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Former BlackBerry co-CEOs Jim Balsillie and Mike Lazaridis, and current CEO Thorsten Heins in a photo collage. (Globe and Mail photo illustration)

Former BlackBerry co-CEOs Jim Balsillie and Mike Lazaridis, and current CEO Thorsten Heins in a photo collage.

(Globe and Mail photo illustration)

Inside the fall of BlackBerry: How the smartphone inventor failed to adapt Add to ...

The product was months late, hitting the market just before U.S. Thanksgiving in 2008. Many customers hated it. The touchscreen, RIM’s first, was awkward to manipulate. The product ran on a single processor and was slow and buggy. Mr. Balsillie put on a brave face, declaring the launch to be “an overwhelming success,” but sales lagged the iPhone and customer returns were high.

The Storm campaign didn’t seem so disastrous at the time: RIM was in the midst of a torrid global expansion. In August, 2009, Fortune crowned it the world’s fastest-growing company. A year after the Storm launch, market research firm comScore reported that four of the top five smartphones U.S. customers intended to buy in the next three months were BlackBerrys.

But the Storm had failed to give Verizon Wireless the Apple-killer it coveted, and RIM soon abandoned the product. So the carrier turned to Google Inc. and its new operating system, Android, and built a massive marketing campaign around Motorola’s Droid phone in 2009 – at the expense of marketing dollars to support BlackBerry products. Verizon’s “iDon’t” campaign highlighted all the shortcomings of the iPhone that Android addressed with its consumer-friendly user interface.

Rather than hurt Apple, the Droid and other Android-powered phones began to steal share first from Palm and Microsoft, and then RIM. By December, 2010, Android’s market share in the U.S. had grown to 23.5 per cent from 5.2 per cent a year earlier, as RIM’s dropped by 10 points, to 31.6 per cent, according to comScore. By late 2011, Android commanded 47.3 per cent of the U.S. market, while RIM had just 16 per cent.

A shift by smartphone users

This post-iPhone period was an era of strategic confusion for RIM. The overall state of the industry “was a bit schizophrenic,” said Patrick Spence, RIM’s former executive vice-president of global sales, who left in 2012. “There was a time when the [wireless] carriers tried to keep data usage predictable. Then it shifted to a period of trying to drive much more usage in different packages, when the iPhone became compelling.”

If there were new rules of the game, RIM would require new tools. The summer after the Storm launched, Mr. Lazaridis bought Torch Mobile, a software development firm that created Internet browsers for mobile phones.

But the process of moving, or “porting,” the Torch browser onto RIM’s highly-customized system proved complex and time-consuming. RIM’s technology was based on Java computer code and an operating system built in the 1990s, while the Apple and Android systems used newer software platforms and standards that made it easier to build friendlier user interfaces. “This really meant we were not positioned for the future,” Mr. Lazaridis said. In order to survive, RIM would have to change its DNA.

RIM executives figured they had time to reinvent the company. For years they had successfully fended off a host of challengers. Apple’s aggressive negotiating tactics had alienated many carriers, and the iPhone didn’t seem like a threat to RIM’s most loyal base of customers – businesses and governments. They would sustain RIM while it fixed its technology issues.

But smartphone users were rapidly shifting their focus to software applications, rather than choosing devices based solely on hardware. RIM found it difficult to make the transition, said Neeraj Monga, director of research with Veritas Investment Research Corp. The company’s engineering culture had served it well when it delivered efficient, low-power devices to enterprise customers. But features that suited corporate chief information officers weren’t what appealed to the general public.

“The problem wasn’t that we stopped listening to customers,” said one former RIM insider. “We believed we knew better what customers needed long term than they did. Consumers would say, ‘I want a faster browser.’ We might say, ‘You might think you want a faster browser, but you don’t want to pay overage on your bill.’ ‘Well, I want a super big very responsive touchscreen.’ ‘Well, you might think you want that, but you don’t want your phone to die at 2 p.m.’ “We would say, ‘We know better, and they’ll eventually figure it out.’ ”

Trying to satisfy its two sets of customers – consumers and corporate users – could leave the company satisfying neither. When RIM executives showed off plans to add camera, game and music applications to its products to several hundred Fortune 500 chief information officers at a company event in Orlando in 2010, they weren’t prepared for the backlash that followed. Large corporate customers didn’t want personal applications on corporate phones, said a former RIM executive who attended the session.

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