Monday, January 23, 2012

RIM: we've seen this movie before

Research in Motion this morning promoted COO Thorstein Heins to be the new CEO. The two co-CEOs, Mike Lazaridis and Jim Balsillie, stepped down from any executive position but remain on the board. (Lazardis, a co-founder and the only remaining original director from 1984, becomes vice chairman).

The FT reported:

Thorsten Heins jokes that as a German, he knows something about discipline.

“Once I decide on building an idea, or on building a product or a service or a network, I do this very rigorously,” Mr Heins told the Financial Times. “Discipline in the development process, flawless execution, quality [and] accountability in the system.”
The analyst reaction was mixed; this comment from RBC (via the WSJ Deal Journal) seems representative:
On the one hand, this appears a positive step, as Messrs. Lazaridis and Balsillie are stepping away from the Co-Chairman, Co-CEO structure which some investors have highlighted as one source of RIM’s current problems… On the other hand it’s unclear to what extent the new CEO will be able to materially impact the vision and direction of the company in light of rapidly changing competitive conditions, and correct RIM’s seeming inability to navigate these challenges. CEO Heins, while a seasoned network executive, has never been a public company CEO, and lacks deep consumer marketing and software experience.
When I heard the news, two words immediately came to mind: Michael Spindler.

Spindler was Apple Europe president, promoted to Apple CEO after John Sculley was ousted in 1993 (and before Spindler was ousted for Gil Amelio three years later). Spindler was a notoriously operations-oriented executive (nicknamed the “Diesel”) who sweated every detail in sight.

I’ve never met Heins, so I don’t know if he has the Spindler stubbornness and lack of imagination. However, in most companies the COO (contrasted to the VP of R&D or the VP of marketing) tends to focus on implementation rather than generating great new ideas.

Certainly RIM could use to ship better products sooner, so improving execution is a good idea. But in the end, will it change RIM’s eventual fate? I doubt it, any more than Spindler’s (or Amelio’s) execution was ever going to save Apple. RIM has still to solve its fundamental problems.

RIM had a great run, bringing email to the cellphone, solving key ergonomic and battery life issues. However, like Nokia (and unlike Samsung, LG and even Motorola) they underestimated the impact of the iPhone and the desire of cellphone owners to access the open Internet. Pursuing the same strategy (even with better execution) and expecting better results is the very definition of insanity.

RIM doesn’t need new execution: it needs a new strategy. Nokia made a bold move — which may or may not work — but at least licensing Microsoft’s platform provides an ally, newer technology and perhaps the badly needed economies of scale.

RIM clearly lacks the scale to support its platform alone, in the face of the Android onslaught and Apple’s continuing success in controlling the industry’s wallet share. It was rumored to be trying to license its platform to other firms, but who would want it now? That’s the problem with most proprietary platform leaders: they open up when it’s both too late to hurt the company and also too late for any potential partner to care (NB: DEC, Sun, Sony).

One strategy for RIM would be to concentrate more on the server side, providing BlackBerry push e-mail to handset makers, network operators and business users who don’t have BlackBerry hardware. The problem I can see is that the traditional BlackBerry business model is dying because most of the differentiation is gone: why would I pay $10/month for BlackBerry services when I can get gmail (or hotmail) for free? (This is exactly the Windows 95=Macintosh ’89=Macintosh 2000 problem.) Or, as one analyst quoted by the WSJ put it, “Our discussions with carriers suggest declining relevance and increased pushback on BlackBerry fees.”

Another strategy would be to sell the company for the value of the patents, as Nortel (the oldest of Canada’s onetime telecom giants) and Motorola (the creator of the cellphone) have done. Obviously the RIM management has little interest in this as long as there’s any other alternative.

Absent a partner, RIM is going to go the way of DEC, Sun and Motorola, sold for its residual value. Even after the management change, RIM appears no closer to forestalling that seemingly inevitable outcome.

No comments: