After a disastrous quarter, Research in Motion is in a free fall. But there are reasons to remain hopeful for a turnaround. Apple and IBM were in the same position once, too, and things turned out well in Cupertino and Armonk. For Waterloo, Ont., to avoid becoming the second Waterloo that ended an era, RIM needs to learn four things from the Apple and IBM.
By Rob Enderle
Research in Motion is in free fall. RIM reported a massive quarterly loss of $518 million dollars this week, as sales fell to almost half of what they were last year, and the company announced that it can’t get its new BlackBerry 10 out the door this year. On top of that, RIM is cutting one-third of its work force, which amounts to 5,000 employees.
While for many this is a major indicator that RIM is going out of business, the company is actually in a similar situation as Apple was when Steve Jobs came back and IBM when Louis Gerstner was hired. Not only were both of those companies successfully turned around, the efforts eventually resulted in companies that were stronger than ever, with Apple and IBM at near record valuations.
I followed the Apple turnaround closely and was part of the IBM turnaround myself, so let’s talk about what it would take to fix RIM.
1. New Leadership Unafraid of Tough Decisions
When a company has fallen as far as RIM, the very first step is to bring on board a leadership team that can make the hard decisions. Generally this starts with the board of directors. If the board isn’t structured to motivate or replace the executive staff, then the firm is doomed and the critical decisions simply won’t be timely or effective.
RIM should look for a board that has been through situations like this before, can see what must be done and staff the company appropriately. Sustained problems such as RIM’s generally are tied to a board that it too weak, isn’t engaged or doesn’t have the proper experience—and if the board doesn’t, or can’t, step up, then the firm won’t be turned around.
2. Aggressive Financial Triage So Execs Can Steer Ship
When you are having a meltdown, the most important person is the CFO. What you need is time, and if you can’t substantially slow your losses, you won’t get it. At IBM, even before Gerstner was hired, the board brought on Jerry York, who had helped turn Chrysler around; it was York’s initial moves, not Gerstner’s, which saved the company.
The CFO has to be willing and capable to do financial triage, cutting out the parts of the company that aren’t useful and holding the parts that are critical to the firm’s survival. He must also carry out very aggressive execution plans focused on slowing the bleeding to a point where the rest of the executive staff has time to do its jobs and dig out of the crisis.
If everyone is always focused on the ship sinking, no one will take the time to pilot the ship out of the storm, and the ship will sink. Fixing RIM will mean removing the threat of immediate failure, or else too many people will focus on jumping ship and not enough will get their jobs done in order to save the firm.
3. Rebranding That Assures Customers You Can Succeed
The second most important person in a turnaround is the CMO—and we saw Jobs effectively step into that role initially on his return to Apple, building a view that there was in fact a future for that company. Meanwhile, to stop the flood of departing customers and investors at IBM, Gerstner hired a marketing dream team, which worked on creating an image of a successful IBM that built products people wanted to own.
Critical to both turnarounds was the premature belief that the companies had been turned around. The reality followed the image, and that belief helped assure the positive outcome for the firm. On the other hand, if people believe you are going to fail, reality will make little difference, and both investors and customers will abandon the firm.
4. Leadership with Vision, Willingness to Do Anything
Finally, you need a CEO who can articulate a vision. That vision isn’t necessarily of a new product or service, but of a future world where the company is successful and the pain that employees and investors are experiencing is a thing of the past.
This is where you really need someone who can give an “I have a dream” talk that customers and employees alike will believed. Someone who can articulate this message and who has a history of creating a bright future can go a long way toward creating it. That’s why turnaround CEOs are so highly valued.
In addition, these CEOs must be willing to do whatever it takes to make the turnaround happen. Look at Jobs. Swallowing his pride, he begged rival Bill Gates for money—but it was Microsoft’s $150 million that got other large investors interested in Apple again, and it drove the turnaround. CEOs (or those who think they will become CEOs) often think there are certain critical tasks that are beneath them. Those people will fail as turnarounds CEO.
Wrapping Up: Fixing RIM Not Impossible
You can look back at how Apple and IBM were turned around to see how RIM might be saved. While it may seem easy from the outside, inside is a whole different matter.
When a company needs a turnaround, you often have a board that’s a mix of old-timers and revolutionaries who can’t agree on anything and who tend to put friends or mere warm bodies into the critical jobs. The boards at both Apple and IBM had to step up, and step in, to fix their respective firms. If RIM’s board isn’t willing to do that, then the company will likely follow Palm into the history books or become a small, and likely failing, subsidiary of a larger firm.
There is a market for a corporate and government personal communications solutions. In that regard, BlackBerry is superior to both Google Android and Apple iPhone. However, RIM has to become a company that looks like it can survive and then get next generation products out the door. Unless there are some dramatic changes, that likely won’t happen.
Rob Enderle is president and principal analyst of the Enderle Group. Previously, he was the Senior Research Fellow for Forrester Research and the Giga Information Group. Prior to that he worked for IBM and held positions in Internal Audit, Competitive Analysis, Marketing, Finance and Security. Currently, Rob writes on emerging technology, security and Linux for a variety of publications and appears on national news TV shows that include CNBC, FOX, Bloomberg and NPR.