Professional Documents
Culture Documents
Research in Motion:
Managing Explosive
Growth
Introduction
Since its humble beginnings in 1984, Research in Motion has come a long way. By 2008,
with a market capitalization of close to 70 billion, it was poised to become one of the largest
companies in Canada and the stage was set for it to become a near monopoly in world mobile
communications market. RIMs product Blackberry had taken the world by storm (pun
intended, since Blackberry Storm is one of RIMs most profitable product), and the word
crackberry had become synonymous with the workaholic professional. Yet, as the mobile
telephony market for professionals started showing promise, RIM found itself besieged
numerous competitors all over the world. RIM had a distinct first mover advantage in the market
and was well known for its ultra-secure enterprise software. However, this advantage was rapidly
eroding in the face of high R&D investments from RIMs largest competitors such as Nokia,
Apple, and Microsoft. This was problematic as it foreshadowed the question of whether or not
RIM was well positioned to continue to meet expectations, deliver award-winning products and
services and maintain its lead in the smartphone market. Oftentimes, Wall Street expectations for
technology driven companies were also linked to the technology spend and RIM was clearly not
ahead of the game in terms of this metric. Just to maintain status quo, it was clear to RIMs CTO,
Mr. David Yach, that he would need to hire 1,400 software engineers in 2008. Essentially, Mr.
Yach faced the unenviable task of having to select the best options to deliver the growth
expectations of RIM. These options included: (1) doing what they did, only more of it, (2)
building on their existing and satellite R&D locations, (3) growing through acquisition or (4)
going global. In this paper, we will examine the pros and cons of these options in the light of the
capabilities at RIM and discuss the options that would be strategically most suitable for the
company.
blackberry products that would appeal to the professional consumers. However rapid growth
implied that RIM would now have to seriously transform its entire business. With 2007 revenues
up 98% YoY, the team of 1400 software engineers was severely short-staffed and required at
least as much new talent to drive engineering innovations and technological advances
required to maintain current growth rates and profit margins.
Furthermore, by 2007, the competition in the smartphone industry was heating up and
Motorola, Sony Ericsson, Nokia and Palm had products vying for market share. Apples entry
into the arena with its iPhone completely changed the paradigm. For the first time, RIMs market
leadership in the smartphones segment was seriously threatened. Furthermore, Apple was also
trying to position itself into the professional consumer market by investing in developing secure
data service technologies similar to RIM. At the same time, Microsoft, the 800 pound gorilla was
ready to dip into its war chest to develop better push technologies for mobile email. Google with
android was also entering into the fray and it appeared that RIM may lose its first mover
advantage in the industry to the up-and-coming imitators. The only feasible way to survive and
grow in the face of such strong competition was to improve the services that RIM provided
and this meant expanding its base of competent engineers and software developers.
In addition to the reasons cited above for increasing the pool of software developers, it
was also important to note that RIMs technology spend was somewhat dictated by Wall Street
expectations which based future earnings on the level of R&D spend as a fraction of revenues.
RIMs core competency was its enterprise software which it bundled with its own blackberry
hardware as well as licensed out to other companies such as Nokia, Motorola, Samsung and
Sony Ericsson. For this reason software development formed a major activity and core
competency at RIM. Consequently, RIM which was largely owned by institutional investors was
under pressure to add more software
developers to ensure that the Wall Street
analysts
did
not
downgrade
their
and
seized
opportunities.
does not lose this advantage to the follower-imitators but positions itself to gain a strong market
share (See Fig. 1).
Grow
Geographies:
and
This
Expand
approach
Existing
would
involve expanding the satellite offices in various cities and establishing new ones to complement
the R&D efforts in Waterloo. However as the case remarks, the cost of acquisition of talent and
turnovers in the satellite offices are likely to be an issue. For years together RIMs corporate
philosophy has been We can do it better and this has bred in a certain amount of
complacence as well as the Not invented here syndrome. Expanding the satellite offices will
allow the company to bring in fresh new ideas to challenge the Waterloo culture. Some initial
friction is expected, but this friction would probably help the company in the long run and avoid
it from leading down the path of GM in Detroit. In some ways making RIM culture less
communal and more mercenary or networked (Fig 2 red) would actually be beneficial.
Transforming the culture in Waterloo to make it more conducive for a growing big business is
something RIM needs to do today in
order to fully utilize its dynamic
capabilities.
3) Growing through acquisition:
This would provide a quick fix to the
issue of talent acquisition that RIM is
facing today (kind of similar to the
Coty case). Acquisition would allow
RIM to obtain a good mix of
candidates of varying experience
levels. RIM today is well positioned
to grow in the North American
market
(Fig.
green).
Unfortunately, this market is not conducive to growth as the penetration in this market is
relatively high. However, acquisitions can give RIM an edge in the North American Market if
they can acquire companies which can develop new products to support the business (Fig 3
red). On the other hand, strategic acquisitions such as that of Palm can help RIM consolidate its
market position while acquisitions in Europe would help it to exploit the nationalistic tendencies
in the EU and branch out into a
new market (Fig 3 blue). RIM
needs
to
realize
that
every
expansion, we saw that global growth through acquisitions was a favorable strategy. However,
Cotys products were essentially experiential products. Blackberry is also an experiential product
but being a technology focused product it is much more utilitarian than say a beauty product. For
this reason there should be no strong reason to organically grow R&D activities abroad in an
effort to capture market share. On the other hand, in countries such as India and China where
RIMs competitors have expanded, one can expect significant concerns about the security of
RIMs source code. RIM needs to recognize that its value proposition and reputation lies in the
secure push software that it has spent years developing and therefore taking the short-term view
of expanding R&D globally may not prove to be the best strategy. On the other hand, if RIM is
truly interested in cutting costs and appealing to nationalistic sentiments in Asia, it could expand
its marketing operations as well as R&D functions such as project management and
documentation into the Asian countries. RIM may also think about expanding its less critical
hardware R&D and manufacturing functions into Asia to make best use of manufacturing
capabilities and cost efficiencies in countries like China, India, and other Asian countries.
In conclusion, there is no one clear option that would work best for RIM. Given the rate
at which RIM expects to grow, it would need to deploy a combination of all the options
discussed above. Mr. Yach needs to review his current plans and commitments for R&D and
Product Development and determine his priorities for the next 5-10 years taking into account the
revenue projections for the year as well as the expansions in the user base for Blackberry. That
would allow him to develop a strategy for determining the number of developers and engineers
he needs to hire as well as the desirable mix of the new employee base. The relative importance
of the four options outlined above would depend entirely on the forward looking plans that Mr.
Yach develops, after all the hiring strategy needs to fit well with the long term growth strategy.
RIM has consistently demonstrated that it has dynamic capabilities in sensing markets
and seizing opportunities. While at present, RIMs capabilities are ideally suited for expanding
into Waterloo, this option may take precedence. However this option can not be a long term
strategy if the near exponential growth is to be sustained. RIM also has some capabilities in
working through satellite offices and expanding these offices may allow it to leverage these
capabilities effectively. It is only a matter of time before this strategy become prominent in the
talent acquisition process. While RIM has no capabilities in expanding globally, in the past it has
successfully integrated smaller acquisitions. It remains to be seen if it can seize new
opportunities and transform the culture at Waterloo as well as other new locations to truly
become a large global company.