Balsillie

"If Lazaridis chafed at an executive seen as “Jim’s guy,” Balsillie also didn’t think much of a senior executive that Lazaridis had recruited, his old friend David Neale. The long-time Rogers executive who had helped steer Lazaridis to wireless data in the 1980s joined RIM in April 2010 as a vice president, advising the founder on strategy and marketing. Neale and Balsillie disliked each other. Balsillie viewed Neale as an unquestioning yes man at a time Balsillie believed his partner needed to confront hard truths about the business. Neale in turn didn’t think highly of Balsillie’s behavior and brusque manner. “He and I did not enjoy an easy relationship,” says Neale. To other senior executives, Tobin and Neale seemed like two more wedges distancing the CEOs from each other. “The seeds [of division] I think were sown by the kind of people they were bringing on the team,” says Spence. “You see the distance because of the people they’re hiring; they’re not aligned on who is the right person for the organization.” Personality and style notwithstanding, Tobin was thrust into a difficult situation in his new job. Tobin didn’t meet Lazaridis until he started; at their first encounter, the founder grilled Tobin on his high-tech experience and declared that Tobin should really be working for him and not Balsillie if he expected to oversee a software business.5 “I realized every single meeting I had with Mike I had this awkward position of being a direct report to Jim in a meeting where Jim wasn’t there and I didn’t really know the status of their relationship at any given moment,” says Tobin. “I spent a lot of time with [Lazaridis] going, ‘So what exactly are you supposed to do?”"

"Conlee’s responsibilities and title were split between handset chief Thorsten Heins and manufacturing head Jim Rowan, both of whom he had groomed, leaving Lazaridis with two chief operating officers; a third, Morrison, still reported to Balsillie. Lazaridis’s direct reports, including software head David Yach and chief information officer Robin Bienfait, met regularly with Morrison to ensure they were on the same page, “but nobody could stand up and say ‘Okay, all opinions heard, this is the decision’” as Conlee had done, says a former senior executive. “It slowed the company down. It was not that people didn’t perform in their roles; it was just purely the structure that was established did not lead to good, sound, and convergent decision making.” With Conlee gone, inertia and frustration set in at the senior levels. “There wasn’t the individual accountability that we needed,” says Morrison. “It was too splayed because it was across three different organizations. Now, all of a sudden, Mike is trying to manage something, but he doesn’t have the genetic code Larry has.”"

"RIM had an advantage that Nokia and other phone makers lacked: its own data network. BlackBerry messages traveled through RIM’s in-house network, which was plugged directly into the carriers. The unique connection gave RIM a back door to sneak in services carriers wouldn’t allow. In the mid-2000s RIM began shipping BlackBerrys secretly loaded with sleeper applications. Carriers and customers had no idea the applications existed until RIM sent an alert to BlackBerry users about a software upgrade. Hidden within the digital transmission was a file that unlocked the applications on the device—a Web browser and links to popular instant messaging services. Icons immediately popped onto BlackBerry home screens around the world. By the time carriers realized what was happening, millions of customers were using the Internet and exchanging instant messages on their BlackBerrys. Initially carriers were furious. Verizon threatened to pull BlackBerry from all retail channels. “I had to speak with probably twenty different carriers about this,” says Aaron Brown, then a director of services in RIM’s product management group. “But at that point, they realized the truth”: carriers were powerless to turn off the browsing or messaging services. Brown reminded his angry callers about the fine print in service contracts that gave RIM the right to change features and services on its phones “without permission or notice.” After a while carriers stopped complaining. Lucrative data traffic was becoming a multibillion-dollar business for the carriers thanks to the growing popularity of e-mails and instant messaging. “The key was stealthily leveraging and launching, then asking for forgiveness,” Balsillie says."

"There was a bigger game under way. Though they flattered Yankowski with attention, RIM’s partners had no interest in selling their company. They took Yankowski’s calls, showed up for meetings, and swapped boasts to keep him off guard. “Most people’s instincts tell them to seek clarity in business dealings, but ambiguity is more powerful in my view,” Balsillie explains. “You’d be surprised how long you can string competitors along without ever showing your cards.” An unsuspecting Yankowski pursued a takeover of RIM for months. Throughout Yankowski’s courtship of RIM, Balsillie downplayed his own company’s abilities and ambitions—flashing what he calls the “Aw, shucks card.” BlackBerry, he told Yankowski, was a small niche device lacking the global appeal of Palm. He talked of licensing Palm’s operating system and continually asked what RIM should do next. “That seemed to be his primary preoccupation,” Yankowski says. That’s exactly what RIM wanted him to think. “My objective,” comments Balsillie, “was to get him to underestimate RIM.” When Balsillie joined Yankowski in San Francisco for dinner later in 2000, the RIM chief pulled out a prototype of an upgraded BlackBerry, called the 957, which shared many of the features of the latest Palm device, including a large, square screen. He handed the model to Yankowski, who was suddenly full of questions: “What network will RIM use for this BlackBerry?” “We haven’t told anybody yet,” Balsillie replied. Eyeing the screen, Yankowski flashed Balsillie a big grin. “That’s okay. I already know.” “What do you mean?” “It says right here.” Yankowski pointed to the letters CDPD in the top right corner of the screen. CDPD, short for cellular digital packet data, was a wireless data network technology heavily promoted by its creator, AT&T. So that’s what RIM’s up to: dumping Mobitex for CDPD, Yankowski figured. Palm was already testing its next device on the CDPD data network. Balsillie was still giddy when he caught up with David Yach, a Canadian engineer who had been recently hired away from California software maker Sybase as RIM’s chief technology officer. Joining Yach in RIM’s jet, Balsillie blurted out: “He fell for it!” In fact, what he showed Yankowski earlier in the evening was a decoy with the screen changed to read CDPD by one of Yach’s engineers, with the specific intent of fooling the Palm boss. RIM had no interest in CDPD. Lazaridis viewed it as technically inferior technology, correctly predicting it would soon be dead. If Palm wanted to jump to CDPD, that was fine with Balsillie. For now, RIM was sticking with Mobitex, a slower but more reliable messaging highway. Yankowski has no recollection of the San Francisco dinner, but he remembers what happened soon afterward. Takeover talks broke off abruptly when Balsillie said he would have no part of a deal that did not hand him full executive control of the merged company. The petulant demand by a firm with one-twelfth the revenues of Palm seemed…"

"RIM capitulated to pressure for more choice by opening its e-mail system to other handset makers. They would design keyboard phones, and RIM would supply software and links to connect the phones to its data network. In exchange RIM charged licensing fees. RIM called this new program BlackBerry Connect. Many employees couldn’t understand why RIM was rushing to aid competitors. It wasn’t. Like some Balsillie strategies, appearances were deceiving. Balsillie and a small team of executives had other ambitions for Connect. This was more than a licensing program; it was a Trojan horse. RIM’s long-term game was to buy time. Competitors who signed up with RIM would be preoccupied making BlackBerry Connect phones rather than creating their own rival e-mail service. RIM gained an inside peek at rivals’ long-term development plans and opened the door to new customers. Every enterprise customer signed up under the program represented another stream of service access fees for RIM. It wasn’t empowering competitors at all; it was locking in its lead. “Sometimes you have to disguise yourself as another animal in the forest,” says Tyler Nelson, a RIM vice president who ran the program. Lazaridis was initially concerned that Connect would distract RIM’s engineers and designers at a time when RIM was racing to keep up with demand and introduce new BlackBerrys. He never worried, however, that corporate customers would abandon RIM for the Connect phones offered by other handset makers. Their Connect phones could not hope to match the security and encryption protections that made BlackBerry such a valuable business communications tool. “We knew ultimately that the enterprise customer … was never going to go for it, because it was not a verifiably secure solution,” he says. “It was our advantage. It wasn’t hidden; it was in plain sight.” Unaware of RIM’s hidden agenda, phone makers in Europe and Asia flocked to the program to strengthen their presence in North America with BlackBerry-enabled phones. Samsung was so keen to make a Connect phone that one of its employees idled for weeks at a Waterloo hotel waiting for RIM to grant him a meeting with Balsillie. Finally the visitor appeared at the company’s offices in a distraught state. Samsung, he explained, would not let him return home to his family and job in South Korea unless he secured a Connect deal. RIM opened Connect discussions with Samsung, and the manager was free to fly home. RIM’s most dedicated Connect partner was Nokia. The Finnish phone maker had been trying to break into the U.S. wireless business market for years, and Connect looked like an easy shortcut. Nokia’s executives did not worry about dancing with a competitor because Balsillie played down RIM’s ambitions during initial discussions in 2002. “He emphasized he didn’t believe RIM would be able to compete in the hardware business [and] might even give up their hardware business,” says Panu Kuusisto, who managed Nokia’s Connect agreement with RIM.…"

"To Balsillie, RIM was in an existential crisis, mired in what he describes as “strategic confusion.” The company’s business had been disrupted on several levels, with no obvious path forward. Was RIM supposed to defend the QWERTY keyboard, or jump all-in and become a touch-screen smartphone maker? Was it supposed to challenge Apple at the high end of the smartphone market or focus on the lower end with devices like its Curve and Gemini models, which were driving heady sales gains in foreign markets where Apple wasn’t yet a factor? Should the company stick to its closed, proprietary software technology or open its platform? One of the biggest puzzles was what to do about apps. For years Balsillie had fought carriers for the right to sell apps to customers, reassuring them RIM was “constructively aligned” with the wireless carriers. Then Apple waltzed in with an app store despite AT&T exclusion from any app revenues. Now RIM was forced to play catchup. Unlike RIM, Apple had an army of outside developers who had already built consumer apps for its computers and iPods and were primed to do the same for the iPhone. By the time BlackBerry launched its app store in spring 2009, iPhone customers had already downloaded 1 billion apps.2 But, Balsillie wondered, was RIM taking the right approach or should it stick to its “constructive alignment” narrative and leave the sale of apps to carriers? Balsillie struggled with each question. “I was strategically confused for a period of time when the game changed,” he says. “There was tremendous limbo-esqueness. Where do we dance? Apple had the same strategy clearly in 2007–08 that we had in 1999, and now we had to re-examine” every element of RIM’s approach. “The Storm failure made it clear we were not the dominant smartphone company anymore. We’re grappling with who we are because we can’t be who we used to be anymore, which sucked.… It’s not clear what the hell to do.”"

"RIM had arrived at the bridge every high-tech start-up must cross in the pursuit of long-term success. It’s the point at which a product triumph forces a fledgling company to shift from unfettered free-form innovation to the steely commercial discipline required to foster sustainable growth. In Silicon Valley, founders often fall by the wayside after innovations take off. Creative entrepreneurs are often poorly suited to managing business success. Venture capitalists have the upper hand because they typically demand major or controlling stakes when betting on risky start-ups. This wasn’t the case in Waterloo. Balsillie had rebuffed venture capitalists, carefully raising cash through public stock offerings that did not overly dilute its founders’ clout. Lazaridis was the company’s largest shareholder, with an 11.2 percent holding in 2001, followed by Balsillie, with 9.3 percent, and Lazaridis’s childhood friend Doug Fregin, with 3.5 percent. Combined, their stakes would make hostile advances difficult."

"Brenner was unwilling to give up part of his responsibilities and didn’t get along with Tobin. It took them months to negotiate the transfer of responsibilities and executives; Tobin wanted to control project management and set the road map for what services and apps would be developed, but the two never reached an agreement and that role largely stayed with Brenner. “I think Alan assumed that my job was to market and sell whatever [apps and services] he wanted to build, and my instructions were that he needed to build to what I required,” says Tobin. “Because the roles and responsibilities weren’t clear, it created some conflict. Alan felt he was capable of handling the business side as well as the technology side.” Balsillie didn’t agree—he felt Brenner should stick to technology—and Lazaridis didn’t care; when Tobin tried to escalate the issue to both Balsillie and Martin, he was redirected to Yach, Brenner’s boss, who sent him back to work things out with Brenner. To many it made no sense to split the responsibilities between two people; it just caused confusion and gridlock. “Those two jobs aren’t really separate,” said McDowell. “Tobin wasn’t looking for Brenner to tell him what to do, and Brenner wasn’t looking for Tobin to tell him what to do.… The net result is a stalemate.”"

"One thing Morrison didn’t get was Balsillie’s objections to talking about the company’s stock price, a ritual in most executive suites. Anyone caught talking about RIM’s share value was penalized. Balsillie didn’t want staff becoming complacent or distracted about company or personal fortunes. When Morrison sent Balsillie a congratulatory e-mail about RIM’s soaring stock price, he had to buy hundreds of donuts for RIM employees. Stock prices and quarterly results were precisely what Conlee believed needed more attention. He’d been hired to expand RIM “from millions to billions.” The company wasn’t going to get there unless it paid more respect to commercial details. That, the Texan knew, called for “a different culture.” Conlee invited RIM’s engineers to the Waterloo Inn to explain new marching orders. He introduced a detailed schedule of product milestones for Project Tachyon’s 5820 BlackBerrys, goals that would be enforced by a new product management office. Going forward, deadlines would be short and inflexible. All software features on the 5820 had to be completed within two weeks; for hardware design and beta-testing, the deadline was six weeks."

"Balsillie followed two Sun Tzu tactics religiously: appear strong no matter how weak your hand; and move to uneven terrain if an aggressor is overwhelming. For Balsillie, rugged ground meant keeping competitors, suppliers, and customers off balance. “Bung them up in wool and play obfuscation; promise them this and then do that,” he says. “I am very good at that. I can send very uneven signals. Give them nothing to be certain with. Let them think they are getting what they want, but don’t be overly provocative. I can do that forever.”"

"The solution, Lazaridis and Balsillie decided, was an unorthodox plan to infiltrate Fortune 1000 companies. RIM made it easy for influential managers and executives to link the addictive BlackBerry system into their corporate e-mail without involving the IT department. Their secret weapon was the software designed by RIM engineer Gary Mousseau. The program was included free with every BlackBerry purchase and took only fifteen minutes to install on any computer. Once it was running, it connected the BlackBerry to a user’s e-mail and the device was operational. RIM even priced the devices so they fell within executives’ discretionary spending budgets. The idea was to get a critical mass of top executives in a company to use BlackBerrys before their CIO realized a new technology had infiltrated the business. This would be all the leverage RIM needed, Balsillie and Lazaridis believed, to convince CIOs to acquire sophisticated RIM servers to centrally manage large volumes of BlackBerry devices from within their IT departments. The CIO end run was a unique strategy, making BlackBerry the first IT product ever sold from the top down, pushed by senior management onto their IT organizations."

"Balsillie and Lazaridis never called each other out in the Tuesday meetings as relations between their organizations deteriorated. “They were mindful of how they were being perceived” and kept any disputes behind closed doors, says Patrick Spence, who by now was one of three sales vice presidents and Balsillie’s most trusted lieutenant. But tensions between the two CEOs were evident to others. Balsillie encouraged his salespeople to press on quality issues and would chime in, “Did you get that, Mike?” to which his co-CEO would tersely reply, “I got it.” The Tuesday noon grillings rattled Lazaridis. He felt blindsided and thought the salespeople were grandstanding. He would stop meetings when they raised quality issues and ask for more information. “What is it? Can you send me details? I need to understand,” he’d say. Lazaridis would leave the meetings steaming, then walk into a meeting with his direct reports and Morrison at 1:00 p.m. where he would let loose and demand answers. By early 2010, Lazaridis’s chiefs were telling their assistants to clear their Tuesday afternoon schedules in anticipation of long, difficult meetings with their boss. “I got the worst of it,” says Yach, an assessment shared by others. “After hearing about an issue for the first time at the Tuesday noon meeting, I’d immediately e-mail folks to get me background and updates in time for the one o’clock meeting. My most common thought [during the Tuesday meetings] was, ‘I miss Larry.’” Sometimes, Lazaridis says, his direct reports would tell him they were already well aware of an issue raised by Balsillie’s side of the house and dealing with it. “It bothered me that I was hearing about stuff [from salespeople] that I should have heard from the team that reports to me every week,” says Lazaridis. Morrison says, “It became evident [Lazaridis] was losing control of some of these problems and he wasn’t getting straight answers … [or] support from people he needed.”"

"Balsillie recalls the ARDIS deal as the moment RIM put formidable U.S. carriers on notice that the Waterloo bantamweight could play just as rough as the big guys. Steering RIM, he says, meant being “massively scared shitless and fucking terrified” that carriers or competitors would one day toss the company over a cliff. After “trying to bob and weave” around bigger hitters for years, he saw a unique chance to grab the advantage when ARDIS came calling. He correctly gambled that BellSouth was in a corner because it had already signed its contract to buy the Leapfrog, a pager its network badly needed. Recalling the controversial transaction, Balsillie throws his hands in the air and breaks into a broad grin: “I played the leverage,” he laughs. “Welcome to business.”"

"A final draft of the handout circulated by e-mail to directors and advisers on January 19, 2012, began with the statement that RIM’s board, “acting on the recommendation” of Lazaridis and Balsillie, had unanimously approved Heins as the new CEO. Much of the remaining announcement praised the leadership and devotion of the departing chiefs and their courage in sacrificing short-term gains for long-term growth by acquiring QNX and its operating system. This was hardly a reassuring message to rebellious shareholders. A board faulted for deferring to CEOs would be seen to have bowed again, this time to their proposed successor, Heins, an insider who shared responsibility for PlayBook and BlackBerry 10 delays. Instead of reassuring shell-shocked shareholders that a new beginning was under way, the company chose to honor the status quo, hailing years of strategic confusion and product failures as courageous long-term vision. The approach did not sit well with at least one director. “Jesus Christ. What are we doing?” director Roger Martin fumed in a blistering e-mail reply to the company’s directors, CEOs, and advisers. The press release was doomed, he believed, by leading with Balsillie’s and Lazaridis’s recommendation for Heins, as their successor. To his mind, the proposed press release failed to send a clear message that meaningful change was occurring at the embattled company. “We have to remember shareholders are pissed,” Martin continued. “If Thorsten was so fantastic time and time again, why the huge problems at RIM, people will ask?… Let’s stop. Let’s think. Yes, there are persistent storm clouds and threats. Yes, this company is learning to be a $20 billion company. I get all that. But it doesn’t give us license to stop thinking.”"

"Balsillie concluded that RIM’s hardware business would never recover. “When the game changes, if you’re not able to become what the game is now, you must pivot to another game,” he says. “I saw a tsunami of Androids coming and didn’t want to bet everything” on BlackBerry 10 smartphones. RIM, he says, had to offset the vulnerability of the hardware business with “a big, big shift.”"

"Balsillie’s cutthroat tactics were designed for competitors and pushy customers that he believed threatened RIM. Company employees knew better than to cross him. He had a short fuse and could be unforgiving when staff didn’t follow orders or weren’t prepared. Some RIM employees believed the best strategy was to steer clear of the prickly boss."

"What they didn’t know was that Lazaridis and Balsillie had been having exit discussions for weeks. About the only thing the two men can agree about when it comes to their late fall meetings is that they happened. It is instructive and telling that partners who have different recollections of how they came together in 1992 are also at odds over how they fell apart nineteen years later. The conflicting versions could be a reflection of the opposing personalities of independent, strong-willed CEOs. Just as the professorial Lazaridis and hard-charging Balsillie pursued different tactics to conquer the smartphone market, it is inevitable perhaps that they have clashing narratives about their roles in RIM’s rise and fall. It’s also possible that by December 2011 their relationship had become so dysfunctional they were no longer listening to each other. It is entirely possible that both their stories are true."

"When Balsillie raised quality issues in private with Lazaridis, “I don’t recall a heated conversation, but I do recall Mike saying, ‘This stuff is really, really hard,’” says Balsillie. “Mike refused to acknowledge that we had any material technical issues, to the point that he would miss meetings so that he didn’t hear the negative feedback and hoping that we would not discuss it in his absence. That was wishful thinking, and I personally didn’t think we had any way around it. If anything, everyone was counting on Mike to see the flaws first and fix them as soon as possible.”"