It feels like ancient history now, but the BlackBerry was once the hippest gadget going. Made by Research in Motion (RIM), the smart phone--which debuted as a pager-like gizmo in 1999 and added voice capability in 2002--built its reputation on a remarkably usable pint-size QWERTY keyboard and software that could securely push messages from corporate servers onto the device. That made e-mail mobile and so addictive that the CrackBerry became a status symbol among executives and consumers.
RIM's longtime co-CEOs, Mike Lazaridis and Jim Balsillie, were rock stars back then. The Waterloo, Ont., company's glory days are long gone, however, and investors and pundits have been clamoring for the duo's heads in recent months. On Jan. 22 a beleaguered RIM announced that Lazaridis and Balsillie were stepping down from their management roles, though they'll remain on the board. Chief operating officer Thorsten Heins is the smart-phone maker's new CEO. "I don't think there is some drastic change needed," he intoned, neglecting the fact that replacing the guys who had been running the company for 20 years might qualify as drastic.
Few outside Waterloo are so blithe. RIM's decline is the most recent example of the huge price tech firms pay for failing to innovate. Remember Motorola's first Razr? Although RIM is profitable and sales remain robust in Africa, Europe and the Middle East, its stock dropped 75% in 2011 because investors see a fading star. The BlackBerry's share of the U.S. smart-phone market has tumbled from 24% to 9% in a year, according to research firm Canalys. And the BlackBerry PlayBook tablet is an embarrassing also-ran.
RIM's woes began the day Apple unveiled the iPhone in 2007. With its wow-factor touchscreen interface and stylish hardware, Apple's breakthrough fast-forwarded expectations about what a phone could be. But RIM was a tool so ingrained in corporate IT departments that its handsets continued to sell well, leading the company to fiddle rather than reinvent. In 2008, for instance, its BlackBerry Storm slathered an unsatisfying touchscreen interface on top of its existing software.
Over time, compared with the iPhone and a gaggle of powerful handsets running Google's Android operating system, BlackBerrys started to look like relics. RIM's third-party-app offerings were also increasingly uncompetitive, in both quality and quantity. The company finally acknowledged a need to reboot its platform in 2010--which it did by acquiring QNX, the owner of an industrial-strength operating system that could serve as the basis of the first true iPhone-class BlackBerrys.
Those models remain vaporware, delayed until late 2012. Heins says he's shooting for a "blow-the-socks-off experience." At this point, though, Android and the iPhone are so far ahead--Apple's latest quarterly earnings more than doubled from a year ago, to a staggering $13.1 billion--that the knocking off of socks is a minimum requirement for RIM to stay in the game. In 2005, when Lazaridis and Balsillie made the Time 100 list of the world's most influential people, self-described BlackBerrys Anonymous candidate George Stephanopoulos wrote approvingly in these pages that their company was "a case study for M.B.A.s." It still is. It's just that RIM now stands as a stark lesson on the dangers of complacency.