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  1. sosumi11's Avatar
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    Default WSJ:BlackBerry Maker's Issue: Gadgets for Work or Play?

    By PHRED DVORAK, SUZANNE VRANICA and SPENCER E. ANTE
    As Research In Motion Ltd. executives prepared early this year for the launch of their first tablet, the PlayBook, one big question loomed: Who was the device for?

    Some executives, like RIM's technical visionary and co-chief executive Mike Lazaridis, saw the gadget as an extension of the BlackBerry, long favored by corporations and business people. Others were pushing for more focus on ordinary consumers, people eager for games, music and movies, according to executives close to the company.

    "There's an internal war going on around the marketing message. Even the guys at the top don't agree," one executive close to the company said at the time.

    The split showed through in a campaign RIM planned with its ad agency. It envisioned using humor and celebrities like New England Patriots quarterback Tom Brady—but also the tagline "Go Pro"—said two people familiar with the situation.

    By the time the PlayBook went on sale in April, both the campaign and the agency had been canned, and RIM's marketing chief and several of his deputies had left. The tablet, which got fresh competition this week when Amazon Inc. announced its low-cost Kindle Fire, is threatening to be one of RIM's biggest flops at a time when the company is reeling from a series of profit warnings, product delays, declining BlackBerry shipments and a tumbling stock.

    Checkered Past
    Once dominant RIM began a steep slide after the iPhone caught on
    View Interactive

    The marketing muddle shows one of the biggest problems facing RIM: In a market increasingly driven by the wishes of the retail consumer, its executives have struggled to wean the company from its heavy corporate focus.

    For years, Mr. Lazaridis resisted the consumer trend taking hold in the smartphone market, which the company's BlackBerry long dominated, according to people close to the company. He and his co-chief executive, Jim Balsillie, then fumbled attempts to catch up.
    RIM's foray into a new market, tablet computers, has been disappointing. It shipped just 200,000 PlayBooks in the three months ended in August. That was less than half the number shipped in the preceding quarter and a small fraction of the 9.3 million iPads Apple Inc. shipped in the three months ended in June.

    Retailers have begun cutting the price of the PlayBook. Office Depot and Staples cut the price of the tablet to $399 and threw in $100 gift cards on top of that discount, while Best Buy was selling the tablet for $299.

    Amazon's Kindle Fire, meanwhile, is set to ship in November, and will be backed by the company's big customer base and extensive offerings of digital content.

    RIM on Thursday denied as "pure fiction" a report by an analyst who said he believed the company had halted PlayBook production. RIM said it "remains highly committed to the tablet market."


    RIM's share of the key U.S. smartphone market, ranked by operating system, has fallen to 11.6% as of the end of June, according to research firm IDC. That put it in third place behind phones powered by Google Inc.'s Android system and the Apple iPhone. Five years ago, RIM had 48% of the U.S. market.

    Earlier this month, RIM jolted investors with news that BlackBerry shipments declined in its latest quarter from a year earlier, something that hadn't happened in almost a decade. The company cut 2,000 jobs this summer, almost 11% of its work force.

    RIM executives say a handful of new BlackBerry models launched this summer will stabilize sales until next year, when it plans to roll out a next-generation "super phone" with a more powerful operating system. The company has said a major software upgrade for the PlayBook, due in October, will boost sales of the tablet.

    RIM remains profitable and its BlackBerrys are still wildly popular in many countries, from the U.K. to Indonesia. Financially, the company is in good shape, with no debt and a comfortable cash stockpile. Mr. Lazaridis has said RIM is finally rolling out BlackBerrys that can vie with rivals in the "features and performance arms race."

    Many industry watchers say RIM's high-powered PlayBook tablet could give the Apple iPad a run for its money once it gets enough applications and services to run on it.

    The company says it successfully adapted to the consumer shift and used it to expand internationally. A RIM spokeswoman, in an email response to questions, said the company sees its strategy as aimed at "more of a 'blending' of enterprise and consumer" customer needs.

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    Research In Motion co-CEOs Mike Lazaridis, left, and Jim Balsillie at the firm's annual meeting in July 2010.
    RIM has been "able to offer products with the right features and price points for our global carrier and distribution partners," said the spokeswoman, who cited the popularity of BlackBerry Messenger, a messaging system that has become a big hit internationally and with young people in North America.

    Patrick Spence, RIM's head of global sales and regional marketing, acknowledged a mixed marketing message with the PlayBook launch. He said the tablet is aimed both at consumers and at business users who want to enhance the abilities of a BlackBerry smartphone.
    "The real target—and we could've had more clarity around that—was the 70 million existing BlackBerry subscribers out there," he said.
    Mr. Spence said RIM's future is bright if it can deliver on its promised migration next year to the new operating system, called QNX. The move is "setting up the next decade of the BlackBerry experience," he said.

    Some industry watchers worry that RIM is running out of time, arguing that because of the loss of so much market share, it's unclear whether even a successful QNX BlackBerry will be enough to stem RIM's market-share declines.

    In a recent note to investors, UBS analysts said RIM's transition to its new operating system needs to go off without a hitch in order to pick up critical support among application developers and other partners.
    Mr. Lazaridis dropped out of college in the early 1980s to start RIM with a $15,000 loan from his parents. He and a friend set up shop in an office over a Waterloo, Ontario, strip mall. Their first product was a device that sent text wirelessly to electronic signs.

    Eight years later, Mr. Lazaridis hired Mr. Balsillie, a hard-charging Harvard M.B.A. with a passion for hockey, who had tried to take over the company as part of a buyout team. The company brought out its first BlackBerry in 1999, the same year it listed its shares on Nasdaq.
    Sales took off as companies embraced email-on-the-go, and within five years the company had over 3,000 employees. It retained a small-company atmosphere, with most workers drawn from universities around Waterloo.

    As RIM grew to dominate the smartphone market, the leadership resisted early calls from wireless carriers to roll out consumer-friendly features such as cameras, according to a former executive and people close to the company.

    Sprint Nextel Corp., for instance, started to worry that RIM was too slow to support innovative features then popping up in phones, like larger screens and faster processors, according to people familiar with Sprint's thinking.

    One former RIM executive says Mr. Lazaridis didn't want to compete in the cutthroat consumer-phone market, where margins were typically much smaller than in the corporate market. He also objected to cameras or music players, people close to RIM said, because he didn't think they would be favored by the government and military agencies that were some of RIM's biggest customers.

    RIM declined to make Mr. Lazaridis available to comment. The company has always listened to its carrier partners, said Mr. Spence. "We try to listen, and we try to balance that with various different sources and our view of the market to determine what makes the most sense," he said. "We definitely take the input."

    RIM released its first big push into the mass market, the camera- and MP3-player-equipped Pearl, in 2006. Apple brought out the iPhone the next year, and Google soon followed with its Android operating system for smartphones.

    As competition mounted, a series of mini-crises buffeted RIM. It had a long-running legal battle with a patent holding company, finally settled in 2006. Then it had to investigate claims of back-dated stock options. It found sloppiness, not fraud, but Messrs. Lazaridis, Balsillie and another executive agreed to reimburse RIM about $83 million in connection with the matter. Mr. Balsillie stepped down from the board for a year. He declined to comment.

    Critics fretted that at an inflection point in the smartphone market, RIM's leaders were being distracted by the legal issues and also by their extracurricular activities. Mr. Lazaridis was involved in a theoretical-physics center he had founded in Waterloo, and Mr. Balsillie mounted a series of unsuccessful bids for a professional hockey team.
    RIM says the co-CEOs weren't distracted. "Mike and Jim have always been, and continue to be, fully and passionately engaged in RIM's business," the company said.

    By 2008, RIM's corporate-customer base was still growing strongly, and its consumer base was expanding even faster. The two sides of the business were nearly equal in size in 2009, according to estimates by National Bank Financial. But Apple's share of the North American smartphone market had shot up to over 20%, according to IDC.
    Engineers and executives debated what to do about the BlackBerry's operating system, which was looking old and slow next to Apple's, says a former RIM executive. The company started hiring outsiders to try to catch up.

    It brought in a "user-experience" executive from Microsoft Corp., Don Lindsay, to design a new look and feel for the next iteration of the operating system. To revamp marketing, RIM hired Keith Pardy, who had done stints at consumer giants Nokia Corp. and Coca-Cola Co.
    In 2010, RIM unveiled the BlackBerry Torch, the first phone to run on the revamped operating system. Its underpowered processor and low-resolution screen were big disappointments, at a time when U.S. consumers were clamoring for fast Internet browsing.

    By then, RIM had acquired a maker of a super-fast operating systems, an Ottawa company called QNX Software Systems. Messrs. Lazaridis and Balsillie wanted RIM's first tablet to use the new operating system and be out by the end of 2010, people close to RIM say.
    But hiccups developed. People familiar with Mr. Lindsay's user-experience group say it faced resistance in hiring certain designers because RIM recruiters preferred to bring in people from the Waterloo area.

    And RIM executives decided on a last-minute hardware switch: changing the semiconductors that would run the tablet to faster, more powerful processors better at graphics, applications and Web surfing, according to two people familiar with the matter. The launch was pushed back.

    At the same time, trouble was brewing in the marketing group. RIM tapped ad agency Leo Burnett, which had worked on major consumer brands. The agency butted heads with RIM executives over direction, including who the target audience of the BlackBerry brand was, according to people familiar with the relationship.

    They say some RIM executives found it difficult to give up on ads that highlight technical specifications. During a brainstorming session, some RIM marketing executives insisted on highlighting the phone's keyboard, one of these people said.


    RIM's Mr. Pardy was trying to wean the company off product-focused ads—a position that didn't win him any friends in the marketing department—two people familiar with the relationship say. Mr. Pardy declined to comment.

    Late last year, Leo Burnett and RIM parted ways. RIM then hired 72 and Sunny, a small California ad agency. Its first job: a campaign for the soon-to-be-launched PlayBook.

    But RIM hadn't settled on what the tablet's marketing message should be. Mr. Lazaridis was publicly describing it in late 2010 as a "professional tablet," inspired by feedback from corporate chief technology officers, who saw it as a way to enhance functions of a BlackBerry. Some RIM executives backed that idea and wanted to aim the tablet directly at corporate customers. Others wanted to go aggressively after ordinary consumers, emphasizing features like the device's video and game capabilities, says an executive close to RIM.
    Some RIM executives backed that idea and wanted to aim the tablet directly at corporate customers. Others wanted to go aggressively after ordinary consumers, emphasizing features like the device's video and game capabilities, says an executive close to RIM.

    The new ad agency held weekly meetings with RIM officials. It "presented hundreds of ideas and spent months having work rejected," says one person familiar with the matter.

    In early February, Mr. Pardy resigned as RIM's chief marketing officer. RIM fired the 72 and Sunny ad agency—just a month before the PlayBook rollout, according to two people familiar with the situation.
    On April 14, RIM held a launch event in New York. Some early reviews of the tablet had been scathing, especially about the inability to read email on the device without tethering it to a BlackBerry.

    Journalists, analysts and customers gathered around a stage expecting a news conference by Messrs. Balsillie and Lazaridis. At the last minute, RIM said the two wouldn't take the stage.
    —Chip Cummins contributed to this article.
    RIM, Maker of BlackBerry, Debates Its Target Market for PlayBook Tablet - WSJ.com
  2. The_Engine's Avatar
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    Read this article a little while ago. Very interesting and shows how at a crossroads RIM is. More and more it sounds like the dynamic duo needs to step aside and someone with some consistent direction needs to step in.
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    ...Stop being a (insert expletive of choice here) and listen to The Engine. Dudes smart.
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  3. Huot's Avatar
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    Wow if this is true then the failure of the playbook does indeed rest squarely on the ceo's and management and their lack of vision. While the ceo's have served well in the past, they are so focused on security and the way things have worked in the past, they ignore everything else. It is great the playbook is FIPS certified but where are all the government and business purchases then. They clearly lack vision and the ability to respond and make market trends. Meanwhile businesses are giving up on RIM using things like Good Technology to let them use iPads and iPhones.

    Unless someone can pull them into the present, QNX phones are in trouble. Yeah they will be FIPS certified, but little else.
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