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Is RIM's new CEO just a "yes man"?

Research In Motion caves to pressure, but investors are not satisfied.

Thorston Heins, the new CEO at Research In Motion (Photo: courtesy RIM)

Thorsten Heins has a massive job ahead of him. In a surprise announcement Sunday night, Heins was named the sole CEO of Research In Motion. Mike Lazaridis and Jim Balsillie are, by all appearances, stepping into the background. They will retain their board positions, though no longer as co-chairs. Heins isn’t well known, and his first video address as CEO isn’t exactly a rallying cry. He heads up RIM at a time when its market share is crumbling in the U.S., and he faces intense pressure from investors to stop the bleeding. He’ll also have to prove—even with Balsillie and Lazaridis taking on lesser roles—that he is indeed the one in charge. One individual I spoke to for my recent story “How management has failed at RIM,” described Heins as a “yes man,” though a Globe and Mail article quoted another former executive saying he was the only one who could say no to Lazaridis, and found himself in a “gate-keeping” role.

RIM has tried to present the leadership change as a natural succession, but it is nothing of the sort. “There comes a time in the growth of every successful company when the founders recognize the need to pass the baton to new leadership,” Lazaridis said in the company’s official press release. Balsillie said much the same: “I agree this is the right time to pass the baton to new leadership, and I have complete confidence in Thorsten.”

Neither said why now is the right time, other than that the company is “entering a new phase.” What’s obvious is the management shakeup is a concession to investors who have been clamouring to oust Balsillie and Lazaridis ever since the pair presided over a stunning 75% decline in RIM’s share price last year. What isn’t yet clear is whether sticking Heins in the CEO role will be enough to appease the horde. He is, after all, a company man, anointed by the very same guys responsible for RIM’s poor performance. Heins joined in 2007 and most recently served as chief operating officer for product and sales.

The company also appointed current board member Barbara Stymiest as lead director, stripping Balsillie and Lazaridis of their co-chairmen titles. However, they could still exert considerable influence over the direction of the company from their positions on the board. Both are forceful individuals, and those who have worked with them say neither one changes his mind very easily. As I wrote in my story, much of the organizational dysfunction started at RIM when Larry Conlee, its chief operating officer in charge of manufacturing and engineering, retired at the end of 2009. Balsillie and Lazaridis took on a greater operational role at that point, even though a new crop of employees had been groomed for some time to take over many of Conlee’s duties. Some felt that these employees were not given the full mandate to do their jobs, and the influence of co-CEOs was hard to counter. Heins was one of these employees toiling in the wake of Conlee’s departure.

So far, Heins intends to carry out RIM’s existing strategy. (To be fair, he hasn’t yet been CEO for 24 hours.) In interviews, Heins dismissed reporters’ questions about change. He seemed almost bewildered by the concept, telling the Globe and Mail: “Change to what? Change for what?” He reiterated his view in a conference call this morning, saying RIM’s mix of hardware and software services makes it unique, and that he intends to keep it in tact. “I will not in any way split this up and separate this into different pieces,” he said.

The problem is RIM’s current strategy simply isn’t working in the U.S., as more consumers flock to the iPhone or devices powered by Android. Jaguar Financial, a Toronto firm that claims to represent a consortium of investors with a combined 10% stake, has been the most vocal about change at RIM. In an interview with CEO Vic Alboini said the management shake-up is a step in the right direction and that he’s pleased neither Balsillie nor Lazaridis are in a management position. But he’s far from satisfied.

Alboini is looking for Stymiest to add board members who have more technology experience, and to conduct a complete strategic review of the company with an eye toward a partial or outright sale. “What is unfortunate is that Thorsten Heins is basically saying, ‘What do you mean a strategy change?’” Alboini says. “That’s not what the market wants to hear.”

He’s also concerned about the presence of Balsillie and Lazaridis on the board. “The last thing you want to do with a new CEO is put an albatross around them by having the former CEOs—in this case you have two rather than one—remain on the board,” he says. “They can’t help but try to influence the direction.”

Pierre Ferragu, an analyst with Bernstein Research in London who slapped a Sell rating on RIM back in 2009, is equally divided on the management shakeup. “We seek a risk that an insider was chosen,” he wrote in a research note this morning. “We also worry that initial statements of the new management team seem to fully support the company’s current strategy.”

The real significance of this leadership change, then, is that it buys RIM time. It grants the company at least a partial reprieve from investors calling for Balsillie and Lazaridis to step down so employees can focus on getting products out on time, and ensure these products live up to the company’s historically high standards. Heins, with his background in operations, should be able to make sure RIM doesn’t blow its deadlines. In this morning’s conference call, he said repeatedly he intends to improve discipline, execution and accountability at RIM.

He’s also searching for a chief marketing officer. RIM has been without one since Keith Pardy left last year, and the company has been constantly criticized for failing to create a clear and compelling message around the BlackBerry. Balsillie and Lazaridis always played a role in shaping the brand, with mixed results. Appointing an experienced executive to focus on nothing but marketing with no interference from either of the former co-CEOs could go a long way to improving some of the perceptions around the BlackBerry.

But declining market share in the U.S. is the biggest challenge. It’s true RIM is still growing in other countries, but there is nothing to guarantee the same sort of decline won’t occur elsewhere. The company’s last stab at relevance may very well be the launch of the BlackBerry 10 smartphones later this year. Heins recognizes the importance of the U.S. market, and the he needs to turn more consumers into BlackBerry users. “We need to do a better job there,” he said in the conference call. If he can’t do that, then it’s his head investors will be after next.