When Apple (AAPL) Chief Executive Steve Jobs unveiled the iPad last January, he took the stage in his inevitable jeans and mock turtleneck, and held his new tablet computer like a precious jewel. The device, he told the crowd, was a "truly magical and revolutionary product," something "extraordinary" and "unbelievably great."
Jim Balsillie, the co-CEO of Research In Motion (RIMM) (RIM), has a different approach. When he came through New York on Sept. 24 to introduce the BlackBerry PlayBook, his company's answer to the iPad, Balsillie wore a gray suit and a tie covered with ducks. Kicking off a visit to Bloomberg Businessweek, he said: "There's tremendous turbulence in the ecosystem, of course, in mobility. And that's sort of an obvious thing, but also there's tremendous architectural contention at play. And so I'm going to really frame our mobile architectural distinction. We've taken two fundamentally different approaches in their causalness. It's a causal difference, not just nuance. It's not just a causal direction that I'm going to really articulate here—and feel free to go as deep as you want—it's really as fundamental as causalness."
Those words—brilliant, no doubt, if you could only figure out what they meant—illustrate the promise and peril of RIM. On a technical level, the PlayBook may well be better than the iPad. It boasts a seven-inch screen, the same security features that made BlackBerry famous, dual cameras, and support for the Adobe Flash technology that underpins most Web sites. Morgan Stanley (MS) analyst Ehud Gelblum wrote that its technical features appear "to outperform competing device hardware on nearly every metric." If Balsillie and his team can't sell it, however, none of that will matter. And RIM hasn't had much luck generating excitement among investors lately. The Waterloo (Ont.) company's stock is down 37 percent since its high in March, to $48.01, on Oct. 6. Its U.S. sales dropped 2.9 percent in the last quarter, to $2.2 billion.
Of course, it's hard to compete with Apple—and it doesn't help when your leader has a hard time making his vision understood. Ask Balsillie if management's message might seem a bit cerebral and he responds that it's "authentic." Maybe so, but RIM's recent product launches have underwhelmed reviewers, and nobody knows how well the PlayBook really works because Balsillie's partner, co-CEO Mike Lazaridis, didn't demonstrate its functions at the official launch on Sept. 27. Devotees of the iPhone like to dismiss the BlackBerry as outdated, one-dimensional, and as sexy as a mid-1970s calculator. Yet RIM's problems don't begin and end with Steve Jobs. While Apple's second-quarter global market share rose to 13.1 percent from 12.4 percent the year before, according to IDC, it was Google's (GOOG) Android operating system that truly surged, rising to 15.8 percent from 2.3 percent. (RIM came in at 17.5 percent.) What Android and the iPhone have in common are operating systems that encourage third-party applications, allowing users to customize each phone with mobile apps that do everything from tracking ocean currents to locating nearby pizza parlors. It's an arms race in which RIM hardly competes. The iPhone has about 250,000 consumer apps, and Android about 75,000; BlackBerry has just over 10,000.
To some on Wall Street, like investor Buzzy Geduld of Cougar Trading, RIM looks like a company on the precipice. "They need that revolutionary product," he says. Nobody has achieved a seamless mobile Web experience; if the PlayBook succeeds, it may turn out to be a coiled spring. Look at the numbers and it's also clear that RIM is anything but dead. It's still the dominant smartphone for business, with a 41.5 percent share of worldwide business use, vs. 17.5 percent for Apple, according to IDC. It beat Wall Street expectations when its earnings rose 68 percent and revenue jumped 31 percent in the quarter that ended Aug. 28. Even RIM's reputation for security arguably got a boost when Saudi Arabia, India, and the United Arab Emirates recently threatened to shut it down because it's tough to monitor BlackBerry messages. "It's the No. 1 smartphone in the U.S., and in places like Latin America it has incredible cachet with the younger generation," says IDC Vice-President Stephen Drake. "It kind of puzzles me why people are so quick to write them off."
Maybe they can't understand the story. Balsillie says he didn't want to tell it until the technology was ready, but RIM has been slow to the marketing game. The first BlackBerry TV ad ran in 2008, nine years after the product was launched, when it was already racking up sales of more than $6 billion a year. (Sales hit almost $15 billion in the year that ended Feb. 27.) RIM hired its first chief marketing officer, Keith Pardy, last year. It lacked a full-time chief financial officer—critical for communication with Wall Street—for more than two years until former chief accounting officer Brian Bidulka was formally named to the job last December.
Then there are the co-CEOs, who have split the top job since 1993. Lazaridis, 49, is a Turkish-born whiz kid who grew up in Windsor. Ont., and dropped out of college to build an industrial display network for General Motors; he founded RIM in 1984. Balsillie, also 49, joined in 1992. He's a tradesman's son from rural Ontario who went to Harvard Business School. Each is more comfortable talking about the desires of chief technology officers than the needs of the average person. To hear Balsillie talk, it's easy to forget that more than half of RIM's 50 million subscribers are individual consumers. "You hear this cliché, the consumerization of technology, and I don't buy that," Balsillie says. "When I talk to CIOs, users may want to consumerize, but I have to maintain enterprise greatness."
Those chief information officers, though, are increasingly happy to have employees bring their own smartphones to work. It's cheaper than issuing corporate BlackBerrys that users then expense each month, and companies such as Credit Suisse (CS) get around the security issues by encrypting their data through third-party software. "I don't care what device someone has," says Steve Hilton, the bank's head of technology infrastructure services. "We want to get out of the game of managing the system for those devices." Then there's London's Standard Chartered Bank, which announced in May that it's switching completely to the iPhone because of the opportunities to develop more apps.
Balsillie thinks the world is wrong about apps. Many are just glorified bookmarks, he argues, that aren't necessary if you can connect customers to the Web. "I'm not going to bring developers to the Web. I'm going to make mobility Web-friendly," he says. "Why do you need a YouTube app if you play YouTube? Why do you need an app to follow the Tour de France if you can just follow the Tour de France?"
Balsillie has a point—or he would if the consumer universe operated logically. "But we're not living in a perfectly rational world," says Roger Entner, head of telecom research at Nielsen. "People are now living with a very app-centric mindset."
That's why Apple remains the biggest threat to RIM. The marketing and design juggernaut has even turned its retail stores into an entertainment experience. As Wharton marketing professor Eric Bradlow notes, "Apple has done a great job of constructing the playing field and defining what these products should do. RIM is functionally superior, but people are evaluating it on attributes that Apple has defined." RIM's response, he and other critics say, has been to issue "me too"products while refusing to acknowledge Apple as a potent competitor. Some analysts have reacted to its latest offering, which doesn't go on sale until next year, as a sign of desperation. "This was essentially more of a vision statement than a product," says Rodman & Renshaw analyst Ashok Kumar, who argues management is losing its credibility.
Zach Nelson, CEO of application developer NetSuite (N), calls RIM's strategy of developing a tablet for the business market "a genius idea" but says the pressure is on to deliver a game-changing product. "Now is their time to respond," he says. " I think management will be judged more by what they do in the next year than by what has transpired in the last year."
Management experts have long called a co-CEO structure a recipe for infighting and ineffectual leadership. Yet few consider it a source of RIM's problems. The twin structure does make for some odd work-sharing. Balsillie jokes that they're both so maxed out they could use a "tri-CEO" and concedes the division of labor isn't clear-cut. When an issue needs immediate attention, they trade e-mails to decide who'll handle it. "You play these little games where you try to suggest it to the other guy first," he says. "'I'm really busy, can you handle it?' It's like, dang! You know one of us has got to, and the last thing you want is more work."
Over time, each has carved out a distinct role. Lazaridis, the silver-haired founder and mastermind behind RIM's technology, is the face of the company to the tech world. A man who has hosted dinners for Stephen Hawking and poured a big chunk of his wealth into forming the Perimeter Institute for Theoretical Physics, he is regarded as both the visionary and the pragmatist who loves to talk product. "We build professional products," he says. "The more you use them, the more you love them. We don't blow anything out of proportion....Our whole messaging is authentic. Those aren't actors in our commercials. We've always stayed true to ourselves."
Balsillie, by contrast, is a former accountant and self-described "quant jock from Peterborough who doesn't quit." His after-work interest is public policy, which led him to create the Centre for International Governance Innovation in 2001 and the Balsillie School of International Affairs, while also serving on a U.N. panel on global sustainability. He's better known in the U.S. for his interest in ice hockey, having unsuccessfully bid twice to bring ailing National Hockey League franchises from the U.S. to Canada.
For both men, the challenge is to sell the world on a single coherent message. Some analysts say RIM needs to do more to cast itself as the killer brand for business, emphasizing its unique advantages. In an era of growing identity theft and privacy concerns—one in which mobile payments may soon become the norm—security is a powerful attraction. "They know what works, and they don't compromise on that," says Kevin Burden, who leads the mobile services practice at ABI Research. "In some ways, it's refreshing to see a company stick to its beliefs. It's a huge misperception to say the BlackBerry platform itself is archaic." The issue, he says, is marketing: "They have to be fresh and new but familiar."
The challenge of adapting a winning formula is hardly unique to RIM. Sarah Kaplan, a professor of strategic management at the University of Toronto's Rotman School of Management, points out that many companies have faltered because they got locked into a system that worked—for a while. "The leaders don't have a mental model to change their way of thinking," she says. Having the technological edge is rarely enough to guarantee sustained success, and most companies wait too long to address incipient threats. Given RIM's insistence on downplaying Apple and claiming that all is well, it's fair to ask whether Balsillie and Lazaridis have spent enough time debating alternate views. Some wonder whether their Ontario headquarters is too far removed from the intense competition of Silicon Valley. "You need a high-conflict, high-respect organization to change the game," says Kaplan. "If there's any issue with being north of the border, it may come down to a fear of conflict."
There certainly appears to be a geographic divide in how RIM is viewed. More than 90 percent of Canadian analysts rate RIM a "buy," while only half of their U.S. counterparts do. Paul Taylor, chief investment officer of BMO Harris Private Banking in Toronto, says some U.S. investors balk at the notion that an isolated Canadian company can be at the forefront of technology. Balsillie acknowledges the disconnect between RIM's performance and investor sentiment, arguing that "it's almost unprecedented." He can't understand why the rest of the world doesn't get it. "The business is doing well and we've got it under control, and wait and see," he says. "What you've got is a true dichotomy of architectural views of mobility here."
That, or maybe a bad connection. Charles Golvin of Forrester Research (FORR), for one, sees promise in RIM's recent efforts to promote its brand—from sponsoring tours of rock bands such as U2 to developing TV ad campaigns. "There's tremendous passion out there for RIM, and the PlayBook is an opportunity for them to change their perception in the marketplace," says Golvin. "The question is whether they can get their story out." Basillie may even be aware of the problem. At one point in his meeting with Bloomberg Businessweek, he stops and looks around the room, then asks, "Am I communicating O.K.?"
With Arik Hesseldahl and Douglas MacMillan