The sky outside is ashen and rain is streaking the windows of RIM 10, one of the larger low-rise buildings that make up Research In Motion Ltd.’s campus in Waterloo, Ont. Inside a boardroom there, I am waiting for a man facing a much more fearsome storm. Thorsten Heins has a task that now seems far more difficult than it appeared when he was given it just seven months ago: to save RIM from irrelevance.
Everyone knows that time is RIM’s enemy. Everyone knows about the interminable delays in its next product line, BlackBerry 10, which have cost it not only credibility but millions of potential customers. The longer it takes to get it to market, the more ground RIM loses to Apple, Samsung Electronics and other competitors. Many wonder whether the company can even survive; in the days leading up to our meeting, the media pounced on two more takeover rumours, a grim testament to how far RIM has fallen.
But Mr. Heins suggests that rivals, if they are sniffing around, are doing so for a reason. He seems cheerful.
“I’d do the same thing if I were in their shoes,” says RIM’s German-born chief executive officer, refusing to comment specifically on Samsung, IBM or any other of RIM’s alleged suitors.
“The stock price is at a certain level. RIM has a great value proposition that is still in demand … not just given where the price is, but the potential and value of RIM in the future. That’s what drives – if it would be there, let’s assume it – that’s what’s driving the interest.”
RIM’s board is of the view that a turnaround is possible, so it’s not necessary to sell the company. But the market will only wait so long to see proof, which is why Mr. Heins is in a hurry.
“There’s no time for wine during lunch at the moment,” he says. He has insisted on limiting the discussion to 30 minutes, which is why I have arrived bearing coffee, which he takes black, and fresh apple strudel from Sproll’s Fine German Bakery in nearby Kitchener – a town called Berlin until anti-German sentiment during the First World War forced a change.
“That’s where my wife buys bread,” he says. “It’s fantastic.” Though I have not come with the warm vanilla sauce and ice cream that are served as toppings in his native Bavaria, Mr. Heins, a lanky, 6-foot-6 man with an athletic build, rimless glasses and a stiff side part in his salt-and-pepper hair, is nevertheless delighted, especially after he spies the raisins that are apparently the hallmark of fine strudel.
Pastries aside, Mr. Heins has little cause to be upbeat. He probably has the toughest corporate job in the country. While he tries to counter the BlackBerry’s vast market share losses in the United States, and growing pressure from Chinese competitors, Mr. Heins is also trying to shave $1-billion from RIM’s operating expenses – in part by laying off 5,000 employees, after the painful exodus of 2,000 last summer.
In 2008, RIM seemed unstoppable, its stock price peaking at about $148. After several poorly received products, the shares are now $6.88. And they have fallen by 56 per cent since Mr. Heins took over in January from long-time co-CEOs Mike Lazaridis and Jim Balsillie. At that price, RIM is worth $3.6-billion, less than half of Apple’s quarterly profit.
For years, the company has proved that Canadian corporations can do more than extract minerals from poor countries and run safe banks – that they can innovate, disrupt and change the way the world works. Conversely, RIM’s decline has fed into paranoia about the state of the country’s competitiveness.
Does Mr. Heins feel the weight of Canada’s expectations?
“Yeah, and rightfully so,” he says. “RIM has proven that out of Canada you can build an iconic, global Top 10 brand, that Canada is capable of pulling high-tech technology and making it into a meaningful product. Yeah, there is this expectation out there. But, by the same token, though, there’s also a lot of support.”
Those who know him describe Mr. Heins as an intense, thoughtful and demanding technologist, a true believer in RIM who is close to his executives, has high standards and likes a good debate. He hikes and rides a BMW motorcycle, but has quirkier pursuits too: In a town hall meeting the day after he took charge, Mr. Heins told RIM employees he enjoys Formula 1 race simulations. “I’ve been in a real car, also, but that’s a different story,” he said.
Mr. Heins was unknown in North America before being thrust into the CEO’s suite. He joined RIM in 2007 after a lengthy career at Siemens AG, the German conglomerate. As a senior executive there in the early 2000s, he was sent to save the company’s aging optical networking division in Asia-Pacific from cheaper upstarts.
“It was an old portfolio – kind of riding this horse, riding this horse – and then the Chinese came in and, just, bam, they hit us on price, everywhere,” Mr. Heins told me previously. “It happened in [telecom] infrastructure 10 years ago with Huawei, ZTE and UTStarcom, and it’s happening with smartphones again.”
Judging by the present state of the telecom infrastructure business, the analogy to smartphones is as unfortunate as it is apt. Just as Nortel Networks is now bankrupt and gone and industry stalwarts such as Ericsson and Alcatel-Lucent are fading, so it is with mobile device makers. Old-guard innovators like Palm, Motorola and Nokia are dead or struggling. Smartphones have become a commodity. Volume and scale matter. RIM is slashing a work force of about 16,000 employees. South Korea-based Samsung has around 220,000. The math is not that complicated.
Lothar Pauly, who rose to become CEO of Siemens Communications in 2005, worked with Mr. Heins for about a decade, later providing Mr. Lazaridis and Mr. Balsillie a reference. Mr. Pauly said Mr. Heins gave Siemens’ optical networking group three directives: Take the lead back in innovation, become profitable again and reclaim market share. That involved “cutting heads,” as Mr. Pauly puts it. Not only was Mr. Heins’ strategy successful, it was valuable training for a similarly dire situation at RIM.
Mr. Pauly, now at a venture capital firm, said Mr. Heins’ later appointment to lead Siemens’ mobile phone unit did not go nearly as well, and the unit was eventually sold. “He tried to turn it around,” Mr. Pauly said, noting the unit was likely doomed anyway. “He has seen the good days and he has seen the bad days. He’s a more balanced manager than a manager who has seen only growth.”
After seven months on the job, Mr. Heins is more willing to be critical of RIM’s errors. Looking back, he says, the BlackBerry rose to prominence on four key pillars: typing, security, wireless data compression and battery life. As the company grew, Mr. Heins admits “we missed … paradigms.”
One such paradigm shift, he says, was ignoring the move to fourth-generation (4G) wireless networks in the United States. RIM’s engineers thought 4G was a fluffy marketing term and didn’t build any devices, ending up sidelined as carriers such as Verizon mobilized vast advertising budgets to promote RIM’s rivals.
Another mistake was underestimating the popularity of touchscreen phones such as the iPhone.
“If you have a great touch interface, people are actually willing to sacrifice battery life … which we thought wouldn’t happen,” Mr. Heins says. “Same thing with security. Some companies decided that, ‘Maybe I can let go on some security a little bit.’”
This is what the industry calls the BYOD phenomenon – bring your own device. Corporations, banks and government departments that were once BlackBerry-only are now BlackBerry-optional.
There are valuable holdouts, though. Wherever he goes, the CEO always pays attention to who’s using what phone; at a recent business conference in London, “most of them used BlackBerrys,” Mr. Heins said. “It’s all about security, reliability, typing.”
Corporate and political leaders and celebrities who don’t have time for Angry Birds embody the image RIM is trying to sell: BlackBerrys are for busy people.
Mr. Heins points to Jamaican sprinter Usain Bolt: Asked about his first gold medal, Mr. Bolt said he had to “thank a few people on my BBM,” referring to RIM’s BlackBerry Messenger application.
But BBM, RIM’s popular messaging platform, is unlikely to save RIM in a world of increasingly advanced applications. For that task, RIM is relying on BlackBerry 10, software that has been delayed several times.
I ask Mr. Heins repeatedly what he thinks is the best-case scenario for the company – whether BlackBerry 10 is simply meant to stabilize RIM’s global base of about 78 million users, or whether it’s intended to take on larger rivals such as Apple.
“It needs to expand market share, there’s no doubt,” Mr. Heins says. “Today, let’s be frank, I’m participating mostly in the QWERTY [keyboard] market. … I’m not really participating in any meaningful way in the [touch-screen] segment. So with BlackBerry 10, I will maintain and stay the leader in [devices with physical keyboards]. On full-touch, I’m in attack mode.”
Tough words. Tough situation.
Born in 1957 in Gifhorn, Germany.
Earned a master’s degree in science and physics from the University of Hanover in Germany.
Lives in Waterloo, Ont., with his wife, Petra, and two children, a 23-year-old daughter, Svenja, and 22-year-old son, Soren.
Joined RIM in 2007 as senior vice-president of the BlackBerry handheld unit.
Named chief operating officer of product and sales in July, 2011.
Appointed president and CEO of RIM in January, 2012.
Prior to RIM, Mr. Heins had a lengthy career at German conglomerate Siemens AG.
Cycling, woodworking, motorcycling, hiking, and playing racing simulation games.
Serves as a member of the board of directors of the Canadian German Chamber of Industry and Commerce Inc.
On RIM’s strategic review
“It’s prudent when you run a company like this, such an important and successful company, that you look at any options that you can to satisfy shareholder interests. This company is here to create long-term shareholder value. That’s what we’re trying to do. And there are various options for how you can get there. It’s just prudent for management and the board to consider all available options.”
On rumours that RIM is being bought
“You read them daily. Actually, I found it shocking how much those rumours move the stock up and down. I think it’s still a risk in our entire financial system. This is very, very short-term oriented. And sometimes it strikes me how reactive the market is to, really, just rumours.”
On his CEO friends at the Canadian German Chamber of Industry and Commerce
“They’re all using BlackBerry. Some of their wives had iPhones, I admit.”
On BlackBerry 10
“We want to be the best tool for people to achieve their success. That doesn’t mean business. It means artists, working moms. Hundred-metre sprinters. You name it. That’s what we’ll be centring around. That’s why we had this idea of a whole new [user interface] workflow concept on BlackBerry 10, where you’re actually not ‘application aware’ anymore – you actually flow across applications and you just do what you need to do.”