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K.O. for BlackBerry maker RIM?

Blackberry

As mobile technology has made leaps and bounds, Research in Motion (RIM) maker of the once popular Blackberry mobile phone struggles to survive. Can the company save itself from bankruptcy or is it too late?

Turned off…
Thorsten Heins, the new CEO of Research In Motion (RIM) probably cancelled his subscription to the New York Times. One of the United States’ leading daily papers decided to drop its app for BlackBerry after seeing a notable drop off in user traffic on its app. The app will no longer load news stories, essentially turning off. This follows a series of unflattering developments regarding the maker of the once dominant mobile phone brand BlackBerry. Large multinational companies such as Halliburton and Qantas recently decided to no longer use BlackBerry services and have been switching their employees to Apple’s iPhone. The US Government’s procurement agency has also followed suit, starting the switch from BlackBerry to iPhone for all US Government Agencies..(1) (2)

Companies, investors and consumers are losing faith in RIM, leaving BlackBerries in the trash bin en masse for smartphones that use Apple’s iOS and Google’s Android operating systems.  Media reports suggest that RIM is in a death spiral, unable to turn itself around. RIM has postponed time and again the release of a new BlackBerry Operating System (OS) while competitors are introducing new smartphone technologies and products on almost a daily basis. RIM has lost its global share of the mobile phone market from 15.9% in Q3 2003 to recently as low as 5% and that share is rapidly decreasing. RIM’s stock has been pummeled losing 95% of its value from its 2008 high point. How did RIM lose so much so quickly? Thorsten Heins has his work cut out for him, but RIM’s market position will make a turn around much more difficult. (3)(4)

Down a spiral staircase…

The market for smartphones is growing fast. In the U.S smartphone market, Google’s Android OS continues to dominate with a 51.6 percent market share as of June 2012. In the same period, Apple’s iOS took a 32.4 percent market share while RIM fell from 12.3 percent to 10.7 percent with Microsoft Windows based phones captured 3.8 percent of the smartphone market. (5) Forecasters predict that Google’s Android OS and Apple’s iOS will capture a combined 85.8 percent of the global smartphone market by 2013, with Microsoft and RIM to fight for the remainder of the market.(6) According to Marketresearch.com, smartphone shipments will grow at a Compound Annual Growth Rate (CAGR) of approximately 19% until 2016, as the worldwide smartphone market is poised for continued double-digit growth in the years ahead..(7) The worldwide smartphone market has huge growth prospects and most market players post impressive financial results, RIM seems to be excluded from optimistic growth projections and has a bleak outlook. The winds of change blow a fierce wind, and RIM has to face its challenges in order to survive.

The list goes on and on…
If RIM is going to survive, the company needs to act quickly. The smartphone market is increasingly competitive, with a constant innovation stream making today’s technology obsolete almost overnight. BlackBerry’s strengths were its email and security capabilities but as consumers moved toward multifunctional mini-computer-like devices, these strengths were not enough to keep consumers loyal to BlackBerry. As RIM introduced poorly timed me-too products time and again, consumers and corporate clients began to believe that RIM is not an innovative company. As a result, they have been trading in their BlackBerry products for the competitions’ smartphones. With such a rapid loss of customers, RIM has delayed new product launches as well as consistently delayed the release of the BlackBerry 10 OS, further eroding consumer confidence in the brand. Internal RIM issues have been coming to the surface, scaring investors and consumers alike. RIM’s operating costs as a percentage of sales have increased from 76.71% in Fiscal Year 2011 to 92% in Fiscal Year 2012. Increasing business costs directly impacted the profit margins at a time when RIM needed to boost efficiency. According to the Wall Street Journal, the disputes between the former co-CEOs J. Balsillie and M. Lazaridis left the company without a clear direction for growth. The former CEOs had vastly different viewpoints on what should be the company’s focus; innovation of new technology or licensing old technology. This internal squabbling contributed to RIM losing key talent to competitors while subsequent lack of revenue led to the elimination of 5,500 positions in a bid to restructure the company. (8) (9) (10) (11) (12)

Turn this Ship around!
The authors suggest a few ways that RIM can stop its decline and set the stage for future growth. These suggestions are not mutually exclusive and a combination of these suggestions could potentially work for RIM.

Reverse Cuts in Investment and Focus on Breakthrough Products
RIM is currently focusing on releasing its BlackBerry 10 OS yet continues to make missteps and keeps delaying the release of this system. The BlackBerry 10 OS could improve the performance of the company’s existing smartphones and improve its market share in the short term. In the longer term, however, RIM will have to face the rising cost of developing its own OS while Google’s Android system is free to product developers to use and Apple continues to update and develop its iOS. If RIM refocused on research and development on creating truly breakthrough products, like its original BlackBerry device was, the company could set the stage for long term organic growth and be able to afford acquisitions of new technology as the industry develops over time. (11) (13)

RIM should consider adopting Android or Windows Mobile software for its devices and collaborate closely with its suppliers and partners to develop products and services that set RIM back in the forefront of innovation in a constantly changing industry. Verizon Wireless, AT&T, and Vodafone both approached RIM in the past to collaborate and develop products that would counter Apple’s iPhone dominance in the smartphone market. These collaborations did not make as much of an impact as anticipated, but the collaborations are excellent avenues to getting direct feedback from wireless operators on what consumers want when purchasing a new mobile device. (14) Successful companies view collaborations as a window on their partners’ broad capabilities, and we encourage RIM to remain open to collaborations with competitors and suppliers in order to encourage the developments of breakthrough products. (15)

Focus on Corporate Customers now, capitalize on them and consumers in the long term
RIM’s current customer base is largely made up of corporations that contract with RIM to use BlackBerry products for their employees. RIM can leverage its strengths, such as its globally secure mobile network for messaging and emails to capture the market niche for highly secure communications. (11) (16) Collaborating with Microsoft could give RIM an inside view of the needs corporate clients have when it comes to communication and sharing of data with Microsoft’s Office products. Tailoring products to optimize the needs of corporate customers would stem corporate customers from deserting RIM and keep them as successful customers. RIM could potentially use the expertise gained from tailored solutions for corporate clients to create new and innovative products for consumers. This strategy utilizes current clients to reposition products for today’s needs in tomorrow’s technological environment.

Build on global markets where RIM has strength and expertise
RIM is still the market leader in a few key consumer markets. Sales outside of North America now account for more than 50% of RIM’s revenues. RIM still holds the dominant market position in the UK and Middle East. RIM has a strong market position in the developing world, especially in South Africa, Nigeria and Indonesia. RIM has expanded in developing nations and could entrench itself by opening more stores and growing staff levels in those regions. RIM would be able to improve customer care and response times to issues that arise. (17) (18) Developing markets could also provide RIM with the opportunity to utilize local talent to develop new products and services.

Based on our research, RIM has not effectively utilized its subsidiary network. As coined by C. Bartlett and S. Ghoshal in their 1986 Harvard Business Review article on subsidiary utilization, the company may have a “headquarters hierarchy syndrome” where decisions and innovations are driven only from the headquarters while the subsidiaries follow directions from HQ. If RIM were to let their current subsidiaries develop and research products that fit the local tastes and needs, RIM could use this knowledge for global scale products. (19)

Out of time?
After carefully reviewing all the strategies and knowing that Apple’s schedule to release iPhone 5 in September 2012 and Google’s Nexus OS release coming up, how fast can Thorsten Heins make changes at RIM to catch up to the competition before running out of cash? With corporate clients leaving RIM products for the competition, time is of the essence and without drastic changes RIM will be a footnote in the history of mobile telecommunications - and a corporate obituary on the New York Times iPhone and Android apps.

Authors: Chul Won Baek, Han-Li Chang, Peter Klein, Seungbum Park - Group 6 of Global Strategy GM5470 of the On-Demand MBA Program

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1 “New York Times drops BlackBerry app .” Reuters. (2012): n. page. Web. 3 Aug. 2012. <http://www.saultstar.com/2012/07/25/new-york-times-drops-blackberry-app>.
2 Mogg, Trevor. “Qantas latest company to swap BlackBerry devices for iPhones.” Digital Trends. (2012): n. page. Web. 3 Aug. 2012. <http://www.digitaltrends.com/mobile/qantas-latest-company-to-swap-blackb….
3 Whittaker, Zack. “RIM’s market share may drop to 5 percent: analyst.” ZDNet. (2012): n. page. Web. 3 Aug. 2012. <http://www.zdnet.com/blog/btl/rims-market-share-may-drop-to-5-percent-an….
4Garthner, . “Nokia has 42.4% smartphone market share in Q3 2008.” IT Facts. (2008): n. page. Web. 3 Aug. 2012. <http://www.itfacts.biz/nokia-has-424-smartphone-market-share-in-q3-2008/….
5 Albanesius, Chloe. “Android Still King, But iOS Sees Gains on U.S. Smartphones.” PCMag. (2012): n. page. Web. 3 Aug. 2012. <http://www.pcmag.com/article2/0,2817,2407965,00.asp>.
6Reisinger, Don. “Apple, Samsung to own 50% of smartphone market by 2013.” Cnet News. (2012): n. page. Web. 3 Aug. 2012. <http://news.cnet.com/8301-1035_3-57447467-94/apple-samsung-to-own-50-of-….
7“Market Research Projects Smartphone Market Growth at 19% CAGR Through 2016.” MaretResearch.com. (2012): n. page. Web. 3 Aug. 2012. <http://finance.yahoo.com/news/market-research-projects-smartphone-market….

8Bedigian, Louis. “Research in Motion vs. Shareholders: The Final Showdown.” Forbes. (2012): n. page. Web. 3 Aug. 2012. <http://www.forbes.com/sites/benzingainsights/2012/07/09/research-in-moti….
9GlobalData, . “Research In Motion Limited - SWOT Analysis.” Wall Street Journal. (2012): n. page. Web. 3 Aug. 2012. <http://professional.wsj.com/article
10Syndigate.info, . “Singapore : Research In Motion Launches the BlackBerry Curve 9320 Smartphone in Singapore.” Wall Street Journal. (2012): n. page. Web. 3 Aug. 2012. <http://professional.wsj.com/article/TPMENREP0020120730e87q000da.html>.
11Mylant, John. “Research in Motion May be Around for a While.” Motley Fool. (2012): n. page. Web. 3 Aug. 2012. <http://beta.fool.com/johnmylant/2012/07/09/research-in-motion-may-be-aro….

12Miller, Huge, and Peter Burrows. “Apple Provides Lessons for RIM’s BlackBerry Comeback Bid.” Bloomberg. (2012): n. page. Web. 3 Aug. 2012. <http://www.bloomberg.com/news/2012-07-26/rim-channels-apple-in-blackberr….
13Miller, Huge, and Ari Altstedter. “Apple Provides Lessons for RIM’s BlackBerry Comeback Bid.” Bloomberg. (2012): n. page. Web. 3 Aug. 2012. <http://www.bloomberg.com/news/2012-07-04/rim-cutting-carrier-fee-shows-s….
14Connors, Will. “Multiple Missteps Led to RIM’s Fall.” Wall Street Journal. (2012): n. page. Web. 3 Aug. 2012. <http://professional.wsj.com/article/SB2000142405270230445860457748861058…“research in motion”&mg=reno64-wsj>.
15Doz, Yves L., Gary Hamel, and C.K. Prahalad. “Collaborate with Your Competitors - and Win.”Harvard Business Review. January-February (1989): n. page. Print.
16Gillies, Rob. “Struggling BlackBerry Maker RIM Shifts Strategy .” Manufacturing Business Technology. (2012): n. page. Web. 3 Aug. 2012. <http://www.mbtmag.com/news/2012/03/struggling-blackberry-maker-rim-shift….
17Wlodarz, Derrick. “Research in Motion isn’t in a ‘death spiral’.” beta news. (2012): n. page. Web. 3 Aug. 2012. <http://betanews.com/2012/07/25/research-in-motion-isnt-in-a-death-spiral/>.
18Lau, Chris. “7 Things Research In Motion Must Do To Curb Its Decline.” Seeking Alpha. (2012): n. page. Web. 3 Aug. 2012. <http://seekingalpha.com/article/701451-7-things-research-in-motion-must-….
19Bartlett, Christopher, and Sumantra Ghoshal. “Tap Your Subsidiaries for Global Reach.” Harvard Business Review. November-December (1986): n. page. Print.