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Denial Is Not A Turnaround Strategy: Why RIM’s New CEO Needs To Get Real

If you took the statements of new Research in Motion (NSDQ: RIMM) CEO Thorsten Heins this morning at face value, you might walk away thinking the company’s many problems stem from confused marketing and poor execution. They don’t: it’s all about the product, stupid, and that’s why the investors who clamored for RIM to name a new CEO are not impressed with the early returns.

Heins takes over a company once synonymous with mobile computing–a company whose BlackBerry was fondly compared to one of the most addictive drugs we’ve yet to come up with on this planet–that has profoundly lost its way as it continues to crank out products designed for the mobile world of five years ago. It’s true that it’s having trouble doing even that, which is why RIM founder Mike Lazaridis and co-CEO Jim Balsillie had to go, finally bowing to the pressure in an announcement timed to appear during two of the biggest American football games of the season involving teams from the tech sectors of Silicon Valley and New York.

But Heins doesn’t inherit a company that was on the right track, one that has some good ideas but needs help selling those ideas and making sure they arrive on time. RIM’s problems are deeper, chief among them that the QNX software it acquired to finally enter the modern mobile computing era seems to be incapable of working with its trademark BlackBerry e-mail system.

In multiple interviews Sunday and during a conference call on Monday, Heins refused to acknowledge that RIM’s product strategy may be flawed. “RIM has gone through a tremendous growth phase, but we innovated while we were developing the product, and that needs to stop,” he said this morning, implying (but fooling few observers) that RIM is coming up with so many awesome ideas that it’s having a hard time getting them all into its products.

Obviously Heins can’t come out in his first public appearance with a doom-and-gloom routine, but judging by his initial statements it’s not clear whether he realizes the scope of the turnaround project he has signed on to complete. RIM needs all the things he mentioned–better marketing and operational discipline–but it also needs to end its isolation from the broader mobile world of application developers and come up with ideas that will meet the mobile-computing needs of consumers in 2015 rather than scrambling to develop stop-gap solutions for 2012.

In what seemed like a testy interview with Toronto’s Globe and Mail, Heins scoffed at the notion that RIM needed change.

Change to what? Change for what? I mean, what’s the objective of a change? We’ve made a lot of changes in the past 18 months. … We didn’t stand still in the last 18 months, we did our homework. And I think we will complete our homework soon.

So in the same thought, he balked at the notion that RIM needed change and then pointed out how many changes RIM has made over the last 18 months.

There is a business-school case study waiting to be written about this era of RIM, from 2007 through the next few years. It’s a solidly profitable company with a growing user base outside the U.S. that has no grasp of the future, a resistance to outside ideas, and a management team completely tone deaf to the modern consumer. Heins, a RIM executive who came on board during that pivotal year in which Apple (NSDQ: AAPL) introduced the iPhone, may be part of the solution but he has also been part of the problem.

RIM’s fundamental problem is that it hasn’t designed a good forward-thinking and intuitive piece of software in years. It still makes the best hardware keyboards in the business and still operates a back-end network that consumes data far more efficiently than other phones, but the BlackBerry OS is outdated and ill-suited for an era dominated by touchscreen user interfaces.

That’s what QNX was supposed to bring to RIM, and the company has utterly failed to integrate that software into a meaningful product almost two years after it acquired the technology. We won’t know if RIM can salvage QNX until we get a better look at the Playbook 2.0 software released earlier this month and more crucially, until the first BlackBerry 10 (the new name for QNX) handsets arrive in late 2012.

Heins does not have a lot of time. Apple and Android are deeply established in the minds of both neophyte smartphone owners and experienced software developers as the only two worthwhile mobile computing worlds. And Microsoft (NSDQ: MSFT) and Nokia (NYSE: NOK), not RIM, are best positioned to capture any demand left on the table with well-received phones actually in the market.

And he’ll have to operate with Lazaridis watching carefully over his shoulder from a board role under the guise of providing “strategic counsel.” In other words, it’s not clear how much latitude Heins has to refocus RIM’s priorities around software development when the father of the BlackBerry will still wield power inside the company.

Everyone knew Lazaridis and Balsillie had to go, not only because of investor pressure but because companies need to send signals to the market and to its employees that failure on such a grand scale cannot be tolerated. But when RIM investors met the new boss on Monday and realized that he wasn’t all that different from the old boss, they sighed heavily and sold off more of the company’s stock, now down 6 percent in the hours since Heins’ conference call concluded. (It finished down 8.58 percent for the day, and is now down 72 percent compared to January 2011.)

We once again recall the words of Lou Gerstner, who pulled off a successful reinvention of IBM two decades ago that wasn’t all that different from the task ahead of Heins: “No institution will go through fundamental change unless it believes it is in deep trouble and needs to do something different to survive.”

RIM is in deep trouble and needs to do something different to survive. When will it realize that?

2 Responses to “Denial Is Not A Turnaround Strategy: Why RIM’s New CEO Needs To Get Real”

  1. Don’t blame CEO, they want RIM win.
    RIM has strange culture and self distruct political environment.
    In RIM if a new hired person figure out major problem and introduce efficient approach, both manager and his buddy group member will proof their wrong approach works. just like someone point out driving a car is right way, pushing a car is wrong way, then both manager and his buddy group member will hate you, and proof that 3 person can also move the car by pushing it. cheating email will be sent to some vice president, saying like: see, the car moving, pushing a car is a natural part of the process, in order to deny new hired contribution of introducing skill of drive a car, they have to deny merit of driving a car.
    It is very strange company culture and strange company political environment, it promote stealing and cheating skill. RIM’s management may be a typical instance in MBA course.
    This culture deny or steal hardworking team members’ contribution/innovation, generate strange political environment, destroy RIM.
    So don’t blame CEO, some of their VPs and VPs’ expert generate terrible culture and self destruct political environment.