RIM Following In The Path Of Yahoo

It occurred to me yesterday when I was reading an essay by technology investor and author Paul Graham called What Happened to Yahoo that RIM seems to be making the same mistake.

Yahoo was making a lot of money – so much in fact that they stopped trying to make more of it. They were blatantly ignoring new product ideas, and improvements to their services because it was too easy for the sales guys to sell banner ad spaces for millions of dollars. Along comes a competitor (Google) with a fundamentally more valuable product (Adwords) which very quickly destroys Yahoo’s banner advertising business. The lack of development at Yahoo over the years had unfortunately destroyed the corporate culture leaving them ill equipped to invent new products. They certainly couldn’t keep up with all the smart people that Google was hiring.

And so the inevitable happened. The business shrank forcing them to divest from important products and “re-focus” on core products.

I suspect that RIM made the same critical mistake. They owned the smartphone market until Apple came out of the blue with the iPhone. However it had taken Apple about 3 years of development before the first iPhone was released. Certainly at some point in these three years the pieces of technology that make the iPhone possible would have been discussed and tossed aside by people at RIM. They got far too committed to their crappy apps, and qwerty keyboards to try anything that might be an improvement.

The money RIM made hand over fist was from the enterprises that would buy expensive servers to manage all the corporate phones. It was the only solution for so long that they really didn’t have to sell it. Every new phone was only a minor improvement to the existing model, but people bought them so RIM probably thought they were doing a good enough job.

Now that there’s a competitor in the market RIM is finding itself in a bad situation. The phones operating system had been worked on by mediocre programmers who left it in a state where it now has to be tossed out – what’s worse is that they couldn’t trust the internal programmers to program their own operating system so they brought QNX in to do a proper job of it. The hardware hadn’t seen any major revisions or new ideas. And the backend servers that enterprises spent lots of money on have become obsolete – the iPhone can connect directly to Microsoft Exchange.

RIM’s business is now in decline and I suspect that they will soon find themselves cutting product lines to “re-focus” on key markets. They’ll continue to slide until eventually they become an acquisition target for the likes of Nokia or Motorola.

My suggestion to RIM to get them out of this is to step back and address some internal issues. They need to hire the smartest programmers they can find – steal them from Google, Apple, Facebook, and Microsoft if they have to. Give those programmers the freedom to work on projects that aspire to do amazing things for users (not businesses) and hold them to that vision. Tackle and rebuild the corporate culture to find and embrase new ideas, more efficient ways of doing things, and new business ventures to make money from. Encourage and give employees time to mingle between departments to discuss ideas and provide time and ways for them to work on them.

Want another idea? Start a business incubator program following the model of y-combinator but focused on BlackBerry Apps. Hire students for 4 months give them about $20,000 and help with the legal work for starting a business as well as networking connections. In exchange take 5%-10% equity stake in the business. It will help establish the developer community, potentially some killer apps or games for the platform and could eventually result in a huge payout if these companies ever get acquired or IPO.

I suspect however that RIM is a ship too big to turn.