The case of Motorola Inc., starting from its foundation to the achievements and then coming down to from the summit of its grace through different changes and mistakes is a really interesting and informative one. “Motorola”, acquiring its name from motor and victrola, was founded by Paul V. Galvin in 1928. It was first called the Galvin Manufacturing Company. Originally formed for manufacturing alternating electrical current converters and car radios, Motorola has spread its wings over the time to sectors like semiconductor products, communication sector and the information system sector. Motorola started its journey in a humane and democratic work environment. By 1983, under the leadership of Bob Galvin the company had developed many new markets based on many new technologies (Georgia, 1998).
Though Bob Galvin gave a new flight to the company, it was evident to him in his working period only that the organization was turning towards a totally technology based company rather than staying a consumer oriented one. It deviated from its humane working environment in which it started its journey at the time of its foundation. Though Galvin, the CEO tried his best to keep the company at the top where it belonged originally, as one of the most admired companies’ world wide. Still Motorola came down to 34 percent claim of the U.S wireless phone market in 1997 from its position of 60 percent in 1994. Presence of too many managerial layers, internal rivalry, non cooperation between the engineers, production unit, the sales unit and the administrative unit were very prominent within the company. Too much concentration on any new technology that was introduced and negligence of others, ignorance of public demands and above all technological follies let Motorola down so much that the esteemed company fell from its grace soon after the CEO, Bob Galvin departed.
The only person who could save the organization from this fall was Chris Galvin, the son of the departing CEO. Though his father wanted him to be the next CEO, he could not become the CEO before 1998 because of the lack of an engineering degree. After his becoming the CEO though there was still problems persisting Motorola started the necessary changes to turn around. The journey of renewal then started for the company (Georgia, 1998).
The stumble in digital had taken its toll and by 1997 Motorola share of the U.S digital equipment market was 13 percent versus Lucent 38 percent share. By 1995 even the company dominated the Asian market for two way radios and pagers and after battling its way into Japan’s protected telecom market, Motorola’s engineers’ devotion to analog products made them deaf to protests from Motorola’s executives in Japan. Motorola was falling behind its competitors, losing its market share and having a lot of customer complaints due to this lack of coordination within the different departments of the company. Galvin tried vigorously to make up for the market share losses and bring back the company to its previous prestigious position. Motorola should immediately build three verticals i.e. Semiconductors Division, Wireless Development Division , Digital phone Division and align its Technical expertise with their in-house Marketing team and rebuild again a strong Brand image in the minds of the customer that they have lost. I.e. low priced, mid range and exclusive range. The technical team should work hand in hand with the marketing team to better understand the right kind of demand and the product mix which the market requires. The company should adapt all the three competing standards, as in the digital phones, the requirement in every market is different.
The beginning was glorious. Gary L Tooker, a professional engineer had spent a long stint of 33 years in Motorola’s semiconductor operations division, had a different style of working and always gave the divisional heads a free way to make independent decisions. On account of this the market share of the wireless phone business in the U.S. market had increased to 60% under his leadership. In1994 Motorola had claimed 60% of the U.S Market in wireless phones & In January 1995 the revenues were up by 31 percent to 22.2 Billion Dollars and profit had soared 53 percent to 1.5 Billion dollars. At the same time in1994 Nokia Corp and Ericsson were barely a blip in the wireless scene, but by the year 1997, the market share of Motorola had come down to 34% as Nokia and Ericsson had captured major share in the same line of business (Georgia, 1998).
Critical facts of the case – The relevant Change Management issues faced by the Organization
In 1995 the U.S, wireless business was slowly moving towards Digital technology from Analog. In Feb 1995 Ameritech Cellular Product marketing Director Marc Barnett had met Motorola top brass in a cellular industry trade show and had told them the requirement of Digital handsets within a specific time frame one year, in which Suzette Steiger had also reassured Barnett that they will meet their goals.
Robert N.Weisshappel chief of Motorola’s cellular phone and a engineer by profession, had spent 24 years at Motorola and deserved much of the credit for making cellular phone business dominant and also had the greatest skill in designing ever smaller stylist phones believed that most consumers wanted a better analog phone and not a digital phone and also believed that the phone should be big and bulky because the technology was so new. Though the goal was to boost market gains with higher priced products and protect Motorola’s market share, the phone was priced at 1500 U.S dollars (Wilson 2002).
The Signature program turned out to be a fiasco, Bell Atlantic mobile, GTE and Bell south refused to participate in the program as they did not agree to the laid out agreements for the carrier’s and sales to both carriers dropped. Moreover the company’s postponement was not only due to Weisshappel obsession with StarTAC but as the company tried buying semiconductors from competitor Qualcomm to get into software game more rapidly , Weisshappel felt the cost they were charging was unnecessarily high and stop business in 1995, and decided to build up the chips internally. At that time customers were launching digital service. Even after two years in Feb 1997 when Ameritech Cellular had asked for the digital phones Motorola could not cater to their requirements they had to reluctantly place their Digital handsets requirements to Qualacomm (Cameron and Green 2004).
Code Division multiple accesses (CDMA) offered six times the capacity of analog systems and eventually won 50 percent of the U.S market (Rowold 2009). The lapses lasted between 30 minutes and two hours. Motorola was not able to restore it. PrimeCo decided to bring it to lucent. Even there was a comment that whether Motorola would remain an equipment supplier was a question. The slip in digital had taken its payback and by 1997 the company share of the U.S. market of digital equipment was around 14% versus Lucent 35% share (Walumbwa 2005). Semiconductor operations were another trouble spot. Sector sales slipped 8% in 1996, largely because of an industry downturn and steep drop in prices. And even worse, sales of the PowerPC microprocessor, one of Motorola’s highest margin chips were hurt by Apple Computers declining fortunes. By 1995 even the company dominated the Asian market for two way radios and pagers and after battling its way into Japan’s protected telecom market, Motorola’s engineers’ devotion to analog products made them deaf to protests from Motorola’s executives in Japan. To make matters worse, the 1997-98 economic downturns in the region also hampered the demand (Hargreaves and Fink 2003).
Changes in culture
Motorola Inc, when it started, had a work environment that was humane and democratic. Everyone, even the founder Paul Galvin himself was addressed by his first name. The typical time clock in the plant was replaced by an employee honor system. A profit sharing program for the 2000 employees was established by the founder. This environment in which all the employees were working productively, transformed to an environment full of internal rivalry and non cooperation when Chris Galvin, the grandson of founder Paul Galvin was appointed the CEO in 1998 (Rowold 2009).
Motorola was falling behind its competitors, losing its market share and having a lot of customer complaints due to this lack of coordination within the different departments of the company. Galvin tried vigorously to make up the market share losses and bring back the company to its previous prestigious position. He did not like the too technologically driven full of internal rivalry environment. To boost up coordination among division he started paying the top executive based on the company wide performances and not on divisional results. He tried to cut costs through shared research investments. He stressed on the culture be mainly customer based. He started placing more importance on better sales and marketing and planned to hold the managers more accountable. Though that was a daunting task, Galvin succeeded to change the culture (Hiatt 2003).
Analyses and Action Planning
Technological change may have positive effects, including products of higher quality and services at lower costs but the leading organizations today are leaner and more agile than in the past, and they take advantage of technology whenever possible. To maintain this competitive stance, these organizations rely on their operations functions to be dependable and efficient. Effective operations management is the key to business success that integrates other functional areas, which together enable an organization to excel in the marketplace. The successful integrated organization will meet global competition with quality outputs, outstanding customer service, and effective control of costs. Some decisions are strategic in nature; others are tactical. Strategic plans are developed farther into the future than tactical plans. Thus strategic decisions are less structured and have long-term consequences, whereas tactical decisions are more structured, routine, and repetitive and have short-term consequences. Decision making, both strategic and tactical, is an essential aspect of all management activity, including operations management.
Motorola should immediately build three verticals i.e. Semiconductors Division , Wireless Development Division , Digital phone Division and align its Technical expertise with their in-house Marketing team and rebuild again a strong Brand image in the minds of the customer that they have lost. I feel that each and every division should have a separate divisional head and a core team, and should be given free hand and at the same time be held responsible as an independent profit center. By this strategy every division will have a clear focus on time and the money involved in developing and catering the demands of the customers as per the needs of the market. Though the company’s core expertise is in Analog technology, the immediate requirement to move into digital technology is very important at the moment. The Immediate action that the company should take is to immediately focus its core technical expertise in manufacturing Digital phones and cater to all segments. I.e. low priced, mid range and exclusive range. By this the company can take care of the demand where they can earn low margins from the low priced phones and balance the same by earning higher margins from the other two ranges. Moreover catering to these three segments will help them to penetrate not only in U.S but also in Europe and Asia. The company should also revamp the marketing strategies and again build a brand image that they had always cherished in the past (Hiatt 2003).
The cost factor and the time for developing the digital phones is one area which the division should take outmost care as technology is changing very fast , hence the demand for the right kind of product mix should be immediately taken care as per the demand in the market. The technical team should work hand in hand with the marketing team to better understand the right kind of demand and the product mix which the market requires.
The company should adapt all the three competing standards, as in the digital phones, the requirement in every market is different. The company can definitely focus more on any particular standards, but should have a perfect market data of their competitors adapting the same kind of standards. Moreover the marketing team should be consulted and their views should also be taken in this regard.
The company should in-house develop the switch design and then outsource the same. This will help them reduce time and also have switches as per their standards and requirements. From time to time the same should be monitored and proper surveys should be conducted periodically to have a check on the quality standards. This will help the company to maintain the right kind of quality standards in all their products (Hofstede 2005).
I feel if the company shifts their focus from Analog to Digital technology, and immediately caters to the demand of the market with a right pricing strategy and product mix and deliver the goods within the specific time frame, they will be able to again gain back the market share that they have lost. As the company has always been regarded for their technical expertise, it will not be a very difficult task to gain back the customers confidence and the Brand image that they have cherished in the past.
Cameron, E & Green, F. (2004). Making Sense of Change Management: A Complete Guide to the Models, Tools & Techniques of Organizational Change. Kogan Page Publishers, NY.
Georgia, J. (1998), ‘Motorola: The next Generation of Change Management’, Business Week, NY.
Hargreaves, A & Fink, D, (2003) Sustaining Leadership, Ebsco publishing, Sydney.
Hiatt, J. (2003). Change Management: The People Side of Change, Prosci, London.
Hofstede, G. (2005) Culture’s Consequences: International Differences in Work-Related Values, SAGE, London.
Rowold, J. (2009) ‘Transformational and transactional leadership styles, followers’ positive and negative emotions, and performance in German nonprofit orchestras’, Nonprofit Management and Leadership, vol. 20, no. 1, pp. 41-59.
Walumbwa, O. (2005) ‘Transformational leadership, organizational commitment, and job satisfaction: A comparative study of Kenyan and U.S. financial firms’, Human Resource Development Quarterly, 16, no. 2, pp. 235-256.
Wilson, C. (2002) A Strategy of Change: Concepts and Controversies in the Management of Change, Cengage Learning EMEA, NY.