In a blog written about Life Without Wires™, it is interesting to note the announcement made recently by the CEO of Motorola in what amounted to an admission that Motorola plans to sell or spin off their wireless handset business.

Handsets, after all, were the fourth wave in the evolution of technologies that free us from wires – first was wireless Morse code for telegrams, second was the radio, third was the television, and fourth was the cell phone – which was pioneered by Motorola, no less.

A lot has already been written in respected business publications about what went wrong at Motorola. Plummeting from #2 market share in a billion dollar industry to #4 or perhaps even #5 in such a short period of time is a remarkable freefall, so naturally this debacle has attracted lots of ink. For my part, I don’t proclaim to be an industry pundit with secret inside information upon which I can base my own opinion. However, not being an industry insider circulating among the popularized gossip circles of the cellular industry perhaps gives me a fresh outsider’s perspective.

Though none of us on the outside know all of the inner details, I don’t think history is likely to write that the majority or even the plurality of the blame for Moto’s demise in handsets can be laid at the feet of Ed Zander, the Silicon Valley icon brought in to rejuvenate Motorola a few years back. My own armchair quarterbacking says there were a few more factors.

First, is Moto’s corporate culture. Students of management familiar with the work of Ichak Adizes can recognize in Motorola’s handset business all of the classic signs of the worst traits of a formerly successful business that has evolved into a “big company.” Moto became one with a culture that competed with itself, didn’t permit calculated risk, concentrated decisions too high up in the organization and was ultimately overrun by faster, more aggressive and more creative competitors – such as Samsung. Corporate cultures take a long time to go bad, and they take a lot of effort to fix. Ed Zander’s mistake was to believe that a simple reorg or two together with a few interviews and snappy slogans would be sufficient to fundamentally remake a non-competitive corporate culture. The market evidence of this failed tactic is overwhelming. Take the diversity of cell phone models Motorola was offering shortly after the introduction of their hit Razor phone, for instance. Moto didn’t come out with swivel phones or slider phones or the like. Instead, they cloned the razor in tiny incremental steps, but didn’t keep up in the features race or experiment with new types of phones. A trivial example perhaps, but very indicative of a culture problem nonetheless. Nobody wanted to be responsible for a possible flub – so every product group decided to build a variant of the hit phone HQ loved. Another example of their failed culture is the abortive attempt to build an iPod-esque phone with Apple. This was the phone that played 100 iTune songs – remember it? Clearly Moto had the first crack at working with Apple to build what has since become the iPhone. But nope – the Schaumburg guys and corporate types from the cornfields outside of Chicago knew better than Steve Jobs did. They didn’t get the vision. So, Apple went elsewhere. Ouch. What a lost opportunity.

A second contributor to Moto’s handset biz downfall is one which I have not seen anything written about yet. It is the spin off of Motorola’s semiconductor unit – now a privately held company named Freescale Semiconductor. If you look at the financial performance of Freescale when it was a public company, it was clear that the wireless division that supplied Moto’s handset division had terrible margins versus those of other major suppliers in the handset market. Yet, the other divisions of Freescale, within a few quarters of their IPO, were operating at margins on par with their respective market segment competitors. I conclude therefore that fundamentally, the Freescale chips themselves – which had once been driven by the Moto handset division – were not competitive in cost, features, and/or time-to-market. Since a high percentage of the cost of manufacturing a cell phone is the chips that they are built from, Motorola’s culture clearly used their captive semiconductor unit as a form of indentured servant. Essentially not permitted to compete on the open market, it was therefore unable to stay sharp and be fully in tune with the harsh market realities of a rapidly evolving global cell phone marketplace. This is directly attributable, of course, to problem number one: a non-competitive and stagnant corporate culture.

Finally, a third issue in the unfortunate demise of Motorola’s handset division was their board – the board that left Mr. Galvin in his position for too long, and the same board that brought in a brilliant exec best known for his career in building servers at Sun Microsystems, who’s only previous cellular experience was owning one.

It is indeed a shame to lose the only major cell phone manufacturer in North America. It didn’t have to happen. However, great success can often lead to a corporate culture’s hardening of the arteries that over time ends in a company that is no longer competitive. This pattern has been repeated by many companies. Some turn things around. Sadly, many don’t. But, the history of major brand names is that they do not disappear. So, don’t expect Moto to vanish. Conversely, don’t expect a quick rebound following the sale or spin out of the cell phone group either. Changing corporate cultures to perform at the peak of market competitiveness takes time – and a lot more time than a simple reorg can accomplish.

This entry was posted on Wednesday, February 20th, 2008 at 12:10 pm and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.