Losing The Signal

By  Jacquie McNish and Sean Silcoff

42-MINUTE AUDIO / 6,000 WORDS (24 PAGES)

SYNOPSIS

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Would you like to know how the company that created one of the world’s most addictive products and pioneered a market spiraled into holding only 1% of its market after losing its way? This book summary provides insight into what propelled the rapid growth and precipitous downfall of Research in Motion, the Canadian technology company that created the BlackBerry smartphone. Losing the Signal provides unique access to many of the key players inside RIM. It covers the backstories of founder Mike Lazaridis and his co-CEO Jim Balsillie, and the impact of their unique “business marriage” and dual leadership on the company. It charts the course of RIM’s ascent and descent, highlighting key business choices, market dynamics, and corporate scandals that led to RIM’s organizational unraveling, strategic confusion, and ultimate defeat in the smartphone race. 

 

SUMMARY

As partners and co-CEOs of Research in Motion, Mike Lazaridis and Jim Balsillie together achieved much more than they could have individually. The success of their partnership was largely due to their complementary skills and talents and the ambition they shared for the company they led. After spending several of RIM’s early years struggling to pay the bills and searching for customers, they knew they had encountered a big breakthrough when they entered into a service contract to help Canadian wireless carrier Rogers Cantel, Inc assemble a mobile network. Several failed product attempts later, the BlackBerry would come to life and solve the “mobile e-mail riddle” for high-powered customers the world over. The first of its kind, BlackBerry stood out in a sea of clunky two-way pagers and mobile contact and calendar devices. Lazaridis and Balsillie rode the wave of success for several years, until competitors like Apple and Google changed the game. Scandals, a protracted patent war, and strategic confusion also pounded RIM, in the end leaving the company without focus, direction, or leadership.

 

Partners in the making

The underdog – Jim Balsillie

“The smart-ass, as it turns out, really was smart”

Jim Balsillie was born in Seaforth, Ontario, Canada, near Lake Huron. Jim proved himself as a fledgling salesman from a young age, hawking Christmas cards door to door and succeeding at other entrepreneurial jobs as a kid. Though his father worked as an electrical repairman to put food on the table, the Balsillie’s had a storied and colorful past. The family was descended from aboriginal Canadians and could trace relatives back to dealings in the Canadian fur trade. Jim also had an aunt who made a name for herself managing exotic dancers. Sales, whatever the mode, was in his roots.

Balsillie’s mother used to tell him, “Jim, you always fall in shit and come up smelling like roses.” Even as a child, and certainly later charging forward as a CEO, Balsillie always found a way to come out on top of a situation not in his favor. As a twelve-year-old in grade 7 in Peterborough, Ontario, Balsillie was prohibited from math class after mouthing off to the teacher. After pursuing self-study, Jim scored first on the annual math exam, not only among his classmates at school, but among all children in the entire province.

As he grew into an adolescent, he became enamored with Peter C. Newman’s tale of the Canadian wealthy upper-class, The Canadian Establishment. “What Balsillie really wanted was to be someone.” Ever ambitious and dogged, he created a three-part plan for himself. First, he would enter an elite undergraduate institution. Second, he would land a good job in accounting at the firm Clarkson Gordon, and third, he would graduate from Harvard Business School. Though lofty, Balsillie succeeded on all three fronts. Through his pursuit, however, Balsillie was never truly able to hide what he believed was his “underdog” status. “In Balsillie, (college classmate) Wright saw someone who was determined to change a world he believed was stacked against people who shared his working-class background and lack of connections.”

After attending Harvard Business School, he could not resist the opportunity to prove himself in his home country of Canada while also gaining a position of real authority. Rather than pursue top-tier jobs in banking or consulting, Balsillie took an alternative route after meeting fellow Canadian Rick Brock at an event. Brock was the head of Sutherland-Schultz, a mid-sized Canadian electronic equipment maker headquartered near Waterloo. After further discussions with Brock, Balsillie was excited about the possibility of working in the fast-paced technology firm. After graduation, he joined Sutherland-Schultz with the title of executive vice president.

 

The boy electrician – Mike Lazaridis

 “In a sense (my parents) were entrepreneurs; they were explorers. To me, [change] was an opportunity.”

Mike Lazaridis, originally named Mihal Lazaridis, was born in Istanbul, Turkey. Mike moved with his family to Canada as a child for his father to pursue employment at a Chrysler assembly plant in Windsor. The immigrant family worked hard and over time achieved their “Canadian” dream. The Lazaridis’s bought a house, complete with a basement that would become known as “Mike’s laboratory.”

Just as Jim Balsillie was enamored with the book The Canadian Establishment, Mike Lazaridis fed off The Boy Electrician, “a chatty how-to guide for understanding and building electrical machines, radios, and other equipment.” Lazaridis was scrappy, always finding a way to create something new and exciting in his workshop. If he was missing materials, he would make them or find them somehow. Among other inventions, he created his own solar panel, oscilloscope, and computer in his basement.

In his 8th grade yearbook, his classmates depicted Lazaridis as a mad scientist with thunderbolts coming out of his head. Lazaridis was not only book-smart, he was savvy in all related “hands-on” technical topics. The first floor of his school housed the “shop” classrooms – an electrical classroom, a machinery one, etc. On the second floor were the advanced science, math, and business classes. Lazaridis was unique among his peers in that he was a star in both realms.

It was no surprise when he chose to major in electrical engineering at the University of Waterloo. In college, he secured a work-study position at the competitive Control Data Corporation. Assigned to the night shift doing computer diagnostics, he quickly outsmarted the system by writing an automatic program to do his job for him. When it came time for graduation and Lazaridis was considering different full-time jobs, Control Data Corporation was not an option as it had recently encountered severe financial setbacks. From this, Mike learned an invaluable lesson. After witnessing Control Data Corporation’s struggles, he concluded that, “Innovation could not thrive without corporate support and effective commercial strategies.”

Unaverred, Lazaridis decided to set up his own consulting and technology services firm. The first product he developed with close friend and business partner Doug Fregin was a system they called “Budgie.” Budgie was a customizable advertising device that could display whatever the user typed on the keypad onto a TV screen. Though the device did not gain traction with potential customers, it inspired the pair to license their business. It was March 1984, and they had officially started “Research in Motion.”

 

Research in Motion – Climbing up

“The innovations were promising, but buyers were scarce.”

Coming together

“I want this guy to work with me… It was like meeting your future wife. You just know.”

Mike Lazaridis and Doug Fregin spent Research in Motion’s, or RIM’s, early days pursuing modest ventures such as designing computer solutions for local technology companies and creating other devices like Budgie. Though Lazaridis in particular had ambitious goals, still five years into the venture the pair were still struggling to pay the bills, working above a Waterloo bagel store designing electrical components.

Engaging with their next client, however, would change everything. Rogers Cantel, Inc. was owned by Canadian cable businessman Ted Rogers. Rogers Cantel had an arm specifically focused on experimenting with messaging on radio waves, and they had a problem they couldn’t solve. They enlisted RIM’s services to help them understand and activate a mess of wires and parts they had acquired from the Swedish company Ericsson. The mess was called Mobitex, and it was supposed to enable a wireless data network for whomever controlled it. Rogers intended to use the network to communicate with its service trucks.

When Mike Lazaridis heard the assignment, he knew it was big. The Mobitex network would activate a “radio-based system that enabled communications on a network of computer and mobile devices.” While corporations had systems and networks at their physical locations, there was not a solution to enable data or messages to easily reach employees who were traveling. Though RIM went to work on activating the Mobitex network, the commercial side faltered. There were few believers and fewer buyers, in the mobile data that Rogers was selling.

As RIM and Rogers struggled with commercialization and financing, Jim Balsillie was reaching the end of his time at the Waterloo firm Sutherland-Schultz. It was being acquired, and the bureaucratic, by-the-rules takeover firm immediately saw that Balsillie would not be a good fit with the new management team. This departure reaffirmed Balsillie’s adherence to the beliefs of Sun Tzu, outlined in The Art of War. “It’s not a friendly world out there…you can’t panic. You have to stay focused. You got into a state. Emotionally you become formidable. You go into a warrior state.”

Balsillie got a healthy severance package, and intended to put it to good use investing in a new venture. His current boss recommended RIM, a supplier of theirs. Balsillie and Lazaridis first met in RIM’s offices above the bagel shop. Lazaridis was wearing sweatpants. Though Balsillie recollects that Lazaridis and his staff were clearly “geeks,” he also recalls that Lazaridis was “mesmerizing” when talking about technology. From Lazaridis’s perspective, he perceived a “confident executive who understood banking, finance, deal-making, and best of all how to sell a product. In other words, he had everything Lazaridis didn’t.” A partnership was born, with Lazaridis retaining a 40% stake in the company, Balsillie 33%, and other partners Fregin and Barnstijn the remainder. It was 1992, and eight-year-old RIM was finally positioned to begin making good on its ambitious goals.

 

The early days

“In a jungle of technology predators, the small company had to be as ruthless as the giants.”

In the years immediately after Balsillie joined, RIM continued to focus efforts on the Mobitex network – getting it off the ground, programming tools for users to write applications for it, and creating software for Mobitex users already connected to it. Soon, however, it was clear that the big money was in hardware, not software. While other players began charting the territory with devices like Motorola’s Tango (a two-way pager), Nokia’s 9000 Communicator (an expensive cell phone with a keyboard, the size of a book), and U.S. Robotics’s Palm Pilot 1000 (a sleek device with calendar, contacts, and other information), RIM was slowly and quietly building a wealth of experience and knowledge in the sector by operating the proprietary Mobitex network and experimenting with associated hardware. Lazaridis’s vision was a future where the most “logical device” would send and receive email.

RIM first responded by launching the Inter@active 900, also known as the “Bullfrog” internally due to its clunky and poor design. Early users, however, were taken with the device despite its aesthetics, after experiencing its convenience and utility. If design could be improved, they were convinced the product would become a game-changer. Lazaridis made the crucial decision to bring the design of the next generation “Bullfrog” in-house, whereas previously it had been contracted outside of RIM.

In addition to design, the success of the product depended on the expansion of the Mobitex network. If RIM could convince Mobitex owner, now Bell South, to expand it nationally, they were convinced that the product would take off. It was 1997, and, with the design of the new device underway, Bell South “bet the ranch” on the expansion of Mobitex. What would become known as the major innovative device BlackBerry was...

 
 

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