Interview: BlackBerry CEO John Chen on the progress of his turnaround

“People don’t necessarily love what I say, but they know it’s the truth”

 
BlackBerry CEO John Chen

(Photoillustration by Gluekit)

John Chen has a reputation as a turnaround artist. As CEO of California-based Sybase Inc., he inherited a company that was once a leader in the electronic database market but was rapidly losing money and customers. (Sound familiar?) Chen came aboard, in 1997, and cut costs and jobs to return Sybase to profitability. He then focused the company on providing database solutions for the mobile market. The strategy worked: In 2010, SAP bought Sybase for US$5.8 billion. With Chen now one year into his tenure at BlackBerry, it’s unclear he’ll be able to repeat that performance. But he has nearly stopped the financial bleeding, having outsourced manufacturing to Foxconn and aggressively focused on enterprise clients while still offering low-cost handsets to emerging markets. With BlackBerry’s global market share at just 0.5%, Chen has a lot more to do.


You took over BlackBerry at the most difficult time in its history. What was your assessment of the company before you came aboard?

I was intrigued and impressed by BlackBerry’s history, and what it’s done for the whole computing market—not only phones. BlackBerry is an iconic company, and one that’s definitely worth saving. So I just took the job. There was not a lot of forethought involved. It’s not like I analyzed a model and all that. There’s so much you don’t know, but you know that fundamentally things are either broken or not connected correctly. I knew it would be a lot of hard work. I also knew there would be a lot of doubters inside the company, probably more so than outside the company, honestly speaking. I can’t tell you that when I came in that I knew 100% I could fix it. That would have been naive. But I came in with the idea that I would add value to the company and do my best to create a better environment.

Did you have an idea of how you would do that?

A little bit. I had an idea that we needed to go back to the core strength of the company, which is the enterprise space. I think we lost our way over the last two or three years. We tried to create a one-size-fits-all range of devices, and a lot of things were lost. But the first thing is to repair the foundation: the balance sheet and the finances of the company. Then we need to continue in an area where the market will be receptive. We lost a big part of the market—a huge part of the market. That’s not to say that you cannot gain it back, but you have to add some value. The customers you want need to know you’re targeting them. That’s half of the battle. The other half is to make them come back.

You’re known for having performed turnarounds at both Sybase and Pyramid Technology. What’s something you learned in the past that you’re applying to BlackBerry?

Every time I’ve done a turnaround, the first thing has been to spend time with the customers. They know what’s going on. I’ve learned a lot from the customers I’ve spoken with. Unfortunately some of those customers are quote-unquote “gone” now, but they were meaningful conversations. And then I spent time talking to employees about the core strengths of the company. They have a lot of the answers. The most difficult thing is to collect all the information, build on it and make some decisions.

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Were there any surprises?

There were some positive surprises and negative surprises. The negative was how we had disconnected with our corporate customers. We’ve sold, I don’t know, 350 million handsets in the past. There were something like 50,000 enterprise customers around the world using our servers and software. When I came in, we were trying to introduce yet another set of software, different from the old, that meant corporate customers had to run both the old and new software for all their devices to work. That was very surprising to me. This problem should be solved on November 13, when we release our new server, BES 12. It’s going to be an extremely robust and highly secure server that manages everything—iPhones, iPads, Androids, Windows, old BlackBerrys and new. I’m collapsing the old infrastructure and the new infrastructure into one.

Once you had learned more about the company, what did you do next?

I realized that if we don’t have innovative products, it doesn’t really matter if our distribution channel is broken. You could have the best salespeople in the world, it still won’t matter. So I’ve spent a lot of time with people in engineering and technology to create an organization that focuses on four pieces of product. First, I needed to make a handset that’s not only innovative, but made in such a way that’s cost effective so I can make money. I also know that my traditional service fees are coming down very fast, and I need to find a way to recover and replace those. That will be the BES 12 server. But I’m going to add a lot of valued-added services. For instance, we just bought a company that has technology to manage two phone numbers on one SIM card. I just had lunch with a carrier executive, and they love it. Enterprises love it because it separates the work environment from the personal environment. If I’m an employee, I pay for my side of the phone bill, and if I leave the company, I keep my number. This isn’t a magic bullet, but it will start replacing revenue. We’ll introduce more things like this. It’s a big part of our strategy.

You mentioned two products you’re focused on. What are the others?

We have BlackBerry Messenger. People always say, well, WhatsApp has 600 million users and they only make $15 million in revenue. I have 91 million active users on BBM and I expect to make almost $100 million in revenue next year from zero. People have the right to ask, “What in the world are you smoking?” But my messaging technology is a little different from everybody else’s, not only because it’s secure, but more importantly, because we’re focused on enterprise clients. We’re building products such as BBM Protected, which offers secure communication. It is agnostic; it runs on any device. And finally, we created BlackBerry Technology Solutions. Within that technology group is QNX, which is the leading software platform for connected cars right now. This group manages 44,000 patents, and we’re generating more. So this is very much about licensing and more aimed toward the future.

How would you describe your leadership style?

I’m very straightforward. That’s what I try to project inside and outside BlackBerry. We’re realistic. We’re not going to tell you, “Oh yeah, I have this new phone, and when I release it everybody will run from iPhone to me.” If I said these things, you would be very doubtful that I’m being realistic.

So no more overpromising and under-delivering for BlackBerry.

Yep. I’ve built a reputation for being honest and realistic. People don’t necessarily love what I say, but they know it’s the truth.

I’m guessing employee morale was low when you arrived. What have you done to improve that?

It was pretty poor, yes. I would say it’s improved, but not to where it needs to be. Employee morale only picks up when the company does well. I could get up and say, “We’re doing great, everybody loves us, charge!” But those words are quite hollow. In my employee town hall meetings, I try to relay facts, instead of telling people how they should feel. There’s no reason why they should feel good, to be honest with you. But there are a lot of reasons they should feel hopeful. We went from burning a lot of cash to burning very little. We went from losing very big money to losing two cents a share in the last quarter. Maybe some great motivational speaker can do a better job than I can, but that feeling will only last as long as people have patience. You have to deliver the results. Then people start believing and things will turn quickly.

One well-known problem at BlackBerry concerned decision-making. It wasn’t clear who was responsible for what. What are you doing to fix that?

That’s a very complicated science. We’re working it out right now. It’s about who has what authority to make what decision, and how does the system have accountability when that person makes the wrong decision. This is typical of turnaround situations. I’ve tackled this problem before, in my past companies. When a company grows very fast, like BlackBerry did, a few heroes of the company make most of the decisions, but they may not be documented or logical decisions. And when a company starts doing poorly, a lot of people who actually help the company day-to-day start leaving, furthering the damage. What I’m doing is going in and defining how things ought to be done. The first pendulum swing is pretty extreme, from no process to too much process. That’s happening now. Now I need to make the pendulum swing back a bit. It’ll take a while. I wouldn’t expect more than a year or two.

Do you envision BlackBerry remaining a niche enterprise player, or becoming something else?

It has to be more than that. The first step is becoming profitable. It will still be niche at that point, but there’s no reason why we wouldn’t become bigger. I’ll refer you to Apple. In 1997, Apple almost went out of business. Nobody was buying a Mac. At that time, they were niche in the educational market. Look at them today. The point is, in the technology world, successful turnarounds are rare, but the number isn’t zero. IBM got turned around. HP is going through that process. Oracle got turned around. I can’t guarantee success, but it is doable. When I came in, I said I need six to eight quarters to get the company stabilized. We’re a little ahead, so we’ll make that objective. A year from today, we’ll be generating profit.

Were you pleased to hear Kim Kardashian still loves her BlackBerry?

[Laughs] I’m very glad that she came out and said that. My understanding is that she keeps a number of our devices stashed away. It had nothing to do with myself. It was something that was spontaneous on her part.

Did you know who she was?

I knew she was a celebrity, but nothing beyond that. Now I’m very intrigued. One of these days I’ll look her up.

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