Lately you’ve seen a few columns here on the topic of leadership: Namely, how to do it well.
Invoking the equal time rule, today I want to talk about failed, misguided, and destructive leadership, using two examples from very different walks of life. The first, a CEO of a Fortune 50 firm, is a matter of public record, but the second, a Protestant minister, is someone I’ve learned about recently and must understandably remain unidentified.
The Fortune 50 CEO
Namely, Ed Zander of Motorola from 2004 to 2008, during which the company’s market cap went from a high of over $50-billion to a low of barely $10-billion. What did Zander do wrong and how did he do it?
Much of the material that follows comes from Chicago magazine’s September 2014 story, “What happened to Motorola?”
Now, to be fair to Zander, plenty of damage had been done to Motorola well before he arrived. In 1994, Motorola peaked at #23 on the Fortune 500, with $22-billion in revenue and $2-billion in profits; 60% of mobile phones sold in the US were Motorolas. But under Gary Tooker (CEO, 1993—1997), Motorola became a company at war with itself. Its network business was an early developer of digital cellular technology that was rapidly supplanting analog in Europe and Asia, while its handset business remained firmly committed to analog.
A Motorola executive at the time describes visiting the network engineers’ headquarters and seeing “a thousand” of them all using digital phones made by Qualcomm, “even though the other side of the company was engaged in a bloody fight against Qualcomm that went on for years.”
Meanwhile, Finland’s Nokia was frantically reinventing itself for the new digital landscape and Motorola “was about to fall off a cliff;” Nokia became the world’s largest maker of mobile phones for the next 15 years.
When Zander arrived in 2004, fresh from being COO of Sun Microsystems, he’s introduced as “a skilled corporate showman who entertained with verve and humor.” It goes downhill from there.
Meanwhile, in arguably one of the worst decisions ever made by a major corporate CEO, Zander struck a deal with his Silicon Valley friend Steve Jobs, the CEO of Apple. Together their companies created a Motorola iTunes phone, the first phone connected to Apple’s music store. “We can’t think of a more natural partnership than this one with Apple,” Zander said at the time. Named the Rokr, the phone launched in the fall of 2005. Jobs, who introduced it, called it “an iPod Shuffle right on your phone.”
Zander says he believed that by working with Apple, Motorola could become cool again. But Motorola was teaching one of the most creative, competitive, and consumer-savvy companies of all time how to make a phone.
In other words, Zander was sharing Motorola’s crown jewels in intellectual property—how to make sleek and cool and big fat profit margin (all at the time) phones with the most dangerous possible competitor, all in the name of juicing short-term revenue and profits.
Doubling down on his short-termism, Zander also slashed the firm’s R&D budget. Long among the top 10 US firms in patent registrations, it dropped to #34 in 2006.
The last item on the bill of particulars indicting Zander is that he was disengaged. Motorola—before it shared its crown jewels with Apple—had shared them with China (in fairness, this was on prior leadership’s watch). Nevertheless, China was a critical market for Motorola, and one Zander never engaged with. So when China enhanced its network from 2G to 3G, Motorola had no 3G capable phones. Motorola managers on the ground, wanting to report back a solid market share to the US, dumped 2G phones at fire sale prices. When the shouting was over, Samsung had stepped in and topped Motorola in phone sales for the first time. As the article drily reports, “it never looked back.”
