Taking lessons from RIM's plummet

The death knell is sounding loudly for Research In Motion after the company's latest news, which managed to disappoint even the most jaded analysts. RIM announced a loss of half a billion dollars this week.

The company, which invented the smartphone but which has watched its once dominant share of the market collapse as competition from Samsung, Google, Apple and others gnawed at it, also said its sales fell by a third in the latest quarter.

The only good thing about RIM right now is it offers so many lessons in one tidy package. Investors and business leaders alike can learn a lot form studying the company's rise and, in particular, its collapse.

Lesson No. 1: Business is volatile and none more so than technology. Leaders in tech have an amazing knack for becoming losers quickly. How? Complacency brought on by arrogance brought on by success. It happened to RIM. But it's happened to others too, including Apple, which almost disappeared 15 years ago. No matter what business you're in, success should make you sweat and work a lot harder, because the more of it you have, the more others will be gunning for you. That applies to a big company like RIM, but also to a star employee rising up the ranks in a firm. If you get a promotion and a raise, don't get cocky; others are watching you and they want what you have. Some of them will be ruthless. Work harder than ever. Your bosses, incidentally, expect you to work harder.

Lesson No. 2: Never overpromise and underdeliver. That's what RIM has done with promises to release its blockbuster new phones running on its new operating system, which is supposed to make its phones more competitive with iPhones and Android-powered phones. The company is pinning all hopes of a turnaround on these phones, yet it has at least four times delayed their launch. Apple, in contrast, never promised anything when it staged the most amazing comeback in corporate history. It just innovated and surprised the market with new ideas that quickly caught on and made billions of profits.

Lesson No. 3: Refresh your ideas constantly. You get the sense Apple and Google, RIM's biggest rivals, have a culture of openness to new ideas, including new people. That is not the sense one gets from RIM, which oozes a stodgy ethos.

Lesson No. 4: Be careful whom you listen to for advice. Yes-men are a dime a dozen. They surround every successful (read: wealthy) entity, be it a firm or a person, and they benefit from this station with rewards -- jobs, perks, favours. Their only mission is to keep the scraps coming, not to provide useful advice -- and they certainly can't be counted on to voice an opinion that goes counter to what the successful entrepreneur/company wants to do. Seek out those who have the courage to tell you you're wrong. You don't have to agree, but you should be thankful to have them in your midst. I don't believe RIM's board of directors did their jobs at all. They should have told the management team to stop being distracted and pay attention to business.

Lesson No. 5: This one is for investors and it can't be stressed enough. Once a trend is in place, it takes a long time to turn it around. This could be regarding a company or an industry or a currency. For instance, once the Canadian dollar started to move convincingly against the U.S. dollar, it was clear this would be a multi-year event. Currency moves always are. The same with, say, printing. The digital age has crushed printing and the stocks of companies involved in the business, Yellow Media for instance, which produced the Yellow Pages, starts to fall. They will continue to fall for a long time, maybe forever. Yet investors kept buying it as it fell because they viewed it as "cheaper."

The same goes for RIM. Investors who didn't buy the stock on its way from $5 to $100 suddenly thought they had a unique opportunity as it fell from $100 towards $5. Yet it was not difficult to see RIM's problems as a major -- potentially terminal -- threat.

There are other lessons to be sure, but this is a good start that demonstrates the value of reading up carefully on failures. You can learn as much from them as from a success.

Fabrice Taylor is an award-winning financial journalist and analyst and author of the President's Club Investment Letter. Email him at:

fabrice.taylor@gmail.com

Republished from the Winnipeg Free Press print edition July 1, 2012 B11