Taking On the World

Canadian business history offers few examples of successful manufacturing companies that have conquered the world. There’s Bombardier in aerospace and mass transit, Magna in auto parts and McCain in frozen food (if you count pizza and fries as manufactured goods). The list in technology is particularly slim. Nortel Networks sat atop the telecom industry for a while, before collapsing. For a long time Canada did not have a consumer technology giant to rival Nokia in Finland, Ericsson in Sweden or Apple and Motorola in the United States.

Then, out of nowhere, sprang Research In Motion, an entrepreneurial start-up based in Waterloo, Ontario, and maker of the got-to-have-it BlackBerry. Founded by Mike Lazaridis, the son of Greek immigrants to Canada, RIM began life quietly in 1984 as a small technology contractor before making the decision to develop wireless email solutions. Years of dedicated and painstaking research led to the line of fabulously successful BlackBerry smartphones we know today.

Over 75 million BlackBerry devices have been sold worldwide, while RIM products and services are now offered in 170 countries. Despite competi- tive assaults by other players, BlackBerry remains the leading seller in the North American market and its growth shows little sign of moderating. RIM’s annual revenue, now approaching $15 billion, has increased at a rate of 910 percent over the last five years and Fortune magazine ranked it last year as the fastest-growing major company in the world. With a stock market value of around $40 billion, it has made a lot of shareholders very happy.

The BlackBerry brand has managed to attain household status alongside such icons as Apple, Intel, Amazon and Google. For better or worse, the BlackBerry changed the daily lives of millions of busy people who valued instant access to email. It became a status symbol, so addictive that it was likened to an electronic version of crack cocaine. CrackBerry addicts were often a source of distraction at meetings as they thumbed their way through messages.

The remarkable story behind the BlackBerry’s rise is told in detail by business journalist and author Rod McQueen. It is not the first book on the subject; last fall saw publication of BlackBerry Planet by Alastair Sweeny, based on interviews with current and former employees. But Sweeny’s book appeared to lack access to key figures at the top. In this case, McQueen has secured the cooperation of RIM’s founder, Mike Lazaridis, and co-chief executive, Jim Balsillie, who together wrote the book’s foreword as a kind of product endorsement. This is an obvious asset, but also has its downside later in the story.

Access to Lazaridis and Balsillie gives the book unmistakable authority and authenticity as we get an inside look at the ups and downs of the two entrepreneurs on their ride from obscurity to enormous wealth. Easily the most fascinating part of the book is the early history at RIM, when Lazaridis, who dropped out of the engineering program at the University of Waterloo just short of graduation, took the plunge and started his own company to develop computer-aided sign technology.

McQueen paints a vivid picture of RIM in the early days, showing all the potential pitfalls that can await an entrepreneur and demonstrating how the shrewd Lazaridis was able to steer his way around most of them. What distinguishes really successful entrepreneurs from all the rest is their laser-like focus and their ability to pick their battles. They don’t get distracted by other opportunities. Lazaridis always had a clear sense of what he wanted and how to get there. From computer technology, he moved into pagers and then to wireless email at a time when few others foresaw the demand that would come.

One of his shrewdest decisions was to hire the hard-driving Balsillie to run the financial and sales side of the business. A University of Toronto grad with a Harvard MBA, Balsillie proved to be a slick and aggressive dealmaker and was the architect of RIM’s successful entry on the stock market.

The author deftly describes the critically important role played by the University of Waterloo in RIM’s success. The university has one of the most entrepreneurial cultures of any Canadian institution of higher learning, allowing professors to profit from their patents without paying punitive royalties or giving up ownership of their companies. Waterloo trains its engineering and computer science students to succeed in the real world, which is why Microsoft is a major recruiter on the campus each year. RIM has hired thousands of Waterloo grads over the years, and its corporate campus, adjoining the university, almost seems like the corporate wing of the school. Both Lazaridis and Balsillie have given back in kind, donating hundreds of millions to the university.

As the book unfolds, however, it seems a bit unbalanced and the price of the author’s exclusive access looks a little steep. Product engineering and development are explained well, but at times the tone verges on cheerleading, with frequent quotes from suppliers and partners about what a great company RIM is and how visionary the founders are. We read about every honorary degree awarded to Lazaridis and Balsillie and every philanthropic donation they make (which have been hugely generous), but mistakes and controversies are sometimes glossed over. The author devotes a chapter to the patent infringement case brought by NTP Inc. in the U.S., which cost RIM more than $600 million U.S. but does not mention similar suits brought by Visto and Motorola.

While noting that the company launched its own internal inquiry on the backdating and repricing of stock options, the book devotes all of two paragraphs to a story that raised a lot of hackles among investors. It omits to note that regulators accused RIM of having misled shareholders. McQueen does not mention that Balsillie, Lazaridis and another executive were fined $9 million by the Ontario Securities Commission and the U.S. Securities and Exchange Commission and that they were required to forego about $68 million in properly issued options in order to repay the company. Nor is there mention of the fact that Balsillie had to step down for a year as chair.

The book is also silent on Balsillie’s controversial attempts to force his way into the National Hockey League with unsuccessful offers to buy the Pittsburgh Penguins, Nashville Predators and Phoenix Coyotes in order to move a franchise to Hamilton. This is admittedly peripheral to the BlackBerry story, but it would have given readers a fuller insight into the personality of Balsillie, whose aggressive tactics seem to have made him persona non grata among NHL owners.

Finally, McQueen gives short shrift to competitors in the smartphone market, including Apple’s tremendously successful iPhone, which has been gaining market share among users outside the corporate market dominated by RIM. The next chapter of the RIM story is clearly going to be defined by the battle against Apple, itself one of the greatest marketers in the history of consumer technology. The formidable Google has also entered the fray with its Nexus One smartphone.

McQueen is remarkably dismissive of such potential threats: “Of all the erroneous allegations made about RIM over the years,” he writes, “the most persistent has been that some competitor is developing a killer device that will either end RIM’s dominance or dispatch the company into oblivion.” We’ll see. No doubt the brilliant Lazaridis and his cadre of engineers are busy concocting future innovations that we cannot even imagine right now. But RIM is no longer alone in this market.

These reservations aside, McQueen has written the fullest story so far on a valuable chapter in the country’s business history—one that shows diffident Canadians that they can indeed be world beaters.