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Research In Motion: Dealing with conflicting interests

On a sunny summer Sunday in 2010, Mike Lazaridis, founder, president and co-chief executive officer at Research in Motion (RIM) gets a coffee from his wife in his home-office. Without having breakfast, Mike went straight to his office that morning to book a flight to Beijing for next week. After entering his personal data, a confirmation button pops up on his screen to confirm the flight. Just before clicking it, Mike sits back in his chair and has a look around his office. Besides the reports from his chief financial officer analyzing the tremendous growth over the last years, the room is filled with notes from his chief technology officer1. Participating in an industry characterized by constant technological innovation through high research and development (R&D) investments from its occupants, RIM has started the process of geographical expansion of R&D activities three years ago. However, new market developments justify the attention to making decisions that could potentially contradict the entrepreneurial roots which made the company so successful. In what way should Mike allocate his R&D spending and where is the trade-off between the companies’ initial value proposition and altering it to the industry? This case discusses one of the problems that can arise when business is exploding in a dynamic and fast-changing industry. Research In Motion (introduction) Research in Motion Ltd. (RIM) was founded in 1984 in Waterloo, Ontario, by Mike Lazaridis. Lazaridis, the son of Greeks who immigrated to Canada from Turkey in 1967, was 23 at the time. He had recently dropped out of the University of Waterloo, where he was studying electrical engineering. Backed by loans from friends and family, Lazaridis and two friends started RIM. During the first years of RIM, Lazaridis became interested in the long-term potential of digital wireless devices, after it received a contract that required RIM to investigate the potential of newer wireless digital network systems. By 1991 RIM was developing software to support a complete wireless e-mail system which led to the development of smart pagers that would utilize packet-based networks to provide wireless Internet access.

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The market shifted from “cell phones” to “smartphones”. which featured integrated e-mail. This independency enabled RIM to react more flexible to market changes. We saw the beginnings of that in 2007. but you pretty much have to sprint every lap. Although originally built for busy professionals.As the first company in the world to introduce a device which is connected to wireless technology. browser and organizer applications besides the traditional functions. confidential data encryption and firewall integrity from one single handheld device. Research and Developments was at the core of the BlackBerry’s success. and more. reaching close to $15 billion in revenues (see exhibit 1). but we will see a lot more in the future as other smart phone vendors try to catch up and then get back in front. Revenues once again increased fivefold during the period 2007-2010. Blackberry’s success led to a fivefold increase of revenues during the period 2004-2007. The telecommunication industry The Wireless Telecommunications industry has been booming since 2005 as recent technological developments had encouraged making the normal mobile phone evolve to a new and more complex phone with more possibilities. Starting as a small company moving from contract to contract. Vital for the BlackBerry success amongst them was the comprehensive security to access email and corporate information. Nowadays. BlackBerry had made considerable headway in the consumer market and had become something of a social phenomenon. the BlackBerry is a Personal Digital Assistant (PDA) which can be used for phoning. When somebody receives an email. Amongst the early adopters of the (adjusted) BlackBerry system was the National Security Agency for the system could meet the stringent security standards of governmental organizations. In 2008. Especially. the line of BlackBerry devices has led to a tremendous growth of the company. unlike other major companies which used the mobile software developed by windows. Over the years RIM has delivered multiple award-winning products. The operating system of the BlackBerry is developed by RIM. RIM created a blue ocean with their BlackBerry mobile e-mail solutions in February 1999. which shortly means that it automatically updates incoming messages. The strategy is to set a standard for businesspeople. no matter how good that design is. rivalry in the smartphone segment was intensifying. it immediately appears on your BlackBerry. a new device that introduced many features. will soon struggle. A broad. RIM is selling wireless technology products and implementation services to other companies. This race is a marathon. an analyst commented: Apple’s innovation in its mobile phone user interface has prompted a lot of design activity among competitors. Besides the services for BlackBerry devices. The biggest growing markets are India. Since the launch of Apple’s iPhone in June 2007. it featured a push system for e-mail delivery. Also. instant messaging. New players (exhibit 2) entered the industry. China and the US. The unique aspect of the BlackBerry is that the email-system could be integrated into the organizational email-system. Experience shows that a vendor with only one smart phone design. GPS. 2 . The BlackBerry included a wearable wireless handheld device. which analysts predicted to ship around 1 billion smartphone devices by 2012. internet. continually refreshed portfolio is needed to retain and grow share in this dynamic market. since they announced to enter the business segment of the market.

research and development and other employees is intense in the wireless communications industry. evolving industry standards. from an organizational culture perspective. However. And for that. 3 . our business could be harmed. And for some people. especially engineers. High growth (2004-2007) R&D and engineering were the heart and soul of RIM. RIM has been very successful in nation-wide campus recruiting. The first large revenue boom in the period 20042007 entailed R&D worries for Lazaridis initially. Lazaridis surely acknowledges the importance and difficulties of recruiting in this market: The Company’s success is largely dependent on its continuing ability to identify. in order to stay competitive. for the large growth could hinder RIM’s ability to rely on its historic R&D-growth strategy: sourcing from the local talent pool and making selective acquisitions of small technology companies. motivate and retain skilled employees. expanding abroad opposed to some deeply rooted business principles. Besides moving abroad. one executive commented: There are people here. growth by acquisition was another alternative. even leaders and senior people. It’s most important efforts were to improve the functionality.The wireless communications industry is characterized by rapid technological change. it just doesn’t resonate well with them. as well as developing new devices for current and new emerging segments. And RIM is getting to be a big company now. attract. The problem of explosive growth for RIM is to attract new employees. Many competitors of RIM have made strategic acquisitions of technology over the years. Competition for highly skilled management. Where in the end the technology acquired became the base of that. frequent new product introductions and short product life cycles. recruiting abroad and subsequently having the recruits moved over to Waterloo could work as an alternative strategy. Lazaridis responded: The process of developing new technology is complex and uncertain. Although new graduates were essential. he had to set his mind beyond Waterloo. new product feature. RIM was looking to hire a very particular mix of engineers. Over the years RIM has built an excellent relationship with its hometown University of Waterloo. On top of it all. so vital. who have said: “What? Products being built elsewhere? No! We can’t do that! Then we won’t have any control!” So some of it is a cultural shift and a mind shift for the people that have been here and it is hard for them to let go and to be part of a really big company. and if we fail to accurately predict emerging technological trends and the changing needs of customers and end-users. develop. Any players’ success depends on the effects of its Research and Development efforts. it could expand co-op programs to other universities as ground approach for finding new talent. Lazaridis had to face the challenge to find capable engineers that would fit the RIM culture and figure out where to locate them. senior hires were also needed. As was common practice. security and performance of the Blackberry solutions. technical. The talent at the University of Waterloo was so widely recognized that even Bill gates made frequent visits to court the best students.

Dallas. many telecom analysts think RIM delivers short. However. to attract the best and brightest students for the company. Most governments regulated the import and export of encryption products due to national security issues. there are restrictions regarding cryptographic software. 2 Investment analysts often looked to this percentage to gauge the sustainability of revenue growth. potentially leading to both explicit and tacit knowledge “leakage”. to enhance and expand the BlackBerry wireless solutions or to be incorporated into the company’s software. R&D expenses were seen as a proxy for new product or service developments 3 Collected from the competitors’ annual reports 4 . attending career fairs.Besides the strong desire to stay close to home. RIM had approximately 13. Also. The company’s recent entry into the consumer market has mainly caused the growth RIM is facing. Canada). RIM uses its personal and professional networks of existing employees as an ear-on-the ground approach to finding new talent. They organize recruitment events where they hope to connect with their future innovators. Also. These events present a wonderful opportunity to talk to our campus recruiters.5%. Sidney (Australia) and Germany (one facility). not only in North America but all over the world. Besides the main R&D facility in Waterloo. High growth (2008 – 2010) R&D expenditures rose significantly after 2007 (exhibit 3). it actively connects to top universities and colleges. 5614 on Research and Development (which was 2100 people in 2007. in this fast moving industry. and 200 people in 2000). help to promote the company and select the top-students. participating in information sessions and more. they are already losing shares to their consumerbased competitors. Despite these investments the company’s spending on R&D is still much lower than those of the competition in terms of revenues2. Nokia for example had R&D spending of 14.875 full-time employees. you have to provide the governments with the ability to access the keys. there were other burning issues that opposed against establishing core R&D sites outside of Canada. The R&D spending in 2010 went up to 6. creators and leaders. Their so called “Campus Ambassadors”.4% of their revenue. software piracy and product imitations were more common in developing countries where protection laws lagged the Canadian. Once you encrypt data in China or India. As of February 2010. receive some neat giveaways and learn more about new graduate and student opportunities at RIM. especially source code loss. Legal issues. old RIM interns still studying at the university. We visit campuses around the world. RIM now has R&D facilities in Ottowa. Chicago and Seattle (US). Palo Alto. Since 2007 RIM has made seven acquisition and acquired stakes in one other company (exhibit 4). Mississauga (both Ontario. Although the 2010 financial results for RIM are very satisfying. which is still much lower than the average of the competition (10-12%3). nowadays RIM is one of the biggest R&D spenders in the world.

4 smartphone software developing collective of Nokia. Amongst RIM’s direct competitors. The world’s biggest multinationals are becoming increasingly happy to do their research and development in emerging markets. with high-tech as its forefront” “Microsoft set up an R&D facility in Beijing in 1998 because of the great pool of talent located in the area” Specifically China and to a lesser extent India have been pouring resources into education over the past couple of decades. Blackberry is originally built for professionals. R&D expenses have increased over tenfold. China produces 75. Ericsson. has become the world’s fourth-largest patent applicant. Motorola and Samsung 5 . He decides to take a break and go outside for a bike ride. but to what degree should RIM follow the trends of their industry? How far should Mike take his company to gain access to intellectual capital? Is it that RIM is changing the industry. glancing over an article that is praising Apple’s innovative products. He needs time to think about the true core of his company. Huawei for example. and all have extensive collaborations with many local universities.000 people every year. India. is it the industry changing RIM. Symbian4. South-Korea and Vietnam. however. Many analysts have reported a hastening movement of R&D facilities from the US to Asia. Motorola and Nokia all have multiple large R&D centers in China. or is it there a dynamic solution in order to lead. Should Lazaridis risk losing intellectual property by outsourcing their software development.Asia – technological innovation The Asia Pacific region is becoming the powerhouse of innovation in everything from telecoms to computers. The success of the company is based on RIM’s cryptographic and software codes. and come up with an appropriate model that will sustain the companies leading role in this industry.000 people with higher degrees in engineering or computer science and India 60. Apple has no R&D facilities in Asia. After a few minutes Mike closes the browser and turns off his computer. for a risk reduction in collapsing under the tremendous pressures to be innovative? Mike switches to a new tab in his browser. Companies in the Fortune 500 list have 98 R&D facilities in China and 63 in India. Their value proposition is built around security. The tremendous growth after 2007 is mainly to be attributed to the headway in the consumer market. “An R&D explosion is underway in China. a Chinese telecoms giant. Over the last years RIM has already made significant sacrifices maintaining their corporate culture in this rapidly changing and dynamic market. he thinks twice before clicking the confirm button on his computer. Conclusion Taking a sip from the hot coffee Mike’s wife just brought in. They are reinventing systems of production and distribution. and the simultaneous migration of some of America’s leading researchers and innovators in the same direction. Even though located in the heart of Silicon Valley. He can’t resist looking to his favorite tech-industry website. and they are experimenting with entirely new business models.

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2001 by the Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson to manufacture mobile phones. the iTunes media browser. maps.Aperture. music. digital video recorders. including GSM. Illinois. Inc. Its business and government customers consist mainly of wireless voice and broadband systems used to build private networks and public safety communications systems like Astro and Dimetra. games. Nokia is also engaged in providing free digital map information and navigation services through its wholly-owned subsidiary Navteq Sony Ericsson Sony Ericsson is a joint venture established on October 1. computer telephony.2 billion as of 2009. the iLife suite of multimedia and creativity software. a suite of professional audio and film-industry software products. Apple software includes the Mac OS X operating system. Nokia Nokia Corporation is a Finnish multinationalcommunications corporation that is headquartered in Keilaniemi. Nokia offers Internet services such as applications. Motorola's home and broadcast network products include set-top boxes. multinational. with over 123. CDMA. Nokia is engaged in the manufacturing of mobile devices and in converging Internet and communications industries.000 employees in 120 countries. is an American-based. It is a manufacturer of wireless telephone handsets. The company's best-known hardware products include the Macintosh line of computers. and also designs and sells wireless network infrastructure equipment such as cellular transmission base stations and signal amplifiers. and personal computers. and high-definition television. and network equipment used to enable video broadcasting. is an American multinational corporation that designs and markets consumer electronics. Nokia's estimated share of the convergedmobile device market was 38% in the third quarter.Exhibit 2 Short overview of competitors in same market as RIM Apple Apple Inc. Both companies have stopped making their own mobile phones. a city neighbouring Finland's capital Helsinki. the iPod. Final Cut Studio. It is the world's largest manufacturer of mobile telephones: its global device market share was 30% in the third quarter 2010. 7 . the iPhone and the iPad. media and messaging through its Ovi platform. solutions and services. Logic Studio. telecommunications company based in Schaumburg. Nokia produces mobile devices for every major market segment and protocol. sales in more than 150 countries and global annual revenue of EUR 41 billion and operating profit of €1. the iWork suite of productivity software. a suite of music production tools and its iOS Mobile Operating System. a professional photography package. Espoo. down from an estimated 34% in the third quarter 2009 and an estimated 33% in the second quarter 2010. The stated reason for this venture is to combine Sony's consumer electronics expertise with Ericsson's technological knowledge in the communications sector. Motorola Motorola. Nokia's subsidiary Nokia Siemens Networks producestelecommunications network equipment. and W-CDMA (UMTS). computer software. compared with 41% in the second quarter 2010.

four editions of the Treo run Windows Mobile.Palm Palm. is a smartphone manufacturer headquartered in Sunnyvale. Previous product lines include the Palm Pilot. Palm V. Palm VII. Inc. replacing the original Palm OS Garnet in their newest devices. While their older devices run Palm OS Garnet. California that is responsible for products such as the Pre and Pixi as well as the Treo and Centro smartphones. 8 . In early 2009 Palm announced a new operating system. Zire and Tungsten. webOS. Palm III.

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RIM of Canada acquired Cellmania Inc.Exbhibit 4 Acquisitions and stake-outs 2008-2010 Chalk Media Corp 29 Jan 2009 .RIM acquired Viigo Inc. 23 Aug 2009 . Dash Navigation Inc Torch Mobile Viigo Inc QNX Software Stm Ltd 07 Jun 2010 . 03 Jun 2009 . a Toronto-based developer of Web browsers. a Toronto-based developer of mobile content and services applications. from Harman International Industries Inc. DataViz Inc 10 . a Sunnyvale.3 million. 06 Sep 2010 . 26 Mar 2010 .RIM acquired Torch Mobile. for $15 million. a Mountain View-based developer of mobile software.RIM acquired Alt-N Technologies Ltd. It was acquired RIM for about $18 million. a Grapevine. Cellmania Inc 25 Aug 2010 . Alt-N-Technologies Ltd 12 Feb 2009 .RIM acquired QNX Software Systems Ltd.based manufacturer of car Global Position System (GPS) navigation system device for $8.Research in Motion acquired all the outstanding common stock of Chalk Media Corp (CM). Certicom Corp 22 Mar 2009 .based developer of email messaging and security server applications for the medium and small business communities. a developer of mobile communication software.RIM acquired all the outstanding common stock of Certicom Corp (CC).RIM acquired Dash Navigation Inc.RIM acquired an undisclosed minority stake in DataViz. a Milford-based developer and wholesaler of productivity software. an Ottawa-based developer of realtime operating system software. The Certicom intellectual property portfolio includes over 350 patents and patents pending worldwide that cover key aspects of elliptic curve cryptography.