The innovator’s dilemma that bamboozled BlackBerry

A new account of “the fall of BlackBerry” in Canada’s Globe and Mail sheds light on the torment of the country’s once-mighty technology champion with some new revelations of internal rifts and missed opportunities. Four stand out for me.

1) Co-chief executives. BlackBerry (or Research in Motion as it was called until recently) was one of the best-known examples of a company run by co-CEOs – co-founders Jim Balsillie, pictured left, and Mike Lazaridis. I’m no fan of the structure, but as the Globe and Mail points out, it worked well in the good times. In fact, the article says it was “one key to RIM’s early success”, with Mr Lazaridis, the engineering genius, paired with sales and finance expert Mr Balsillie. They were “collegial and collaborative” but the structure “made it difficult to get definitive decisions or establish clear accountability”.

Boards contemplating a co-CEO approach should also note that it depended for its success on a whip-cracking enforcer in the form of chief operating officer Larry Conlee. When he retired in 2009, “a slack attitude toward hitting targets began to permeate the company”.

2) An alternative “ecosystem”. One of the strategic planks of Nokia’s decision to partner with Microsoft in 2011 was that operators such as Verizon or Vodafone would jump on the chance to have a “third ecosystem” competing with Google’s Android and Apple. According to the Globe and Mail, BlackBerry had an even earlier opportunity, when, in 2007, Verizon Wireless – which had lost out to AT&T as the first iPhone distributor – asked Rim to produce “an iPhone killer” that it would back with a huge marketing campaign. The BlackBerry Storm that resulted was late and inadequate, and Verizon Wireless subsequently backed Motorola’s Droid phone, running Android. If the Storm had worked, BlackBerry might have established itself as a more credible fourth player in the smartphone market.

3) BBM. As the clouds gathered round BlackBerry in early 2011, the Globe and Mail says, Mr Balsillie proposed extending BlackBerry Messenger, the popular instant messaging system that only worked on BlackBerry devices, to other devices and carriers – he called the plan “SMS 2.0″. But by then the rift with Mr Lazaridis, who was four-square behind the strategy of developing the new BlackBerry 10 operating system, had widened.

The Globe and Mail says new chief executive Thorsten Heins’s decision to kill SMS 2.0, backed by Mr Laziridis, and concentrate on BlackBerry 10 was the reason Mr Balsillie eventually quit the company’s board in March and sold all his stock. (Only later did the company launch a standalone BBM app for iPhones and Android devices.)

4) The innovator’s dilemma. As Clayton Christensen pointed out in his book of the same name, the big problem for successful companies is that by focusing on their successful products and services, they neglect the opportunity to develop their own disruptive technologies and next-generation products. One solution is to set up a separate unit, with the explicit mandate to create those disruptive products and leapfrog the slower-moving core offerings.

BlackBerry’s Mr Lazaridis did just that, using QNX Software, which it bought in 2010, to develop the PlayBook tablet and the new BlackBerry 10 operating system. But here is the most interesting aspect of what will undoubtedly become the BlackBerry management case study: in spite of those good intentions, the QNX team experienced virtually every problem that academics predict for such autonomous units. It needed parent company resources simply to complete its PlayBook project; its isolation “created tensions and morale problems” both at BlackBerry itself and at QNX; and the resulting delay in producing the disruptive technology simply meant the company fell further behind the iPhone and Android devices.

From Nokia to HTC, companies have discovered that the smartphone market changes faster than any corporate strategy can. But the problems identified go beyond this sector. The fate of Eastman Kodak, for instance, provides a cautionary tale of how onrushing disruption can still destroy a company even if it spots the threat well in advance of its impact.

The salient quotation in the Globe and Mail’s account comes from Patrick Spence, Rim’s former vice-president of global sales: “Buying QNX was the right play ultimately. But we didn’t make the turn fast enough. Everyone underestimated the complexity [involved in building the right system].”

BlackBerry is not dead yet. Fairfax Financial, the Canadian investment company, is mounting a $4.7bn takeover. But if the company does disappear, “it didn’t make the turn fast enough” will be a good epitaph.