When Ziyad Mir was looking for a work placement in 2009, there seemed no better place than Research In Motion Ltd.
Like his colleagues in the University of Waterloo's famed systems design engineering program, which is known for spinning out world-class programmers, Mr. Mir admired the entrepreneurial success of a local startup that grew into Canada's biggest technology company. RIM was right next door and had unbreakable ties to the university – having been started by Mike Lazaridis when he was still a young student there.
But times have changed, and although this region is still rich with talent, many of the brightest no longer aspire to work at the company that helped put Waterloo on the global map. "It was definitely a really great place to have your first internship," says Mr. Mir, now a 20-year-old intern at LinkedIn Corp. in Mountain View, Calif. "But you don't see a lot of the strong students ending up wanting to go to RIM full time, which is sad."
The talent, in other words, is following the customers, millions of whom have shunned the company's once-dominant BlackBerry in favour of smartphones made by Apple Inc., Samsung Electronics Co. Ltd., and a host of other wireless-industry rivals. To take one remarkable measure of the shift: Apple sold 37 million new iPhones in the final three months of 2012 – about half as many phones as are used by the 75 million BlackBerry subscribers in the world today.
That RIM is losing, and losing badly, is obvious. The question is what can be done to halt the slide. Technology companies, more than others, are vulnerable to death spirals: A poor set of products causes customers to flee, causing revenues to fall, causing layoffs or other cutbacks, causing the best people to leave – which then makes it more difficult to innovate and create compelling new products.
It is the job of Thorsten Heins, the 54-year-old German physicist who this week became RIM's new chief executive officer, to arrest the decline. He has already said that RIM will not pursue the quick-fix solutions that have been proposed – breaking up the company, selling it, perhaps getting rid of the handset business to focus on software and services. "We are going to do this ourselves," he told the company's 17,000 employees this week. They will do it the hard way.
For Mr. Heins, repairing RIM will require him to change its image with a number of important groups. With consumers, RIM must somehow portray the BlackBerry as cool again, via a new marketing strategy that will be driven by a person he hasn't yet hired. Mr. Heins needs to win over large wireless carriers like AT&T Corp., who are as infatuated as their customers with the iPhone and Android phones. He must woo outside developers, who are a big reason for Apple's success, and persuade them the BlackBerry is not dead – and is still worth creating software applications for.
It's a complicated task. And it all starts in Waterloo.
RIM's business went off the rails because it couldn't produce a smartphone on time that was better than its competitors' products. But it couldn't create a better smartphone because, in part, its work environment has become increasingly dysfunctional and bureaucratic, according to numerous sources close to the company.
Employees and former employees describe a process where they were frequently re-assigned in the middle of complicated, long-term projects because there was no executive in control who could make firm decisions about key elements of the production process. That led to wasted time, and immense frustration for employees, one person said.
Mr. Lazaridis, who resigned as co-CEO this week, was considered by some to be a perfectionist. He would, at times, delay the process by requesting more and more software features and functionality, sources say. Some believe the unusual two-headed structure of the company, in which Mr. Lazaridis and Jim Balsillie both held the CEO title, also slowed things down. "What has happened [now]is that there has been an agreement to have everything flowing through the desk of one person," a former RIM executive said. "You remove the potential for duality."
Mr. Heins, who was chief operating officer, will need to bring a new type of discipline to the company's sprawling operations. "This is what I will really focus on ... that we get better at execution," he told employees this week.
There is no margin of error for him. Arguably, the final blow for Mr. Lazaridis and Mr. Balsillie came on Dec. 15, when the company announced a major delay in BlackBerry 10 phones – the line of smartphones that will run on a new, more powerful operating system and are designed to narrow the gap between RIM and the competition. Those phones are expected to come out in the fall, and since RIM is already far behind, it is not a deadline Mr. Heins can afford to miss.
As he rallies RIM's employees behind the BlackBerry 10 project, Mr. Heins will need to turn it into a truly viable platform, rather than an also-ran alternative to Apple's iOS and Android. That will mean ramping up the company's efforts to get apps – which means luring third-party developers to create them and investigating more seriously the idea of licensing their software to rival handset manufacturers, many of which currently use Google's Android system.
RIM has already embarked on the arduous task of convincing developers to stick with the BlackBerry platform. Part of the problem has been that BlackBerry's software was never designed with apps in mind, since it was invented well before Apple's iOS software and Android. Many developers complain that it's cumbersome to make apps for RIM, partly because the BlackBerry comes in so many different forms. They have different screen sizes; some are touch screen, while others are not; they vary in processing power. As the company launches BlackBerry 10, RIM must pull developers along with it by simplifying its tools for them, stressing that apps can work across RIM's multitude of devices.
An equally complex challenge is lifting the company's image in the eyes of both potential and current employees, some of whom say they hang their heads at dinner parties – a far cry from the proud days of RIM's ascendance.
On Mr. Heins's first day as CEO, RIM held its first-ever global town hall meeting to introduce him to the company's work force. Employees submitted questions beforehand. One asked how Mr. Heins would respond to family members and friends who asked "how it was going" at RIM – a question posed in a sombre monotone that brought ripples of knowing laughter to the gathered crowd.
"Great," Mr. Heins said, enthusiastically. "Things are great. Guys, don't put your head down. Keep your head up – 54 per cent growth, year over year, never a quarter without profits, BlackBerry subscriber base grown by 35 per cent year over year ... Yes, there is a region [the United States]where we have to get into fighting mode, and we will, but this is a global play, guys. Be proud of where we are."
But the harsh reality is that in a Waterloo tech scene where the battle for skilled engineers is already incredibly fierce, people no longer view RIM as a gleaming beacon for the next generation of top talent. RIM's sprawling, managerial work environment simply doesn't appeal to many of Waterloo's best and brightest, who would rather fire Nerf guns at each other between energy-drink-fuelled programming sessions than be part of a large team reporting into a project manager, who then reports up the chain.
Although there are many employees who remain incredibly proud of RIM's accomplishments, there are others who remain committed but find public perception of the company deflating.
"They've created this massive corporate culture that just doesn't attract the top talent any more," says Hongwei Liu, a second-year University of Waterloo engineering student who did two co-op placements at RIM but took a year off school to start a new company. "No one feels like they can make a difference there."
RIM, of course, draws from multiple talent pools: It has a large block of employees in Ottawa at QNX Software Systems, the company whose acquisition provided the PlayBook tablet with its distinct operating system – and which will power the next generation of BlackBerrys.
RIM also hires globally, with its official Twitter accounts frequently sending out job openings in London, Mexico and elsewhere. It's sometimes easy to forget that RIM, like other tech companies, is always hiring – in the Middle East, Asia and the Americas; in software, enterprise support, marketing, and public relations – despite its high-profile restructuring, which included 2,000 layoffs last year.
But one seasoned executive who works with new companies in the Waterloo area said a small technology startup recently had five current RIM employees come for job interviews. It's a phenomenon he is seeing more of lately as RIM employees lose momentum and get frustrated, with some middle managers receiving fake promotions – added responsibilities, but no extra pay.
"Everyone who's hiring is hiring RIM people. It's nuts," said the executive, speaking on condition of anonymity. The things that make RIM employees unhappy are "simple things. It's things like they're still in the same buildings they started in, they're still in the same physical space – it's awkward and empty, and not a very nice environment to work in."
Mr. Mir, who has already worked his fair share of technology jobs, says there are key cultural differences between RIM and other large technology companies. "A lot of the Silicon Valley companies are really energetic, employees are really enthusiastic, they're super excited about the products they're working on," he says. But at RIM, "it's a different culture. It wasn't as vibrant. It wasn't as energetic. People just weren't as crazy about what they were working on."
There has already been numerous high-profile departures in recent months as RIM, having added thousands of employees in recent years, underwent the first major restructuring in its history. The marketing and sales groups, which were Mr. Balsillie's domain, have lost the largest number employees after retired chief operating officer Larry Conlee – Mr. Heins's former boss at RIM – was brought back as an adviser to help with layoffs, one source said.
There are some close to the company who also see the risk that as Mr. Heins takes over, executives closely linked to Mr. Lazaridis and Mr. Balsillie may see this transition period as an exit opportunity.
Jefferies analyst Peter Misek, a veteran technology watcher, says you can tell a lot about a high-tech company by how proudly its employees talk about the company when they go out for dinner. This year will be a make-or-break one for RIM, Mr. Misek said, and there is a real and serious risk that employees will begin to look elsewhere even as Mr. Heins tries to rally everyone behind his efforts to bring out the BlackBerry 10 platform.
"If they still need that talent, they have to pay up for it," he says. "If they don't pay up for it, they start atrophying from the bottom. And it's very difficult to reverse, and it starts to spread throughout the company. That's the death knell. That's the same stuff that happened at Nortel."