Globe&Mail: Board member defends RIM, new CEO

Globe&Mail: Board member defends RIM, new CEO
By Gordon Pitts

Almost five years ago, Roger Martin, the influential dean of business at University of Toronto, answered a call for help from Jim Balsillie. As half of the leadership duo at Research in Motion Ltd., Mr. Balsillie was anxious to restore the reputation of Canada’s high-tech darling, then mired in an options back-dating scandal. Mr. Martin became a RIM director, bolstering a weakened board, and the options scandal faded. But the upheaval swirling around the high-profile company has only intensified.

Today, the 55-year-old is part of a RIM board under fire, facing criticism from investors and analysts who say it failed to take the dramatic steps needed to stem the decline of the Waterloo, Ontario, maker of the BlackBerry smartphone.
The combative Mr. Martin forcefully rejects that view, challenging the notion that last month’s resignation of the embattled Mr. Balsillie and Mike Lazaridis as co-CEOs and chairmen was a case of too little, too late.

“I laugh at the vast majority of critics when they say ‘Oh, you should have made this CEO transition, like, four years ago.’ Yeah, right – like, to who?,” Mr. Martin scoffs over lunch at Mideastro, a favourite restaurant in Toronto’s Yorkville.

In a rare outpouring of candour by a RIM director, he heaps scorn on the notion that the board should have hired a star outsider to re-energize RIM – a strategy that, he points out, failed abysmally at other stumbling tech giants, including Dell, Hewlett-Packard and, in its troubled 1980s, the now seemingly flawless Apple.

“So we’re supposed to hand it over to children, or morons, from the outside, who will destroy the company?” he says. “Or should we try to build our way to having succession?”

It was only late last fall, he says, that a RIM executive, Thorsten Heins, clearly emerged as the next leader – and it was the co-CEOs who pulled the trigger on the internal transition.

Mr. Martin has come to lunch to talk about his life as dean of U of T’s Rotman School of Management, where, having left a lucrative consulting career, he has served for 13 1/2 years, built a formidable academic brand, and emerged as one of the world’s leading management thinkers.

But today, he is distracted by two pressing issues – the Super Bowl loss by his beloved New England Patriots and the fate of RIM, a company perceived to have lost its way in the smartphone market, causing its stock price to plunge.

In his defence of RIM, and in his role as dean, he appears as defiantly determined as Patriots coach Bill Belichick, with whom, he believes, he shares a willingness to embrace contrarian strategies, and overcome the skepticism of detractors.

He also echoes Mr. Belichik’s disdain for certain critics, with Mr. Martin reserving his most withering contempt for those he derisively labels “geniuses,” who urged the recruitment of an outsider to break up the long-running team of Mr. Balsillie and Mr. Lazaridis.

He says when he came aboard, the RIM leaders were still absorbed in building the company founded by Mr. Lazaridis, which had gone from zero to $10-billion in revenues in less than 15 years. As they coped with stunning growth, they were scrambling to build management depth.

At that point, “If we were to say to Jim and Mike, ‘Well, we’re the board and you should go away now,’ they would have laughed at us.” There was no one internally or externally who could have replaced them, he says.

That was the situation until the fall of 2011, when Mr. Heins, having joined the company in 2007 and shown he could master both hardware and software operations, emerged as a proven talent with the respect internally to lead the company.

Mr. Martin agrees the two ex-CEOs made mistakes, particularly in the U.S. market for smartphones, where Apple and Google-based products have stolen the BlackBerry’s thunder. And he concedes the board failed to push for more marketing muscle in anticipation of serious competition.

The BlackBerry had been the undisputed leader in handheld devices, and thus was able to sell itself in the period before strong alternatives emerged. “What would have been optimal is having the sales and marketing capability in place before that transition happened,” he admits.

He also says he was forever urging RIM to consider the importance of the browser experience on the BlackBerry, which was seen as less than stellar.

Mr. Lazaridis in particular was obsessed with his devices being efficient in their use of wireless networks, while more powerful smartphones coming on the market gobbled up huge chunks of bandwidth.

“People were saying we can’t make powerful phones like Apple. Yes, we can, but we couldn’t believe consumers would put up with that kind of battery inefficiency and that kind of network inefficiency.”

Still, he has little patience with calls to be more like Apple. He points out that Apple dismissed its own co-founder Steve Jobs in the mid-1980s in favour of an outside marketing specialist, only to bring Mr. Jobs back, laying the foundation for its current exalted status.

“They ask ‘Why can’t you be more like Apple?’ So we should go bankrupt and fire our founders and bring in a moron? That’s what we should do?” Mr. Martin says.

He is also dismissive of analysts who would scrap RIM’s integrated business model, getting out of hardware and licensing its software. That was the tack taken by successors to Apple’s Mr. Jobs, but when he returned to the fold, he reinstated the integrated platform.

“So that is what the geniuses who have all these clever thoughts about business models are saying – and a big piece of me just laughs: Have you no memory? Do you not even think?”

Before joining U of T, Mr. Martin, a Harvard MBA, spent 13 years as a management consultant. He still advises select companies, including long-time client Procter & Gamble Inc. When his Rotman term ends in almost two years, he would consider staying on as a senior scholar or running a foundation, while continuing to write books and advise companies.

But RIM is top of mind now, and he insists the board did not present an ultimatum to the co-CEOs to resign – they made the decision on their own over the Christmas break.

But surely the slumping share price, despite a robust return on equity, advanced that decision? “You can think what you want to think. I think we are trying to manage the company as well as possible – and there’s a whole lot of reasons to take this next step.”

The product pipeline looked strong, a qualified successor was ready to take over and the two builders were tired of the “brutal” pace, he maintains. Mr. Balsillie told him the day after he resigned, he had his first good night’s sleep in about 20 years.

The tricky aspect, he says, was the former bosses deciding what they wanted to do. They decided to stay on as directors, while former banker Barbara Stymiest replaced them as board chair. Their continuing presence has raised concerns that Mr. Heins may not chart an independent course.

If Mr. Heins had wanted the two off the board, they might have left, but that was not the new CEO’s wish, Mr. Martin says.

“And people just don’t understand the depth of understanding these guys have of their business, the connections, whatever. ” Mr. Lazaridis, he says, “is a genius – so having him off the board would be a good idea?”

The two former CEOs are about more than RIM. Mr. Balsillie founded a global policy institute and pursued hockey teams; Mr. Lazaridis built a physics research hothouse. Had they become distracted when the company needed their full attention?

“I just don’t buy that,” says Mr. Martin, arguing that the outside interests energized the two. “We’re all human beings – they’re not automatons.”

Mr. Martin is himself the master multi-tasker, who juggles consulting, writing, tennis and running Canada’s top-ranked business school. He could be talking about himself when he says of Mr. Balsillie and Mr. Lazaridis: “They need their passions. I think it makes them better.”

Media Mayor Inc.
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