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BlackBerry blow-up: How a leadership rift ripped RIM apart

An excerpt of ‘Losing the Signal: The Spectacular Rise and Fall of BlackBerry,’ on the fatal division between Mike Lazaridis and Jim Balsillie


 
In this photo from 2009, Research in Motion co-CEO Jim Balsillie (right) and President and co-CEO Mike Lazaridis listen during the annual general meeting of shareholders in Waterloo, Ontario. (Mike Cassese/Reuters)

In this photo from 2009, Research in Motion co-CEO Jim Balsillie (right) and President and co-CEO Mike Lazaridis listen during the annual general meeting of shareholders in Waterloo, Ontario. (Mike Cassese/Reuters)

Once Canada’s greatest corporate success story, BlackBerry (formerly Research in Motion) today finds itself struggling to survive. In their book Losing the Signal: The Spectacular Rise and Fall of BlackBerry, authors Jacquie McNish and Sean Silcoff take readers behind the scenes of RIM’s dramatic decline through extensive interviews with the key players, including co-founders and former co-CEOs, Mike Lazaridis and Jim Balsillie. In this excerpt, the crumbling relationship between the two men—and its corrosive effect on the company—finally comes to a head.

RIM was entering a nightmarish year. By the end of 2010, it would lose its crown as the leading smartphone platform to Google’s Android. But as Research In Motion struggled against external forces, some of the greatest battles would be fought within the company. The two organizations reporting up to each CEO became increasingly dysfunctional silos and breeding grounds for distrust, politics and factionalism, as layers of ambiguity and uncertainty consumed the company’s top executives. Initiatives that required co-operation among groups in different units often stalled unless they had the attention of one of the top chiefs. “It turned into a goat rodeo,” says chief operating officer Don Morrison. “We became collectively ineffective at moving from the idea stage to the conversion of an idea into a commercial success for anything other than devices.”

Paradoxically, as the company’s pace of growth dwindled compared to both Apple and Android, it was still struggling with its own success, as ever-increasing sales strained the global manufacturing network. As 2010 unfolded, the greatest source of friction between the two sides of RIM was product quality. It had been a mounting problem since at least 2006, when RIM launched the Pearl. Dirt got trapped under the tiny rollerball used to navigate the screen, gumming up its performance. The USB port on BlackBerrys often detached from the circuit board and the plastic lens covering screens on some models cracked easily, says David Van Tongerloo, who managed an independent BlackBerry repair service for corporate customers in Houston from 2006 to 2009. The BlackBerry operating system was nearly a decade old and laden with so many software patches it ran slowly and was overdue for a coding cleanup.

Product issues worsened with the Storm, and customer returns increased; a 2010 release called Torch—a hybrid touchscreen keyboard device using the Torch browser—drew complaints from customers that buttons fell off within days of purchase. “Storm impacted the quality of everything,” says chief technology officer David Yach. “All products took a dive because we were spread too thin.”

RIM could hardly afford another reason to alienate customers. Balsillie had always left the science and manufacturing to Lazaridis’s side of the house, but the persistent quality issues frustrated him. He felt something had to be done, even if it meant an unwelcome incursion onto his partner’s turf.

Related: Jim Balsillie’s efforts to win the North

Balsillie’s sales leaders came to RIM’s all-executive Tuesday noon meetings stocked with product complaints from carriers, saying they couldn’t make their numbers because of quality issues, and further badgered their engineering colleagues at separate cross-functional gatherings. These meetings had always been forums for openly hashing out business issues, but now they became tense sessions that turned sales and product people against one another.

Balsillie and Lazaridis never called each other out in the Tuesday meetings as relations between their organizations deteriorated. “They were mindful of how they were being perceived” and kept any disputes behind closed doors, says Patrick Spence, who by now was one of three sales vice-presidents and Balsillie’s most trusted lieutenant. But tensions between the two CEOs were evident to others. Balsillie encouraged his salespeople to press on quality issues and would chime in, “Did you get that, Mike?” to which his co-CEO would tersely reply, “I got it.”

The Tuesday noon grillings rattled Lazaridis. He felt blindsided and thought the salespeople were grandstanding. He would stop meetings when they raised quality issues and ask for more information. “What is it? Can you send me details? I need to understand,” he’d say. Lazaridis would leave the meetings steaming, then walk into a meeting with his direct reports and Morrison at 1:00 p.m. where he would let loose and demand answers. By early 2010, Lazaridis’s chiefs were telling their assistants to clear their Tuesday afternoon schedules in anticipation of long, difficult meetings with their boss. “I got the worst of it,” says Yach, an assessment shared by others. “After hearing about an issue for the first time at the Tuesday noon meeting, I’d immediately email folks to get me background and updates in time for the one o’clock meeting.”

Sometimes, Lazaridis says, his direct reports would tell him they were already well aware of an issue raised by Balsillie’s side of the house and dealing with it. “It bothered me that I was hearing about stuff [from salespeople] that I should have heard from the team that reports to me every week,” says Lazaridis. Morrison says, “It became evident [Lazaridis] was losing control of some of these problems and he wasn’t getting straight answers . . . [or] support from people he needed.”

Related: How did Mike Lazaridis make our 2013 Power List?

Identifying the problems was easy enough. An internal audit in 2010 found “significant challenges” in the company’s product development process, including general disarray and lack of consistency from program to program, while a second audit that year noted “the quality of our handheld products does not meet RIM’s expectations, or the expectations of our carriers.” Accountability for product quality was spread across several functions and executives, complicating decision-making and hampering efforts to improve quality. “The functional orientation of the quality organization structure negatively impacts the communication and collaboration between quality teams and creates situations of competition and even conflict between groups, duplication of effort, and limits information-sharing,” the second audit read.

Figuring how to fix quality proved more daunting. Part of the problem, says Yach, was that the company had millions of stockpiled units and parts that had been made when quality problems were at their worst. Yach figured the best way to improve customer perceptions was to stop selling the older devices, but “as a management team we didn’t make that decision.”

When Balsillie raised quality issues in private with Lazaridis, “I don’t recall a heated conversation, but I do recall Mike saying, ‘This stuff is really, really hard,’ ” says Balsillie. “Mike refused to acknowledge that we had any material technical issues, to the point that he would miss meetings so that he didn’t hear the negative feedback and [was] hoping that we would not discuss it in his absence. That was wishful thinking, and I personally didn’t think we had any way around it. If anything, everyone was counting on Mike to see the flaws first and fix them as soon as possible.”

Lazaridis says he recognizes the company had challenges but largely dismisses the issue, saying it would be common to any company that was growing as fast as RIM, juggling multiple versions of products for hundreds of carriers. “Yes, we had legitimate business quality execution problems,” he says. “Anybody does, with a complex product.”

Trashed Blackberry phones sit in a bucket during the NBC Today Show in New York April 21, 2008. The phones were to be used by students in an art piece and then recycled for Green Week. (Lucas Jackson/Reuters)

Trashed Blackberry phones sit in a bucket during the NBC Today Show in New York April 21, 2008. The phones were to be used by students in an art piece and then recycled for Green Week. (Lucas Jackson/Reuters)

Lazaridis’s chiefs, pressured by their boss, Morrison, and, indirectly, Balsillie, realized they had to do something. They struck a task force to root out the causes of quality issues and fix them. But Morrison grew frustrated by the lack of progress. “You could never find someone who would stand up and take accountability,” he says. “I wanted to know who was responsible for product introduction. I wanted to see attribution lists [detailing specific reasons for product returns], understand the most egregious problems, who was dealing with them.” Where Morrison expected straight answers and action plans, he says the task force instead delivered complex slide presentations without a clear path to fixing the problems. “I don’t think the task force was a very effective group,” he says.

By mid-2010, Balsillie was losing patience. He decided to bring the quality issue to a head, exposing the board to the extent of the growing rift between the two CEOs. That June, Balsillie, Morrison, and his sales vice-presidents—Craig McLennan, Rick Costanzo, and Spence—took over a board meeting, held at Langdon Hall, a luxury resort-spa located in a 19th-century estate mansion near Waterloo. The retreat was supposed to be about the company’s global operations and led by director and strategy expert Roger Martin. Instead, Morrison and the sales VPs forced their own agenda on the meeting, detailing quality issues they felt weren’t being addressed. Balsillie cued them along and pressed RIM handset boss (and future CEO) Thorsten Heins to respond. For the most part, Heins sat silently, getting redder, according to observers. Lazaridis walked in late—he claims not to have been invited—and immediately became defensive. When Heins said he was confident the company could turn around its fortunes in the United States, Balsillie shot back: “Would you bet your house on it?” Heins said no.

Related: How BlackBerry is trying to shrink its way back to profitability

Balsillie and his team were troubled by the reaction of directors, who were reluctant to take sides or challenge either of the company’s builders. “Jim was always complaining about something,” says one person close to the board. Other than Antonio Viana-Baptista, a former telecom CEO Balsillie had recruited to the board, the directors asked no questions, according to Balsillie, Spence, and McLennan. “I was so disappointed by that,” says Spence, who Balsillie by then had earmarked to the board as a potential successor. “You expect a higher level of engagement, passion, excitement, and interest” from the board—particularly “if I was identified as a high-potential person and somebody that was important to the organization.”

Concerned by the apparent disinterest among directors, Balsillie brought the quality issue to a second board meeting that summer. At that encounter, “Mike dismissed the severity of the quality issues” and said everything was “under control,” says Balsillie. “The board accepted Mike’s representation almost on faith, and I wasn’t going to seek a pointless showdown with him then and there, so they just moved on. I don’t think the board quite ever accepted” the depth of the problem, Balsillie says. “Everybody is going, ‘Our stuff is great,’ and I’m going, ‘We’re going to get killed.’ I said to the board, ‘We can halve the size of the company as easily as double it . . . We’re deluding ourselves here.’ ”

Related: Barack Obama’s still using a BlackBerry…sort of

To those insiders who witnessed the quality debate but weren’t aware of the prior tensions between the CEOs, it was alarmingly clear the relationship between Balsillie and Lazaridis had gone cold. “It was a shock to Mike that [they] would be so vocal about quality in front of the board, and Mike was blindsided,” says Yach. “Absolutely” it was an affront to Lazaridis and his team, says another person at the Langdon Hall meeting. “From my perspective, that was as much of an affront as I’d seen at any point. You could see the tension between the two sides of the company.”

“You’re looking at the company and saying, ‘It’s dissonant and you guys stopped getting along,’ ” says Balsillie. “Yeah, well, it had to do with this infestation of cockroaches, okay? We all got irritable when there were eight billion cockroaches in the house. Before there were cockroaches, all was fine. When the structure changes, everybody struggles.”

RIM’s directors were running out of time. They had faithfully backed Balsillie and Lazaridis through so many storms: regulatory sanctions, product disappointments, and growing evidence, as one person close to the board puts it, that the CEOs were no longer “acting like a partnership.” The board’s loyalty endured because they believed the founders, fathers of an improbable global technology success, had the talent to pull RIM out of its tailspin. “We were reluctant to get tough with them; they were successful executives,” one director explained. Another factor was the absence of successors. Directors had to be careful about alienating Balsillie and Lazaridis because there were no experienced understudies. Thorsten Heins, a Lazaridis lieutenant, and Patrick Spence, Balsillie’s candidate, were identified internally as potential CEO material, but the board had limited contact with them and neither had the kind of broad executive training needed to run a struggling global company. With no stand-ins in the wings, the CEOs had the upper hand. “If we were to say to Jim and Mike, ‘Well we’re the board and you should go away now,’ they would have laughed at us,” RIM director Roger Martin later told the Globe and Mail.

By mid-2011 there was no more time for excuses. The board was under too much pressure from shareholders to shake up the executive suite.

Excerpt from Losing the Signal: The Spectacular Rise and Fall of BlackBerry by Jacquie McNish and Sean Silcoff ©2015. Published by Harper-Collins Publishers Ltd. All rights reserved.


 

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