4 tough challenges for RIM’s new team

The next 12 to 18 months are likely to be critical for RIM’s future, as it makes its first major leadership change since its start nearly 30 years ago.

1. Leadership matters: Who are the new leaders?
All three are relatively new to RIM, compared to the original founders, Mike Lazaridis and Jim Balsillie, who famously held the positions of co-CEO and co-chairman. Both remain as members of the board. They told the board that it was now time to move forward with the previously created succession plan. This past weekend, the board agreed, and acted.

The new chief executive is Thorsten Heins (pictured above), with RIM since December 2007, about six months after Apple began shipping the original iPhone and disrupted the smartphone market. Formerly with Siemens Communications Group, Heins started at RIM as senior vice president for hardware engineering, and rose rapidly to become chief operating officer for product and sales in August 2011. Lazaridis and Balsillie have been grooming Heins as their successor for some time, according to reports.

The new chairwoman, Barbara Stymiest, 55, became a RIM board member that same year, after top positions with the Royal Bank of Canada and before that the Toronto Stock Exchange, where she was the first female president of a North American stock exchange. When she took over, the exchange was wracked by technology problems. Under her leadership, five years later TSE was the first North American exchange to be publicly traded. Royal Bank hired her in 2004 as COO in a management overhaul to stem falling profits. She was responsible for “strategic development,” with all corporate areas reporting to her, including finance and risk management, according to Bloomberg News.

One of the key figures who influenced the sudden leadership change, according to some news reports, is the newest board member, now one of RIM’s biggest investors, Prem Watsa, the Indian-born, publicity-shy CEO of Fairfax Financial, a Toronto financial holding company, specializing in insurance, re-insurance and other markets. “Tackling troubled companies is Mr. Watsa’s bread and butter,” according to The Globe and Mail. “His commitment to RIM reflects his long-held strategy of buying companies on the cheap and then unlocking their true value.” And his track record shows it: Fairfax’s share price has gone from $5 in 1985 to $415 last week.

The combination of large-company administrative skills strategic thinking, and investment savvy could prove to be a potent blend, energizing RIM at all levels.

Still missing: top-level marketing skills. Heins said in a conference call this week that finding a chief marketing officer who can breathe new life into RIM’s marketing efforts is a top priority.

2. The strategy: Don’t expect changes
Despite the calls for radical change, all three new leaders agree the current strategy, developed over the past two years or so, is sound: in effect, to recreate RIM around a new line of devices that exploit a new operating system, a new application development model centered around HTML5 and other Web standards, a bundle of services, and an expanding “ecosystem” of applications, with the option of running Android apps via a virtual machine.

Heins is emphatic that the decision to base all new RIM devices on the Neutrino realtime operating system, acquired by buying QNX Software Systems in 2010, was the right decision.

In the conference call, he disputed the idea that the QNX operating system was a “me-too” platform, trying to catch up to rivals. It’s a proven multi-threaded OS, he said, widely used in a range of markets including automotive telematics and core Internet routers (it’s the basis of Cisco’s IOS XR software for carrier routers, for example). “It’s not in a catch-up race,” he said with a slight laugh. “It’s very competitive.”

RIM’s PlayBook tablet in 2011 was the first RIM product to run it, and reviews of the user interface — shaped by the design expertise of another RIM acquisition in late 2010, Swedish-based UI designers The Astonishing Tribe — and of the underlying operating system were generally favorable [a YouTube video shows the UI in action]. RIM will release Version 2.0 for the PlayBook in February. The company plans to introduce a range of other products in the latter half of 2012, based on the QNX code, now dubbed BlackBerry 10.

As Heins noted, RIM isn’t licensing another’s technology, as Nokia is doing with Microsoft Windows Phone, nor building a new one from scratch as Palm did with webOS. Instead it can continue to refine the UI of a proven OS.

3. It’s all in the details: Getting RIM to grow up
While Heins didn’t overtly criticize his predecessors in the conference call, he made clear that the company’s weaknesses are. One is execution — getting a quality product to market on time and on budget. For several years, RIM has been plagued by product delays and other problems that stem from being unable or unwilling to bring a greater degree of discipline to product development.

“When I joined in 2007, RIM was growing and still acting as a startup,” he said. “But startup processes don’t scale.” Since his appointment as COO, he’s been focusing exactly on scaling a range of business processes, and said “we’ve improved a lot in the past 10 months.”

“We have to scale these processes further: [such as] resource management, rigid project management, rigid program management, and also the processes of defining a product and executing on the product,” Heins said.

Over the past 10 years, RIM “innovated while we were [still] developing the product — that needs to stop,” he said. Innovation needs to be focused and limited to the early stages of planning, prototyping and design. Once a product has been thus “defined,” the temptation to make changes has to be resisted, and “execution has to be precise and decisive.”

The challenge, and opportunity, Heins faces is somewhat similar to that at Apple. The current CEO, Tim Cook, was personally recruited by the late Steve Jobs to bring discipline to Apple’s development and management of an overseas supply chain, which has been critical to Apple’s volume sale of high quality products, and to its big profit margins. As a result of Cook’s success, Jobs recommended the board appoint Cook as his successor.

4. Marketing: Facing and listening to consumers
Another top priority is obtaining a chief marketing officer. “I want this ASAP,” Heins said. He wants someone who can communicate to RIM’s markets effectively. But that effectiveness will also depend on listening to customers in those markets, according to Heins. “I want us to have a bit more of an ear to the community, especially our consumer users’ space,” he said. “We need to do a better job there.”

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