The CEO with the hottest seat in corporate America right now is probably Ed Zander of Motorola (see article here, see chart here.) And well it should be hot, as recent negative results now verify Motorola is once again in a Growth Stall (see article here). After a great couple of years, the last two quarters have been back to back negative ones. Fewer than 7% of companies recover from a growth stall to consistently grow a mere 2%.
This isn’t the first stall for Motorola. There were several before, and just 3 – 4 years ago many investors felt that Motorola may not survive. But a new CEO (Zander) came in, implemented a slew of Disruptions, opened up a bevy of White Space projects and Motorola started to really improve. He ignored analyst calls for massive, widespread layoffs and instead rapidly moved new products to market (like RAZR) and started building new businesses in Motorola. Results were stellar, and Zander was widely applauded for the changes including being named CEO of the Year by popular journals.
But these latest earnings announcements demonstrate that a post-stall recovery is very hard to maintain. Motorola was desperately Locked-in to its failing Success Formula when Zander took over. Despite all his Disruptions and White Space projects, Motorola did not fully develop a new Success Formula, nor did it complete a migration to a new Success Formula, before slips started happening in the traditional business. Profits dipped, and then Carl Icahn started a raid on the company.
Unfortunately, leadership then hiccuped. Reacting to Icahn, and the cries of stock analysts, instead of doing more Disruptions and creating more White Space to keep its focus on growth, Motorola started trying to Defend & Extend its old strategies – announcing an 11% (7,500 person) layoff would begin. The company shut down an R&D facility at the University of Illinois in Champagne (one of the top engineering schools in the world) to save money. And it began "reorganizing" (see article here) The company even took to financial machinations as it focused on engineering the P&L instead of new products – as can be seen in the latest earnings news.
From his early actions it appears Zander knows the right thing to do. And he has continued following the original path, such as the announcement early this month that Motorola has agreed to acquire Leapstone Systems, further bolstering the network division – where growth rates and profits both exceed the mobile handset business (see article here.) What Motorola needs now is not another change in CEO, but rather more Disruptions and White Space to push Motorola further away from the old behaviors and Lock-ins which got it into so much trouble in the 1990s, then early this decade, and now more recently. It’s not Zander that is the problem, but the truncated effort to use White Space to develop a new Success Formula and then mobilizing Motorola toward that Success Formula.
Motorola was an incredible turnaround story. Disruptions and White Space were allowing this Phoenix Principle company to regain flight. But right now the Phoenix is in the crosshairs of many analysts and Icahn – who are collectively calling for the CEO’s head when they should be screaming for more Disruptions leading to more growth. Motorola will not save its way to prosperity. It must develop a new Success Formula that puts Motorola back in the Rapids – and keeps the company out of the Swamp. If investors and employees aren’t careful they’ll accomplish their goal of unseating Zander, Icahn will swoop in, and then we can expect yet more heads to roll, businesses to be sold, more product development to be shuttered and after Icahn gets his cash back he’ll leave Chicago with a shell where once a great company stood.
Better to let the Phoenix take flight. If the Motorola organization and its leadership have the guts to get out of the broken down old nest and really test its wings.