RIM CEO on What Went Wrong and the Future of BlackBerry
In an exclusive Q&A, CIO.com's Al Sacco chats with RIM CEO Thorsten Heins on the current state of BlackBerry and how it fell from grace, what the company is doing to ensure things in Waterloo don't get worse, and the product delay problems that have plagued RIM.
On Thursday June 28, Research In Motion (RIM) CEO Thorsten Heins announced the company’s latest financials in a particularly grim earnings call. Heins reported a first-quarter loss of $518 million, or 99 cents a share. Overall sales for the period were $2.8 billion, down from $4.9 billion in the same quarter a year ago, he said. And Heins announced RIM would be cutting roughly 5,000 employees.
These are dark days for the former king of mobile. But Heins isn’t throwing in the towel just yet. With a major mobile platform launch expected in early 2013, Heins is optimistic that RIM and BlackBerry will turn things around. But he’s also realistic about the significant challenges his company is facing.
CIO.com Senior Editor Al Sacco sat down with Heins to talk about those challenges, what went wrong at RIM and how Heins plans to revive the company to make BlackBerry 10 a suitable rival to iOS and Android.
Al Sacco: Hi Thorsten.
Thorsten Heins: Hello, Al.
Before we get started I wanted to say thank you for your time. I know you’re a busy man, and I appreciate you making some time for me.
My pleasure. It’s good to talk to you.
Thanks. Let’s get to it. I’m curious why you decided to take the helm at RIM, in what is so clearly a time of turmoil for the company? Do you have any past experience that’s comparable to turning a company around the way you’re attempting to revive BlackBerry?
When I came in to RIM, that was in 2007. I really admired the company for its innovation power and for the position it had achieved in the enterprise. What really caught me was that RIM was not just a device supplier, it actually had a real end-to-end solution. It had an offering that was going far beyond just the device. So I wanted to join the company to take it to the next level.
(Heins has been with RIM since December 2007, serving as a SVP of the company’s handheld business unit and then as one of RIM’s two chief operating officers until he took over the CEO in January 2012. For more on Heins, read, “10 Things to Know About RIM’s New CEO.”)
When I was asked to be CEO, I had a certain view on RIM from my position as the COO. I’m dedicated to this company. I think it has a lot of strength, it has a lot of power. It has trouble, it has challenges right now, and I just wanted to help the company through this phase and just make sure it remains a success–it will become a successful company again, let me put it that way. With the structure we’ve put in place and BlackBerry 10, I believe we can get that done.
To your second point, yes, I have experience in two turnaround scenarios. One was in 2002, when I was asked to take on the optical and transport division of Siemens AG. It was an aged portfolio, outdated, under heavy attack from Chinese competitors, and we turned it around. One and a half, two years later, it turned profitable, and then it became the most profitable division of Siemens actually. Kind of ironically, it got there because we innovated a great product and that set the role model for the world. All of the sudden, the avalanche just started and we couldn’t even build enough of that product.
“I’m dedicated to [RIM]. It has a lot of strength, it has a lot of power. It has trouble, it has challenges right now, [but] it will become a successful company again.”
It’s kind of a parallel to RIM, too. I wouldn’t say we have an outdated product portfolio, but certainly a platform that is coming to its limits. But we also have the innovation around BlackBerry 10 as a platform, not just for smartphones really, for enterprise, for mobile computing, and then for some hardware, too. So I see some parallels.
So, yes, I’m familiar with the situation, and I think I can claim that I have experience in leading a company and a division through this situation.
I know you’ve been with RIM for a number of years, so I’m guessing you’ve been using a BlackBerry for some time. Have you ever used another smartphone from a RIM rival?
Yes, I absolutely do [use a BlackBerry], however, just to stay educated about the market, I always have a second device that is a competitor device so I know where I am, in terms of the competition.
What other device or other devices do you use?
I have the Samsung Galaxy S III right now.
No iPhone? You’re only using an Android device?
I did iPhone already. I really go across the board, so I had an iPhone before because it was important for me to understand touch devices at the entry level. I had the Samsung Mini for a while. I change them on a pretty regular basis.
Good for you. That’s not the answer I expected. If you didn’t work for RIM–say you worked for another technology company–do you think you’d still be using a BlackBerry?
Yes, I think I would absolutely be on a BlackBerry. I’m really not saying this because I run BlackBerry. I belong to the tribe that BlackBerry speaks to. These productivity people, people that are always on their tippy toes, that need to keep moving. Because I don’t have much time. I’ve never had much time in my career to get stuff done, and then you need a tool that is just extremely helpful. I wouldn’t say I never do any other things, like entertainment, on a device. I love race simulation, so I’m pretty good at that. (Laughs) Formula One racing on a PC. But, I need information at my fingertips, I need it immediately. Frankly, I still love that keyboard. It just lets me type blindly, great haptic feedback. I can even talk to people while I’m typing. It’s just my tool.
I also used BlackBerrys before, when I was at Siemens, I had the 87–I don’t what [model] it was, it had a track wheel. And I got so excited because I could have my e-mails all the time, at any given time. It was fantastic. I still have it, by the way.
I have quite a few old BlackBerrys myself.
I heard that you were a very loyal BlackBerry customer, and that you actually helped us in the early days to make an inroad into enterprise. You probably know more about our enterprise business than I do. (Laughs)
I don’t know if I’d say that. But I do know a lot about your company, that’s for sure. Let’s move on to some questions about RIM and its place in the mobile market today. Just a few years ago, RIM was the undisputed king of the mobile market. Today, its CEO is writing editorials to convince stockholders that RIM is “not dead or dying.” How did the tide turn so quickly? From your perspective, what did RIM not do that it should have done during the past few years?
There was a strategy deployed that said, let’s take RIM global, and let’s really go for the global smartphone market. Remember, in 2007, 2008, 2009, the market just opened up, and BlackBerry had kind of created what would later be called the smartphone segment. That meant we had to build a regional portfolio and had to really go after the market. And that led to undeniable success of the company.
“In the U.S., we have a big, big challenge, and we missed on some innovation, but in the rest of the world, we still enjoy a healthy business.”
What also happened, in the U.S., was the drive to 4G started, and it got accelerated. Carriers were actually leapfrogging from what they wanted to do with 3G, like HSPA+. They leapfrogged and put a lot of investment into 4G LTE. I think we weren’t ready for it. We were busy building our global portfolio. We had a slightly different view on when the LTE rollout would happen. And we made a decision to focus on the rest of the world, which led to some very high numbers, but then, consequently, led to us not being focused on the new, innovative technologies in the U.S. The U.S. regained the lead in mobile technology by doing this. So it was not just that the company was not getting it, it was really that the whole market in the country regained a technology lead in the world. That’s a big step.
The BlackBerry OS that we have today is a good and solid platform that allowed us to create everything that we did. But given our understanding that mobile computing would now be at the same level as laptops, with dual-cores, quad-cores, high resolution graphics, GPUs, we needed a new platform. That’s why we decided to build the mobile computing platform which today we call BlackBerry 10.
In the U.S., we have a big, big challenge, and we missed on some innovation, but in the rest of the world, we still enjoy a healthy business, and I would say, a lot of number one positions in certain countries.
Something I hear very often is that RIM “failed to innovate” and that a “lack of innovation” led to the fix that RIM’s now in. Is it that simple? Did RIM fail to innovate?
I would not say that we failed to innovate. RIM is still a very innovative company. BlackBerry 10 will absolutely prove this. I think that the reason is something else. We had a very, very successful recipe of what BlackBerry was all about. There were four main pillars: battery life; typing; security; and compression. Then there was a shift with LTE. With LTE it was important actually not to save network resources, it was important to load the networks, to sell data plans and sell data volume. We didn’t miss on innovation. I think we missed on understanding, specifically in the U.S., that this trend was shifting, and that our positioning and our value proposition in the U.S. market was not following that trend shift.
In your opinion, how significant have product delays been to RIM’s current situation in the market? Why have we seen so many product delays from RIM during the past few years?
Part of it actually goes back to your last question. We are a very innovative company, we were and we are. What sometimes happens is, you get so excited about innovations that you push them into existing development projects. And what I’ve learned in my discipline, in my 25 years in R&D and in telecom, once you have decided on a project, you must keep it stable. With our eagerness to be extremely innovative, we had the tendency to put new stuff into existing project programs, and that is not a recipe to deliver on time and on quality.
We’re dramatically changing this with BlackBerry 10. We’ll continue to innovate, but we have a clear understand of what BlackBerry 10 is all about. And we keep that program very, very focused.
[RIM has delayed the launch of BlackBerry 10 numerous times. Most recently it announced that the first BlackBerry 10 device won’t arrive until early 2013. It had previously stated BlackBerry 10 would launch in 2012.]
On the most recent BlackBerry 10 delay: “I could actually have kept the schedule, if I had made a sacrifice on quality and on platform stability. I decided not to do that, because I need to make sure that when we deliver a BlackBerry, it is best quality…when we ship BlackBerry 10, we will do it at high quality.”
The delay of BlackBerry 10 is not because we added stuff to it. The delay is because our software groups were actually so successful in coding the various feature components and building blocks that when we put them into the main “trunk line,” as we call it, when we wanted to build the first main release, we got overwhelmed by integration efforts. I had to make a decision. I could actually have kept the schedule, if I had made a sacrifice on quality and on platform stability. And I decided not to do that, because I need to make sure that when we deliver a BlackBerry, it is best quality.
Am I disappointed that we had to shift it into the first quarter? Yes, I am. But the point is, it was a decision between: Rush it out again, and then fix the quality stuff later; or bring it out with high quality. What I commit to the public out there is that when we ship BlackBerry 10, we will do it at high quality. That was the decision I made.
But I do have some questions about a few statements you made. In the editorial, you noted that RIM is seeing increasing subscriber numbers in many different counties outside of North America. However, when you look at the big picture, the market share numbers are troubling. For example, recent global mobile OS market numbers from IDC suggest RIM’s overall share of the OS market is steadily decreasing, with RIM holding just 6 or 7 percent of the market today. Meanwhile Android (59 percent of the market) and iOS (23 percent) continue to grow steadily.
So while RIM may be growing in some geographic areas, it is losing ground overall, and that appears to be related to what’s happening in North America. Can RIM succeed without capturing a larger part of the North American market? Would RIM be content with continued success in smaller markets?
We are North American, we’re a Canadian company, and we want to win in our home market. That’s why we are building BlackBerry 10, so we have a platform and product that actually can compete in the North American market and so we can win market share back. And we will do it.
Talking market share numbers, that was part of the value system I talked about. We are not heavily participating in the full-touch [screen] market yet. There were a few attempts for us to get out there. However, I would be the first one to admit that the success was rather limited. So, one of the big steps we’re taking now to win market share back is to go into the full-touch device market. That is what our first BlackBerry 10 product is about. Then our second product is going to be a QWERTY device, following closely behind that full-touch device. So we need this product to actually enter into the full touch market and then also to go after the BYOD segment in the enterprise as that moves to full touch.
You’re right that market share overall is declining. The reason is the growth is in touch. QWERTY is pretty stable, it’s a stable segment, growing slowly. The growth is in the full touch device business, and that’s where we will see growth. There is a loyal segment of BlackBerry users in the U.S. I think you will see the shrinkage of the BlackBerry market come to a halt. I think we’ve bottomed out on this one. Not that I’m satisfied with it, okay? That’s why I’m building BlackBerry 10 to fight that back.
In the Globe and Mail editorial, you cited RIM’s relationships with 650 carriers around the globe as a major strength of the BlackBerry brand. Obviously, carriers play a very important role in handheld sales and marketing today, and carriers’ efforts at marketing devices can make or break a device launch. It may be different in other countries, but right now, when I walk into a wireless carrier’s store in the U.S., I barely see any BlackBerry presence. What is RIM doing with its carrier partners to convince them to put resources behind the BlackBerry 10 launch?
I cannot give you specifics on carriers, but our new CMO Frank Boulben is working with carriers on go-to-market plans, not just in the U.S., but really global for early in the first quarter next year.
We will do everything necessary to be successful. And also, the carriers are supporting us, Al, because they see a duopoly. iPhone and iOS are proprietary and basically closed to them. And they see Android now as actually kind of monopolized by Samsung. So they want to serve choice, and we have to prove to them, that’s our job with BlackBerry 10, that we offer that choice and we can offer the competitive element of the market that they’re now seeking.
“I’m not happy with the situation at RIM. Who can be happy and satisfied with where we are? What I am satisfied with is that I know we have a path to the future with BlackBerry 10, because I see it…I have faith in the future. My team is working relentlessly to create that future.”
The general message of your recent editorial, and your message in your BlackBerry World keynote address in May, is that you understand BlackBerry stock holders’, customers’ and users’ frustration, but that they should keep the faith and their patience will be rewarded. But how long do they have to wait for RIM to prove it is still in the game? Will BlackBerry 10 solve all of RIM’s problems? Or are we looking at two or three more years before faith in RIM is restored?
Faith in RIM and the financial expression of that are two different things. I’m not happy with the situation at RIM either. Who can be happy and satisfied with where we are? What I am satisfied with is that I know we have a path to the future with BlackBerry 10, because I see it.
In January with the full touch device and the QWERTY coming, I think we will reinstall faith in RIM. That’s what we’re working on. This is what our objective is, and when I’ve talked to carriers about the delay of BlackBerry 10, the overwhelming feedback was, “First, thank you for letting us know in advance. Second, Q4 is mostly a prepaid quarter anyway, lot of noise coming, actually why don’t we focus on a Q1  launch and make this a major launch in Q1?” I think we have a lot of support there.
I have faith in the future. My team is working relentlessly to create that future.
You’re not worried about missing the 2012 holiday season?
I’m not happy about this, but the point is, there’s a lot of noise out there anyway. You have to ask yourself, is it good to launch within a lot of noise? How do you get above the noise then? Or do you launch outside of this noise and get much more attention?
It’s never good to be late. But without disclosing the entire launch schedule that we had in mind for BlackBerry 10, it’s actually not as dramatic as many people see it in terms of what we forecasted in volume and what we had in our financial predictions.
How long will it be before we see a second or third BB10 device? How many different devices will RIM ship in 2013?
Very shortly after. I won’t give you a specific date, but it’s kind of like a one-two punch. You will see more than two devices, but I can also tell you that you will see us being much more focused in the product portfolio that we will be bringing out. The number of devices we will offer is going to be quite dramatically reduced. But that is not because we can’t do it [offer more devices]; the reason is the portfolio quality that we want to put in play here.
That was part of the globalization of BlackBerry. We just had too many products out there. That’s part of the focus program I’m running at RIM. We have very loyal customers that really like their BlackBerrys, so there’s no need to churn them every six months.
Finally, I’d like to ask you for a prediction: Where will RIM be in one year from now? In July of 2013, what will I be writing about RIM and BlackBerry?
I think you will be writing that you are surprised by the performance and the user experience of the BlackBerry 10 product, that it helps you achieve your daily objectives but also have fun. By then you will see that this is a true mobile computing platform that allows BlackBerry to even explore other domains and spaces, like automotive, in cars.
I think you will be writing that if BlackBerry gets its execution right and straight than the company has a great future.
I know that you’re personally disappointed with us shifting back BlackBerry 10, and I understand it. I get it entirely. But I want to win your personal faith back, too, and win your conviction in RIM back that we are a great company and we are a company that can create the future.
Al Sacco was a journalist, blogger and editor who covers the fast-paced mobile beat for CIO.com and IDG Enterprise, with a focus on wearable tech, smartphones and tablet PCs. Al managed CIO.com writers and contributors, covered news, and shared insightful expert analysis of key industry happenings. He also wrote a wide variety of tutorials and how-tos to help readers get the most out of their gadgets, and regularly offered up recommendations on software for a number of mobile platforms. Al resides in Boston and is a passionate reader, traveler, beer lover, film buff and Red Sox fan.