 from a high of $137.
[01:01:37] Because they had all these disastrous product failures and security issues.
[01:01:42] Eventually that the normally compliant board lost confidence.
[01:01:46] And in January, 2012, the two co-CEOs resigned.
[01:01:50] You would think, okay, well, you know, what happens now?
[01:01:53] Surely they're going to bring in somebody and he's going to, you know, pivot the company.
[01:01:56] And they didn't, the board went with Lazard's choice of CEO, an insider who had worked on all these products with Lazard's or all these disastrous products.
[01:02:06] And the first thing he comes does when he comes in is he scraps Balsilli's two pronged plan.
[01:02:11] Yeah.
[01:02:11] And Balsilli is enraged by this.
[01:02:13] He sells all of his shares for $317 million.
[01:02:17] Nice chunk of change, but they were worth $3 billion at one stage.
[01:02:20] And of course, I think in 2013, seven years after the iPhone, BlackBerry eventually launched two phones on their new operating system.
[01:02:31] Reviews aren't good.
[01:02:33] They've lost.
[01:02:34] They're not even part of the mobile equation by this stage.
[01:02:38] Nobody really is interested in them.
[01:02:40] The two phones flop.
[01:02:41] And BlackBerry are bought by a company called Fairfax Financial in 2013 for $4.7 billion.
[01:02:49] They lingered for another few years.
[01:02:52] They stopped designing their own phones in 2016.
[01:02:54] In 2022, they discontinued all their smartphones.
[01:02:58] And now BlackBerry is an enterprise and software cybersecurity company.
[01:03:03] Turned over V850 million, market cap of $1.3 billion.
[01:03:07] And that's where they're at.
[01:03:10] And Balsilli retired.
[01:03:11] He started donating a lot of money to some universities.
[01:03:14] He set up an international think tank.
[01:03:16] He managed to buy hockey teams.
[01:03:18] Yes.
[01:03:19] Well, he didn't.
[01:03:20] Yeah.
[01:03:20] We forgot to mention that.
[01:03:21] He tried to buy hockey teams three times and was unsuccessful.
[01:03:25] One of them was gone out because of, you know, ethical concerns.
[01:03:29] I think.
[01:03:30] Wasn't that right?
[01:03:32] What?
[01:03:32] The hockey league had ethical concerns about Balsilli?
[01:03:35] I believe so.
[01:03:36] Yeah.
[01:03:38] Which is.
[01:03:39] Yeah.
[01:03:39] Well, anyway, he didn't get his hockey team in the end, but it was just.
[01:03:44] What I found really fascinating from it was that it was their success, their relationship,
[01:03:51] how the iPhone just pulled the rug from underneath them, but how they didn't fall.
[01:03:56] It took them five years of stumbling for it to eventually come to an end.
[01:04:00] Enough that the people would say, oh, they should have pivoted.
[01:04:02] They should have, you know, done this.
[01:04:03] They should have done that.
[01:04:04] Very few companies that were disrupted by the iPhone managed to pivot successfully.
[01:04:10] Garmin was one.
[01:04:11] And Garmin could be an interesting story itself, but very few of them did.
[01:04:14] It's not easy to pivot when you've had so much success.
[01:04:18] So that's what I took away from the story.
[01:04:20] I guess, I guess for me, um, one of the, the sort of points in the book that stood out
[01:04:26] for me is the fact that the guys kind of walked away after being deep in the trenches for so
[01:04:31] now had had little or no contact.
[01:04:35] Yeah.
[01:04:36] And that, that was at the end of the book.
[01:04:37] Now maybe post sort of publication, um, that, uh, kind of made, right.
[01:04:45] It itself.
[01:04:46] Um, but it just seemed as if the depth of the relationship was professional.
[01:04:52] There was no, there was no actual personal shared sort of relationship there.
[01:04:57] I thought that was quite peculiar.
[01:05:00] Um, I thought it was as well.
[01:05:01] And the interview that Balcilli gave with the two authors of the book, he never gave any
[01:05:07] impression that him and Mike Lazardus are friends, but I nearly got the impression that
[01:05:11] he wanted Lazardus to know that he still really respected him.
[01:05:15] You know, he said at the end of the talk, he said, they said, have you anything more to
[01:05:18] say?
[01:05:18] And he said, yeah.
[01:05:19] He said, I just want to say that I had such a good time and I had so much respect for
[01:05:23] working with Mike Lazardus and it was, if he was just, you know, giving a shout out and
[01:05:29] saying, you know, Mike, I still really enjoyed our time together.
[01:05:32] And he gave a big shout out to all the workers.
[01:05:34] And he said it was a fantastic experience building the business.
[01:05:37] But I think that the last five years of the business and how it came crumbling down, I
[01:05:43] think it must've had a huge impact on them as well.
[01:05:46] Cause you have, they did really well.
[01:05:48] You can't say like, this is a story of failure in a huge company.
[01:05:52] They walked away with a lot of money.
[01:05:54] They, they made huge, uh, transformative changes to people's lives.
[01:05:59] But I do think the five years of how they were just scrambling around must've had a
[01:06:03] really, uh, hard, not a hard impact on them.
[01:06:07] It must be.
[01:06:08] Yeah.
[01:06:08] And I guess you're, you're kind of, you're in a kind of a small, reasonably small town or
[01:06:15] small city and in Canada, which you dominate all your office space.
[01:06:20] You're king of the castle.
[01:06:21] It, it must've been psychologically very difficult for me.
[01:06:25] I would say so.
[01:06:25] I would say so.
[01:06:26] It's a fascinating story.
[01:06:28] It really is one of the, the really good success failure stories that I've come across.
[01:06:32] And I suppose because it's relevant as well, because we both had BlackBerrys, you know,
[01:06:36] yeah, I knew the technology and it, I just loved it.
[01:06:40] Yeah.
[01:06:40] And I've had one of each, you know, I've had loads of Androids.
[01:06:43] I've had iPhones, I've had BlackBerrys, you know, the BlackBerrys is a great device for
[01:06:49] its type.
[01:06:50] Yeah.
[01:06:51] Yeah.
[01:06:51] Unfortunately, it's timed in last.
[01:06:54] Yeah.
[01:06:55] All right.
[01:06:55] Well, listen, that was a good one, Keith.
[01:06:57] We've got another good one coming up in the next episode.
[01:06:59] Yeah.
[01:06:59] I'm looking forward to discuss that.
[01:07:01] Some big personalities there.
[01:07:03] Some big personalities.
[01:07:04] All right.
[01:07:05] Bye.
[01:07:06] Bye.
[01:07:22] Bye.
[01:07:23] See ya.
[01:07:23] Bye.