Blackberry Governance
Posted: August 25th, 2021
Blackberry Governance
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Blackberry Governance
Introduction
In the sphere of corporate business, executive management plays a pivotal role in enhancing success or failure to bothupcoming and establishedorganizations. When chief executive officers in corporations lack vision and accountability, they are likely tobring down even the most prominentcompanies. This governance sentiment perfectly applies in the case of Research in Motion (RIM), currently known as BlackBerry. Early in the 21st century, RIM was the real deal. RIM introduced the smartphone market as we know today. This Canadian company dominated the smartphone market, with over 50% in market share. Currently, this company is tantamount to a bit player with less than 1% in market share (McNish, 2016). Before Apple launched iPhone, BlackBerry was the to-have phone for all. This enthusiasm towards BlackBerry meant that RIM was destined for greatness. The market was ready to consume BlackBerry products. Unfortunately, the corporation did not live to satisfy the consumers’ expectations. Analysts point out poor governance as the primarycause of BlackBerry’s collapse. However, some distinctive aspects count as triumphs for BlackBerry. Besides, this company was once a global leader in the smartphone market thanks to its innovative corporate leadership. Under the leadership of John S. Chen, BlackBerry’s current CEO, the company has undergone through a period of revitalization.An investor planning to inject funds into BlackBerry must considerthe company’s history, strengths, and weaknesses. An analysis of RIM’s governance assessment to determine whether the organization is worth a sizeable investment or otherwise is essential for future investment decisions.
Company History
BlackBerry’s journey is significantwith regards to the debate on governance and accountability of the corporation. The rise and fall of BlackBerry were as a result of fundamental decisions made by executive management. Douglas Fregin and Mike Lazaridis invested RIM in their university years back in 1984. During that time, mobile phones were yet to be invented. People used pagers and carphones to communicate. This Ontario-based company undertook a myriad of technology projects during its infancy years. Some of the notable ventures included Budgie LED sign product and DigiSync film reader. The later technology became popular to the extent that RIM was acknowledged by Academy Awards and Emmy Awards. RIM worked with Ericsson to develop technologies for wireless payment processing systems and pagers. During this collaboration betweenEricsson and Rim, BlackBerry OS was born. RIM’s pager technology grew in sophistication as it launched advanced two-way communication devices in North America. Consequently, RIM became the first wireless data technology developer in the region (Jowitt, 2017). RIM’s technology was used by firefighters, ambulance services, military, and police forces spread across the world. In 1992, Jim Balsillie, a Harvard graduate, joined RIM and felt compelled to invest $250,000 in the entity.Balsillie later joined Lazaridis as co-CEO of RIM.
The launch of the Inter@active Pager, a keyboard-based gadget, in 1996 marked the onset of success for RIM. The company producedhandsets, the software running on the devices, and a communications network. RIM was listed on the Toronto Stock Exchange in 1997 and started selling its email-enabled BlackBerry devices in the US market in 1999. BlackBerry gained traction as a communications-secure company following the 9/11 terror attack in New York.Subsequently, RIM registered an influx of more customers, including the US government, which bought over 500,000 devices (Jowitt, 2017). The number of users rose sharply as RIM launched devices that supported voice calling and colored screens. By 2007, BlackBerry users surpassed the 10 million mark following innovations such as the addition of multimedia capabilities and digital cameras.
Regrettably, RIM’s success was not long-lived as it was quickly overtaken by Apple in 2007. As more players entered the market with new technologies, RIM was overshadowed. Notably, BlackBerry was just not ready for the intensified competition, and as it turned out, the corporation gave in to the rivalry (Jowitt, 2017). Not even the support from The Queen and the US President, Barrack Obama, would save RIM. Rather than laying out measures to stay ahead of the competition, RIM adopted a reactive strategy that proved detrimental in numerous cases. For instance, the rushed release of the Playbook in 2011, a project intended to counter Apple’s iPod increasing popularity yielded dismal results. Furthermore, RIM had to terminate 2,000 employees due to reduced revenue (Jowitt, 2017). The fierce fight put up by Apple and Android pushed RIM into trouble.A worldwide four-day service outage for BlackBerry users further aggravated RIM’s problems in October 2011 (Jowitt, 2017). BlackBerry’s predicaments gave the impression of a giant brand struggling to stay afloat. Increased pressure forced RIM’s co-CEOs, Lazaridis and Balsillie to step down to salvage the worsening situation at the organization. The new CEO, Thorstein Heins, was not to reign for long as his tenure saw RIM lay off 5,000 employees and launch the BlackBerry 10 software update later (Jowitt, 2017). While Heins lured more subscribers into BlackBerry’s bandwagon to85 million users, his primary job to steady the ship did not reach fruition. BlackBerry’s financial health was still in crisis. Thus, Heins stepped down in 2013 after rising to the helm just a year before (Jowitt, 2017). John Chen, BlackBerry’s new CEO, discovered that the creation of the handsets harmed the organization. Chenwanted to do away with phone designing operations and instead license BlackBerry’s patents to partners. Although this strategy faced roadblocks initially, the approach became BlackBerry’s mainstream in September 2016.
There is still hope in BlackBerry’sfuture despite the corporation’s near collapse in history. First, BlackBerry owns a trove of patents. Second, the organization’sdecision to buy QNX in 2010 gives the company an important stake in the technology market. Significantly, QNX offers products such as telematics systems and in-vehicle infotainment. In his previous positions, Chen has earned the reputation of a leader who pays particular attention to focus, troubleshooting, and turnarounds. Chen has already demonstrated these capabilities at BlackBerry as evidenced by drastically improved corporation’s margins, plenty of room for improvement, an evolving marketing narrative, and a stronger focus on product strategy (Marsh, Partridge, Castanon-Martinez & Incera, 2017). UnderChen’s tenure, BlackBerry has registered improved financial income and increasedsales. Rather than specializing in smartphones only, BlackBerry has diversified its servicesto include automotive, security, and software systems (Jowitt, 2017). Although BlackBerry is already on its way back to success, analysts believe that the organization still has a long wayto go before it can regaintheiconic brand it once was.
RIM’s Approach to Governance
Organizations are groups of people interested in a common goal. These groups are headed by leaders who devise strategies, spearhead the group’s initiatives, and steer companies to their predetermined destiny. In the lifetime of organizations, tons of opportunities, threats, and challenges emerge. Good governance is the keynote element to business success. Besides, the statement that the rotting of a fish starts from the head down is not necessarily realistic but politically correct. In other words, a poor display of mismanagement from the people at the helm trickles down to the low-level employees. Managers ought to lead by example to influence the subordinates into following their steps. Therefore, as the people occupying positions of power take credit for the successes of an entity, they also must take the blame for missteps. Therefore, BlackBerry’s ups and downs denote the kind of approaches its leadership embraced at different stages. Notably, the corporationhas adopted two approaches to governance in its lifetime. In the early years, the company used an unprecedented dual-CEO governance structure where Lazaridis and Balsillie shared managerial obligations. After the duo stepped down in 2012, a single-CEO system took over with Heins assuming the mantle. Both approaches to governance have their strengths and weaknesses that have significantly swayed the company either to achievement or failure. The corporate structure characterized by side-by-side co-CEOs led to the spectacular rise of RIM in the late 20th century and early 21st century. The two managers shared managerial obligations. While this collegial approach to governance yielded positive fruits, the strategyalso had some downsides, including accountability deficit and delays in decision-making. Similarly, the single CEO system seemed not to work with Heins. On the other hand, the same governance system appears to be working for Chen. Besides, the role of the board of directors in the running of BlackBerry since its inception is significant to the conversation of the company’s governance issues.
Governance Strengths
Strong governance does not entail establishing rules and enforcing them. Instead, the approach involves building robust systems, inclusion, accountability, transparency, a positive culture, and managing risk. These characteristics tend to make stakeholders feel attached and important to the organization. Consequently, all employees work harmoniously not only to protect the firm’s interestsbut also striveto help the corporation achieve the predetermined long-term goals. Good governance is realized when well-intentioned leaders bring their ideas and experiences to the policy-making table. Such authority comes with an inherent desire to consider stakeholders’ interests when formulating policy initiatives. While good governance is hard to achieve, RIM’s leadership, on several occasions, has demonstrated its ability to cherish transformative company control. Most of RIM’s governance strengths were witnessed in the company’s early years when the competition wasinconsequential and during Chen’s tenure.
The unusual dual-CEO system that defined BlackBerry’s initial corporate structure partly drove the company’s early success. In most cases, rarely do two people share authoritative power andstill run a giant company efficiently. Lazaridis and Balsillieincorporatedtheir diverse competencies inthe organization where each leader specialized in the governance areas that he was well-versed to handle. While Balsillie dealt with corporate functions such as finance and sales, his counterpart headedsupply chain, engineering, and product management. As Lazaridis oversaw as RIM designed and produced the phones, Balsillie took the marketing and selling the finished products responsibilities (Silcoff, McNish & Ladurantaye, 2018). This collaborative division of labor brought numerous benefits,including improved efficiency and low exhaustion rates. With time, the dual-CEO structure rooted at RIM. There was no going back as relinquishing power would be potentially disastrous. For two decades, the two CEOs coexisted without problems. The leaders shared governance structure brought out the best of their strengths. The success of this partnership enhances the growth of RIM. While many businesses would not have survived under this kind of leadership, RIM proved that the structure is effective. Lazaridis and Balsillie acknowledge that RIM would be not have become the enviable global brand if they were separated (Ghosh, 2011). While many critics were against RIM’s co-CEO arrangement at the top, the strategy proved useful with regards to the growth of the company.
The relationship between Lazaridis and Balsillie was so collegial that the two shared voice mail passwords. This harmonious management was beneficial to RIM on several fronts. First, the co-CEO approach to governance led to smarter decision-making. Since the two leaders were willing to work jointly, their commitment to the brand at the expense of their leadership interestswas demonstrated (Silcoff, McNish & Ladurantaye, 2018). The duo mastered the art of bringing out the best in each other,and their complementary skill sets led to RIM’s success. The two leaders also consulted each other and debated on issues before taking a final stand. This approach eliminated possible flaws and biases that come with individual decision-making. This critical analysis does not happen when a stand-alone CEO is expected to make all the important decisions. Second, the noble working relationship between RIM’s CEOs inspired the subordinates to embrace teamwork. Lazaridis and Balsillie led by example so that the lower-level employees had no option but to endorse the collaborative approach. Besides, the specialization aspect prevented leaders’ burnout. In normal circumstances,CEOs get overworked and tire as they are expected to handle all managerial obligations single-handedly. Therefore, when the functions are shared between two equally capable individuals, exhaustion is kept at bay. The investor should have in mind that although this coexistence contributed to the upsurge of RIM, the co-CEO arrangement was scrapped in 2012 after both Lazaridis and Balsilliestepped down. Moreover, numerous weaknesses of the co-CEO governance system exist as discussed later in this assessment.
The presence of Larry Conlee, RIM’s chief operating officer (COO), provided the much-needed unifying factor and accountability so that the top management was efficient. Most people wish for their ideas to be advocated and benching those of other contributors. Cracks of division were always lingering around RIM. Nevertheless, Conlee was quick to mend them before it was too late. Lazaridis’ subordinates did not get along often with Balsillie’s side. As the company rapidly grew in size, instituting accountability and obtain definitive decisions became challenging (Silcoff, McNish & Ladurantaye, 2018). Without Conlee’s intervention, the collaborative relationship between Lazaridis and Balsillie would not have endured for long. When problems arose, Conlee was there to mend them and restore harmony at the top. The COO established a project management office, which would ensure that executives were held to account for their decisions and how they met deadlines (Silcoff, McNish & Ladurantaye, 2018). Conlee cracked the whip when deadlines were exceeded, and leaders would not account for their choices. The leader alsobelieved that there is always room for improvement, even for the best performers like Lazaridis and Balsillie. Unfortunately, the aspect of checks and balances faded away when Conlee resigned in 2009. A slack attitude befell RIM after Conlee’s departure as there was no other operational executive to push teams to meet deadlines. The investor must take note that the lack of a professional to fill the void left by Conlee introduced a culture of reluctance that hinders optimal performance and desired results.
John Chen has gained some ground inregards to turning BlackBerry’s fortunes. Both the product focus and financial position have improved since he assumed office in 2013. Chen came into the broken brand with a purpose to help BlackBerry bounce back. Knowing that his predecessor had failed in the same domain, Chen felt compelled to rethink his strategy. Fortunately, Chen’s reputation of turnarounds preceded him. His governance sparked some optimism around BlackBerry. Chen’s task was demanding, as almost everything was falling apart. Nonetheless, Chen, under the support of other executives, has provided promising strategies and product realignments that seem to suit BlackBerry’s future. For instance, thepersuaded the board of directors to endorse his proposal to do away with phone manufacturing and focus on other profitable and less capital-intensive offerings such as makingsoftware, automotive, and security systems (Jowitt, 2017). Commendably, Chen’s approaches have put Blackberry back on the trajectory of growth. BlackBerry’s total non-GAAP income for the 2017 financial year was slightly above $1 billion (Marsh, Partridge, Castanon-Martinez & Incera, 2017). Half of this revenue came from software trade. Although the corporationwas making way more than that before its dramatic fall, the figures signify a positive indicator that the brand is not done yet.
While the organization has faced several challenges such as a significant drop in BlackBerry’s Service Access Fees (SAF) revenue, the company’s revitalized successes such as doubling of margins under Chen’s leadership show that the giant brand is on the right track back to glory. Chen has invented a way of retaining its phone manufacturing operations without accruing the production cost. BlackBerry licenses its partners such as PT BlackBerry Merah Putih of Indonesia, TCL of China and Optiemis Infracom of India to design branded BlackBerry devices and sell them for a fee (Marsh, Partridge, Castanon-Martinez & Incera, 2017). Furthermore, Chengenerated income from BlackBerry’s depreciating intellectual property through joint venture agreements. The fact that BlackBerry still exists against the decline perception is a remarkable achievement for the CEO. With its stronghold of superior security, BlackBerry intends to tap into the making of embedded OS for carsandother domains including smartphones, manufacturing firms, the internet of things (IoT), and other markets facing disruption in the coming days. BlackBerry has an expansive white space for it to explore under Chen’sleadership (Marsh, Partridge, Castanon-Martinez & Incera, 2017). Nevertheless, BlackBerry must learn from the company’spast mistakes and understandhow to cope with competition from brands such as Apple, Samsung, Google, and Microsoft.
Governance Weaknesses
When corporate leaders make smart decisions that perfectly resonate with the consumers’ needs, the ultimate result is an achievement. Thriving brands such as Apple and Samsung leadership steer the organizations’ success. Similarly, ailing brands such as BlackBerry are an indication of poor governance. What was once an iconic company in the world was pushed to a painful near-collapse situation by governance weaknesses. This section addresses BlackBerry’s governance missteps that pushed the corporation on the verge of collapse. While the co-CEO structure worked well for a long time, the approach was partly to blame for RIM’s downfall. There were deep and wide rifts at the boardroom and the different executive levels (Silcoff, McNish & Ladurantaye, 2018). These multiple divisions adversely affected the company as they happened at a time when BlackBerry ought to have channeled its attention towards upcoming market trends. As BlackBerry was busy fighting internal wars, the corporationsmore creative rivals introduced irresistible products to the market. Consequently, BlackBerry was not adequately prepared to challenge the next-generation gadgets such as Apple’s iPhone. What was once a leader in the sphere of innovation was outshined by the competition. The leadership was blinded by the company’s success that they forgot to keep track of the market new entrants. Success was something that the co-CEOs could not replicate. By the time BlackBerry was responding to the launch of iPhones, it was too late(Silcoff, McNish & Ladurantaye, 2018). Even worse, the unpolished PlayBook launch in 2011 did not attract customers leading to losses. Hence, BlackBerry faced a likely collapse and further governance faults.
The top leadership could not agree on important strategic decisions. At a time when BlackBerry was on its knees, the co-CEOs and board directors ought to have been deliberatingon practical ways to save the company. In contrast, the managers were involved in strategic showdowns that did not benefit the brand. Heins and Lazaridis were against Balsillie’s bold plan to lure wireless carriers totake up BlackBerry Messenger (BBM) at the expense of SMS applications in all phone devices. Balsillie’s novel strategy would see BlackBerry charge all brands manufacturing hundreds of millions of non-BlackBerry phones(Silcoff, McNish & Ladurantaye, 2018). Thiscross-platform project would generate new profits for RIM. Unfortunately, divisions in the senior levels crumpledtheplan. Balsillie, who previously worked closely with his co-CEO, Lazaridis, was frustrated when Heins killed the initiative upon assuming the CEO position in 2012. Consequently, Balsillie quit the board that did not see the great potential in Balsillie’s proposal.
During the co-CEO system, decision making was significantly slowed. When multiple parties have to be consulted before settling on a given option, the speed of decision-making is slow. Therefore, BlackBerry faced challenges in instituting accountability as RIM grew in size. Devoid of speedy decision making, RIM experienced chronic delays when it came to launching products. For instance, the Playbook gadget that was supposed to “kill” Apple’s iPhone was unveiled in 2011, many months past its planned release date (Silcoff, McNish & Ladurantaye, 2018). If BlackBerryhad been led by strong leadership, the corporation would have taken a few months to design an authentic sleek and advanced device that would outshine the iPhone. Moreover, BlackBerry was accused of copying the iPhone’s features and could not design it better than Apple. BlackBerry’s problems worsened when it dawned the CEOs realized that the corporation was not empowered to counter the competition (Silcoff, McNish & Ladurantaye, 2018). RIM’s governance issues accumulated into one big problem that the company was in a state of confusion. At a time when CEO Lazaridis decided to acquire QNX in a strategy to inject some innovativeness to BlackBerry, the move was faced with some resistance. The board had to decide whether the company would restructure its operations afresh to accommodate QNX or integrate the new firm into its functions. Deciding whether the company should continue using java applications or build the BlackBerry OS from scratch took a whole year (Silcoff, McNish & Ladurantaye, 2018). Dragging of many other crucial decisions brought unwanted distractions to RIM’s operations rendering it less competitive in a market defined by aggressive innovators.
BlackBerry’s governance lacked innovation and customer satisfaction. A significant portion of RIM’s problems came as a result of the firm’s persistence leadership strategic mistakes and lack of vision(Silcoff, McNish & Ladurantaye, 2018). Renowned leaders tend to anticipate what the customers want now and, in the future, so that they can guarantee relevance for the foreseeable time. Regular research to determine customer demands works best for effective managers as they stay a step ahead. BlackBerry’s biggest mistake is that it failed to keep up with Google and Apple, two of its direct competitors. The corporation’s leadership was satisfied with the company’s progress that they did not envisage the encroachment of competitive forces. Being the pioneers of the smartphone industry, they did not think that other players direly wanted their crown. Therefore, the governing structure at BlackBerry was reluctant to go out of their way and anticipate the changing consumer needs(Silcoff, McNish & Ladurantaye, 2018). Besides, the management was not aware that customers drive market revolutions as opposed to the top managers. More importantly, the lack of vision among the directors and co-CEOs denotes their mistaken mindset that smartphones were bound to remain mere communication devices. To their surprise, Apple released devices that facilitated full-fledged entertainment.
BlackBerry trailing the newcomer brands also points to the governance’s resistance to change. This company came earlier than its competitors and established its position at the helm of the smartphone industry. Early in the 21st century, BlackBerry enjoyed more than half of the market share (McNish, 2016). With such a leeway, RIM should not have lost its grip in the market and getdwarfed by new entrant rivals. RIM had gained an enormous influence around the globe as people perceived the firm’s product as next-generation technology. Consumers had so much expectation, and BlackBerry became the company to beat. Shockingly, BlackBerry switched positions with Apple (Castaldo, 2012). Eventually, the corporation was slowly forced out of the market with a negligible market share. The top leaders were still stuck by the concept that brought BlackBerry into business, keyboard phones. Even when the firm’s consumers demanded touchscreen technology, RIM was still for the idea of physical keyboards. The message was crystal clear, and consumers wanted touchscreen phones for easy navigation and better video viewing(Silcoff, McNish & Ladurantaye, 2018). Rather the company giving customers what they wanted, which is a command in the business context, the executive management opted to retain its email-enabled fancy phones. In the meantime, other competitors researched ways to add browsing and other capabilities on their gadgets. While it is understandable that the keyboard feature is what makes the BlackBerry brand, failure to make adjustments to conform to the users’ desires was a risky approach.BlackBerry gambled, and in the end, turned out disastrous. Furthermore, the corporation failed to embrace the use of apps in its devices, forcing more customers to run to Apple and other brands that provided phone apps.
While BlackBerry still believes in completing a comeback, the organization’s current management is still not up to the task. Numerous opportunities still exist for BlackBerry to exploit. While re-entering the smartphone market is not an option for Chen, the leader believes that venturing into non-smartphone hardware gadgets and software systems is BlackBerry’s future. Significantly, BlackBerry owns a vast global network that it can lease (Marsh, Partridge, Castanon-Martinez & Incera, 2017). Considering that this network is not likely to enhance the company’s new line of focus, selling it would be logical. Chen is yet to decide what to do with its widespread network. Having come into power back in 2013, Chem ought to have taken decisive action regarding BlackBerry’s way forward to put up with the competition, which is driven by technological trends.
Recommendation
Governance is an important factor for aspiring investors. The people occupying executive positions hold power to steer BlackBerry to either a fruitful or a futile destiny. While RIM’s history is rich, especially the strong co-CEO leadership, there are also numerous cases of poor governance associated with the corporation. The strengths of BlackBerry’s governance are overshadowed by its weaknesses. Currently, BlackBerry is no longer the enviable company that every investor looked up to. Once Apple and other brands redefined the smartphone sphere, BlackBerry had no response. Although Chen’s efforts to awaken re-ignite the corporation are commendable, numerous strategies and efforts needto be fine-tuned before BlackBerry regains its lost glory. The organization’ssoftware offerings and licensing agreements, though working to turn things around for BlackBerry, are not generating enough revenue that would give hope to investors. Some degree of dysfunction still exists in BlackBerry as the company is not operating in its full potential. Most importantly, multinationals such as Apple, IBM, Google, Microsoft, and Samsung are making vast investments in infrastructure and productivity software whereBlackBerry is now focusing on. Therefore, quitting the smartphone market is not a guarantee that BlackBerry will enjoy a competition-free environment. Therefore, an investor willrefrain from making a sizeable investment in BlackBerry in favor of other promising startups.
References
Castaldo, J. (2012, January 19). How management has failed at RIM. Canadian Business. Retrieved from https://www.canadianbusiness.com/technology-news/how-management-has-failed-at-rim/
Ghosh, P. (2011, July 15). Why does RIM have two CEOs? International Business Times. Retrieved from https://www.ibtimes.com/why-does-rim-have-two-ceos-299195
Jowitt, T. (2017, October 20). Tales in tech history: BlackBerry. Silicon. Retrieved from https://www.silicon.co.uk/e-innovation/science/tales-tech-history-blackberry-223557
Marsh, C., Partridge, B., Castanon-Martinez, R., & Incera, M. (2017). BlackBerry is back: Strategy and product updates point the way forward. New York, NY: 451 Research LLC.
McNish, J. (2016, January 5). The rise and fall of BlackBerry. Paris Innovation Review. Retrieved from http://parisinnovationreview.com/articles-en/the-rise-and-fall-of-blackberry
Silcoff, S., McNish, J., & Ladurantaye, S. (2018, April 7). How BlackBerry blew it: The inside story. The Globe and Mail. Retrieved from https://www.theglobeandmail.com/report-on-business/the-inside-story-of-why-blackberry-is-failing/article14563602/
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