If you were a business person in the early 2000s, then you almost certainly had a BlackBerry, a smartphone created by Research in Motion, or RIM, known for its email and internet functionality, secure encryption, and satisfying keyboard. There were tens of millions of BlackBerry users by the mid-2000s, making RIM one of the top players in the smartphone market. But despite their ubiquity, BlackBerry devices all but disappeared about five years after iPhone.
So, how was Apple, a company with no smartphone experience, able to beat RIM who'd pioneered the industry? Well, the first issue turned out to be Blackberry's initial success. But before we begin, I want to thank CleanMyMac X for sponsoring this video.
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Try it today for free by clicking the link in the description and get 20% off any subscription with the code APPLEEXPLAINED. In 1998, In 2008, RIM entered the telecommunications industry by developing a pager called the RIM Interactive Pager 950, eventually nicknamed Blackberry due to its round black keyboard buttons that looked similar to the fruit. Pagers were commonly used in the 90s since cell phones at that time were bulky and expensive with poor network coverage.
Instead, getting into contact with someone meant using a phone to call their pager and entering a callback number that would appear on the screen. Some more expensive pagers could display letters, but the device itself could only receive messages, not send them. That was until the RIM Interactive Pager 950, which completely revolutionized the industry and introduced concepts that live on in our mobile devices today.
Like the QWERTY keyboard that was designed to be used with both thumbs instead of a user's fingers. It was also slightly curved to make typing more comfortable and minimize errors. The keyboard also reduced the number of buttons as much as possible. On a typical computer keyboard, the main letters and numbers section had 58 keys. The RIM Interactive Pager 950 reduced that number to just 30, mainly by including an orange special characters button that allowed two characters to share one key.
This keyboard concept was not only copied by other mobile device manufacturers, but still exists today on iPhone and Android devices with their compact keyboards and special characters key. But what really excited customers was what they could do with the keyboard. Instead of simply receiving messages, they could respond to them, transforming the pager from a notification device to a communication device.
Allowing people to text each other before the concept ever existed. Something that would later explode in popularity on mobile phones and become the most popular form of communication. even today.
But the RIM Interactive Pager 950 had a second groundbreaking feature, email. For the first time, people could read and respond to their emails on the go from a compact device that fit in their pocket. This may not sound like an impressive achievement today, but it was a game changer for communication in the 90s.
People were no longer limited to payphones and home computers to communicate, and they were willing to pay for the privilege. At $249, or about $480 today with inflation, the RIM Interactive Pager 950 was more than 10 times the price of a basic $20 pager. But customers were happy to pay the premium price considering the functionality they received.
In the following years, RIM introduced updated models of their successful pager like the RIM957 Wireless Handheld in 2000 which added a larger screen, and the name Blackberry to the device for the first time. Then the Blackberry 5810 in 2002, which introduced cellular support, allowing users to make calls and send SMS texts. But in 2003, the Blackberry began to take shape as a true smartphone, with a color display, web browser, and integrated speaker and microphone. RIM broke $1 billion in revenue with this device and were on their way to becoming a dominant player in the emerging smartphone market. By 2006, BlackBerry was generating over two billion dollars a year.
And what made the company successful was their focus on business customers. Many employers encouraged their workers to purchase BlackBerry phones, and they quickly became a status symbol of important, busy people. Competition from Motorola and Palm emerged, but Room was able to keep hold of their dominant market position by delivering an experience centered around productivity. Their keyboards were considered the best in the business. with the perfect amount of grip and satisfying key clicks.
This made typing quick and effortless, an important feature for users sending hundreds of emails a day. Their devices also had industry leading battery life, with many users only having to charge their Blackberry once or twice a week. And its secure encryption meant Blackberry phones could be used by high profile people like Anna Wintour and Barack Obama.
RIM had created a winning smartphone strategy. But this success ended up being a golden blindfold for the company, since when the market was transformed by iPhone, RIM couldn't even recognize what was about to happen. When Steve Jobs introduced iPhone in January 2007, it came as a shock to Blackberry co-CEO's Jim Balsley and Mike Lazaridis. While watching the webcast and seeing everything iPhone was capable of, Lazaridis thought to himself, how did they do that?
The first surprise was that iPhone was essentially a Mac computer with communication features. While the Blackberry was a communication device with some added computational features like a calendar, email, address book, and calculator. Lazaridis recognized that iPhone was an impressive engineering achievement, but what confused both CEOs was how Apple could include a full web browser, since carriers wouldn't allow Blackberry to include it in their products. And that's because at the time, carriers had more control over a phone's capabilities than the actual manufacturer. That's why before RIM even made their first pager, they had to partner with a wireless carrier and receive approval for the product's design and features.
They entered into an agreement with Bell South in 1998 and had been under their control ever since. But Apple went about things differently. They actually wanted to avoid traditional carriers altogether.
Jobs imagined Apple building out their own WiFi tower network across the US, allowing users to access the internet and make calls using unlicensed WiFi spectrum rather than cellular signals from satellites. That way Apple wouldn't have to negotiate with carriers, and customers wouldn't have to pay a phone bill. But Jobs eventually gave up on that idea due to practicality, cost, and international support issues. So the next best option was taking as much power away from carriers as possible and shifting it to manufacturers.
That way, Apple could have complete control over iPhone's design, software, and features. The problem was, not many carriers wanted to give up their control. Supporting data-heavy features like full web browsing and music and video streaming would require carriers upgrade their towers and reallocate their spectrum, a huge expense that they'd rather avoid.
But Apple had something no other phone manufacturer did. Extremely popular products like iPod, that, generating more revenue than anyone else. Even Blackberry's $2 billion in 2006 was just a fraction of the over $20 billion Apple had made.
Carriers desperately wanted access to Apple's customers, even if it meant giving up some control in the process. This was bargaining power that Motorola, HP, and Blackberry simply didn't have. And it resulted in iPhone getting exclusive features like full web browsing. But despite being impressed by iPhone, RIM's co-CEOs didn't think it threatened BlackBerry. In fact, after seeing the touchscreen smartphone, Balsley told his artists, it's okay, we'll be fine.
Because in their mind, the products were made for different markets. BlackBerry was made for enterprise and business users, while iPhone was for casual, everyday users. RIM's chief operating officer Larry Conley said, iPhone wasn't secure.
It had rapid battery drain and a lousy keyboard. And to be fair, he was right. iPhone didn't have any encryption capabilities at launch, making it unappealing to businesses and high profile people. It also had battery life that paled in comparison to Blackberry, achieving just five hours of internet usage compared to at least ten hours. And one of the biggest complaints of the original iPhone was its software keyboard, within Gadget saying, Of the numerous touchscreen keyboards released over the years, not one has proven a viable substitute for a proper physical keyboard.
One hindrance we've had thus far is that despite being a multi-touch system, the keyboard won't recognize the second key press before you've lifted off the first. It requires single, distinct key presses. But the worst thing about the keyboard is that some of the methods it plies in accelerating your typing actually sacrifice speed in some cases. For example, there's no period key on the main keyboard. You have to access even the most commonly used symbols in a flipped over symbols keyboard.
This is almost enough to drive you crazy. So there was no question that iPhone compromised on security, battery life, the keyboard, and even cellular data speed, which was quite slow due to AT&T's Edge network. But as Steve Jobs said, products are packages of emphasis. And the things iPhone emphasized were extremely appealing to customers. Its display was unbelievably large at the time, making photos and video more enjoyable to look at, web pages easier to read, and long lists quicker to navigate.
iPhone's touch sensitivity made it the easiest smartphone to use, with a straightforward interface people intuitively understood. This was a huge issue with mobile devices at the time. In fact, A major reason why business people were the most common BlackBerry user is because regular customers didn't want to go through the headache of learning to use the device if they didn't have to. But perhaps the biggest mistake BlackBerry CEOs made was failing to challenge their preconceptions of the smartphone market.
They assumed that their users wouldn't switch to a digital keyboard since many of them enjoyed the speed and satisfying clicks of a BlackBerry keyboard. They also assumed there would always be two different product offerings for two different markets, business and casual, with iPhone only appealing to casual users. And for the immediate future, they were right. But long term, iPhone had the potential to appeal to business users. Security encryption wasn't some proprietary technology owned by RIM, it was freely available for any manufacturer to implement on their products, iPhone included.
Battery life was also a short term problem. Apple could eventually make the device more power efficient. and include larger batteries.
Several employees in SideRim suspected Bosley and Lazaridis recognized these inevitabilities, but instead of competing with iPhone head-on, they focused on what made BlackBerry successful in the first place. Its communication features, security, and physical keyboard. With iPhone, Apple had put RIM in a tough spot. But what came in 2008 would ignite a battle over smartphone market dominance.
Mainly because both companies took such different approaches to their products. Blackberry made devices to appeal to carriers, who would purchase a large number of units, then sell them to customers. Apple made products to appeal to users themselves, giving little thought to what AT&T might want. That meant Blackberry devices were designed to consume as little data as possible in order to lighten the load on cellular networks and allow a higher number of devices to be added without causing congestion.
And while Apple was concerned with network reliability and speed, they saw any slowdowns as a temporary issue that would eventually be solved. Since growing consumer demand would force carriers to invest in their networks, making them faster and more robust. But in the meantime, the original iPhone experienced its share of network issues. Dropped calls and slow data speeds were common, especially in large metro areas, mainly due to the volume of iPhones being added to AT&T's networks in such a short time, and because they consumed more data than other smartphones.
Steve Jobs was actually asked about this at an All Things Digital conference in 2008. I love my iPhone, my wife loves her iPhone, and we have no concerns about the speed of the AT&T network or the data robustness. Our concern is that we can't make a phone call on it. We live in Houston, not San Francisco or New York.
And the network has gotten so bad in the last year that we can't be on the phone for more than a minute without dropping a call. And if we're on the phone for five minutes, the call drops three times every time. Is somebody from Apple working on that? Well, somebody from Apple is talking about that.
I mean we don't have people that you know climb up on poles and adjust antennas because we don't know anything about that but yeah you can bet we're doing everything we know how to do. Can I expect relief soon? I'll tell you what I'm told things in general when they start to fix them get worse before they get better that's what I'm told and If you believe that, things should be getting a lot better soon. Blackberry on the other hand never had issues like these, because their products were never built to overextend the networks they ran on. But that wasn't the only difference in strategy.
The structure of each company was also different. Apple considered themselves a software company first and foremost, while RIM was a hardware company with software built as a complement to their products. So naturally, each company wanted to lean in to their perceived strength.
Blackberry was betting on hardware, like a physical keyboard, to remain an essential part of productivity-oriented smartphones. While Apple was betting on powerful, intuitive software to be a smartphone's main appeal. That's why in July 2008, Apple opened the App Store, a first-of-its-kind marketplace where users could download software applications straight to their iPhone, making it a device capable of doing just about anything. But Blackberry was focused on giving customers more hardware options.
In 2008 they continued including physical keyboards with their Blackberry Bold 9000, but they also introduced a touchscreen device meant to challenge iPhone called the Blackberry Storm, differentiating itself by adding a physical click when pressing the screen, similar to a trackpad or mouse button. They called this technology SurePress, and it was reassuring to RIM's executives that they were able to since they were carrying on the traditional click sensation that helped popularize their early products. But the real question was, did this clickable touchscreen actually improve the user experience? Well, here's what Joshua Topolsky from Engadget had to say.
The purpose of this technology, ostensibly, is to provide two aspects to touchscreens which are currently lacking in most devices. The ability to hover without selecting or moving an onscreen element, and the physical sensation of clicking when you type or navigate. The Storm screen certainly provides those two things, but our question is whether or not they actually improve the experience.
And in our opinion, they do not. And the reason why gets to the heart of RIM's biggest vulnerability, software. Which Topolsky points out, saying, The operating system used on this phone is almost identical to previous Blackberries. The company has added touch and multitouch functionality to take the place of trackball movements. What this means is that unlike iPhone, the Storm's user interface is not custom built for touch navigation.
Things which flow naturally on an iPhone, flicking through lists, scrolling for a contact, moving around in a webpage, or looking through photos, feels inelegant and uncomfortable on the Storm. So it appeared that even if Blackberry had the best hardware, their software wasn't optimized to take advantage of it. And this was a huge problem. By 2008, Apple already had a two year head start with iOS, so Blackberry needed to catch up.
But that's not how Balsillie and Lazaridis saw it. In fact, RIM was doing better than ever in 2008. They generated over $6 billion, doubling their revenue from 2007. So it appeared as if their hardware-focused strategy was working. But in 2009, RIM encountered their first major setback that would begin to slow the company's momentum. The BlackBerry Storm started fairly strong, selling half a million units in its first year, and reaching one million sales by January 2009. But its biggest selling point, the clickable shear-press display, proved to be its Achilles heel.
The mechanical switch that produced the clicking sensation turned out to be faulty, and RIM would have to replace every single Storm they'd sold. This cost Verizon, the Storm's exclusive carrier, hundreds of millions of dollars. So they forced RIM to pay $500 million to cover their losses.
This effectively made the first generation Storm a financial failure. But RIM wasn't giving up on the product. They went to work on a second generation model released at the end of 2009 with a redesigned SurePress mechanism that was more reliable and allowed for quicker typing.
But the fundamental problem with every BlackBerry device wasn't so much its hardware, but its software. By the end of 2009, iPhone and Android were competing in a completely different area than BlackBerry. They were focused on an app-based smartphone experience that prioritized large high resolution displays and a simple user experience.
Each platform had an app store that offered hundreds of thousands of free or low cost apps. While BlackBerry devices were still running an operating system based on technology from 1999. CEOs Bossley and Lazaridis didn't see this as an issue. Because they still believed business customers wanted a fundamentally different OS focused on security, email, calendar, faxing, messaging, and calling, rather than what iPhone and Android were doing with apps, cameras, social media, and content consumption. And this was a common assumption at the time, since in the past, Most business people carried two phones, one for work and one for personal use. But RIM never asked themselves this critical question.
What happens when iPhone or Android can do everything? Because Apple quickly began adding features to challenge BlackBerry's hold on the business and enterprise markets. Like encrypted iMessages, support for Microsoft Exchange Push Email, contact and calendar syncing, remote device swiping, and and encrypted access to corporate networks.
And Apple's growing smartphone market share was evidence that Apple was giving BlackBerry a run for its money. In just two years, Apple had captured 18% of the worldwide market, only three points behind BlackBerry. Which proved there was not only strong demand from casual users, but also business customers who wanted the convenience of doing their work and play on a single device.
It quickly became clear there were no longer two- two distinct smartphone markets. Business users and casual users were merging, and they wanted a device that was both productive and entertaining. But the Blackberry OS wasn't capable of an app store, and it wasn't optimized for touch, despite RIM forcing it to run on their touchscreen Blackberry store. Many shareholders began calling for RIM to shift their smartphone strategy and build a new operating system from the ground up, to compete with the modern apps and features users were enjoying on iOS and Android. But RIM CEOs Balsillie and Lazaridis refused to change their business strategy.
By 2011, BlackBerry's market share had fallen to 10.4%, a 51% decline in two years. But despite this, their revenue hit an all-time high, at almost $20 billion. This was a blessing, but also a curse. since it gave the company's executive team a false sense of security.
Balsillian Lazardists felt like their strategy of sticking to a traditional, business-oriented smartphone was working, which only delayed development of a more modern operating system. But it was only a matter of time before the entire smartphone market would shift out from under RIM's feet and catch them completely off guard. In 2012, Bossley and Lazaridis learned just how difficult it was to stay on top. RIM's market share continued to shrink, dropping from 10 to 6 percent.
With Samsung emerging as the new smartphone leader at almost 40 percent and Apple coming in second at 25 percent. But more importantly, RIM's revenue had not only slowed, but declined for the first time in the company's history. causing panic among shareholders who demanded that Bosley and Lazaridis be replaced by more competent leadership.
So in 2012 they agreed to resign, as RIM's Chief Operating Officer Thorsten Heinz took over as CEO. He steered the company in a completely different direction, beginning development of a modernized operating system called BlackBerry 10. It would be released a year later in January 2013 and feature an interface optimized for touch navigation and support for Android apps in a later update. The OS finally brought modern software features to Blackberry. But there was just one problem. None of their existing devices could be updated.
Users would have to buy a new phone to have access to Blackberry 10, and the smartphone market was becoming very competitive. Apple was selling iPhone 5, which ran iOS 6. And Google's Android was on version 4, with countless devices on the market. Most people who wanted a modern smartphone had spent the last six years deciding between iPhone or Android.
In fact, most customers no longer considered BlackBerry a relevant brand, especially considering their track record. RIM's claim to fame was putting a physical keyboard on a mobile device, but that technology was outdated by 2013. They also tried adding a physical click to a touchscreen device that ran an operating system initially released in 1999. designed for devices with trackballs. RIM's vision for the BlackBerry had been so convoluted and contradictory that people weren't sure who their devices were for, and releasing an updated operating system six years late wasn't enough to undo the damage. By the end of 2013, BlackBerry had lost almost all their worldwide market share, sitting at just 1.9%, and their revenue was in a freefall, dropping from $18 billion over the next five years.
to $11 billion in a single year. By 2017, things had gone from bad to worse. RIM had made just over $1 billion in revenue, a 90% decline in just six years.
Then the company announced that they'd end the BlackBerry 10 operating system completely by 2019. BlackBerry had been beaten, but the defeat was mostly self-inflicted. Apple redefined smartphones with iPhone, but BlackBerry's leadership didn't feel comfortable abandoning their tried and true product strategy until it was too late. Which ultimately cost them their entire business. This is Greg with Apple Explained, thanks for watching till the end, and I'll see you in the next video.