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Motophone: Motorola's big India bet
November 21, 2006
Three years ago, Motorola's future looked hazy. Their marketshare took a pounding and the losses were mounting. The 78-year-old phone-maker needed a shake-up.
Enter Ed Zander and his RAZR, SLVR, ROKR and KRZR models. Not surprisingly, the company saw a 10 per cent increase in marketshare and is now back in the mobile limelight. Chairman and CEO at Motorola Inc, Ed Zander feels that his company is still transforming itself; after having sold and acquired some businesses and focusing on 'seamless mobility'.
"Our shareholders certainly want more and we are committed to building up a better company. When people ask, "'What's after RAZR?- I say more RAZR!'" says Zander.
Excerpts from CNBC-TV18's exclusive interview with Ed Zander
In the past three-four years, you have seen massive layoffs; you came in and fast-tracked the RAZR, you brought a lot more mobility within the organization. What has been the toughest transformation in the past three years as you put Motorola back on track?
The second thing is the vision, which is always the harder thing and as we are going over the next three-five years, we had to make some choices about divesting our semiconductor business and our auto business.
We have acquired probably a dozen smaller companies in different areas and we are still evolving the asset portfolio of the company to compete long term. So, there were two things one was the execution and vision and, of course not changing but modifying the culture, which I think was difficult when we have a 78-year-old-company that has a phenomenal cultural underpinning it. So, the culture is still a challenge from time to time.
How much opposition did you face internally because I know you were brought in by the board, but you did bring in a whole new culture to Motorola and that mustn't have been easy within such a large company?
So, I think when you reach down and ask your employees 'what do you want?'- everybody wants to win the market, they wants high levels of customer satisfaction and want to innovate. It wasn't hard getting the base level there, but we still have to work at it.
The RAZR was iconic and I believe the project was in development even before you joined Motorola. What's the pressure - on being able to introduce, over a period of time, iconic products like the RAZR. What does that do for the entire innovation process in a company?
The mobile devices is a little more than half our business and it's good news that we had a phenomenal hit. The challenge is that everybody expects a new one every year but you are not going to get a blockbuster movie every month.
So, what we have done is that we have broadened the product line, in addition to the RAZR - and introduced, I think, a lot of great iconic products across the board - right from the high-end down to the low-end.
We needed to broaden the portfolio to get into new experiences like music, print and picture and other things. We also needed to get into more geographies such as China and India for example, and we have done a lot of that.
When people ask, 'What's after RAZR? I say more RAZR!'
Don't you become a slave to the image because everytime you don't do something as big as the RAZR, you are benchmarked against that and even if it's a moderately selling product, it's a failure because it's not the RAZR?
It's like the sports analogies and the World Cup. They expect you to win everytime. I am more pragmatic on that. Sometimes you are going to hit the grand slam, which is what RAZR was. The way you win ballgames is not the way you get home runs, you hit a lot of singles and doubles.
How do you institutionalize innovation?
RAZR is a good example and we are doing a lot stuff around the next generation - like Wi-Max technology, which is backend. What we are trying to do inside Motorola is hard. We have lots of planning sessions about what the big bets are and what are the big technology changes that are going to happen, which are disruptive. We have something called the early stages accelerators and we sometimes find our own internal venture capital.
So, if you've got a great idea at Motorola, we will get some money your way and let you go play for a year or so in our labs. We view the R&D that we do on a quarterly and annual basis and try to look for the new innovations or the big bet and what we have to encourage.
At Motorola we ask that you 'Don't be afraid to fail- take risks' because you are not going to get everything like the RAZR. You may get 2 or 3 that aren't going to happen. In innovation, it is the hardest thing to re-invent yourself, because just when you think you are doing well, somebody comes along and whacks you. At Motorola we say "whack yourselves before somebody whacks you."
Don't be afraid to fail is a tough thing to believe in, if you are trying to get back to the top spot and you have increased market share considerably from a few years ago. So how many years have you given yourself to get to that top spot?
One of my direct opponents who runs the business is more aggressive than I am. You've got to win games. I will just say that our number one in this space is a very formal competitor and it has been there for a longer-time and has a lot of marketshare.
For example, here in India, which is a phenomenal opportunity, where we had no marketshare just a few years ago, you got to go out there everyday and compete for six million subscribers a month. We have to go get some of those six million and it is not going to be because I think so.
We are pragmatic about climbing a big mountain. Sometimes, you will get the kind of growth in marketshare like we did the last year, which was pretty good and sometimes you get a rest - so, you get healthier and invest in other areas. I can't get 25 per cent marketshare in India just because I come here and say I want a 25 per cent marketshare. We've got to put in infrastructure, retail, brand and all the kinds of things to get to number one.
I was reading this interaction you did with Harvard Business School and you said that a really important part of your success is that you study your competitors very closely. What does Nokia have, that you don't?
We have a lot of things that they don't. I don't want to tell you what I know about them, let's keep that a secret. I will be very general. I think they have done very well in a couple of things - they really understood about scale maintenance and supply chain.
They have a very well developed supply chain manufacturing organization, that is pretty much worldwide and which gives them the necessary cost structure. So,they have cost structure and scale towards manufacturing- what we call 'platforming,' - they have that commonality in all components.
If you look back at Motorola 3-4 years ago, every one of these units was like a special product. The second thing was back in 2001-2002, the company invested in the emerging markets, so when you are sitting here in India with the kind of marketshare that they have or South-East Asia or the size which came in from the Eastern European area and places like Russia - that is where the action is going forward for the next five years, in terms of a lot of the growth.
That is the kind of the thing that we've got to do. I think we have a really good understanding of the product - it seems iconic and with some other capabilities and features, we have got a great brand. We just have to bring it to more people.
How do you look at Apple as a competitor because they have done some phenomenal stuff in this space?
Apple has a great relationship with us and I know Apple for a long time. We have actually done pretty well with iTunes outside the United States. But it was logical that it wasn't going to be this kind of success when Apple had their own products, so we have restrictions on a lot of different things - about the items and products.
You got to remember something - in a case like India we sell via retail, but in a lot of cases in the United States, we sell through carriers. No matter what I wanted to do, I had iTunes on the product while major carriers in the United States had something else. We thought we could make iTunes, a bit of a standard, but frankly lots of carriers wanted to carry their own different needs and numbers of songs. So we learned from that.
What did they not teach in business schools that you needed to know it at Motorola?
But did they teach you to ask the right question?
Yes. When you are an engineer, there is only one right answer, there aren't two right answers - the right answer is 3.146 and it isn't 3.147. But business schools are good because there are two ways to look at it, there are lots of ways to look at problems.
Do some forecasting for us in terms of the bets you are making on Wi-Max, where you expect technology to go, more importantly what kind of consumer behaviour trends are you expecting over the next 5-10 years?
It's always hard, I would say that during the early 1990s while I was with another company and we were talking about the internet, I couldn't do an interview like this to talk about the internet because nobody knew what the internet was, or how it would affect us. That was just 10 years ago. It's in our lives everyday - we bank on it, we shop on it, we communicate with it. In contrast, there was the telephone or the television or other things.
In the next 10 years, we've read about 3G and 4G - that stuff is coming here into South-East Asia and India. The next generation networks allow you to put an amazing amount of video data, music and other things we talked about over the years, and if you couple that with what we are able to do on the handsets, everything that you did from PCs will now be done on handsets. Now, what form that takes and what;s the experience like, we are working on it.
Today, in the United States we are getting 3G networks and now I use my handset. I use my PC 30-40 per cent less when I travel and on day trips, I don't take it anymore.
On my handset, I look up my mail, I surf the Internet, I see CNBC, CNN, I get my sports and I can actually watch remote TV. So, I have changed my whole lifestyle around the use of my portable device. So, the mobile Internet is a big thing. Wi-max is an enabling technology, 3G, IPTV -all these terms you hear about, is the next generation of disruptive technology.
In developing countries like India, do you see regulations keeping up with all these technologies?
3G is going to happen here shortly, their spectrum is being released on 3.5 and 2.5 for Wi-Max. I am working with a lot of other companies on that at some trials, and looking at some other things. In a country like India, you are first attending to people just with the basics, which was GSM and CDMA technology, and I think it's moving along. What we see is that the next generation of broadband and some of the government's discussions were really positive. I think you are moving along.
What is the main focus for a large organization like yours in countries like India and China?
The challenge is to design for profitability, if you notice some of our newer products at the lower end of the market or products we've introduced around the world, that we will be shipping here sometimes over the next few months - called Motophone which is an exciting breakthrough technology, it's a whole new design, it's pretty energy efficient, it's designed for markets like India and China.
It's designed for cost and for a person in rural India - in terms of noise suppression, voice prompts, battery time. So, we have been able to design products for both China and India and South-East Asia.
When do you think India will bring in a substantial portion of your revenue?
India is important today - it really is. We are now in double digit growth figures in marketshare which is important. We are looking at a good 2007, hopefully.