Should You Moto?

In 2004 Motorola (see chart here) was about to take off.  It's radio business was continuing to grow as it launched into digital products.  And its handheld cellular business was about to go nuts with the launch of a new product called Razr.  A new CEO was focusing the company on the future, obsessing about competitors that were launching new products, Disrupting everything from the new product launch process to free corporate lunches and opening White Space all over to get growth going.  And it worked.

But then, almost as fast as it grew, Motorola went south.  Instead of continuing the new approach, Ed Zander, the CEO, became overwhelmed by a 2-pronged set of concerns.  Carl Icahn started buying shares and asking to oust the CEO so he could (somehow) start cutting costs.  Instead of taking on Mr. Icahn by demonstrating how his results were headed the right direction while Mr. Icahn was clueless when it comes to high-tech, Mr. Zander began cost cutting to appease Mr. Icahn.  Secondly, Mr. Zander stopped pushing the scenario building, competitor obsession, Disruptions and White Space.  Instead, he reacted to employee uneasiness by turning immediately to a Defend & Extend strategy, Locked-in on the Razr.  New products dried up as the company just pushed harder and harder on Razr sales.  The company quickly began operating as it had 8 years earlier when it slid into disarray, lousy returns and massive layoffs as the future grew murky.

Now Motorola is trying to define a new future.  The plan is to split the company into 2 parts.  Radio and cellular.  But the problem is that the biggest, cellular, is in deeply difficult territory.  Sales are down, new product launches are few and profits are gone.  So the Board hired a new CEO for that business – the former Chief Operating Officer at Qualcomm.  And now Crain's Chicago Business reports he's issued an internal memo with his plan (read article here).  So can we expect a turnaround?

His plan involves changing his top reports.  And he's cutting a line of new products being launched to save cash and "better position products for the future."  He's narrowing the technology line-up toward those he believes are the most likely winners.  And he's reorganizing along geographic lines.  So do you think this will "fix" Moto?

There are reasons to be concerned:

• Products are being stopped from market review.  In the end, White Space has demonstrated that the marketplace is much better at selecting winners than executives are.  It was "getting Razr out the door" that got Moto going again – an historical problem at Motorola that loves to over-engineer everything and has been slow to new products letting competitors chew them up.
• The company is narrowing its technology use.  History has shown that technology shifts can happen fast in high tech, and those companies that avoid the bets by playing the widest technology tend to make the most money the longest.  Making technology bets is a quick way to turn a large fortune into a small one – and Moto doesn't have much fortune left.
• There is no Disruption in what he's doing.  Changes in employees at the top, and reorganizing along traditional lines, does not attack the behavioral or structural Lock-ins.  Without an attack on existing Lock-ins the organization will not do anything new.  Organizations like to Defend & Extend what they've always done.  Given that there's no Disruption planned, why would we believe the organization will be more productive?
• No White Space.  The opposite could be implied, with the decision to stop a new product launch and to narrow the technology use.  It's up to the leadership to be right, to guess the future of technologies and customer needs as well as the design of new products.  Instead of White Space to develop a new Success Formula to which the company can migrate, this is an effort to have the CEO be brilliant and lead the organization into better results.  Unfortunately, this approach almost always fails as Lock-in inhibits transition and the difficulties of being prescient become obvious.

I'd love to see Moto come back.  But with the approach as relayed by the Chicago journalists, it appears unlikely.  Perhaps a few big investors with private equity will think that a "streamlined" and "focused" Moto will be a better bet.  But the fact is that only the market will decide if Moto is a good operation.  And that will require having new products and services that meet changed market needs.  Moto operates in a hotly competitive marketplace.  It doesn't have the luxury of dictating what will work and what won't.  Competitors will have more to say about its success than management will.  And this approach is weak on scenario development – and absent on talking about competitors.  Without Disruption and White Space, how can we expect the company to be effectively market reactive?  Doesn't look good for shareholders, employees, suppliers or customers.

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