Research in Motion, the company behind the massively popular BlackBerry, saw its fortunes vanish into thin air after the unveiling of the first iPhone.  

Canadian technology company Blackberry, formerly Research in Motion, once stood on top of the mobile phone food chain. But after the introduction of the iPhone, revenues nosedived, sending the company decades back in time.

When Steve Jobs introduced the world to the iPhone, the revolutionary design sent shock waves through the industry. Blackberry executives kept their head in the sand and only when Apple unveiled its smartphone, the manufacturer frantically put together a rivaling product, the Blackberry Storm. This abomination became the precursor for a company who stopped innovating, losing market share year-over-year. Once the pinnacle of mobile technology, has become a relic of technology’s past. 

Building Research in Motion

Research in Motion (RIM), the company behind the once popular mobile phone BlackBerry, was established in 1984 by two engineering students Mike Lazaridis and Douglas Fregin. The company would start out as an electronics and computer science consulting company, operating from the Canadian city of Waterloo. During these founding years, the company worked from contract to contract with a handful of employees. At the closing hours of the 1980s, the company reached $1 million in sales. 

The team at RIM was ambitious and believed more money was to be made by developing wireless transmission technology such as wireless point-of-sale customer terminals. The breakthrough came in 1987, when cellular telephone operator Rogers Cantel Mobile Communications Inc. requested RIM to investigate opportunities in new wireless digital network systems, which would be supported by technologies provided by Swedish technology company LM Ericsson.   

Ths is provided the necessary capital for RIM to expand in the mobile technology space and in 1987, it would become the first wireless data technology developer in North America. RIM became the first company outside of Scandinavia who developed connectivity solutions for Mobitex wireless data communications networks. Mobitex solutions were used to handle credit-card sales. Over the 90s, RIM technologies would see a wide range of adoptions, from vending machines to computers, with the company stepping into the e-mail software space in 1991.   

The following year, in 1992, James Balsillie, joined the company, responsible for managing RIM’s finances and business development operations. Balsillie was no rookie in the world of business, having a MBA from Harvard University and holding executive positions at Ernst & Young and Sutherland-Shultz Ltd. In the same year, RIM launched a pager that could not only receive, but also send messages. A revolutionary innovation in an era of upcoming wireless technologies. 

Research in Motion was riding waves of technological success. In 1997, it felt confident enough to go public, raising over $115 million in investment funding. The following year, in 1998, the company introduced the first BlackBerry, entering the market as a wireless handheld computer. Customers could read the news, send emails, keep track of the stock market and check the weather. 

This catapulted RIM to become Canada’s fastest growing technology company, with demand for BlackBerry devices, featuring their iconic keyboard, skyrocketing. The revenue doubled in 1999 to $47.5 million, with RIM generating a net revenue of $6.8 million. A massive boost from the $400.000 net income just a year prior. BlackBerry would enter some rough patches at the turn of the millennium. Revenue would grow to $1.67 billion in 2007, simultaneously the turning point in RIM’s history. 

The invincible BlackBerry 

In the early days after the unveiling of the iPhone, BlackBerry was still very much in denial that it would lose its dominant position. In September 2008, CEO of Research in Motion, Jim Balsillie, told Jim Goldman at CNBC, that the company had been facing tough competition for years. Hence the attempts of Apple and Google to disrupt the smartphone market were nothing new. They didn’t pose a greater threat than those that have come before, Balsillei added. 

The remarks made by Balsillie during this brief interview with CNBC wouldn’t strike many as a surprise. The company was still at the top of its game, with billions in revenue and still seeing steady growth. Goldman was also mesmerized by the company’s credentials, noting it was the benchmark for mobile technology operating in one of the most dynamic markets in the world. Balsillie wasn’t even concerned about the company’s stock price, which was entering treacherous waters after Apple moved into the mobile market.

Balsillie was still convinced it could maintain, and solidify, its dominant role in the smartphone market with the announcement of its high-end Blackberry Bold just a few months prior. CNBC labeled it as Research in Motion’s answer to the iPhone. The device, which still sported a physical keyboard, would include cutting edge cellular technology and integrated GPS, WiFi and multimedia features such as music and video playback capabilities. Balsillie told CNBC the device was a step up from its core product.   

As with all Blackberry phones, the Bold was designed to cater to business customers. But Balsillie was confident it might break into the consumer market, stating he wouldn’t be surprised if it gained tractaction at consumer audiences. The timing for RIM was less than fortunate as the global economy was just about to enter an economic meltdown. RIM was not alone in its struggles. Companies like General Electric and United Airlines were met with tough economic conditions which would cripple their businesses. 

Surviving the iPhone

In October 2008, John Sviokla and Caroline Calkins wrote for the Harvard Business Review that there was still a way out for BlackBerry to survive the rapid rise of the iPhone. Both were impressed by the device, which had created an ecosystem for itself through its App Store, with Apple housing it in a neatly designed and competitively priced package. In order for BlackBerry to decrease the speed at which Apple was capturing market share, it had to create a product that could meet and rival each part of the iPhone’s ecosystem. 

At the time, the App Store, or applications store as it was called by the duo, still had a fraction of all the amazing and impressive apps that you can download today. This meant Blackberry still had some time to come up with a comparative device before Apple would completely capitalize the market. In order to bridge the gap, Sviokla and Calkins noted, Blackberry had to create radically better devices. The Storm was just released and they were convinced it was suitable for mass adoption, as per the early reviews.

However, to truly gain traction with buyers, BlackBerry would have to price the device at $0. This price would be offered to existing customers who would upgrade their existing BlackBerry’s. New customers would get the Storm for free with a cellular subscription plan. This could potentially drive early sales, they commented. The pricing model was long before smartphones would exceed the $1000 mark, and receiving a phone for free together with a mobile plan was commonplace. The most challenging part for Blackberry would be creating a similar ecosystem as the App Store. 

The team at BlackBerry would have to revamp its business model to allow for an open market, where developers could offer their applications to BlackBerry customers. Sviokla and Calkins commented this had multiple benefits, as it would relieve BlackBerry from developing its own solutions and customers would remain committed to the platform. But, this was still early days for application developers, with apps such as Uber, WhatsApp, Instagram and Google Maps among others, still in their infancy or were yet to be introduced in years to come. 

Research in Motion stands strong

The die had yet to be cast about BlackBerry’s ultimate fate. But as 2009 rolled in, the outlook for Research in Motion still looked bright. In April 2009, the company reported that it had beat its own estimates, topping analyst’s forecast. The good news resulted in the company’s shares soaring by an impressive 20 percent, confirming that customers still had an appetite for BlackBerry Smartphones.   

Analyst at Canaccord Adams, Peter Misek, told CNBC the company was crushing it and even gaining market share, despite a deepening recession. Misek noted that a recovery in consumer demand helped BlackBerry sales. However, CNBC noted that the outlook might be less than stellar, as its primary customer base, business executives, lawyers and other professionals, would hold on to their wallets. BlackBerry meanwhile had made a strong push into the consumer market by stuffing its Pearl model with multimedia features and launching the touch-screen based Storm to counter the iPhone. 

The iPhone was still set to gain momentum and reach market dominance, buying RIM time to launch new, innovative products. In August 2009, Fortune was still full of praise for the Canadian technology company.  The iPhone was breaking records, but RIM still had a dominant position in the market, the news outlet noted. At the time RIM still owned 56 percent of the smartphone market in the United States. But the Storm would drastically alter the course of history. 

BlackBerry Storm flops

BlackBerry had high hopes for its Storm. Pouring over $100 million into marketing the device and pushing it into the mainstream. But, as the Storm was starting to reach its customers, the smartphone that had to persuade customers to leave the iPhone on the shelves, the early buyers were met with an unpolished, unfinished product. The signs were promising at first, with BlackBerry shipping around 500,000 Storms. 

Customers however received a device riddled with bugs and hardware malfunctions. They didn’t have to look very hard to discover these problems either. The unique selling point of the Storm, the BlackBerry keyboard experience, was unreliable. When users wanted to prompt the keyboard, it lagged. The device’s accelerometer was equally slow. Readers of the New York Times sent in their complaints. Calling the device a monstrosity. An absolute nightmare. 

Customers complained about the browser refusing to open. Another compared the Storm to a Stephen King novel, possessing its own mind. The touchscreen had a life of its own . The customer experienced lag when switching between portrait and landscape mode. The BlackBerry storm failed miserably in the design and quality department. These software issues were present at every turn. 

A Mac in the shape of a phone

Diving deeper into the story behind the Storm story, one could’ve predicted the imminent demise of the device. In September 2013, Sean Silcoff and Jacquie McNish, authors of the book Losing the Signal: The Untold Story Behind the Extraordinary Rise and Spectacular Fall of BlackBerry, detailed how the company’s most ambitious project led to the ultimate demise of the once great cellular technology company Research in Motion. 

They traced back the turning point of the company to co-founder of RIM, Mike Lazaridis, a tinkerer who built his own oscilloscope and computer while attending high school. Lazaridis came from humble beginnings. While this makes for a great origins story for Research in Motion, it simultaneously was the company’s Achilles’ heel. Lazaridis, Silcoff and McNish noted, couldn’t comprehend the technology behind the iPhone. Seeing it as a glorified Mac crammed into a cell phone. A costly misinterpretation. 

Apple had indeed built a Mac in the shape of a phone. It was a computer in your pocket, with a lot of memory, a mesmerizing screen and rocking two processors. A revolutionary concept. Unthinkable for a phone. The iPhone, was capable of many great things. Meanwhile, BlackBerry devices looked like relics of a bygone era. The hardware that drove it was immediately outdated. Capable of sending texts and taking phone calls. 

Lazaridis couldn’t phantom that a phone needed to do more than take calls and send texts. Believing that technologies driving the iPhone would result in a total collapse of AT&T’s wireless network. The BlackBerry was the most sensible option. The co-founder of RIM became a vocal critic of the iPhone. Throwing every USP the BlackBerry had to defame the iPhone. But,  Silcoff and McNish highlighted, Lazaridis went into panic mode.  

Code red

All alarms were going off at RIM. The company had to come up with an answer to the iPhone. Fast. But RIM was at a disadvantage, as it had stuck to its tried and tested formula. Now, it had to radically switch gears to develop a counter to the iPhone. Lazaridis told employees at RIM that they wouldn’t be competing with Nokia, but with a Mac. 

Meanwhile cellular providers who didn’t sign an exclusive deal with Apple, became increasingly worried with AT&T’s exclusivity over the iPhone. Verizon saw massive success with the BlackBerry and was eagerly awaiting the next big hit that could topple AT&T’s iPhone deal. For RIM, this was the perfect opportunity to turn the tables around. Research in Motion’s answer to the iPhone, became the now infamous Storm. 

Verizon became displeased with what the Storm had become, deciding to turn its back on BlackBerry and moving to Google. Together with Google, Verizon would launch the Motorola Droid in 2009. RIM meanwhile saw campaign budgets funneled away in favor of the hot and upcoming operating system Android. This resulted in RIM losing even more momentum, Silcoff and McNish commented, with Android eating away market share of Palm and Microsoft and then chipping at RIM. 

The iPhone was creating a whole segment of its own. By the end of 2011, just three years after the launch of the Blackberry Storm. Android capitalized 47.3 percent of the phone market in the United States, with RIM falling to a poor 16 percent, coming from 31.6 percent just a year earlier. After this, RIM would never be the same, unable to recover from the rapidly changed dynamic in the mobile market. 

BlackBerry in trouble

The fortunes at RIM started to turn quickly. After 2011, RIM’s revenue started to nose dive. In 2011, revenue peaked at $19.9 billion, but the following year it had already fallen to $18.4 billion and in 2013 it fell to $11.07 billion. In January 2012, Balsillie and Lazaridis announced their resignation. Their resignation wouldn’t have come as a surprise to many, as the company was caught in a death spiral. 

While the term death spiral is being thrown about very easily nowadays, this reality was all too true for RIM, who saw BlackBerry sales plummet at an unprecedented rate. By the end of 2013, revenue fell to $6.81 billion.  Years later we would learn that Blackberry had failed to capitalize on the most important objective, the app ecosystem. In August 2013, professor of strategy at London Business School, Michael G. Jacobides wrote that Blackberry failed to create an effective strategy to roll-out and manage an ecosystem.

Instead it got blindsided by loyal customers who were eager to purchase its latest product, leaving the market wide open for competitors to redefine what owning a phone meant. RIM was held down by its own history and confidence. RIM should’ve focused on controlling the value chain, which ensures strict oversight of product quality and experience. Even if large portions of the business are outsourced, a company keeps delivering a unique value proposition to its customers. 

Jacobides draws examples from the automobile industry, where manufacturers rely on a vast network of suppliers to build their vehicles. However, the brands themselves have the majority share of the market in terms of capitalization. This translates into them having a strong hold over the market and not the suppliers who are creating innovative products, such as developments in electric propulsion. Existing manufacturers still stand strong, despite increased competition and emerging brands. 

A former employee at RIM told Silcoff and McNish that the team behind the BlackBerry device hadn’t lost sight of the needs of its users. The company had fallen prey to its own overconfidence, believing it knew better what the customers wanted in the long term. Picking up on signals such as a faster browser and demands for a larger touch screen. However, it countered those arguments, believing that while the customer might want those improvements, the technology wasn’t ready. 

Better internet capabilities would mean higher phone bills. A larger screen would drain the battery. Instead of anticipating these demands and building technologies that would revolutionize the BlackBerry, bringing the device a new era, the team shrugged its shoulders. The technologies available simply couldn’t power demands in the market. Additionally, RIM had a strong corporate customer base and now it had to also serve consumers. 

Waters it had yet to dip its toes into. The BlackBerry device was a hostage of its past. The Storm failed to impress the masses and alienated its business customers, who expected a reliable device. In 2016, Jim Balsillie, former CEO of BlackBerry, told Anna Maria Tremonti from CBC’s The Current commented that the company was confident it could create a rivaling product against the iPhone. 

The smartphone manufacturer frantically got to work to build its own smartphone, but Balsillie noted that the company was seeing competition from all sides. As the iPhone started to chip away at established phone manufacturers, Google was pushing its Android operating system, he commented. Balsillie added that’s how the technology space operates. One day you can be the disruptor and the next, you’ll be disrupted. Revenues at RIM would eventually fall below $1 billion by 2018, bringing it back almost two decades. 

A drastic turn of events

In hindsight it’s easy to point at the different mistakes RIM had made with its BlackBerry Storm, which had to serve as the answer to the iPhone. However, few could’ve predicted that Steve Jobs would push so hard to launch a revolutionary new device that would shake the foundations of the mobile technology industry. Many were caught off guard. Companies like Sony, Palm, HTC, Nokia among others would all topple over. Once dominant players, were no nothing more but numbers behind the comma on the graph. 

Could RIM have turned its fortunes around in such a short time? Highly unlikely. The executives at RIM were of a different technological era. An era where many pioneers launched revolutionary technologies, building the foundations upon which many technologies would be built. One might even argue that the BlackBerry was more a stroke of luck than an actual strategy. An evolution of its already existing product. That the demand was high, was mere coincidence.