Losing the Signal - The Blackberry Story

 

There's too much work at office nowadays, I don't get any time to catch up on my reading. But every now and then, there is buzz about some new book and you just have to read it.  A few weeks back there was a general buzz in the news about Blackberry, formerly Research In Motion. It seemed that Microsoft was keen on buying the dying company. And two Globe and Mail editors were about to publish a book about the rise and fall of Blackberry. Two online newspapers had published excerpts from the book, and they covered the general theory that it was Apple's iPhone that brought down Backberry's smartphone business. The excerpts read like one of those TV documentaries were scenes were re-enacted and interviews explained them in detail.

I had to read this book. And so I did. I got myself an pirated online .epub version of the book and read it over the weekend. It was indeed a good read, and here is what I learned.

 

1. The story of Blackberry is one of those untold or unheard of success stories of technology companies from the 1980s. Their story starts around the same time Microsoft and Apple started business, but never got the same kind of media spread. So they have been in business for 30 years, but they earned worldwide praise for their devices for only about 8 years, from 1999 to 2007, then they Blackberrys were the definition of a smartphone.
2. Mike Lazaridis (born Mihal), the founder and long serving co-CEO of the company, was an engineering genius. He used to fix broken things right from childhood, and helped out fixing stuff in his school, and this set the stage for his career in the emerging telecom industry. He was the son of immigrant parents from Istanbul, his family had limited means, and he did many odd jobs in his neighbourhood and school (selling self-made quiz buzzers at one point) before he found his calling in world of electronics and communication. He built his own oscilloscope ! When he started engineering at the University of Waterloo in 1979, they had one IBM 360 computer !Discouraged with the world of big business, he decided to be his own boss by starting a consulting company that designed computer solutions for local technology companies. He and his friend Doug Fregin dropped out of University weeks before the course completion and in an unintended nod to the many lessons they had yet to learn about running a business, Lazaridis and Fregin formally registered their new company under the name Research In Motion Ltd. on March 7, 1984.
3. At first, the company designed custom electronics for companies in Canada, and then they jumped onto the wireless communication industry designing & manufacturing pagers, the only cheapest way back then to transmit non-voice data. They worked with Ericsson to change the one-way paging system into two way, and then decided to do something about bringing e-mails to a hand held device. At the time, the only way to access e-mail was via a desktop or laptop computer. Palm was selling a wireless devices they called the Personal Digital Assistant, but it had no e-mail, only Contacts and Calendars could be shared. Mike Lazaridis himself used one, and wanted to bring these new technologies into their own range of offerings.
4. The name Blackberry was not coined by anybody at Research in Motion. Instead, they hired Lexicon Branding, a local company renowned for its gift of selecting memorable brand names, particularly for nerdy high-tech products like Intel's Pentium and Apple's powerbook. The codename for the new device was PocketLink, and most of RIM liked and wanted that name. Somebody at Lexicon had written soothing words on a whiteboard to throw around ideas for the new name, and the words included “summer vacation,” “melons,” and “strawberry”.Next to the name of the red fruit, one of the employees had scrawled “blackberry.” It was the 40th and last name considered for the new device and Laziridis liked it instantly.
5. The Blackberry was never intended for every user on the planet. At the time, network speeds barely allowed full HTML page browsing, and RIM wanted to sell their dedicated , encrypted e-mail services on the expensive phones to top executives who would appreciate the product. When other companies were designing multiple phone models for every demographic like age group, profession, language and country, RIM produced the same kind of phones with only a few differences between them. In 2001, they were struggling to meet sales demands for their phones, because no other manufacturer had any similar offerings. They had a plant in Waterloo in 2002 to make the phones, but they did not take the risk of opening more plants in other countries, specially third world countries. This was the main reason why their phones were priced high, and it is a mistake other companies did not make.
6. RIM had the technology to put a full HTML web browser on a phone for years, but US and Canada network operators prevented them from doing that, fearing it would clog up their network. Steve Jobs at Apple had full control of his company, and told AT &T that they would not be involved in the design of the Apple phone at any point at all, and that they would have to support full web browsing and multimedia on the network, even the licensing deals. AT & T had no choice but to take up the offer. This is the reason why the iPhone looked cooler when it came out, it boasted of all the features other companies were denied to put on their own phones.
7. RIM never considered Apple a threat, because while RIM was making sophisticated phones for the executives of the enterprise, Apple's phone was more like a multimedia device, and RIM predicted the new phones would clog up AT&T's network. It did. The network got so overloaded, people started complaining of dropped calls and slow internet. But what RIM did not predict was that the users didn't really care. Apple sold millions of phones in their first month alone,  more than the sales of RIM's Pearl in the last quarter. RIM took their time in responding with a touch device called the Blackberry Storm, but its touch-cum-press-down-screen proved to be a disaster, every one of the first phones had issues and had to be replaced. If RIM had designed a touch screen similar to that of the iPhone, things would have been different.
8. There were other issues as well. A few months before the iPhone launch, RIM was hit by a patent related lawsuit from NTP Inc, a shell company, which would reap millions off RIM's profits for years. RIM was in talks with Motorola for a takeover, but those talks fizzled because Motorola did not want to sell them their patents. Motorola went down, was bought by Google, and then sold to Lenovo. RIM also had a scandal regarding back-dated options for their stock.

 

However towards the final chapters of the book, what plays out is that the reason the company failed in the end is the same reason they had succeeded in the first place : exclusivity. RIM did not make phones for everyone, just the elite. They sold fewer phones than rivals all through history, but those were expensive phones for the enterprise worker. Sure they were built sturdily, had great battery life, and the unique keyboard and encrypted e-mail system, but these were custom made for those who needed it. Also, a big part of RIM's revenue came from loyalty, a Blackberry user had to buy the overpriced phone all right, but then they also needed to pay RIM a monthly usage fee to use the Blackberry network for secure e-mail. And this licensing fees comprised a big part of the companies revenue. Once a Blackberry user decided to ditch the service, that loyalty was lost. And so was the monthly fee. After the i-Phone, whenever the two CEOs had to discuss on the probable next steps they could take, the decision was always between maintaining Blackberry's exclusive and signature keyboard+service system and following Apple's lead of a large multitouch smartphone or licensing BBM to other vendors, and they chose exclusivity each time. This constant pattern of choosing the lesser of two evils eventually undid whole company.

All in all, it was a good read. Some really good investigative journalism, sounded too much like a documentary screenplay. But a great insight into the another part of the technology industry from the eighties.