What Ed Zander Must Do At Motorola

HE MUST USE HIDDEN STRENGTHS TO GO FOR GREATNESS.

April 1 2004 by Arun Inam


 Analysts are offering advice to Edward Zander, the new chief executive of Motorola. Sell off most pieces of the company, they say, and concentrate on cell phone handsets. They argue that handsets, which account for 40 percent of sales, need Zander’s exclusive focus to regain share taken by Nokia and Samsung Electronics.

If Zander follows this advice, however, it would be disastrous. Motorola would end up shedding or ignoring businesses that are intrinsically more profitable than handsets, which are becoming commoditized. Those businesses could form the basis of a Motorola that’s more competitive in the booming marketplace for “anytime, anywhere” communications.

Motorola’s technologies represent the direction of mobile communications more than either handsets or voice infrastructure do, although you’ll never hear that from analysts. It’s easier to study handset shipment volumes than to understand a business where revenues originate from a heady mix of hardware, software and services. Some of Motorola’s best assets remain hidden to outsiders-and even to some of its own executives. Even so, Motorola, with its huge installed base of customers, is better positioned than most companies to create the next generation of mobile products and services.

Zander faces a classic dilemma for the CEO of any large, complex company: Should I focus on operational improvements to one or two core businesses that could close the gap on Wall Street’s near-term expectations, or invest in the more ambitious task of reinventing the company? Lou Gerstner, after taking the reins at IBM in 1993, chose the latter tack, which was riskier but ultimately more rewarding.

Just as Gerstner did, Zander and his team have the potential to create a global powerhouse. Companies such as Nokia and Lucent compete in piecemeal fashion against Motorola businesses that are currently run as stand-alone units. But Motorola has built a stronger set of relevant assets than its competitors. If Zander can link these assets creatively, sell unnecessary pieces and acquire or partner to obtain missing ones, no firm could match Motorola’s depth of capabilities.

Consider Motorola’s strong presence in many sectors. The Commercial, Government and Industrial Solutions unit supplies enterprises with advanced, secure voice and data products. The Integrated Digitally Enhanced Network business offers the popular “push-to-talk” technology. Other Motorola businesses have turned vehicles into networked communications centers and made cable-TV setup boxes a strong contender as the portal of choice for the home.

Behind these businesses lie deep knowledge of how enterprises and consumers communicate; technological know-how in network security and reliability; and expertise in integrating different systems and applications to function together without a hitch. These assets allow federal agents to run fingerprint identification software or communicate in times of crisis without a dropped call. They let police, fire and ambulance personnel talk to each other on disparate systems. And FedEx can run a worldwide delivery service built around Motorola offerings.

So how can Zander and his team revive Motorola? They should start by understanding how consumers and enterprises will be using mobile products in the future. This means looking beyond the narrow voice-driven perspective of wireless carriers to a richer set of media, productivity and automation services. If Motorola can integrate handsets with secure, media-rich offerings, customers will be able to truly obtain access to information anytime, anywhere.

Zander also needs to develop a view on which business models will best address the new opportunities. There may not be one “right” business model, but rather two or three different ones.

Unlocking Motorola’s hidden assets will not be easy. Managers have spent relatively little time thinking about how to use customer knowledge, technological know-how and other seemingly ephemeral assets to create new value. Fixing that would require matching the world-class engineering talent within the company with equally world-class leadership talent from the outside. That’s what it would take to reinvent Motorola.

Arun Inam, a managing director of Mercer Management Consulting, was vice president for global strategy at Motorola.