Home Bookend - Where reading meets review BlackBerry Town: How high tech success has played out for Canada’s Kitchener-Waterloo – Chuck Howitt

BlackBerry Town: How high tech success has played out for Canada’s Kitchener-Waterloo – Chuck Howitt

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In this compelling book, author, freelance writer, and retired journalist at Waterloo Region Record, Chuck Howitt chronicles how a powerful amalgam of academics, altruism and acuity can spawn an arresting ecosystem that fosters a virtuous cycle. “Blackberry Town” is a homage to the zeal and vision of one man that transformed an ordinary and uneventful region into a teeming microcosm of technology and entrepreneurial bent. As readers would have easily guessed from one look at the title, the man is question is none other than Mike Lazaridis, the former founder and brain behind the company formerly known as Research In Motion (RIM), and famous for the manufacture of the once eponymous and ubiquitous mobile phone, Blackberry.

While the primary focus of Mr. Howitt’s book revolves around Laziridis and the Blackberry, the quintessential theme animating his work is a seamless public-private partnership that worked overtime to put a region at the forefront of the global telecommunications and information technology map. Mr. Howitt’s fascinating story incubates (no pun intended) within the much-vaunted portals of the University of Waterloo (UW). A pesky, innately curious and zestful undergraduate takes it upon himself to seize most of an engineering Professor’s in-class and post-class time peppering the latter with questions on wireless communications. Laziridis the student and Professor Mohamed Elmasry were both acutely aware of the fact that the subject of wireless communications was not even part of the curriculum! This enthusiasm transformed into a full-fledged obsession when Lazaridis and nine other students piled into a van and drove all the way to Ottawa one weekend to listen to David Bohm, a legend among physicists, who had worked with Albert Einstein at Princeton University and was considered one of the most significant theorists in the field during the twentieth century.

The University of Waterloo turned out to be the perfect laboratory to fuel the aspirations of a young Laziridis. Boasting a phalanx of legendary computer engineers and physicists, by 1980, only two decades and a bit after its first intake of students, Waterloo had become a computer science “juggernaut in Canada and the world.” This stellar repute was the tireless efforts of the indefatigable James Wesley “Wes” Graham, popularly known as the “father of computing at UW. However, as Mr. Howitt illustrates, Graham was not the only superstar making the rounds at UW. The unassuming William Tutte with a PhD from Cambridge University immigrated to Canada in 1948 to accept a teaching position at the University. Recruited to UW by Ralph Stanton, head of math and the same unsung hero who brought Graham to the university, Tutte was a world-renowned expert in combinatorics, an obscure but important branch of math dealing with subjects such as optimization, graph theory and cryptography. “But Tutte was hiding a much greater secret than any of the calculations underlying his math theorems. During the Second World War, he had worked at the legendary British code-breaking office at Bletchley Park. Tutte and his team cracked the code behind one of the most important wireless machines used by the Germans to send top-secret messages. And they did it without having a working prototype of the device, known as the Lorenz machine. Unlike his more famous colleague Alan Turing, who used a prototype passed on by the Poles to crack the codes behind the Enigma machine, Tutte and his crew had only intercepted messages to work with. Sifting through those messages over four grueling months, Tutte slowly pieced together how the Lorenz machine was structured, then created an algorithm used to build an electronic computer called the Colossus. The computer, among the first in the world, was used to break Nazi codes for the rest of the war. Tutte and crew’s breakthrough was described as “the greatest intellectual feat” of the Second World War, but in a cruel twist of fate, no one heard about their heroics. After the war, the British government destroyed or classified all records from Bletchley Park and forbade any of its employees to share their secrets.”

It was no surprise then that the mercurial Laziridis was all worked up with inspiration with such a hallowed group surrounding him. Post tinkering with cathode ray tubes and computers to come up with a system to display text on a TV screen, Laziridis was convinced that it would be a cool way for companies to advertise their products. Summoning his childhood buddy Doug Fregin from Windsor, the pair launched their new enterprise in the spring of 1984. “Searching for a name for their startup, Lazaridis was idly watching TV one day when he saw a story about football players trying to improve their balance by taking ballet lessons. Printed across the bottom of the screen were the words “poetry in motion.” He had an epiphany and the name Research In Motion was born.”

A lucrative contract with Sutherland-Schultz, in addition to bolstering the revenues for RIM also brought into its fold an aggressive, ebullient man who along with Laziridis would shape the future contours of RIM – Jim Balsillie. “In 1992, Sutherland-Schultz was being sold and the new owners made it clear there would be no place for Balsillie. At this point, the ambitious Harvard grad was tired of playing second banana. He wanted to run his own operation and had a severance deal from Sutherland Schultz to help make it happen. It wasn’t quite big enough to purchase all of RIM, but Balsillie at least wanted a majority stake in the company. Lazaridis wasn’t willing to give up control of his baby but by this point had decided he couldn’t live without Balsillie on his team.”

The duo got to work on making RIM a force to reckon with. The start though was more than just a bit tepid. The Inter@ctive Pager introduced in the fall of 1996 received mixed reviews. “Corporate User magazine called it the top wireless product of the year, but Wireless Internet and Mobile Computer Newsletter, a widely respected publication, was not impressed. The pager is a good one, but “it’s a bit too heavy, bulky and expensive ($675 per unit) to attract many mobile professionals,” said Allan A. Reiter.” However, history would be made with the next product offering, the 950. However, Laziridis and Balsillie almost missed their date with destiny by a whisker. As Mr. Howitt illustrates, “although prototypes of the 950 weren’t ready, Lazaridis planned to use two industrial-foam mockups of the device as part of his presentation. But when he and Balsillie arrived for the crucial meeting, they realized that the mockups had been left in the taxi they had taken from the airport. Awkward moments ensued while the embarrassed RIM founder asked that someone call the cab company to retrieve the precious Leapfrogs. In the meantime, he stalled for time by laying out the business plan for the mobile email market and the fact BellSouth had first-mover advantage over its competitors. He described what the 950 would look like and how it would work. Thirty anxious minutes crawled by. The BellSouth executives seemed bored and unconvinced. All seemed lost when a BellSouth employee suddenly walked in with the missing mockups. Their arrival seemed to jolt everyone awake. As Lazaridis extolled the powers of the device, BellSouth executives passed them around. With tangible evidence of the 950 now in their hands, something they could feel and touch and look at, skepticism in the room gradually melted. Lazaridis’s confidence was infectious. The telecom bosses were enthralled. Lazaridis “had those guys thinking he would walk on water,” said Jim Hobbs, vice-president of BellSouth’s mobile data group.” Three cheers to the Atlanta taxi driver!

There was no looking back. In early 1999 RIM announced a new name for its sizzling wireless device. The BlackBerry. The name had come from a California firm specializing in corporate branding. “RIM evangelists, as salespeople came to be known, whipped out their BlackBerrys in airports and trade shows. Curious onlookers were soon enthralled by a device that could send and receive messages of up to 2,600 words in seconds instead of minutes, all on a battery that lasted up to three weeks. The BlackBerry was truly a data powerhouse.” This jump start of RIM kick started an economic boom in the hitherto quiet and calm region of Kitchener-Waterloo. With a workforce of more than 900, a market cap of $9.5 billion, double-digit revenue increases each quarter and ownership of seven buildings locally, RIM was on the road to becoming the most successful company ever to emerge from Kitchener-Waterloo. The real estate market attained stratospheric heights as at one point in time, RIM occupied more than twenty-five buildings in Waterloo Region, an equivalent of nearly 3 million square feet.

Laziridis demonstrated his bent for the furtherance of scientific curiosity by digging in $170 million of his personal wealth to establish the Perimeter Institute for Theoretical Physics, while his perpetrator in crime, Balsillie invested $100 million into the Centre for International Governance Innovation (CIGI) and the Balsillie School of International Affairs. Offering graduate programs in global governance, the School, was a three-way partnership among CIGI, UW and WLU. “A new building costing nearly $8 million would rise up beside CIGI on land leased from the city for $1 per year. The school would be financed with a $33-million donation from Balsillie and $25 million each from the two universities. CIGI would get more money as well, a $17-million endowment from Balsillie and $17 million in matching funds from the province.”And Doug Fregin and Balsillie topped up Lazaridis’s gifts to Perimeter Institute with significant contributions of their own. “The Institute for Quantum Computing took root at the University of Waterloo thanks to another whopping donation from Lazaridis and his wife Ophelia — this time $101 million — with Fregin chipping in $35 million of his own cash. And Wilfrid Laurier University decided to name its business school after Lazaridis when he gave $20 million to the institution for a new school focusing on high-tech entrepreneurship. Meanwhile, Michael Barnstijn, employee number three at RIM, and his wife, Louise MacCallum, also on the company payroll, sprinkled a total of $30 million around the area for a variety of causes including the Kitchener Waterloo Community Foundation, a museum in downtown Kitchener and a nature preserve in Cambridge.”

The success of RIM also birthed a raft of cutting-edge information technology companies whose presence gave Kitchener-Waterloo the status of Silicon Valley of the North. Open Text Corp, MKS, Descartes Systems Group, Com Dev, Dalsa Corp and Certicom all distinguished themselves in various specialized fields. Giving company to this “Waterloo Six” was Sandvine, a spin off from Pixstream, an entity that was acquired by Cisco when the former was at its prime only to be dumped a few months into the merger. Sandvine would grow into the largest global producer of hardware and software to help carriers manage their Internet networks, boasting annual revenues of $120 million US in 2016 and a workforce topping 700. Around this time, a group of entrepreneurs founded “Communitech.” The objective was to help one another build successful companies to help ensure the future prosperity of Canada. The organization was envisaged to support the entire “Community of Tech”. It’s enterprising President Iain Klugman, “moved the Communitech office to UW’s research park to partner with a tech incubator launched by the university called the Accelerator Centre. Hackathons, pitch competitions and workshops were held throughout the year, and tech celebrities and thought leaders were brought in from Silicon Valley and other tech hubs to inspire the troops during the annual Entrepreneur Week. The seven-day extravaganza also featured a film fest with documentaries and movies about the dot-com craze and tech luminaries such as Steve Jobs and Bill Gates.”

However, the euphoria at RIM would not last forever. Becoming more than a bit complacent and oblivious to the competition heating up around it, the Blackberry faced its first real challenge when Steve Jobs unveiled the sleek and spectacular iPhone. At the same time, the rollout of the Blackberry Pearl was facing some unique challenges. “The Pearl simply wasn’t easy to use without a corporate IT person walking you through the process. But these were former cellphone users. There was no IT person to show them how the device worked. “People going from a traditional cellphone had no idea what all the icons were, how to make a call, how to email, text because it was a huge leap,” Gibson [Lindsay Gibson, the woman driving sales within the company.] said. The engineers designing the hardware and software on the BlackBerry were not in touch with consumer needs and how they went about using a mobile device, Gibson said. In one case, participants were asked to set up the Bluetooth wireless connection on the device. One woman kept confusing the Bluetooth key with the menu key. Others had trouble getting the music player to work. Apple had not run into the same problem with the iPod. When it launched, consumers found it simple to use.”

When the supposed answer to the threat of the iPhone, The Blackberry Storm failed to garner the required and anticipated reception and reaction, the end was near for both Laziridis and RIM. Adding to the woes was a debacle involving the back dating of stock options and an investigation by the Securities Exchange Commission. RIM was forced to take an additional $30 million US charge against earnings, on top of the $220 million US for variable accounting violations. To atone for these errors, executives agreed to return any benefit from exercised options and re-price unexercised options granted at below market value. Balsillie agreed to step down as board chair, Kavelman was moved to chief operating officer and Balsillie and Lazaridis donated up to $5 million each to cover the costs of the review.” In January 2012, Laziridis and Balsillie stepped down from their positions and were replaced by Thorsten Heins, a former executive of Siemens in Germany. Eventually the name of the company was changed to Blackberry.

While Laziridis pursues his obsession with Quantum Computing, Balsillie has taken on the avatar of a policy maven. Acting as a government lobbyist , Balsillie is striving to pave the way for Canadian tech companies to scale into large enterprises and compete on the world stage. The rich ecosystem which these two giants created still throbs with excitement at Kitchener-Waterloo. Ample testimony to this fact is brought out by the presence of innovative companies and startups such as Vidyard, North, Clearpath Robotics, Aeryon Labs, Kik, Miovision, Magnet Forensics, Auvik Networks, Axonify, Ssimwave, and eSentire. Meanwhile Open Text has gone on to become one of Canada’s most formidable companies. “At one point one point, it bought seven companies in fourteen months. The largest was the enterprise content management division of Dell Computers for $1.6 billion US in 2016. The buying spree prompted the Globe to call Open Text “Canada’s tech acquisition machine.””

With 20,400 tech workers, constituting 8.2 per cent of the total labour force, Waterloo boasts the third-highest concentration of tech workers in the country and the highest concentration among mid-market cities. Waterloo Region also employed 22,300 people in the tech sector in non-tech occupations such as sales, administrative support and finance. “Nick Waddell, editor of Cantech Letter, an online magazine focusing on Canadian technology, considers Waterloo “the crown jewel of a Greater Toronto tech corridor that could rival the world’s greatest tech hubs.”” However as, Mr. Howitt reminds us in his concluding words, there is no other company that is to attain the superstardom of RIM at its zenith.

“At the same time, no tech superstar on the order of RIM has emerged. Iain Klugman, CEO of Communitech, may prefer a forest of small to medium-sized trees to one Douglas Fir towering over the rest, but as the 2018 CBRE study notes it never hurts to have one or two outstanding companies to attract entrepreneurs and investment to the area. And yet opportunities like the one RIM capitalized on to build a global business only seem to come along once in a generation. Apart from taxi-hailing and tourist-accommodation apps, Silicon Valley has not produced anything significant since the Google search engine and the iPhone. The San Francisco area also benefits from attracting large tech companies built elsewhere such as Facebook, whereas Waterloo does not. Most of its successful companies were and are home-grown. Perhaps in the end, Waterloo and the Canadian tech industry are better off with firms like Open Text — steady, reliable, not-too-flashy, the anti-BlackBerry, but something built to last.”

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