Research in Motion has made a change at the top, removing its co-CEOs and putting in Thorsten Heins as CEO. RIM’s problem was largely one of demand generation and perception that the company was out of date with the times in a market that is driven by companies who create the image of being cutting edge. It is a market shifting from a focus on hardware as the major differentiator to one focused on what applications the devices run and what content they can access. The good news is that few companies currently selling into this market have hardware vendors are expert in either area; the bad news is that Google is an expert and Apple is gaining expertise at a massive rate, and one stands behind a Microsoft-like vendor ecosystem and the other was the most powerful tech company last decade.
Apple/Google: Opportunities Exist
Both Google and Apple have exposures; Google, like Microsoft in the 90s, isn’t taking security seriously enough and Apple has lost its lead product pitchman Steve Jobs. This suggests both firms are vulnerable but on different vectors. Apple will likely increasingly struggle to drive market leadership because their voice has been diminished, suggesting the possibility that the next big thing could come from someone else like RIM. But they would have to have the skill set to do this and currently do not.
Privacy and security only really become an area of focus when there is a big security problem and lots of people are compromised. This kind of an event, according to McAfee, is very likely in the next 12 months given the massive number of hostile applications that appear to exist in the Android ecosystem. Timed right, a device that had a vastly higher focus on security could move in against a platform that might, when this event occurred, be widely banned. RIM can make a more secure device, but concerns surrounding what access RIM gives to governments could undermine their ability to do this effectively.
CMO is the Critical Role
In both cases, the problem is more of an image problem initially than it is an engineering problem. The new CEO brings to the table a strong engineering skill set from a strong engineering company out of Europe Siemens. Siemens is the company that bought ROLM from IBM which was a troubled property and, largely through mismanagement, destroyed it. At the core of that mistake was an excessive focus on trying to bring European technologies into a US market which didn’t see their value. This was a combined mistake, consisting of the wrong products for the market and an inability to market the product’s unique advantages in a compelling fashion. Granted, ROLM was an enterprise PBX vendor, but it showcases weakness similar to RIM’s -- a lack of ability to properly position the products in the customer’s minds so that they see the advantages not just the unacceptable differences.
Heins is looking for a new CMO, which showcases that the company recognizes this shortcoming. However, engineering-driven companies often treat marketing as an afterthought. This means they often don’t know what to look for and even if they do get someone excellent, often by accident, they won’t fund or support them adequately. Over time, to be successful, marketing would need to provide direction to engineering and design groups so that the resulting products could, like Apple’s products, be more easily marketed. So while Heins clearly recognizes the shortcoming, his engineering background may not have provided him the skills needed to select the right person and, even if he does, he will likely not resource them adequately to assure success. Currently, you can see similar behavior in Microsoft and Google. This is mitigated at Google through marketing efforts by carriers (Verizon Droid) and partners like Samsung, and in Microsoft through the Windows OEMs, but you’ve seen both firms struggle with a variety of initiatives like the Windows Phone platform with Microsoft and the Chrome OS with Google.
The start of any turn around is to bring someone on board that can get the ship on the right course. At Yahoo, we saw this done horribly with Carol Bartz, as she lacked both the knowledge of the market and the skill set needed to execute a turnaround. At RIM, Heins does understand the business, but the specific problems that plague the company surround the perceptions surrounding the products and a product set that has proven difficult to market successfully to consumers who have replaced IT as the decision makers in RIM’s chosen market.
This gives RIM a better chance of recovery than Yahoo had with Bartz, but, given Heins background, makes it likely they will pick a CMO that will lack the needed skills and be under-resourced. Our first indication will be the CMO they select; if that CMO has something like the Verizon Droid or iPhone in his or her pedigree, it would indicate he or she may have the right skill set; the harder thing to determine is how well they are funded and that will likely have to wait until they execute their first campaign or product launch.
In the end, the most likely path to success is one of acquisition, but given how often these mergers fail, with Palm as the most recent example (and ROLM decades ago), this is hardly a sure thing either. So, while the odds for RIM recovering have improved with this executive change, the critical moves have yet to be made and, until they are supporting a more positive outcome, RIM still lacks a strong enough foundation.
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President and Principal Analyst, Enderle Group
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