The other night, I watched my two-year-old daughter play with the toy phone handset from her Fisher-Price activity table.
She wasn’t talking on it. She was typing with her thumbs.
This in itself was no surprise; thumb-typing is what she sees grownups do most often with their phones.
What struck me, having just finished reading an advance copy of Losing the Signal: The Spectacular Rise and Fall of BlackBerry, was the enormity of the cultural impact that a once-tiny upstart named Research In Motion (RIM) had made on the world, from its base just a couple of kilometres from our house.
No one thumb-typed until Mike Lazaridis made it technically feasible, and until his co-CEO, Jim Balsillie, sold us on the concept. Since then, people have bought well over a billion smartphones of all kinds.
By now, we all know that BlackBerry – known as RIM for the first 29 years of its existence – makes only a tiny fraction of the smartphones sold today; that the company fell far and fell fast from its once-untouchable perch atop the market it created.
Many of us, especially in Waterloo Region, also know something of how it all happened – or at least, we like to think we do.
Unless you’re among the few who worked in the upper reaches of RIM’s corporate structure, you can expect that feeling to change when you crack the cover on Losing the Signal, which goes on sale today.
Its authors, Globe and Mail business reporters Jacquie McNish and Sean Silcoff, have built a riveting chronicle of the company’s long history atop a base of deep research and untold numbers of interviews with many key players – from telecom carriers to ex-board members to top former executives, including “dozens” of hours spent one-on-one with Lazaridis and Balsillie.
(Full disclosure: I was a colleague of McNish at the Globe and Mail when I worked there from 2003-2011; Silcoff joined the Globe in 2012).
By turns entertaining and informative, unflinchingly critical and sympathetic, this book is as thorough and balanced an account as you can expect from two people who didn’t work there – especially a pair of journalists who, in earlier circumstances, would have faced strong resistance from RIM execs in reporting this story.
The story not only does justice to the magnitude of RIM’s achievements over time, many of which were overshadowed in the blow-by-blow coverage of the company’s struggle to compete with smartphones running Apple’s iOS and Google’s Android software; it also highlights lessons – and there are more than a few – to be learned from its tactical missteps, weak board oversight and unusual co-CEO management structure.
While Lazaridis and Balsillie seemed an unstoppable duo on RIM’s way up, everything changed in the mid-2000s, according to McNish and Silcoff, when a patent lawsuit followed by a stock-options backdating controversy drove a personal wedge between the two chiefs.
“That literally knocked the wind out of my sails,” Lazaridis tells the authors.
The falling-out left RIM a company divided just when it needed unity the most: as Steve Jobs introduced the iPhone to the world in 2007. The internal corporate chasm at RIM only grew from there, hindering the company’s ability to meet competitive threats quickly in an industry that waits for no one.
For all the complexity of the RIM/BlackBerry saga, McNish and Silcoff navigate the twists and turns in a commanding and readable way. Losing the Signal is a quick read, but that’s likely due more to its clear and compelling content than its compact 250-page length.
To find out more about the story behind the book, I interviewed McNish and Silcoff by phone last Friday. What follows here is a lightly edited transcript of our 45-minute conversation.
Q – So much has been written about BlackBerry’s fall from the top of the smartphone market in recent years. However, Losing the Signal goes back to the beginning and tells us, in great detail, how a tiny Waterloo startup grew into a global game-changer. Just how big was RIM’s contribution to the way the world communicates?
McNish – BlackBerry got right what so many people didn’t get right, because it focused on two things: what the wireless networks at the time could cope with, and what the consumer really needed.
When you think of all the predecessors, from Apple’s Newton to the Viking by Ericsson and others, everyone was in the race to get this done. The biggest player was Motorola with its pagers, and it tried a two-way pager, but it didn’t work.
What Research In Motion figured out, working closely with the carrier at the time, BellSouth, was how you could efficiently send text data over wireless networks. They understood how to do it efficiently by compressing the data, by breaking it up into packets, creating the right software programs so that it could be universally used by computers, so that people could get their emails from their desktops onto the handheld device.
That was a big step forward.
The other thing that we really have to give Mike Lazaridis credit for – the other competitors were experimenting with styluses or tiny little keyboards, thinking that we would all use all of our fingers on the keyboards. Mike understood that that wasn’t going to work, and he focused on a keyboard that could work with your thumbs.
When you think of it, how mesmerizing that was to be able to thumb for the first time on your BlackBerry, it was like a toy; it was exciting, and he made it easy. It was intuitive; you press a letter long enough and it becomes a capital; two spaces and you’ve got a period.
All of that was with a mind to what the consumer wanted, what they would understand, and what the networks could manage.
Q – How unlikely was it that this company sprang from the soil in Waterloo, Ontario, as opposed to Silicon Valley or some other well-known tech community?
Silcoff – That’s an interesting question, and it’s particularly salient when you look at Shopify, which just went public. It’s yet another reminder that a company doesn’t have to be from Silicon Valley to be a success in the field of innovation.
Waterloo should be an obvious place as a hub for talent because it produces so many incredibly smart and talented engineers; you’ve got that terrific co-op program.
What was really the reason for their success was a combination of brilliant people: a very visionary innovator who lived and breathed science and was always thinking about the future, and an extremely smart, savvy and tactically brilliant salesman and strategist in Jim Balsillie.
It was an unlikely combination, but it was a combination that you could find in Waterloo or Ottawa or Vancouver. There’s no rule that says this has to happen in Silicon Valley.
The other thing that’s important to remember is that it wasn’t just a matter of building a great product. It also came from building a fairly complicated system to support it, that people didn’t have to know about. All they had to know was that this product worked really well when they put it in their hands.
That also meant they had to hire the right people to put it in the hands of users, and a very smart strategy early on was to hire young, hungry kids who came from small towns in and around Waterloo Region.
Jim said something really interesting to us. People had asked him along the way, ‘How do you get people to come to the small city of Waterloo?’ And he turned it around and said, ‘Actually, we hire people who are excited to come to the big city of Waterloo.’
That’s certainly what they looked for when they recruited young evangelists to put the product in the hands of the people.
McNish – To add to Sean’s point, sometimes outsiders can be the true innovators, because they’re not invested in the same way as, at the time, [employees at] Apple or Palm or Motorola.
Motorola was a mobile communicator that started in the walkie-talkie business, and was used to sending messages out. They could never figure out how to do the two-way transmissions like Mike did so successfully with the BlackBerry.
I think being an outsider was an advantage for them right from the beginning.
Q – In the 1980s and early 1990s, before much of the world had heard of RIM, local residents and reporters had a sense that big things were in store for this little company. RIM appeared to be on a permanent upward trajectory, and the explosive success of the BlackBerry only enhanced this bulletproof aura, which continued even after the iPhone was introduced. What role, if any, did this sense of euphoria play in how the company was managed, and in its eventual fall from the top?
Silcoff – I don’t think these guys ever took anything for granted and ever had a sense of inevitability.
I think Jim was constantly looking over his shoulder and concerned. They may have projected a sense of cockiness, and certainly when Apple came along, they dismissed Apple and a lot of people criticized them for that.
But every step of the way, they were aware they could be absolutely flattened by larger competitors. You see that in the anecdote about the BlackBerry Connect program. They figured that, at some point, someone was going to figure out how to do wireless email like they did. So, they smartly leveraged the request they were getting from their customers, which was, ‘Can you license out your email to other handset makers?’
And they agreed, but really it was a masterful strategy, because what they ended up doing was delaying all the other handset makers from coming up with their own email systems for a couple of years.
I think that’s why there were so many tactics deployed along the way. The carriers didn’t make their life easy. Even though Vodafone, for example, signed up, it wasn’t an automatic slam dunk.
The first BlackBerrys kind of sat on the shelf at Vodafone, and the carrier was actually kind of irritated with them, and it wasn’t until a salesperson from RIM got herself embedded inside Vodafone and really started pushing and promoting the product that it really started to take off.
So I think there are plenty of examples in the book where you see that they really had to put a lot of effort in, every step of the way.
It probably wasn’t until 2005 or 2006, in the last couple of years before iPhone came along, that they were in a position where they could even afford to breathe.
And of course, they couldn’t breathe then because of the NTP [patent lawsuit] scandal.
McNish – I think the sense of local pride that you’re talking about didn’t just exist in Waterloo; it existed across Canada.
RIM was like the hockey team that won six Stanley Cups. We were so proud of them; that we had a world-beater that was going everywhere.
I remember the first time I met a BlackBerry salesperson, and I felt it was like I was talking to someone who had a religious sense of purpose. They really believed in their product and I think a lot of Canadians really believed in this product. It was a truly fantastic step forward.
That was the cultural championing that we saw across the country that we felt as Canadians and as users.
Within RIM, Sean is absolutely right – there was a buttoned-down dedication, no-nonsense, no-time-for-celebration culture.
They were very bad at celebrating their successes, and that was deliberate. Jim liked to say, ‘We don’t want people to wear their arms out patting themselves on the back. We’ve got to keep moving forward.’
They were tight-fisted. They didn’t build great monuments to their company’s greatness like you see at Apple and Google with their complexes in Silicon Valley. They built squat buildings that all looked the same; they weren’t into that muss and fuss.
So, I don’t think there was a sense of invincibility. I don’t think their paranoia or their concerns about the future ever left them.
Q – The book cites many developments as catalysts in RIM’s reversal of fortune. If you had to pinpoint a moment when things began to change, what would it be?
Silcoff – It’s really the arrival of the iPhone, their initial reaction to it, and then the Verizon contract for the Storm that followed.
It was a series of events that started in 2007.
When they saw the iPhone, it was dismissed initially by Mike and Jim. They saw a product that was going to gobble up network space and was going to suck batteries dry and wasn’t very secure. And typing on glass didn’t seem like a great thing to do.
They were right about all of those things; it did suck up network space; it wasn’t as easy to type on an iPhone as it was on a BlackBerry; it did run down the battery and it wasn’t as secure.
The thing is that consumers, who were the new target for smartphones, didn’t really care about all of that.
What’s interesting is that, while RIM initially dismissed the iPhone threat, Google immediately changed course, and that led to the development of Android. And Verizon, within a couple of months of seeing the Apple iPhone arrive, called up RIM, and they realized they needed an iPhone killer, because AT&T had a four-year exclusivity (with iPhone).
McNish – All of that, from a strategic and competitive point of view, is true, but underlying all this – which very few people were aware of, unless they were in the upper ranks of management of RIM – is that this great and unlikely alliance of Mike Lazaridis and Jim Balsillie was falling apart.
It was very central to the management of the company, to how people responded, and their ability to respond to the competitive threat.
Mike and Jim fell apart privately and internally over the stock-options scandal. Mike felt that it was something that could have been avoided; that Jim should not have allowed this to happen; should have been more vigilant.
Mike felt a great sense of reputational damage and hurt and frailty over the whole experience, and it was the beginning of the end of this great alliance. It became something that more and more people became aware of, and you saw the company divide into silos: Jim’s camp, Mike’s camp, their own different ideas about how to respond to the ever-increasing threats from Apple, Google and Samsung.
It led to internal paralysis over strategic direction and operational management.
It is, I think, truly the saddest part of the book.
Q – RIM’s board of directors is cited several times throughout the book. How big a role did RIM’s approach to corporate governance play in what ultimately befell the company?
McNish – I think that’s a huge, huge factor and a very good question.
This is a board that was hand-picked by Jim and Mike. It was filled with people who were little more than yes-people to what Jim and Mike wanted. It was a success company; many of them lacked any technology experience.
In the wake of the stock-options scandal, they had to bolster their ranks and hire more sophisticated big-business directors. But even those directors didn’t fully understand the technology challenges, and as well, the whole struggle within the company – whether we stick with handsets, or whether we go with Jim Balsillie’s plan of instant messaging – became a very difficult issue for the board to manage.
Silcoff – I think it’s interesting, and there are probably some good lessons to draw about the board.
A board isn’t necessarily going to make your company successful; I mean, Jim and Mike really drove the success. But you need a board to be there when you need a board to be there.
A few examples stand out. (One is) when the whole debate was raging internally, when the quality really fell off sharply on the smartphones, and it seemed like the board couldn’t navigate between what was an obvious rivalry between the two sides of the house over what the problem was. And then, with the PlayBook, there didn’t seem to be a lot of board oversight or serious direction on what the PlayBook should be, and that suffered from a real confusion about what was realistic to deliver, what should be in the product, how it should be marketed, etc.
I think the most telling example is the first board meeting that was held after the iPhone came out. The directors seemed to be preoccupied only with the stock options, and we didn’t get a sense that Apple was even discussed, which is kind of surprising. You would expect that would be a topic of conversation for the directors.
Q – Waterloo Region is now a globally ranked startup community, owing largely to the University of Waterloo’s co-op computer science and engineering programs, but also to the high-calibre talent, capital and profile that RIM brought into the community. For Waterloo’s next generation of tech entrepreneurs, what’s the most important lesson to be learned from what happened to this company?
McNish – I’m going to channel Jim Balsillie here. Only the paranoid survive.
He does work quietly with entrepreneurs in the area, and it’s a little bit like speed dating – they’ll come in and he’ll say, ‘What’s your name? What’s your plan? OK, let me tell you, they’re going to kill you. They’re out to kill you. They’re out to destroy you.’
The Research In Motion story is a living testament to the constant predatory efforts, particularly in its early days, by people to take their business.
Jim wrote a column recently in which he cited Silicon Valley individuals saying, ‘When you get big enough, that’s when we target you to kill you.’ I mean, it is an unbelievably competitive business.
It’s not enough to be technically savvy, to have a product that’s a huge leap forward. You’ve got to have the business smarts to weave and dart and dance around these people who are out to kill you or take over your business at predatory prices.
I think the other thing the Research In Motion/BlackBerry story teaches us is that you really have to have enormous conviction in what you’re going to make.
There’s this great story from the early days of introducing BlackBerry, where they did a focus group. I believe it was in Toronto, and one gentleman said, ‘So you’re handing me a device that’s going to beep a red light and buzz every time I get an email? Well, you’d better give me a hammer with that item, because I sure don’t want anything like that.’
So, sometimes you’ve just got to really even ignore what the consumer focus groups are telling you, and just know that it’s right, and just follow that to your fullest extent.
Silcoff – I think there’s also some conventional wisdom that people should be ready to throw out.
One [piece] is that Canada can’t support tech champions.
People talk about Nortel, they talk about RIM, they shrug their shoulders and they look depressed, and they shouldn’t.
RIM ultimately was not successful in remaining at the lead of the smartphone race, but they created the smartphone market, and they built a $20-billion company.
There are stories all over the tech world about companies that became successful and then lost it. I think the greatest thing to take from this is that there are lessons on the way up and on the way down, and that this kind of a company can be built in Canada; can be built in a city like Waterloo.
It’s also worth noting that brilliant tactics and hustle can get you fairly far, but ultimately you need a sound strategy and to be prepared to innovate and pivot when the world changes around you.
I think people should actually be quite encouraged. In some ways, RIM – or what RIM was, because, of course, it’s still in existence and a going concern – is like a falling cedar in the forest. The cedar nourishes the forest back to life, and you’re certainly seeing that in Waterloo and elsewhere. There’s a lot of engineering talent that’s been freed, and many of them have ended up at other startups.
This is still a flourishing tech hub.
With the wealth that was created by RIM, Mike is investing in groundbreaking science that could lead to innovations for decades to come, and Jim is making important contributions to the conversation about innovation policy and helping startups as well.
In some ways you could argue that this story has a happy ending. It’s not the happy ending, necessarily, that RIM is continuing to be the success that it was, but it has a lot of spinoff benefits that I think will be very interesting to watch.
McNish – One other thought, in listening to Sean say that so eloquently, is that I think our notion of failure is a very different notion in the technology sector, because I think failure is constant.
I was in a Vancouver technology hub recently and one of the startups had a sign on the front of the door saying, ‘Failure is just a step.’ It happens a lot, because the speed of innovation is so fast and the stakes are so high and the competition so fierce that it’s much more common than we’re used to in conventional business.
Failure is a way of learning so that you can have, perhaps, more success in the next round.
Silcoff – It’s interesting. Ryan Holmes, who I interviewed yesterday, from Hootsuite, talks about how there’s a good way to fail and a bad way to fail. I think a bad way to fail is to sort of shrug your shoulders and go home and say we can’t do this again, and failing well is saying, ‘What can we learn and how can we do it better next time?’
It would be nice to see that ethos and character develop a little bit more in Canadians. There are certainly some Canadians who are learning how to do that now in Canada and in Silicon Valley.
People talk about this being a golden moment for Canadian tech again, with Shopify and other companies coming up, so it’ll be interesting to see if that becomes a little bit more ground into our character as entrepreneurs, as tech wizards.
Q – RIM executives were not known for giving lengthy media interviews, even when the company was flying high. Why do you think they they spent so much time talking with you about what went wrong? How much convincing did it take on your part to get them to open up?
Silcoff – The story we did in September, 2013 for the Globe and Mail, was really, we feel strongly, the first time the story of the downfall had been, up to that point, fully told and fairly told.
There was a kind of conventional narrative that ‘this company took their eye off the ball; they didn’t take Apple seriously enough; Jim was too busy trying to buy a hockey team’ and so on. We took a different approach and we did quite a bit of homework, and that story really seemed to resonate a lot.
We found it was actually a calling card with a lot of former RIM people. It really opened the door; I think they saw that story as an attempt to really kind of tell a balanced, deep story and get to the bottom of things.
It’s funny, when we read that story now, I think we feel like we really only had the tip of the iceberg, but we also knew that we had a story that was very important and would resonate with a lot of people if we could really flesh it out.
One of the first things, obviously, was getting Mike and Jim to agree to the book, and we got that off the bat. We ended up speaking to each of them for dozens of hours, and they didn’t impose conditions on us. They answered our questions and they were willing to entertain marathon sessions where they went quite deep into everything from strategy decisions to the things that informed them when they were five and seven years old.
I think their participation also opened doors with other people. As you see in the story, many people with the word “chief” in their job title agreed to help us, and those insights were very important to give us a fairly well-rounded view of what was going on. And not just chief level, obviously; we spoke to engineers and people all up and down the company, and people outside the company as well.
Q – Are you concerned that your extensive interviews with ex-RIM executives will lead people to assume you’re soft-pedalling what really happened, because you’re telling the story through the people who were responsible for what happened?
McNish – So far I think what we’ve seen is people on Twitter accusing us of being too hard on the company, that we hate the company and that we’re trying to drive it down to zero, and others have said ‘you were too soft.’ So, if we can find a balance in that, I think we’re doing our job.
I don’t think we are too soft; I think this will be tough reading for a lot of people who were involved in RIM and who we interviewed. All the warts are there, in terms of the breakups between the two CEOs, and the difficulties and the missteps that they took.
Every time someone says, ‘What’s the title of your book?’ and we say, ‘The rise and fall of BlackBerry,’ invariably some of them come back and say ‘and the rise again,’ because people really want to see that. That’s an inescapable sort of response to your favourite hockey team not winning the Stanley Cup for a long time; they want to see it rise again.
Silcoff – I would argue there are some pretty unflinching looks at, in particular, Storm and the PlayBook. I would think the PlayBook is really difficult reading, and some of these stories were actually very hard for people to retell to us.
A lot of people we spoke to, it was almost like they were suffering from a kind of post-traumatic stress disorder. It was a very intense period; people loved working at the company and I think it really bothered them – almost hurt them – to see the company kind of disintegrating around them.
It was really painful for people to relive some of the less-fortunate outcomes within the company.
Q – Jacquie, you mentioned people add in ‘and rise again’ when they hear the title of the book. Is that rise visible on the horizon at this point?
McNish – I think what we’re going to see is continued shrinkage of this company and a continued shift towards Silicon Valley.
They’ve just announced a senior vice-president of communications and she’s going to be based in San Francisco. That sends a pretty big signal that they want their head strategic communications person to be based in the United States, near Silicon Valley.
I think they have time on their hands; they’ve got very patient long-term shareholders led by Fairfax here in Toronto. They believe there’s still value to be produced out of this company.
The big question is, will they do it on their own?
I’m going to go out on a limb here and say I think it’s unlikely that, over the long term, they will survive on their own, and that we’ll see some sort of a partnership or a merger with someone that particularly needs their enterprise, business-related software-handset systems expertise to add to their inventory of product lines.
It’s just difficult to see them continuing in the long term on their own.
Silcoff – If you think about it, this company was really built around a product.
They made $4 billion a year in services revenues, but that really stemmed from the product itself, and if BlackBerrys aren’t selling, or they’re selling in much-diminished numbers, then this company has to look completely different.
That transformation is still ongoing.
Fortunately for John Chen, he’s a very capable manager, and he’s done an effective job at cutting costs. As of last quarter, he had more than $3 billion in cash on the balance sheet, the company wasn’t really losing money at all, and those patents are worth a lot.
So, this is a company with options and time. How many options and how much time? It’s a little hard to say, but it does suggest that even if this strategy they’ve been on – to increase software revenues and launch new devices – even if that strategy doesn’t pan out, one would think he still has another opportunity.
Q – What surprised you most about what the former co-CEOs – and others, for that matter – told you during your interviews for this book?
McNish – I think the thing that surprised me the most was the human wreckage in this story.
Sean talked about post-traumatic stress disorder. There were times when I think we both felt these were soldiers coming back from Afghanistan.
In fact, what one of the senior executives used to say every day was ‘incoming,’ as in, ‘the bombs kept flying at us.’
You see this toll taken particularly at the top by Mike and Jim. It was punishing for them – psychologically, emotionally – and they’re not the same people that they were.
The thing I admire most about them is how they continue to keep going; they continue to keep giving back to Canada in the form of think tanks, investments in quantum physics at the University of Waterloo. It’s extraordinary that they still have that focus.
But I don’t think either one of them ever want to be in a commercial enterprise, ever again, in their life.
Silcoff – Or running one, for sure. I can see Jim as a chairman, maybe, of one of his startups, but certainly in the CEO role, he’s been clear that that’s not something he foresees for himself.
I think Mike will take on more of the role of venture capitalist; he’s with Quantum Valley, so I can see him as an investor and really trying to fuel the next set of big breakthroughs.
Q – Sean, what surprised you most while researching the book?
Silcoff – I think, for all their cockiness and seemingly outward hubris that formed people’s impressions of RIM, just how uncertain and paranoid they were, and how tough a struggle it was at every single step of the way.
To be honest, before I started writing about BlackBerry, I assumed like many people that they made a great product and people bought it, and I really didn’t think much more than that.
It was incredibly difficult for a long time. Nobody made it really easy for them; they had to be crafty and tactically shrewd, and hope things turned out and hope they didn’t get squashed along the way.
I think that was a very important motivating force for many people talking to us – explaining just how difficult these things were.
That happily leads to, I think, one of the most important outcomes of this book, which is that there are a lot of really great lessons here for startups, for people in the business of innovation policy in government, for students of business, and great food for thought in general.
Q – Its recent struggles notwithstanding, what has the company’s existence given to Canada from a legacy perspective?
McNish – I think there are many legacies, many, many.
If we just push the product aside – and Sean touched on this – the ecosystem in Waterloo has been fed by this great exodus of people who played in a global sphere. And now, some of them have actually taken over buildings that used to be RIM buildings and offices that used to hold RIM operations, and that’s quite an extraordinary story, that they’re now running their own startups.
I think when you compare the experience of RIM, when it was trying to raise financing in the early days, to financing today, RIM has played a big role in legitimating the notion that there is this vibrant startup community worth backing financially here.
They had a very hard time. The investment banks and the lenders were very predatory, even with RIM, and now you’ve got private equity and other venture capital investors coming on a regular basis to Waterloo, and they don’t have to prove their credibility. It exists already, and people are prepared to invest in a way that they wouldn’t with RIM.
I think that’s a huge contribution to the local startup community.
Q – Final question: What kinds of smartphones do the two of you carry?
McNish – I’m hedging my bets; I’ve got an iPhone and a BlackBerry Classic.
Silcoff – I’ll be honest with you; I just switched to the Classic because I was quite fed up with the Q10. If I’m not satisfied with the Classic, this may be my last BlackBerry, but I’m still one of those people who likes to type on a keyboard.
Every other product in our house is made by a company from Cupertino.
