Silver RIM to a dark cloud? How Research in Motion affects Waterloo

TORONTO – Research in Motion (RIM) suffered another blow to their business Wednesday, with shares down more than seven per cent.

Due to poor BlackBerry sales, the Waterloo-based company announced it expects significant layoffs and an operating loss. RIM has also hired two outside firms to advise on its business and financial troubles.

Various reports suggest RIM will cut anywhere between 2,000-5,000 jobs as a result of dwindling sales numbers, and speculation has begun as to whether the Canadian tech giant could sell out completely, prompting mass layoffs.

But, is there a silver lining to the dark cloud of that scenario?

GlobalNews.ca asked VeloCity director (and former RIM employee) Mike Kirkup and CEO of Communitech Iain Klugman to tell us the consequences – bad and good – of the possible end of RIM.

VeloCity is a University of Waterloo program built to help students be successful entrepreneurs, with campus-level programs, a dorm where students can learn about entrepreneurship and even an incubator where free space is provided for student teams from the university to be able to run businesses full time and take them out into the world.

Communitech is a not-for-profit organization that supports tech companies with things like business services and networking opportunities. Communitech engages with more than one new startup company in the Waterloo region every day.

Note: The below answers have been condensed for clarity and brevity.

Global News: If RIM gets sold and everyone lost their jobs, how much of a disaster for Waterloo’s tech community would it be?

Mike Kirkup: It certainly would be a difficult and challenging time both for the company and people involved that would be affected, and of course the region as a whole, given RIM’s size and importance in the region.

In terms of the long-term impact, it’s hard to say. There are certainly elements of the company that are very suited towards large companies which would struggle to find a place in a variety of different small companies. So my best example would be trainers. You have to have your company, and market, and customer-base to a certain size before you’re hiring people in to very specifically do the job of training. So it’s people like that that would either need to re-train or leave to go find work elsewhere rather than being kind of gobbled up or start their own start-ups.

Iain Klugman: We have to be careful not to jump to conclusions: RIM has indicated that the company’s management is considering various opportunities and is seeking expert advice. A reduction of a percentage of jobs globally is what is anticipated so the impact on the region has yet to be determined. But the Waterloo Region economy is diverse and resilient; Communitech works with a tech sector comprised of more than 800 tech companies – which is steadily growing.

GN:Is there “another RIM” waiting to scoop people up / will people be picked up right away by smaller companies?

MK: Yeah there are tons of companies here who definitely want to become the next RIM, and in a variety of different ways. Whether you’ve got companies like Desire2Learn or TribeHR or others that are very well-known companies, you know Kik and others, who are all based here in Waterloo.

IK: Waterloo Region is home to Canada’s largest software company OpenText, Canada’s largest satellite manufacturer COM DEV, fast-growing learning software company Desire2Learn and other multinationals, as well as 400 startup companies. The biggest challenge in the Region is a shortage of specialized tech talent, and there are currently approximately 1,300 jobs available in the tech sector. Top talent has many options within the region’s tech community.

GN: Would the end of RIM be good – or even better – for innovation in Canada’s tech sector in terms of new opportunities at many different companies?

MK: I wouldn’t say that it’s necessarily better; it would be different. There’s a certain amount of weight and influence that a company like RIM has, that a lot of people there don’t understand or appreciate until they’re no longer under that umbrella… and startups don’t have that kind of accelerant on their business. They have to go and get those contacts and meet those people the hard way, and so there’s an economy of scale that RIM would provide and continues to provide today.

What’s particularly interesting right now, is that as RIM’s letting people go, and many of those people are getting packages, and exploring opportunities where they can either donate their time or start ventures without need for a strict pay cheque on Day One. And that’s creating some interesting opportunities for a lot of people.

IK: Innovation can happen at large companies like RIM through research and development and spinoff impact in terms of apps development, and it can happen at grassroots startup companies – and at every size of company in-between. The main requirements are good sources of talent, good sources of capital, and a culture of entrepreneurship.

GN: How true is it that startups grow because of the demise of other larger tech companies?

MK: One of the things you see in Silicon Valley which is different than in almost all Canadian cities, is movement of talent is very pronounced. You have people who move very quickly and easily through companies… That creation and inter-mixing of networks creates an immense amount of value.

When people get let go, or there’s layoffs or a company has trouble, this creates a whole new set of opportunities. What’s happening is it’s almost forcing people to go out and perform that role. So there’s benefits associated with more of that mixing, more of that talent trying new things and being a little bit more risky and all of those different things, especially in a startup ecosystem.

IK: Startups are established and grow because the ecosystem has made the environment suitable to establish a new business and is not related to other businesses having setbacks.

GN: What is Waterloo missing to be able to compete with somewhere like Silicon Valley?

MK: What you’ll find is that successful companies create very successful people… And it’s those successful people who come back and invest in the next round of companies, and they create more successful companies, and it becomes this kind of exponential increase in opportunities as more and more successful people then give back in the startup community and start it all over again.

The biggest element frankly, that this community is missing (in my opinion) is incredible design. The three key skill sets that are necessary for a thriving tech ecosystem is incredibly intelligent and effective tech people, which is coming out of the University of Waterloo already… You’ve got incredible business people that are coming out of Laurier and the programs that are there.

So increase in the skill set and number of great designers in the community will be a very important part of continuing to grow the success of the companies in the region.

IK: Waterloo Region is absolutely in the running to be a globally known as a great place to start and grow a tech company. Communitech has just launched an investment accelerator called HYPERDRIVE that’s much like Silicon Valley’s YCombinator except we’ll be nurturing companies for a longer development cycle. We’re looking to increase availability of capital for Canadian startups.

GN: Do you agree that it’s a silver lining to the possible future lay-off situation at RIM that talent would go to other places, or take time to work on new things thus fostering innovation?

MK: I would agree it’s definitely one of the silver linings, but I think to be clear, no one in this region wants to see RIM fail and I think the elements of a lot of those pieces are becoming more available as it stands now… So it’s not a function of the company needing to completely shut down to see some of that silver lining already.