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Four Keys for RIM to Execute a PlayBook-led Turnaround

What a difference a device makes.

Without the PlayBook, RIM is a $19 billion-a-year smartphone giant, which remains both very profitable (17% net profit margin, higher than IBM, HP, Samsung, HTC and, um, SAP) and fast-growing (its global user base today is 75 million, up 50% from 15 months ago).

With it, RIM looks like a fallen star. If RIM’s fallen, can it get back up? Contrary to most, I think it can. The problems around the PlayBook 1.0 were largely tactical and self-inflicted. I agree with new CEO Thorstein Heins’ strategy: focus on execution, including launching new, faster, and bigger PlayBooks and shoring up its software.

What else can RIM execute better? Seeing how as Heins is already being bombarded with unsolicited advice, here are my four Monday Morning CEO suggestions.

1) Keep the PlayBook prices low. Right from the get-go, RIM needed to undercut the iPad on price, to make up for the PlayBook’s dearth of apps.

Even a temporary $100-$200 discount would’ve juiced the PlayBook’s sales, giving it the traction to attract developers, which would’ve translated into apps, which would’ve translated into more sales, creating the virtuous cycle that iOS and Android enjoy today.

RIM belatedly cut the PlayBook’s price just before Christmas. The sale is going on until February 4 (or January 28, depending on the report). You can still get a 64 GB PlayBook for $299. Amazon.com is selling the 16 GB model for $250.

This is a good move. But RIM shouldn‘t stop. It needs to keep aggressively pushing Playbooks into the market so by the time it reports earnings in late March, it can wow the industry with millions and millions of PlayBooks sold. I’m hoping this is RIM’s plan, and that the $485 million charge it took on the PlayBook in the December was to enable this.

As RIM releases new models with more powerful chips and faster networking, it can slowly raise their price again. In the meantime, RIM needs to…

2) Focus on the OS. RIM has ridden its vaunted keyboards and ancillary applications like texting and BlackBerry Messenger (BBM) so long and so high that they’ve become a crutch. To be accepted as first-class platform player equal to Apple and Google, RIM needs to deliver on the technical goods with the PlayBook OS.

The first step is releasing a flawless version of PlayBook OS 2.0 on schedule (the rumor is now Feb. 17). Ideally, this would include a fast, bug-free Android app player, as well as a native PlayBook OS SDK for developers.

The second step is to quietly accelerate its work on delivering BBM and BlackBerry Enterprise Server (BES) to the PlayBook. BBM has 50 million users and has driven RIM’s popularity outside of the United States in the past few years. The latter BES delivers the corporate e-mail access that RIM is known for.

It’s unclear where RIM is on the development of those features. What if RIM suddenly delivered near-flawless versions of these apps for the PlayBook in the next several months? I think the market would be very impressed.

The third step would be to incorporate BBM and BES into the BlackBerry 10 (BB10) operating system. That’s reportedly due for release on the BlackBerry London smartphone this fall. London will be entering a high-end smartphone market that is far more competitive than the tablet market was a year ago. So it will need all of the differentiators it can get.

3) Focus again on enterprises. RIM took lots of steps to try to convince us that it wasn’t all-work-and-no-play. It paid millions of dollars to sponsor bands like Black-Eyed Peas, U2 and John Mayer. It made sure every Hollywood party goodie bag was filled with a BlackBerry phone. Don’t believe me? Check out celebrityblackberrysightings.com.

Even the name the PlayBook was an attempt to make the tablet sound fun, despite the lack of actual, you know, games.

This strategy plays against the PlayBook’s built-in strengths, strengths such as security and e-mail that appeal not just to IT managers, but end users, too.

Take Cale Dansbee, an IT manager for San Diego defense contractor, Ausgar Technologies Inc. He ran a six-week pilot of the PlayBooks at his 100-employee company late last year.

“Before I could finish it, most of my senior managers were sold and wanted one,” he said. The PlayBooks provided “extra screen real estate” for e-mail and other tasks in a familiar interface. “It really hit the sweet spot for them. We were really surprised, because managers are fairly finicky. They like what they like, and are quick to judge.”

Dansbee plans to roll out about 25 PlayBooks, mostly to Ausgar’s managers. Did Dansbee trial any iPads with them? “Yeah. Their reaction was that ‘It’s fun and neat, but it doesn’t do what I need to do.’”

Ausgar’s not alone. There are actually some companies already using PlayBooks today. The Royal Bank of Scotland. UK insurer, Aviva. Sun Life Financial.

And despite the iPad’s strong sales, few companies have committed themselves yet to a single tablet platform.

Of the estimated 30 million tablets purchased last year that were used at work, only one-sixth were actually bought by the companies themselves, according to Strategy Analytics analyst Gina Luk. The vast majority of tablets were purchased by the workers themselves and brought in via Bring Your Own Device (BYOD) policies.

Also, the global tablet market is forecast by firms like Gartner to grow to 208 million by 2014.

Translation: the tablet market remains early and up for grabs.

4) Spare no expense to woo developers. BlackBerries were so secure and beloved by IT managers because there were so few fun, time-wasting apps on them. In the Consumerized age, that’s no longer a virtue, but a detriment.

There are obvious things that RIM needs to deliver. The aforementioned Android app player, for one, Support for cross-platform HTML5 and Adobe Air apps, for another.

But the long-term viability of the PlayBook and its smartphone cousins depends on RIM attracting many more native PlayBook developers than it has today. Judging by the 4,000 or so apps available for the PlayBook today, that’s a small number. There are 330,000 apps for Android Marketplace and 600,000 for Apple’s App Store.

RIM has some recent high-profile developer wins. At CES, game maker EA and car maker Porsche both showed off PlayBook apps. I’ve heard of rumors of big-name ISVs in the enterprise space preparing PlayBook apps.

To win more than a few select ISVs, however, RIM needs to do more than talk up the average selling prices (ASPs) of BlackBerry apps, and put some cold hard cash on the table. This could involve slashing its cut of revenue from sales via App World, or paying ISVs to port popular iPad apps to PlayBook.

Such financial incentives could still be effective if run for a limited time, or capped at a particular dollar amount. But the rules of platform economics dictate that for RIM to come from behind, it will need to take extraordinary steps to build a substantial developer ecosystem.

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