Five lessons from Research-in-Motion’s meltdown
by Kevin Kelleher, contributor
FORTUNE — In the hyper-competitive world of mobile technology, you’re only as good as your latest innovations. So brands rise and fall with surprising speed. But even by those accelerated standards, the fall of Research-in-Motion (RIMM) this year has been sudden and brutal.
RIM’s stock has fallen more than 50% since February, and its share of the U.S. smartphone market has dropped to 24% from 34% in the past 18 months. The Blackberry used to be the most coveted mobile phone until the arrival of the Apple’s (AAPL) iPhone and phones powered by Google’s (GOOG) Android software. Competing with those companies is hard enough, but RIM’s management has made several serious missteps this year that have turned its decline into a full-on corporate meltdown. It’s a case study in how not to handle a crisis, starting with these five lessons.
Don’t make promises you can’t keep. On April 28, RIM said it expected to earn a net profit of $7.50 a share in its current fiscal year, citing new Blackberry products that would arrive later in the year. Some analysts questioned this bullish guidance, estimating an EPS figure closer to $6. And sure enough, when RIM announced its first-quarter earnings, it revised its guidance down to a range between $5.25 a share and $6 a share.
What happened? RIM pinned its bullish hopes on Blackberry projects in had in the works, but then had to delay their releases. Upgrades to the Blackberry Torch and Storm models will come in late summer, much later than expected. In 2011, a delayed smartphone is a smartphone that’s dead in the water. On the news, RIM’s stock fell 27% to its lowest point in nearly five years.
Don’t release half-baked products either. The smartphone delays coincided with a bumpy release of RIM’s tablet, the Playbook. Reviewers who tested the Playbook in development had a lot of early praise for it. But once it was released, the reviews turned mixed. Most worrisome, the Playbook launched without the email service that makes its smartphones so attractive to many users. As a result, initial sales started strong and fell off quickly. The Playbook ended up feeling like it had been rushed to market to compete with the iPad.
It’s better to court developers than to alienate them. At the end of the day, a mobile platform is only as good as the developers writing for it. Even before HP (HPQ) bought Palm, webOS was a fine operating system, but it failed to draw a critical mass of developers. Despite RIM’s strength in the enterprise market, developers have been fleeing its plaform for iOS and Android. RIM tried to remedy this by announcing it would support Android apps, but this may be backfiring. There are signs that this move is driving developers away from RIM’s new QNX platform, which powers the Playbook.
Don’t attack the messenger. And don’t take the message personally. After the tech-news site Boy Genius Report printed an anymous but verified “open-letter” by a RIM executive, the company replied with its own anonymous blog post. RIM was right to respond to the letter, but so wrong in it its handling of it. The open letter had sensible ideas, even if they were hard for RIM’s leadership to swallow: Admit that Apple is “nailing” smartphones, focus on consumers and not carriers and consider a “fresh-thinking, experienced” CEO.
RIM’s reply was one of the most hamfisted PR moves in recent memory. It blithely dismissed the open-letter’s suggestions with a declaration of denial. (“RIM is fully aware of and aggressively addressing both the company’s challenges and its opportunities.”) Even worse, it took some ad-hominem swipes, suggesting the author was “fake” or had “ulterior motivations.” That inspired a dozen other impassioned criticisms from current and former RIM employees.
Dead air would have been a better response: RIM ended up looking arrogant and even more out of touch.
Don’t take loyalty for granted. This is the lesson underscoring all the others. Only a couple of years ago, RIM had built up an enviable degree of loyalty among consumers, employees and investors. It was positioned to win over developers as well. But its moves in the past several months are eroding all of that good will.
All that loyalty could have made a turnaround quick and painless. Instead it’s frittering that good will away. And it’s not really clear what the company is getting in return.