RIM: Outlier or Innovator?

RIM has spent the last 18 months falling behind the market and off the path of their strategic vision. They have clearly moved from market leader to fast-follower.

Add to that, a change in leadership was announced Sunday night, during the NFL semi-final game between the NY Giants and the San Francisco 49ers.

With the appointment of Thorsten Heins as CEO, celebration should occur under the theory of some action is better than no action. But the market has reacted to the announcement as if it were “non-action.” Shares are down this morning by 7.5 percent and analyst quotes all fall under the “wait and see” heading. There are also many questions being asked about the underlying governance structure – although Balsillie and Lazaridis have stepped down as Co-CEOs, they are still the largest shareholders and are remaining on the Board of Directors, with Lazaridis holding the role of Vice Chair and Chair of the Board’s new Innovation Committee.

But do the the co-CEOs really deserve that? Over the past few years, they’ve both clearly suffered from “shiny object” syndrome. Instead of motivating and leading, the leaders were clearly busy out “playing”:

·Jim Ballsillie’s five year quest to purchase an NHL Hockey team is all consuming (attempts for the Pittsburgh Penguins, Nashville Predators, Phoenix Coyotes and Buffalo Sabres have all failed)

·Mike Lazaridis’ passion for the Perimeter Institute for Theoretical Physics and his role as Chairman of the Board

·Employee Bands…

This lack of focus by the CEOs has left Thorsten Heins, as Chief Operating Officer (COO) Product Engineering, back home minding the shop during the downward slide of 2010/2011. This begs the question of what role he played in the market delays and lack of product execution for the Playbook 1.0 and the new BlackBerry Operating System (BB10)? If he wasn’t accountable for the lack of innovation, lack of time to market for new products – who was?

In the book Outliers: The Story of Success, ”Waterloo” native Malcolm Gladwell writes a chapter called “The Ethnic Theory of Plane Crashes.” In it, Gladwell explores two plane crashes — one Colombian (Avianca Flight 52) and another South Korean (Korean Air Flight 801) — and addresses how the culture of the pilots perhaps contributed to each disaster. He focuses on how well the pilots communicated with each other and with air traffic control. Poor communication in these examples has to do with something called a culture’s Power Distance Index (P.D.I.). The term and concept come from psychologist Geert Hofstede, and P.D.I. is a measurement of “how much a particular culture values and respects authority,” as Gladwell defines it. Countries with a high P.D.I. generally value being more deferential towards authority, and thus not contradicting a superior. Therefore, Gladwell argues that since both Colombia and South Korea rank towards the top of the P.D.I. list, the subordinate members of their cockpit crews were unable or unwilling to speak up as assertively as they should have about safety concerns. Can we make this comparison to RIM’s corporate cultures as well? Does RIM corporate culture suffer from a high P.D.I?

One of the most compelling parts of this chapter is Gladwell’s look at the extraordinary circumstances needed for planes to crash in the first place. Can we make the same analogy as we look at corporations? “Plane crashes are much more likely to be the result of an accumulation of minor difficulties and seemingly trivial malfunctions,” Gladwel writes. Can we look at RIM as perhaps having shared very similar challenges as these ill-fated flights — a series of minor difficulties that accumulated into one big “crash?” Gladwell lists a litany of factors, such as bad weather, the plane running late, pilot fatigue, and pilots who “have never flown together, so they’re not comfortable with each other.” On top of that, he adds, “The typical accident involves seven consecutive human errors.” How many errors has RIM made?

RIM was founded in 1984 and had a 20-year track record of market leadership and innovation. In 2005, with the failure to settle their patent dispute with NTP, the company started to feel some market hesitation – U.S. sales did not continue to expand at the rapid pace of past years due to looming fears that the courts may require RIM to shut down service in this market. From 2005 to 2007 RIM was so caught up in creating “work-arounds” to the patent issue that they weren’t driving product innovation. In the meantime, the iPhone was demoed in January of 2007 and launched June 29th, 2007. At this point, RIM was officially behind the market and playing catch-up. Heins was hired in 2007 as Senior VP of the BlackBerry Handheld Unit with the task of battling the iPhone and bringing the portfolio back to market leadership. Four years later… they have clearly fallen further and further behind, with many asking if the heyday of the past is retrievable.

In his interview on Sunday, Heins’ opening message was that there is nothing wrong at RIM and that they are going to hire a new Chief Marketing Officer (CMO) to get the brand back to its glory days as the North American market leader. Has he not seen the fall-off in revenues, market share and developer relationships etc., etc., etc.? When you dig deeper, he also talks about how they are innovation-focused, yet not all that disciplined with processes and execution – if that’s not the bailiwick of the COO then where does it fall? Again, is RIM suffering from High P.D.I and was Mr. Heins not in the cockpit with the Co–CEO’s for the last 18 months?

If the innovation RIM possesses is as strong as Heins believes, then some active leadership and possible reflection on the high state of P.D.I within the RIM culture will be a good thing. If RIM simultaneously works to lower that rate and perhaps incorporate the discipline of “deliver on your commitments” and holds employees accountable to quality, time and cost, that will be a welcome improvement. Of course, this doesn’t address the issue that this would contribute to one heck of a big cultural transformation, which makes us wonder: does he have the strength of leadership personally and in the executive team to pull it off? Time will tell… we always love a good comeback story!

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