(To regular readers, if you want to really understand the Moto situation, you might want to go get a cup of coffee with this entry. This is one of the long postings, even by my standards ha-ha)
So we have an executive search going on in America to find a new CEO for Motorola's handset unit. That is good. Business Week on its April 7 issue speculated about possible candidates, and mentioned several North American telecoms execs including Verizon COO Denny Strigl, Nortel CEO Mike Safirovski and (I can't believe BW bothered to mention this loser) Sprint-Nextel ousted disaster ex-CEO Gary Forsee (can you imagine Moto hiring the CEO who was so incompetent to preside over the Sprint 1,000 fiasco, and watched his company stock lose half its value in a few fast months while the rivals all showed customer, revenue, profit and share price growth. The incompetent CEO who would not reacting, being either too clueless to fire his Chief Marketing Officer and to apologize or too timid to do so. Regardless, for a CEO who managed to run America's worst company - not worst telecoms company, overall worst company by customer satisfaction - this guy is the ultimately wrong person to steer Motorola back to global customer satisfaction and reverse a downward trend in market share. Forsee is the absolute worst choice imaginable, he has permanently disqualified himself for any professional job in telecoms). There were also some quite bold thoughts - Nokia's Anssi Vanjoki for example (I would be most stunned if Anssi accepted this job).
Here are my thoughts on the Moto CEO search
First, the obvious easy "quick and dirty" solution to the CEO need, is an American telecoms executive (from Lucent, Verizon, Qualcomm, Sprint-Nextel, Nortel, AT&T, or one of the Canadian carriers, or RIM). Sounds so good. American, thus very well tuned to American management style, the quarterly reporting needs, someone who rolls up sleeves and gets thing done. And coming from one of the giants of telecoms, an easy sale for the major shareholders of Motorola. From another company of similar size and in a technically very demanding industry, would "know the terrain." A safe bet?
That is wrong on just about every possible dimension. Let me explain. Telecoms in general, cellular telecoms and cellphones in particular, have been going through a dramatic change in the past ten years. The industry used to be ruled by and one might say obsessed with, technology. The engineers were in charge. Engineers make horribly bad marketers and businessmen. They have been around in an industry with a lot of technology to play with, but the last decade - the 1990s - was the last time, where sheer engineering technology was enough. The customer demand for cellphones and cellular network connectivity was so enormous, that even companies as horribly mismanaged by engineers as the American carriers, were able to grow and prosper.
There was a time when telecoms was all technology, led by engineering. That time is gone. Today mobile telecoms is a global, fiercely competitive industry, where marketing, customer understanding (ie segmentation), and sound business principles rule the day. All of the big global successes in the industry - from Nokia to Vodafone to Virgin to Apple's iPhone - have been led by marketing, not engineering. And as American players have been late to understand this, the position of the world's largest wireless telecoms players a decade ago - from Motorola and Lucent, to Sprint, AT&T and Verizon, has shrunk, shrunk, shrunk, in the global marketplace.
There was a time when most Latin American carriers (operators) were owned by Americans, today they are mostly owned by the Spanish and Italians. There was a time when Lucent was the biggest telecoms infrastructure provider, today they are owned by the French. Nortel has been on the block for years, but has found no buyers (probably partly because of the accounting scandals). Even much of the US carrier business is in the hands of foreigners, T-Mobile is owned by the German parent of the same name, while Verizon's largest owner is UK's Vodafone with about 40% stake in the wireless carrier. Japan's NTT DoCoMo owns a stake in AT&T. Most of the successful newcomers to America come from abroad, such as Virgin from the UK and Helio from South Korea. And at the same time American domestic carriers have some of the worst customer satisfaction ratings of ANY companies in the world, rivalling those of the insurance companies (Sprint Nextel actually rated worst company in America). In almost all advanced mobile telecoms markets the domestic carriers have above-average customer satisfaction ratings, and some of the more marketing focused companies, such as Virgin and Blyk in the UK for example, have excellent customer satisfaction ratings.
And of the domestic handset market in the USA, Koreans (LG and Samsung), Japanese-Swedes (SonyEricsson) and Finnish (Nokia) companies have the majority of the USA market although Moto is strong in its home market. Outside of America it is a disaster for good ole Moto-Moto, as most know, in global market share former number 1 Motorola is falling and now ranked 3rd.
If we consider a CEO from one of the major North American network infrastructure equipment vendors (Lucent, Nortel, Qualcomm) then there is very little similarity in that business and that of handsets, as we can tell, from Ericsson splitting its handset business away from networks (where Ericsson concentrated), Nokia splitting its networks away from handsets (where it concentrated) and before they abandoned the telecoms business, Siemens did the same, first sellling off the handset business but continuing with networks. There is almost no synergy.
With fixed landline telecoms carriers (operators) there is really almost no transferrable knowhow between that carrier/operator business and the handset vendor business. So it would be far more a hindrance than a benefit to hire someone from the fixed landline (including broadband internet) players.
As to wireless carriers, there is more similarity to handset vendors, but here the American carriers are the pits, the utter bottom-barrel clueless monsters ruining their own backyard and not even knowing how to make the telecoms business grow and make money (at the rate of the industry average). American wireless carriers are consistently rated among the world's worst by heavy users who have moved from one country to another, such as expat employees, or exchange students, etc, and this holds true whether comparing American carriers with advanced markets like Scandinavia, Japan and South Korea, or mainstream Europe, Asia like UK, Spain, Germany, Poland, Malaysia, Singapore, China and Australia; to emerging markets such as South Africa, Brazil, Chile, India etc. The WORST. So if the new CEO is supposed to bring insights into Moto from how the carrier business works, its like going to the worst car maker (who remembers the Yugo) and trying to build Cadillacs or BMWs with that "competence".
And finally of the other North America based handset makers, they are all one-trick ponies, from RIM's Blackberry to Apple's iPhone to the few PDA makers. Hardly the competence to take on Nokia, Samsung and SonyEricsson which release new phone models every week.
There is not one major North American wireless/cellular telecoms player who has managed to succeed better than leading European and Asian rivals. Not Moto, not Lucent, not Nortel, not Verizon, not Sprint-Nextel, not AT&T, not even Qualcomm (which has done the best of this sad lot). Nor has Microsoft been able to do more than a tiny dent into Symbian's lead in smartphone operating systems after years and years of trying. Even RIM the tech press darling which makes the Blackberry, reported last summer that 75% of their subscribers are still in North America after six years of attempting to expand their American success overseas. The "crackberry" is not all its cracked up to be, outside of American shores. The only US telecoms player which has found legitimate success overseas, is Apple with its iPhone - and that, as we all know, was a marketing story, where 30% of iPhones sold in America were smuggled abroad to countries where the device is not for sale yet. But Apple's iPhone unit is the smallest player among the list I've mentioned and by no means a major player in telecoms (yet).
American industry is blind to cellular
So what is wrong? American executives in telecoms do not see the future, they are stuck in the past. Imagine being a car executive thirty years ago, but running a car factory in the Soviet Union. That is not where you could learn about modern methods of just-in-time manufacturing and advanced customer segmentation and microchips and electronics into car design. A car executive in Japan or perhaps Detroit could be competent to head a new car factory, but not one from the backwards markets, such as the former Soviet Union.
That is the state of North American cellular telecoms today. Most ironically, as the cellphone was invented in America - by Motorola. But all global telecoms industry specialists agree (including the leading USA based cellular telecoms experts), that North America is the technological backwaters on everything mobile, from cellular networks and wireless carriers, to mobile services to telecoms marketing to cellphone handsets. And to really draw that point home - yes, Russia today is far more advanced as a cellphone nation than the USA or Canada! Yes, "developing world" Russia. They have passed 100% cellphone penetration rates and joined the over 50 advanced countries where there are more cellphone subscriptions than total population alive, all babies and great-grandparents included. I was just in Moscow last week with Ericsson and met with the Russian MultiMedia Club and learned a lot about the advanced wireless applications, advanced marketing campaigns, high end phones, etc that are commonplace in Russia today. Yes, Russia is on par with the Netherlands and Greece and Malaysia and Australia; at least two years ahead of the USA (three years ahead of Canada).
Ok, this is not supposed to be another blog entry bad-mouthing the North American cellular industry. I just want to be very clear. If you want to compete against Nokia (number 1), out of Finland - one of the world's five most advanced markets for mobile and the country where society is most untethered; or Samsung (number 2) or LG (number 5) out of South Korea - another of the five most advanced mobile markets where digital convergence is most advanced; or SonyEricsson (number 4) out of Sweden and Japan - two more of the 5 most advanced mobile markets, incidentially Japan is the most advanced "3G" next generation mobile market. Yes, if you want to compete against four rivals based in four of the world's most advanced markets, and you come from the country that is second-to-last among industrialized countries, so massively lagging, that several developing countries from Chile to Poland have already leapfrogged your home market, then yes, the very fact of the home headquarters and home market and the region where you have the biggest market share, North America, give Motorola a huge disadvantage.
Moto actually ahead of the rest of American cellular
It is even more pronounced with any management from any of the other US based players, because of the whole US telecoms corporations lot, Motorola is the only one with a relevant presence in most of the rest of the world. The American carriers have retreated from international holdings - so they have almost no vision into any more advanced markets; the equipment makers (Lucent, Qualcomm, Nortel) have only meaningful visibility to those countries where they have networks installed. So if America is the backwaters, at least Moto was the most global of the lot, and look how badly they messed it up the past decade. Now if Moto hires a CEO from this backyard, the new CEO will be the blind leading the partially sighted. How moronic would that be?
Why is this relevant? In Finland or Sweden the execs of Nokia or (Sony)Ericsson do not have to imagine and believe in a vision of a future for cellphones. They can experience the cellphone future in their HQ and home and shopping mall and on TV every day and night. Execs in Finland and Sweden have no problem whatsover believing that SMS text messaging is the killer application more so than voice, and that a real massive business can be built on the SMS messaging platform - including over 100 billion dollars of person-to-person texting, another six billion dollars of ringing tones, two billion dollars of TV voting (think American Idol) or another two billion dollars of mobile advertising, etc etc etc. The managements in these countries have no doubt that the cellphone will emerge as a superior payment system to credit cards - because so much of the world's mobile payment innovations were invented here - Finland had the world's first coca cola vending machine paid by cellphone, Sweden the first parking by SMS, Finland the first city public transportation paid by cellphone, etc.
Then take South Korea of Samsung and LG, and Japan of Sony(Ericsson). In both countries there is a vibrant mobile advertising industry. In both countries over a quarter of the population pay using the cellphone. In both countries 2D Barcodes are everyday features used by the majority of the phone owners. In both countries there is a heavy penetration of digital TV tuner-equipped superphones (if you think 599 dollars for an iPhone was steep, try 1,300 dollars for a cellphone that has in effect your TiVo digital cable/satellite set-top box inbuilt into the device, including 30 minutes of pause and rewind of real-time TV). Both countries are ranked number 1 and 2 in broadband penetration per capita, broadband migration from narrowband, broadband speed throughput (both have 100 Mbit/s standard today with 1 Gigabit broadband being rolled out), and to add insult to injury, these two countries have the lowest cost broadband. South Korea has even the world's first nationwide WiMax network (on the Korean variant, WiBro). Yet South Korea and Japan were the first two countries to see the majority of internet access migrate from the PC/laptop users to advanced cellphone users. Both countries have the highest penetration and migration of 3G and 3.5G phones and services and they have stopped selling any second generation phones (the iPhone is second generation phone - it is too old fashioned technically to be officially sold in those markets, that is partly why Apple is rushing its 3G variant). Every phone is a cameraphone and 8 megapixel cameras are not uncommon at top end phones. In that kind of market, all manner of super data services for cellphones are not only technically viable, they are a commercial reality.
The top management at Nokia, Samsung, SonyEricsson and LG have their own wives and husbands, own kids, and their own parents (ie grandparent age people) actively using the "futuristic" services on the topmost phones - Samsung and LG have Korea-specific top end phones they don't bother to export because the rest of the world is not ready for them yet. These executives live and breathe a wireless ubiquitous connected future. For them it is easy to accept the enormous rates of change that are going on in this industry, because they see it daily, with their colleagues and subordinates, their secretary, their dentist, the waiter at the restaurant and the taxi cab driver, their car mechanic, even their library uses advanced cellphone based services to serve customers better.
In America there are plenty of "Doubting Thomases" who will dismiss SMS texting, or the mobile wallet, or mobile advertising, or remote control, or TV-media and cellphone integration. They don't even know what near-field, 2D Barcode, SIP and other advanced features can provide. The Americans read their domestic IT-industry focused experts write enthusiastically about the Blackbery with its wireless email and the "real internet on cellphones" nonsense and Location-Based Services discredited concepts and hype up enterprise/business solutions. All outdated or irrelevant views, where Finland, Sweden, Japan and South Korea have all moved far beyond, in fact years beyond those concepts. Let me repeat that. These four countries have moved YEARS beyond those concepts that are still enthusiastically embraced only in North America and by their local (archaic) experts.
So if Moto hires any telecoms executive currently based in America, that CEO will enter the handset market share contest, running a company that is falling behind, with the HQ and much of their R&D employees living in a country that is years hehind. And the CEO will bring with him or her, a vast arsenal of outdated prejudices and be utterly blind to the new opportunities in cellphones. To be even MORE blind to the global realities than Moto's own staff.
So lets talk a bit about what changed over the past 10 years.
Its NOT a technical thing. Its not that we've gone from 2G to 3G or to color screens or touch screens etc. Its rather a long list of fundamental changes to the industry. Any current executive at the top of a telecoms player, will tend to have been in the industry for 10 years or more, to achieve CEO or CxO level status. If you've been in the industry ten, fifteen, twenty years, to achieve your status as top executive with a major American telecoms player, then your mind is overloaded with presumptions and mental baggage, on concepts that once were true but are not true anymore, and of widely held misconceptions that have only recently been proven to be untrue. (I keep tellling people, mobile telecoms is the most counter-intuitive industry of them all, so there is a lot of that going around).
Lets look at specifics. Ten years ago, there were fewer cellphones than fixed landlines (Finland was the first country where this reversed, exactly ten years ago in 1998; America saw this happen only two years ago, so for most Americans it is still a novelty and a surprising fact. They tend to believe that because they tended to hold a technology lead in airplanes, rocketry, the internet, etc, when an major change like that happens, America is among the first, and the rest of the world follows. It is usually astonishing to then learn, that actually, UK has more cellphones than landlines, Italy has more, Spain has more, Germany has more, Japan has more, Australia has more, etc etc etc, that yes, America was second-to-last to have this happen - and yes, Canada is dead last on this list among industrialized nations). Why is this important? Today for more than half of all Finnish households there is no fixed landline whatsover (Finland is one of the world's most connected countries and had a fully digital backbone network first in the world, with world-leading fixed landline penetration levels back then). The cellphones for individual family members become the norm. What is then the role of any fixed-mobile converged solutions in this scenario? A lost cause. But many many American telecoms executives still pray to the altar of Fixed-Mobile convergence. The pray to a false god.
Ten years ago the primary service on cellphones was voice; and many American top telecoms experts in wireless still today will repeat this faulty mantra "but in the end, we must remember that the cellphone is primarily a voice communciation device". TOTALLY WRONG. And don't buy into the iPhone hoopla (so, eh, its a.. media device?). No! Don't buy into the RIM propaganda (oh, I get it, you mean wireless email?). No, as all mobile telecoms execs in all leading markets - from Scandinavia to Italy and Spain to Ireland and the UK to Israel to Singapore to South Korea - know: the only addictive service on cellphones is SMS text messaging. The killer app - the only killer app - is SMS. The primary purpose of a cellphone now, in 2008, in any advanced market, to the majority of users, is no longer voice calls, it is now text messaging (SMS texting is the most widely used data application on the planet, with over 2.4 billion active users, nearly twice as many as the total number of internet users worldwide). Where did we first observe SMS addiction? In Finland (and by the way, my second book M-Profits was the first book to mention SMS addiction in 2002).
And why is this important? Have you ever tried to send an SMS text message on a Motorola? The average Nokia user will send out at least three in the same time (obviously without any predictive text). Consider this - the ONLY proven addictive service? Any average Nokia, Samsung, SonyEricsson will be far better than the best Motorola for SMS texting? Why is this? Because Americans have completely misunderstood SMS texting, dismissing it as a youth fad, believing their American IT colleagues promising a wireless email (Blackberry) or IM Instant Messaging or some unified messaging vision. Nokia's global messaging study in 2001 already showed the addiction. They have known. No. If there is only one addictive service (as addictive as cigarette smoking as the Australian university study on SMS showed), then your device HAS to be optimised for it. But ten years ago it was only starting to happen (first in Finland) and still in early 2007, one year ago, less than half of Americans were active users of SMS. American execs have not been convinced of the addiction. Samsung, SonyEricsson, LG and Nokia execs have suspected it longer, and known it for a fact ever since the Belgium university study proved it conclusively five years ago.
Ten years ago the majority of cellphone subscriptions were enterprise/corporate customers. Not today, enterprise/corporate accounts consist of only 20% of all subscriptions in the Western world, even less in the developing world. Again, this was first observed in Finland ten years ago and the USA found this trend only four years ago. Still today many USA based wireless experts speak passionately about enterprise solutions being the main driver of cellphone penetrations. Why is this relevant? Motorola - and American makers including Microsoft's operating system, Blackberry, and the PDA makers - too often think that high-end smartphones cannot be bought by normal citizens, that they are only bought by the enterprises/businesses, and thus they hand on a platter the far greater consumer market to the Swedes-Japanese, Finns, and South Koreans. Why is it that Nokia has an E-Series and an N-Series? E-Series is the enterprise/business phone series but the N-Series (wider range of devices that are also more expensive) outsells the E-Series by a wide margin.
Of course average consumers will buy smartphones. The analogy is as if a car manufacturer thought there is no consumer market for SUV's, that an SUV can only be bought by some rancher or hunter or for some business use, not willing to accept that regular parents like the car to move kids (and pets and miscellaneous stuff) around, and many people are willing to pay a premium for the height and perception of safety. And that soon thereafter, a luxury bracket SUV market emerged for all the high-end pricey SUVs. The trend is that we buy a more feature-rich phone every time we upgrade phones. Nokia knows this. Motorola seems to have hidden its head in the sand. Any USA based telecoms exec would have a hard time believing in a mass market (consumer ie non-enterprise/corporate opportunity) for smartphones that cost MORE than the iPhone.
Ten years ago almost all cellphone subscriptions were postpaid ie contract based. Today the majority of all subcriptions worldwide are prepaid (pay-as-you-go/voucher) based. This invention comes from Portugal and Italy ten years ago and still today most American accounts are postpaid/contract accounts. In the vast majority of the developed world, and essentially all of the developing world, cellphone accounts are prepaid/pay-as-you-go/voucher based.