The downfall: How Research In Motion lost the plot!

It’s really hard to believe how Reasearch In Motion (RIM) once touted as the fastest growing mobile company, today finds itself in the pits! On June 7, RIM announced to the world that it will officialy discontinue its 16GB tablet ‘Playbook’. The Playbook is inarguably the worst performing RIM product ever. It was such a big disaster that even selling it for free was a difficult task. Earlier this year in January, RIM had announced a change in its leadership, whereby, the Co-CEOs Mike Lazaridis and Jim Balsillie stepped down and were replaced by another insider, Thorsten Heins. RIM’s share price has fallen by 90% from its 2008 highs and it is expected to post an operating loss in the three months ending June. What could have led to the slide in fortunes of such a great company? Let’s explore the reasons behind RIM’s fall.

RIM’s rise as the fastest growing mobile company was astonishing. In just a few years it became the dominant player in the industry. RIM was the weapon of choice for the political and enterprise class. CIO’s all over loved RIM’s devices. No one could have predicted that RIM’s fortunes could change so soon. From being the dominant player to being in apposition where questions are being asked about its future, RIM has traveled this downward journey in a very short span of time!

One major reason was the denial mode in which RIM’s top executives lived. RIM failed to understand the potential of Apple’s Iphone and Google Android based smartphones. To RIM these were pure consumer phones. However, things started to change for RIM as the corporate employees who had bought these expensive smartphones began bringing their devices to office. Many IT managers were comfortable with the idea of employees bringing in their own devices. Given the times of recession, this was also a cost effective way. The entire ‘Bring your own device’ (BYOD) trend has been capturing enterprises has meant that corporates are now much more comfortable in letting employees carry their own devices to work. This changing trend hurt RIM badly, as both Iphone and Android smartphones were slowly becoming the choice of consumers and eventually also finding their way into enterprises which has the main market of RIM’s Blackberry devices.

Another factor where RIM lagged was development of new products. In the five years since Iphone was released, RIM still hasn’t found a viable competitor to it! Its attempt to enter the tablet market also fell flat on its face. Whenever asked about its response to Iphone and Android phones, RIM has always talked about Blackberry 10. However, the Blackberry 10 operating system project has been delayed for too long now, and devices based on it will not be available in market until the end of this year.

Iphones and Android devices took over the market because they appealed to everyday users and not just the enterprise customers. Both Apple and Google launched their online app stores which allowed customers to download all the apps they needed from a single place. RIM was very late in launching its own app store. A major reason why enterprises loved the Blackberry was because of its security features. However, IT managers soon realized that similar security features could be obtained from third party vendors. The employees wanted to bring their expensive and snazzy devices to the office, corporates had to relent.

 

                                                                Thorsten Heins, Research In Motion CEO

When Thorsten Heins took over as CEO, he tried to downplay RIM’s troubles saying that the company will stick to doing what it was doing. However, seeing the way RIM’s sales have been falling he now seems to have changed his views. He is ready to adopt strict cost cutting measures, job cuts, as well as strategic shifts. On 30^thMay RIM announced that it is hiring bankers J.P. Morgan and RBC Capital for strategic advice. Critics are commenting that this move is an indication that RIM is ready to put itself on the block, or maybe some parts of it might eventually be sold. Even if they stick to their beloved Blackberry 10 project and do come out with devices based on this OS, it is really hard to see how things could turn around for RIM from here. Well, for all we know Research In Motion might not even exist in another year or so!