Much has been written about the fall of Blackberry (BB). On our side we even speculated that maybe since they were doing so well not long ago, it was difficult for them to argue any changes in direction. Well, nothing can be farthest from the truth. The inside scoop went outside last week-and thanks to an excellent article from the Globe and Mail.

Dynamic Duo

We have to start first by explaining how BB (founded as Research in Motion: RIM) worked. Since almost its inception it had two leaders, Jim Balsillie (the salesman) & Mike Lazaridis (the geek). Up until last year, the company operated in that way, having two-CEO’s (co-CEO in their term). Lazaridis’s (company founder) team was the one that conceived, designed and manufactured the devices, protocols, etc. Balsillie’s team then marketed, distributed and sold it around the world. Like any relationship, when things are fine and dandy, why change it?

The change came in the form of ‘forced external change’. It’s name was the iPhone, and while publicly and externally these two leaders said the iPhone was and inferior device, internally they were very aware of the menace it represented to RIM.

To Mr. Lazaridis, a life-long tinkerer who had built an oscilloscope and computer while in high school, the iPhone was a device that broke all the rules. The operating system alone took up 700 megabytes of memory, and the device used two processors. The entire BB ran on one processor and used 32 MB. Unlike the BB, the iPhone had a fully Internet-capable browser. That meant it would strain the networks of wireless companies like AT&T Inc., something those carriers hadn’t previously allowed. RIM by contrast used a rudimentary browser that limited data usage.“I said, ‘How did they get AT&T to allow [that]?’ Mr. Lazaridis recalled in the interview at his Waterloo office. “ ‘It’s going to collapse the network.’ And in fact, some time later it did.”

So, Blackberry scrambled to make a worthy competitor of that new shinny device. However to compete with it, they have to build it from scratch, doing this was the biggest challenge they faced, as BB was already a corporation, changing its culture it’s no small task, even more when adding to re-make products from nothing. It would take years, time they couldn’t wait. They knew they still had some time left after 2007 (some years), but they were aware it was not that long.

To their luck, since the iPhone was exclusively being sold on AT&T, Verizon was desperate to have a device that could compete with that. Thus Verizon called them in 2007 so they make an ‘iPhone killer’. This device was the BB Storm, which was based on their older software, that simply couldn’t compete with the modern approach iOS had. In the end the Storm, was … well a storm for BB. 😛

As sales began to drop, Balsillie had a new bold plan to maintain or increase revenue. Balsillie’s team became aware that during the heydays, RIM had revenues of about 800$ millions coming just from the BB service. Of that money, almost all was profit.

Balsillie new grand plan was to create SMS 2.0. As operators were starting to lose revenue due to decreasing payment of services (MMS, Ring-back tone, Voice Mail, etc), thanks devices like iPhone -which did all that without the need of the operator-, the answer was to open BB Messenger (BBM) to all the mobile platforms. The plan was to offer to operators a cut on the income BBM generated, that way the operator will push for BBM. Estimates of BBM working for all platforms with many operators gave security to Balsillie’s team that the company could become (in the worst case scenario) a services company and still make money comfortably.

Long and winding road ahead

As fortunes turned for the worst for BB, Lazadiris became aware that -because of culture-, their team wasn’t going to change quickly enough. Hence he opted for buying a company with an advance operating system, its name is QNX. This new OS is industrial strength, and in geek parlance, is a real time operating system. Notice, neither iOS nor Android are real-time OSs, QNX is far superior to these two counterparts, but as we learned from the Wintel era, technical superiority it’s not all that matters in the race for dominance nor influence.

Being forced to change BB, the board started out by dissolving the dynamic duo and naming one new CEO (however, the duo retained membership of the board of directors). As a new CEO in crisis, Thorsten Heins took *radical* measures, the first one was to dissolve the program for SMS 2.0, in this case with the support of Lazadiris who was worried of not focusing in one thing at the time. As a consequence (or maybe foreseeing a certain sinking ship) Balsillie resigned on March 2013 to the BB board and immediately sold all his stock in the company.

Later was the time for Lazadiris, who questioned the decision of putting all the weight behind the new model Z10, a me too screen-based-smartphone. Instead of prioritizing the Q10 which was a keyboard-based, that while obsolete for some, still had many more chances to sold well with die hard BB users. The CEO won, the Z10 went to sale first, some months later BB took a write off almost 1$ billion due to unsold inventory.

Crash and burn

Initially many people precipitated to put the blame on arrogance and not reacting quickly enough. They might acted arrogantly externally in order to convey confidence on the new challenges, internally they did everything that they could to continue being relevant and keep the position in the industry BB earned. Unfortunately, the execution was poor (is easy to say it now, from far away writing these words). The BBM app was supposed to go live two weeks ago, only to be takes under the excuse of too much load and leaked app. The real reason might be that since the company has been sold (almost certain), they’re going to focus on the enterprise business, while BBM was a consumer business. They had to kill it without mentioning this, hence all these excused around it.

While things went fine and dandy the duo relationship wasn’t strained, when the time came, the duo wasn’t prepared for it, ending up in a divorce. Maybe that was the reason for the fall, not being able to handle the relationship on tough times.