Research in Motion (RIMM) is in a death spiral. Consumers are moving away from the platform in droves, Blackberries have lost the “cool” factor, and RIMM management is unable to control Wall Street expectations. RIMM’s primary problem is incompetent management.
At first, it is difficult to believe that such a large company (at least in the eyes of Canada) could possibly have inept management. People assume if you are CEO of a company, you know what you are doing. How else would you get to the top position of a multi-billion dollar company?
Unfortunately, RIMM management is indeed inept and incompetent. RIMM understands its main problem; no one wants the current Blackberry phone line-up. Don’t be fooled by RIMM sales figures still in the millions of units. Quarterly sales are declining in absolute terms (in a market that is booming). A bad sign to say the least. However, RIMM doesn’t know the solution to its problem. According to RIMM, the solution is introducing new Blackberries. Take the Blackberry that everyone loved, and just give it incremental updates or speed bumps. Problem solved. You can see how this solution is inadequate and simply wrong. According to management, RIMM is facing hard times because Blackberry updates are delayed (It’s hard to recall a moment when RIMM management actually admitted things aren’t going well - a tell-tale sign that incompetency is running the show). Management is living in a fairy tale where iOS and Android aren’t the problem. Some may say that RIMM knows it has no viable solution to compete against iOS and Android. If true, I don’t see how the current management team and Board are still working for RIMM shareholders. It speaks volumes that not even activist shareholders want to get involved in RIMM…yet.
Making matters worse, RIMM is now unable to push out new Blackberries until the end of 2012. I assume RIMM employees are still going into the office each day and doing something. The question is what exactly are they doing?
How did RIMM get in this position? I suspect the timeline went something like this:
1) iPhone is introduced. 2007.
RIMM laughs it off and is confident that RIMM sales won’t be impacted. iPhone doesn’t have a physical keyboard. Who would want that?
2) Significant iPhone updates are introduced, including the app store. Android begins to take off (largely resembling iOS - apps and touch screens). 2008 and Early 2009
RIMM sales are still growing and RIMM’s stock price hits an all-time high in the middle of 2008. The subsequent global financial crisis hits RIMM’s stock price (along with every other company) masking some of the growing issues around the company.
3) iPhone and Android are exploding. Middle to Late 2009.
Up to this point, I really don’t think RIMM was too concerned with its prospects. Consumers (enterprise) were still addicted to Blackberries and its email capabilities and physical keyboards. Fundamental holes are forming though. ASPs are beginning to fall and RIMM is starting to lose grip of the high-end market. Channel fill is at all-time highs. Developed country growth is no longer increasing. Management’s solution is to focus on emerging markets. Problem solved.
4) iPhone 4. 2010.
The game has changed - again. RIMM has to see signs that things are not going well. iPhone blows past RIMM in sales. RIMM introduces its flawed Playbook. RIMM’s plan for phones? Updated Blackberries, of course. Research and development is caught flat-footed and asleep. RIMM has little to nothing in terms of alternatives beyond its signature Blackberry keyboards.
5) Current Day.
Playbook is a disaster. RIMM is in a death spiral. Incremental updates are now in disarray. iPhone and Android are eating up RIMM’s marketshare.
RIMM will make a classic business school case study. RIMM was a company that became a powerhouse for doing one thing really well (email) at a time when the smartphone market was a disaster and phones really weren’t too smart. Apple introduced the iPhone and everything changed. Even though many of RIMM’s metrics appeared healthy (subscriber growth, increasing sales) for a number of quarters post-iPhone, tumors were forming. Consumers were offered a better alternative and RIMM was unable to respond due to their inability (or lack of desire) to move beyond its core competency and lead the market into new innovation.
RIMM now faces a number of severe and multifaceted problems that could very well lead to the end of the company. I don’t think RIMM R&D is capable of innovating. RIMM has already lost the cool factor and chances are slim they will ever get it back. RIMM management seemingly never planned for the product after Blackberry. I don’t think its a stretch to think of it as Apple never planning for the day after the iPod. Sounds incomprehensible. Should companies that make such fatal errors, throwing innovation aside to instead milk current successes, deserve to survive? Even if RIMM does introduce a good phone in the future, consumers won’t care. If one thing is clear in consumer technology, it’s that momentum can be your friend (or in RIMM’s case, your enemy).