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Where BlackBerry’s founders went wrong

Joshua Gans

Losing the Signal: The Spectacular Rise and Fall of BlackBerry

Jacquie McNish and Sean Silcoff


290 pages, hardcover

ISBN: 9781443436182

I owned a BlackBerry during 2007. I loved it. Having finally realized that the phone was not the thing—email was—I wanted to be connected all the time. It was not pretty but it worked. It kept my contacts, my calendar and a few other things. I customized the alerts to make a simple Star Trek beep when notifications came in. And, like one of Pavlov’s dogs, I would bring it out whenever it chirped.

Then came the iPhone. My BlackBerry was quickly discarded and I had a new object of love. Indeed, I did not give that whole episode much emotional reflection until I read Losing the Signal: The Spectacular Rise and Fall of BlackBerry by Jacquie McNish and Sean Silcoff. The book made me realize what I, personally, and so many others owe BlackBerry. BlackBerry, or as it was known throughout most of its history, Research in Motion (RIM for short), pioneered the mobile data revolution and, in the process, changed how pretty much everyone interacted with information technology and the internet.

The book advertises itself as the story of BlackBerry, but it is really the story of RIM’s long-time co-CEOs Jim Balsillie and Mike Lazaridis. The two had comparable backgrounds and similar career aspirations formed as teenagers but came to RIM via very different paths. Balsillie took a business route through Harvard Business School, while Lazaridis was an engineer, dropping out (as is the fashion for innovators) of the University of Waterloo. In a time when divided leadership is synonymous for organizational disaster, these two made it work. It was Lazaridis who founded RIM and had the foresight to bring in Balsillie to focus on the business. Balsillie took charge of the negotiations with the larger carriers that controlled the route from device maker to customer while Lazaridis handled the technology.

The combination led to two innovations that propelled RIM ahead. First, Lazaridis knew what he was dealing with—a device that was a new way of communicating on the run. He cracked the code on how to transmit a mobile device’s text data efficiently, using built-in encryption and a proprietary security system. With a focus on text communication he also perfected the mobile keyboard. It is hard now to imagine how difficult this latter task was. We all know that Apple employed user-oriented designs to drive its resurgence, but Lazaridis understood the user experience as well as anyone. His keyboard was compact and the first interface to rely on “dual thumbs.” To be clear, that is how we type on mobile keyboards today—even if they happen to be touch screens. That idea, and how to design a device to do it, originated with the BlackBerry. And it worked.

Gabriel Baribeau

Second, Balsillie took that new wireless infrastructure to carriers and exploited their weaknesses to keep control over the entire BlackBerry network, especially its state-of-the-art security. I will not go into details here—the book does an excellent job of that—but all email went through RIM’s servers. This gave the company great flexibility in dealing with a multitude of carriers and helped it provide assurances to corporations and then the U.S. government that a decade-old firm could handle their data securely. Moreover, RIM was able to obtain fees initially directly from consumers for its service. That meant that, when carriers found BlackBerrys to be indispensable, Balsillie was able to negotiate for RIM an unprecedented monthly payment of $10 per consumer. With all that in place, it is no surprise that, in an environment where start-ups talk about their “burn rates” in reference to initial losses, BlackBerry was profitable through most of its history. Steve Jobs in 1997 had lamented the poor state of the mobile industry and the fact that he could not send and receive emails from his cell phone. Just a few years later, BlackBerry had solved that problem and would remain the solution for another decade.

I could not put Losing the Signal down. That was completely unexpected. After all, the story is a familiar one. RIM rose, then the iPhone came and it fell. The tale ends not with entrepreneurial triumph but despair, and we know it is going to happen. So why read on? For the first half of the book, the outlook is rosy but doom is everywhere. Then the train wreck unfolds and there is to be no redemption. But as the tension builds, I was searching for something. I wanted to make sense of it all. Was BlackBerry’s fall inevitable? Could something have been done?

McNish and Silcoff are long-time journalists who parlay their writerly talents to produce a fine, well-documented business history—one that will be a compelling read for general readers as well as an essential resource for business people. However, they offer no help in understanding BlackBerry’s downfall. Indeed, one comes away not fully convinced they view the story as one of downfall at all. Their epilogue ends on a moment of hope. Did they inject this merely to account for the possibility that a BlackBerry phoenix will rise, in which case they can claim to have seen the seed? Regardless, any dispassionate reader will surely come away believing the story is over.

McNish and Silcoff have missed an opportunity. BlackBerry’s story is simply too significant to duck the all-important questions. And when one delves into these questions the double-edged nature of the answers soon becomes clear. Yes, BlackBerry was a victim of circumstance, but it was also the victim of its own success. This type of enslavement is nothing new. Harvard Business School professor Clayton Christensen, in his classic work The Innovator’s Dilemma, identified it as the driver behind what he called disruptive innovation. The term is now overused, but when you explore its roots the notion that the best firms, doing what made them great, can be undermined by an innovative new entrant is a powerful concept. For RIM, the new entrant was Apple and its disruptive instrument was the iPhone. But this is where the story gets interesting, for a careful reading of Losing the Signal demonstrates that it was not Apple that was the immediate cause of RIM’s fall. It was Google.

The book contrasts Lazaridis’s reaction to the iPhone with the reaction of Google’s Android engineers. Lazaridis was simultaneously amazed and dismissive, and he had good reason to be. He believed Apple had made all the wrong choices. It had chosen battery-hungry screens and processors while at the same time doing nothing to ensure that the stress of having a full browser on a mobile device would not collapse mobile networks. And there was no keyboard to boot. The Google engineers took the iPhone threat more seriously. They threw out their keyboard-centric design and went back to the drawing board, delaying their own phone by years.

In 2007, after having secured the corporate market, BlackBerrys were finally getting into the hands of consumers. But it was in the consumer market that the iPhone posed a threat. Meanwhile, shut out of Apple’s exclusive arrangement with AT&T, the powerful carrier Verizon looked to RIM for a solution. Verizon had decided that the keyboard had to go. Lazaridis obliged with the BlackBerry Storm—a touch screen device that clicked when used to give the feel of a keyboard. RIM brought it to market in 2008. This was a little over a year after the iPhone at a time when RIM’s stock price was at its highest.

The problem was that the Storm just did not work. Its developers forgot everything that had made BlackBerry great. The company had made its name producing network-friendly and consumer-friendly devices that were so well made and durable millions of users pounded on them day in and day out. Now they had produced an iPhone clone. That was not good. In the first instance, the iPhone was not up to the rest of the competition. Its email service was limited, did not sync well with Outlook, and was subject to considerable practical glitches. Apple conveniently blamed AT&T for the glitches but were actually part of the problem. For most BlackBerry users the iPhone was not yet a real alternative: it was expensive and had a limited roll-out. Instead, it was Google, whose engineers had realized re-engineering was required as they built software to power Motorola’s Droid, that was the main threat as it began muscling BlackBerry out of the consumer market. And Google was doing this just as Balsillie tried and failed to acquire Motorola, while he pushed U.S. carriers so far that they flew into Google’s arms.

This was the short-run problem plaguing BlackBerry’s prospects. But there was a longer-run issue as well. The iPhone may have started with significant flaws, but Apple soon began rectifying them, and while BlackBerry had initially managed to mimic some of its tangible features with the Storm, there was a more central feature of the new competitive environment it failed to keep up with. The intense focus Lazaridis had brought to creating products that work created a blind spot. What he did not understand was that touch screens and computer-grade processors put smart phones on a new path—one that stressed mobile computing platforms rather than the devices themselves. This would require paying more attention to software than the hardware-focused Lazaridis was comfortable with. It took years for him to see that to get on this new trajectory BlackBerrys would have to be completely re-engineered for the platform-based mobile computing future.

Herein lies the irony of the BlackBerry story—the irony that McNish and Silcoff fail to bring out. In 2007 RIM had plenty of time. For the next four years, its subscriber base continued to grow, not just in the United States but around the world. An even bigger irony is that at this time BlackBerry’s consumer demand was driven by BlackBerry Messenger. BBM was the first killer app for mobiles, but because RIM did not really think of itself as producing apps, the company failed to take full advantage of its potential, rebuffing entrepreneur and Kik-founder Ted Livingstone who saw that opportunity. Livingstone and others like him, who were attuned to these market trends, are now worth more than RIM.

Leaving all this somewhat in the background, the book focuses instead on RIM’s public travails. Due to what appears to be bad legal advice, and a corporate culture that had yet to slough off its start-up mentality, the company was distracted by the need to fend off patent trolls. Its co-CEOs were also forced to weather the significant costs and humiliation of a scandal over stock option pricing. Finally, RIM’s board was weak and seemed unable to ensure the company had a long-term strategic vision. Given that the co-CEO structure worked well but was somewhat balanced on a knife edge, board oversight and, more importantly, insight were missing at critical times.

While all this was true, we are left with the impression that it was a mere matter of personalities, rather than something deeper, that stood in BlackBerry’s way. But we must appreciate the extent to which RIM’s success came from its intense product focus and relentless drive to ensure its place in the mobile value chain. Understanding this makes its downfall easier to grasp. Even if it had been better governed, and had a single visionary at the helm who could absorb both business and technical decisions, RIM was a single-product company. When the mobile computing market moved from devices to platforms, the company that never developed into an essential platform was predictably left behind.

One might conclude RIM had no chance. But the time between the launches of the iPhone and Android was when RIM had an opportunity to build that platform. It was already the mobile solution aligned with Microsoft and, as such, worked well with business. It had an immensely popular social networking app. And it was unassailable as the secure solution for corporate leaders and government. Had it isolated those features and understood that its software and infrastructure would be a valuable service—in other words, had it entered what we would term today the cloud-based computing market—RIM might have been able to navigate the waves of disruption that submerged it. Nothing in Losing the Signal suggests that RIM considered or was able to see how to make that opportunity a real one. To be sure, Lazaridis did recognize the need for a new phone operating system, but instead the company depended on its established network infrastructure that enabled secure communication and could work with many systems.

In sum, the BlackBerry story is a classic tragedy. The very qualities that allowed it to push ahead with innovations that, literally, changed the world dampened its ability to make the key strategic shifts that would have allowed it to sustain its success. The fact that its rise and fall were so inextricably intertwined make the BlackBerry tragedy all the more compelling. Is there a lesson here? Certainly. Any entrepreneurs reading the BlackBerry story will naturally find themselves asking a key question. Do I have the strategic foresight to ensure the company I start becomes something durable? If the authors of Losing the Signal can prompt such bouts of introspection in future Jim Balsillies and Mike Lazaridises, they will have performed a profound service.