On Search for Moto CEO, or for that first day to-do list

(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.

It is a very different business proposition, marketing to a customer who can only afford 6 US dollars per month on a prepaid phone account in India for example, than 50 dollars per month a monthly contract commitment for two years, in America. Radically different. But its beyond the customer spend. This impacts handset sales in particular relating to handset subsidies. If the country is mostly prepaid/pay-as-you-go (Italy, Portugal, Brazil, India, China, Indonesia etc), then there is almost no margin for subsidies. Without subsidies, there usually opens a big opportunity for independent phone resellers (like Carphone Warehouse in Europe). This impacts the reseller chain. Selling phones in North America is different (and old-fashioned) compared to most of the rest of the world. An American telecoms expert will arrive with heavy baggage of the wrong business model.

But about those carriers. Ten years ago outside of Japan, no carriers designed phones. Motorola, Ericsson, Nokia, Siemens, Sony, Alcatel, Philips, Panasonic, etc did the designing, and carriers (operators) selected from what was offered. But the Japanese innovation of the carrier specifying the phone spread, first to South Korea, today many carriers/operators have some unique phones for themselves, designed by themselves, from O2 in Britain to Telstra in Australia. Other operators/carriers will specify phone types by their segmentation model - like Orange in France - while others get involved in the handset user interface design, like T-Mobile with its Fave 5/My Faves. A handset maker today has to be far more flexible to carrier requests and needs. And again, this is what Asian and European carriers are far more likely to do, than American carriers.

Talking about handset subsidies. Ten years ago, most cellphones were sold with subsidies. A few countries had legally banned subsides (Finland, Italy, etc). Many developing countries were only rolling out their networks and cellphones were premium items. Today most cellphones are sold without subsidies - ie full retail price (ie the $399 iPhone should retail for about $649 in an unsubsidised form, when sold without a contract), and many countries, like Israel, South Korea etc have abandoned subsidies and in the develping world almost all phones are sold to prepaid/pay-as-you-go accounts without subsidies. Again, looking at the home market, an American exec would assume people want fully subsidised phones, or won't pay more than 50 dollars or 100 dollars for a 300 dollar phone, and this thinking limits the upside potential. In Europe and Asia it is totally not uncommon to buy high end phones that cost 800 dollars to 1,000 dollars (my previous N-Series phone, Nokia N-93 which was Nokia's top line phone at the time, when released in December 2006 cost 600 UK Pounds unsubsidised or 1,200 dollars - half a year before the iPhone launched), and pay full retail price for them - no subsidy at all. Its a different mindset, if you don't think the iPhone is particularly expensive as a phone, just another mid-to-high (but by no means even nearly the most expensive) phone. A different mindset.

But there is more. Ten years ago a phone was a single-purpose device (communication). Over the past ten years the phone has added seven other capabilities, which are in order and country of first adoption: 2) consumption (ie media device) Finland 1998; 3) charging (payment device) Philippines 1999; 4) commercials (advertising) Finland 2000; 5) creation (cameraphone) Japan 2001; 6) community ie social networking (mobile blogging etc) South Korea 2003; 7) cool (ie fashion) Benetton phones in Japan in 2005; and now 8) remote control (they are now constructing apartment buildings where locks operate with cellphones in South Korea and Japan; and household robots are already sold in those countries, again remotely controlled via cellphone).

An American telecoms expert may be comfortable with a couple of those changes, perhaps. A media device? "Yeah, now with the iPhone I can believe that." But they might still fall into the trap of obsolete thinking about mobile as the 7th Mass Media and for example fall into the old IT industry line that music will predominantly reside on stand-alone music players like iPods (incidentially the whole music industry changed its tune already in 2006 that the future of music was musicphones, not the iPod; this was a strong message for Apple to develop the iPhone, as they saw the writing on the wall). But many of those 7 newer functionalities to the cellphone are strange (what exactly is mobile social networking on a cellphone? - oh, its just a 5 billion dollar global industry already, half of South Koreans do it on their phones etc, you should look into it, this is the future for cellphones..), and there are plenty of other industry experts who believe the cellphone will not take over. I heard a representative of a global credit card company just this month claim that plastic will survive the cellphone based credit systems. Ha-ha, he needs to read my fifth book Digital Korea and the chapter about mobile money. Its time to wake up and smell the cellphone.

Network coverage. American carriers have pursued obsolete business models, seeked maximum customers onto congested networks with no incentive to improve network coverage. Where the USA was among the first ten countries to launch cellular services commercially (Japan was first), today North American carriers have BY FAR the worst cellular coverage of any developed country. And geography is no excuse. Australia is roughly the same size as the USA and Canada in size but has far superior cellular coverage in urban areas (including indoor coverage in skyscrapers), rural areas and along highways. Sweden and Finland are relatively large countries (the size of a large American State like Montana or half of Texas) but their population density is less than America's, so to build a cellular network and make it commercially viable is more demanding in these countries than in the USA. Americans don't get to speak on the phone when driving into tunnels (tunnels? my phone drops out of coverage regularly on the freeway). In Italy, Austria, all the tunnels through the Alps you get perfect cellular coverage all through the tunnel (and all along the autobahn or autostrada ie freeway, try to find a freeway in Europe where you drop your connection). In the long tunnels you lose the FM radio coverage, but can carry on with the cellphone conversation! Yes, this is solved with technology and all European carriers care about the calls of their car phone users, to ensure all major roadways have full cellular coverage.

In Helsinki Finland the subway train was built 150 feet underground into solid granite - this is the hardest rock, bedrock, and totally impregnable by cellphone radio signals (and was intended to provide Helsinki residents nuclear fallout shelter in case of Soviet nuclear attack) - yet as you descend deep into the bedrock on those long escallators, you have perfect cellular coverage on all three networks. All the way to the subway platform. And in the train as it speeds through the subway tunnel. Still perfect cellular coverage. A Finnish teenager talks to her friend here, a grandmom chats to her friend over there, while the businessman is clearly talking to a colleague seated a bit further. All 100% cellular coverage so deep underground a direct nuke won't get you. But Finnish carriers provide perfect cellular coverage.

In South Korea if you happen to find a location in Seoul the capital, in any building, anywhere, that your call drops - you call your carrier the moment you get network coverage in the room next door and report this gap in the cellular coverage. The carriers take it as a matter of honor to have that fault fixed by tomorrow. By tomorrow! Even on a Sunday. How many times have American customers complained about the network coverage of a given area time and again, to no avail. Its a total different mindset to coverage.

All advanced mobile telecoms markets have the equivalent of perfect cellular coverage, just about anywhere you might find people - and indeed in very much of the wilderness where you won't find many people - Finland's forests - some of the world's largest continuous forests - are managed via cellular networks (???) - each tree individually tagged by GSM/GPS chip. This is true. A million individual trees typically for a given forest management company, each tree individually tagged and tracked, when they then are felled for the timber industry. North American cellular carriers offer the worst network coverage in the western world, and the USA and Canada are the only two remaining developed countries where network coverage is an argument for selecting a network/carrier. Yes, you read it right - in no other developed country, is the network coverage a relevant competitive argument anymore (except for new networks, obviously, where the national regulator has recently awarded a new network license, and the newcomer network is still being built).

Again why relevant? American consumers have the mistaken notion, that a protruding "external" antenna on the cellphone is more receptive - that this helps with bad networks - than a fully enclosed internal antenna. Technically there is no benefit of the design to show a bit of the antenna, it is only a cosmetic factor, and a feel-good factor when the American cellular networks are so bad with dropped calls. For all other markets, those American style handsets with stubby antennae are ugly and old-fashioned. A small thing, but when you have the device in your pocket, that antenna gets stuck etc. This is a non-issue in the rest of the world. And almost all current global models of cellphones from Nokia, Samsung, SonyEricsson and LG have fully internal antennae.

There is still more. The multiple subscription. Ten years ago no country had even 10% of the total national cellphone penetration as multiple subscriptions. Last year the global average was 28% of all cellphone accounts were second or third subscriptions (and America about 15%). In Western Europe, half of all cellphone owners have two or more subscriptions (and most of the time this means two or more phones as well). That is how we get the over 100% per-capita cellphone penetration levels in over 50 countries, and the high end today such as 130% in Hong Kong, Taiwan, Israel, Italy etc - which is still growing by the way. Where did we observe the second subscription first? In Finland nine years ago. It is of course much more than that. For the employed young adults, they WANT to have two or more phones. It is a sign of ultimate cool, having two phones. Being "important". But in America the ten percent multiple cellphone ownership level was reached only two years ago. Again a radical concept (why on earth would anyone want two phones - especially if there is no difference in the high quality of network coverage?). This is totally relevant to both carriers (absolute churn vs partial churn) and of course handset makers - sell one phone on Sprint now, sell another phone on Verizon next year, etc.

Ten years ago the average phone replacement cycle was 3 years, slightly less than that for personal computers of 3 and a half years. Today it is 18 months for cellphones while the PC/laptop replacement cycle has stayed the same. Note that if you carry two phones, the effective replacement cycle is half that, or 9 months. Its even faster than that in fact. In the most advanced markets - Japan, South Korea, Hong Kong for example - the replacement cycle for young employed adults is 6 months. But the American replacement cycles lag the world average, and are near 24 months. American execs have a hard time believing that large segments of the population upgrade cellphones two times per year. Why is this relevant? When is the right time to start marketing to replace phones. If you think 24 months is the cycle, you start to market the next upgrade perhaps 21 months after the current phone was activated. But if the real effective cycle is 9 months, your Moto customer has already bought TWO rival phones and had a lot of time to fall in love with their way of working. Misunderstanding this means you voluntarily abandoned two unit sales for every one you capture. (Am I getting through, this is symptomatic, every major change in cellular, has happened long ago in the other markets, and only very recently in America)

Ten years ago the cellphone was a communication instrument. Today it is an extension of our personality. It is a statement. It is aspirational. Young people say the phone is the same thing as themselves. That their best friend is the cellphone. The cellphone tells everybody who they are, what they are. The easiest way to explain this, is that for the rest of the world, what values Americans assign to their first car as a teenager, the rest of the world assigns to the cellphone. The cellphone is now the most aspirational device on the planet. This was first discovered by Nokia in 2001. Motorola has talked about this for many years already, but the rest of the American telecoms industry did not seem to catch on, until June 2007, when the Apple advertising for the iPhone hit the airwaves.

Similarly ten years ago many engineering-minded senior executives in telecoms still laughed at the ringing tones and interchangeable covers and the Snake game on Nokia phones. But already in 2001 Nokia was talking of the phone becoming a fashion item. Nokia started a long-term program to incorporate Nokia phones worn by supermodels on the fashion catwalks in Paris, Milan, London and New York. The first step was the Vertu premium jewelry cellphone line (phones embedded with gemstones costing tens of thousands of dollars and beyond), but the true endorsement of a phone as a fashion item was when actual fashion brands joined in, which started with NTT DoCoMo's Benetton phone in 2005. Americans heard of this innovation first with Motorola's Dolce & Gabbana phone a year later.

The fashion industry works on a principle of total change in what is cool, two times per year. A spring fashion and a fall fashion (which are not compatible, ie you cannot readily mix spring and fall fashions, the colors and cuts are deliberately that different). Works like clockwork. In Japan today there is a new phone model line introduced in February for Spring, and in September for the fall. They have big Spring and Fall launches at the flagship stores (and with the fashion industry). Ladies do coordinate their phones with the colors of their shoes and handbags. Again an American telecoms executive might be forgiven for thinking of long production runs to try to save costs, to extend say a Motorola Razr for quarter after quarter after year after year. But look at Nokia, even their bestselling models, Nokia usually discontinues their production six months later, replacing the model. They understand fashion. Moto does not. American telecoms execs almost certainly are not planning their current work harmonized to a six month fashion cycle. Nokia is working hard to bring the rest of the Western world into line with Japanese and Korean cycles.

GSM. Ten years ago, GSM passed the half point, where half of all global cellphone subscribers were on this "European/Asian" technology. The two major "American" second generation cellular technologies were TDMA and CDMA. TDMA has all but vanished, but CDMA is still going strong in North America with more than half of all subscribers on that technology in the US and Canada. But the world has harmonized on its rival, GSM, which, together with its evolution paths GPRS (2.5G), EDGE (2.8G), WCDMA (3G) and HSDPA (3.5G) cover 80% of the world's cellular subscribers today. What was the first GSM country? Finland. Now if any American telecoms expert looks at his home market, it is easy to believe that CDMA is a potent technology and the temptation is to release new phones first to that technology. But the sad reality is that in the "Betamax vs VHS" wars for telecoms, the GSM evolution path has emerged as the clear winner - over a dozen CDMA carriers have started migrating CDMA customers to GSM standards from Mexico to India to Australia to South Korea, and not one GSM operator has gone in the other direction. No, the instinct might be to go for the majority of American subscribers (CDMA), but to win in the global war, you have to go with the majority of the global subscribers (GSM). Americans account for only 7% of the total global cellphone subscriber base anymore.

The SIM card. An innovation by GSM, today obviously over 80% of all cellphones have a SIM card. In most markets of the world cellphones are not locked, so users can swap the SIM card from one carrier for the SIM card of another, and switch networks easily while using the same phone. Young people call this the SIM card switch (many teenage girls will have the picture of their best friend stickered beneath the battery cover to show when they switch SIM cards). On the American CDMA networks there is no SIM card (some Asian CDMA networks do use SIM cards). Most of the GSM phones and SIM cards are locked in America, so the users will not even discover any benefit from switching SIM cards. Few American telecoms execs even understand the role of the SIM card in this ecosystem or even know of its existence (and almost none undestand the power that can be built into the SIM's huge in-built memory). There are several Asian phone makers who have already introduced phones with two SIM card slots, one "normal" SIM slot under the battery and the second hot-swappable slot accessable without removing the battery. Then the phone has a button allowing easy switching of networks (ie active SIM cards) simply by one press of a button. Again, a vital element of the global cellphone business, that American telecoms execs are not exposed to and do not readily understand.

The "receiving party pays" business principle (which is techno-speak, it more accurately means that in America both the calling party and the receiving party pay part of the cost of the call). Yet another relic of a totally outdated principle unfortunately still hindering the American industry. What I condsider the single biggest reason why American carriers suffer so much, grow at such anemic rates, and why the whole North American wireless telecoms industry is in such malaise, is that idiotic idea, that you charge for inbound calls and/or messages (including giving huge buckets of free minutes, but charging inbound calls against the minutes allowance). This has delayed the American consumers' maturity into cellphones and services.

Almost all other countries in the world have figured the math out, and looked at the overwhelming evidence, and long ago switched to the "calling party pays" model by which the full cost of the call is born by the caller only (the exception to this rule is international roaming where yes, the receiving party also pays). With calling party pays, the receiving party has no reason to keep the phone turned off (or indeed no reason why not to carry the phone at all times, even keep it on at night). All countries that have switched to calling party pays have discovered dramatically better economics, as cellphone users discover the concept I call "Reachability" which I discuss in my third book, 3G Marketing, the core element of addictiveness to cellphones. (And yes, the theory holds water. Reachability is the key to why Americans find the Blackberry addictive and is a key ingredient in the greater level of addiction with SMS.) But again, American execs will have certain assumptions about growth rates and economic health of the industry, that is really cave-man age thinking in a digital age. Almost all countries have moved beyond this obsolete model. But any American telecoms exec to join Moto as CEO would be misguided into thinking the world is all like America, and would really need to have someone spend some time to explain what reachability does and why this is vital for Moto.

Candybar. Here unfortunately Motorola fell into an artificial sense of security, on a totally false premise. The launch of the Razr coincided with an industry revolt against Nokia at the time (Nokia's N-Gage gaming phones, the Club Nokia initiative etc) where the carriers felt that Nokia was intruding onto their territory, selling services bypassing the cellular networks. So in 2004, carriers stopped promoting Nokia's early 3G phones. Nokia's market share took a steep dive. At the same time the Razr appeared and was an instant success because it was indeed a cool looking iconic phone. Many USA based industry pundits claimed that Nokia's market share decline was because Nokia failed to capitalize on the clamshell (flip phone) form factor. This was not the case. Nokia had had various form factors before, but it had predominantly candybar shaped phones. Today Nokia's lineup is nearly the same - predominantly candybar shapes and still almost no clamshells. And its market share climbed back from 2006 to what it was and even a bit better in 2007. Without switching to Razr-copy clamshells. No, clamshell form factor was a red herring. That was not why Moto share grew and Nokia fell, and then both reversed dramatically two years later.

The issue was the wireless carrier community hostile reaction to N-Gage and Club Nokia. When Nokia HQ received this "message", it apologized to its distribution chain - the wireless carriers - and withdrew the N-Gage, and re-positioned Club Nokia to be non-threatening to the carriers. The carriers went back to promoting Nokia - their customers still preferred the Finnish phones - and Nokia shot back up to their pre-existing market share. And the Razr effectively died. It was only a coincidence of timing, not a clam shell/flip phone form factor. But Moto management was lulled into this artificial sense of security, assuming they had beaten Nokia and with their Razr and the clamshell, they had caught the new wave of phones. Wrong.

There are very good reasons why so many people prefer candybars (or sliders) to clamshells and lots of Motorola people know this - starting from kids hiding phones underneath their sleeves (in school) and texting through the sleeve. The reason there were so many returned Razrs in January 2005 and January 2006? The Razr is a clamshell, kids could not operate it under their sleeves, so when they received Razrs as Christmas gifts, they hated them, and returned them in mass volumes, much to the bewilderment of Motorola execs. What was once "Star Trek envy" the original Star-Tac Moto clamshell, now that form factor in many markets to many consumers looks very outdated, very wrong, very "last decade". Candybars and sliders are more modern in appeal. But which regional market has the biggest share of clamshells? America. And this again taints the mind of any local expert thinking that because it is so successful in America, surely it must also become so in the rest of the world?.

Oh, kids. Another change. Ten years ago cellphones were gadgets for adults. Some older teenagers in Scandinavia and Italy and Taiwan and Hong Kong were just starting to get some cellphones ten years ago. But today there is a sizeable part of the population aged 6 in markets as diverse as UK, Israel and Japan, who have cellphones. Age 6. And yes, that means that almost all kids age 8-9 have a cellphone. A child's phone is a very different animal to a phone for a teenager or adult. The child will drop it many times, it needs to be robust. It needs to be in childish colors and have butterflies and dynosaurs and such decorations etc. Again, America lags. It is common for American teenagers to have phones but still many parents worry about 10-11-12 year olds getting phones. The advanced markets saw parents losing that argument to their children five years ago.

The youth bring yet another handset design issue. Texting blind. We've written on our blog many times, that the biggest flaw in the first generation iPhone is that the SMS text messaging entry is not good enough for single-handed text entry while not looking at the phone. For the youth this is vital. If an American telecoms exec looks at his or her stylus operated PDA and touch-screen iPhone and thinks internet use, with the phone held by two hands or sitting on a desk or table, that is again the totally wrong concept. Most use of any cellphone globally, is single-handed use because we are in a hurry, with something valuable in our other hand, like our briefcase, the hand of our child, or the steering wheel of our car. We have to be able to use the phone single-handed. With the youth, it goes beyond that - you need to be able to send text messages blind.

One in ten British youth send 100 texts every day; in South Korea three in ten youth send 100 text messages every day. When you do that level of texting, the text entry operates almost subconsciously, almost at the speed of thought, instinctively. You never take the phone out from the pocket, you just send messages to your friends, who often may be right next to you (private joke, private sensitive message, romantic message, secret note in class etc). Clearly Apple has gotten the message, they are now working hard to improve the single-handed operation of the messaging on the iPhone (did I happen to mention SMS is addictive?). Now American telecoms execs could easily have a personal belief that either a stylus or a touch-screen is the way to the future, not understanding how vital texting has become - and single handed operation, blind. No European or Asian handset designer would make this error in judgement. Look at the total sales volumes of the Nokia N-Series vs the iPhone in all European markets - all N-Series can be operated single handed, blind. But even the most passionate iPhone "fan-boys" admit they can't do SMS blind on it (yet, not this first version; expect Apple to dramatically improve it for the second edition)

There are many more changes to our industry over the past ten years, but this is only a blog entry, not a book (ha-ha), and I wanted to touch on a few of them to illustrate my main thesis.

My point is that the mobile telecoms (cellular, wireless) industry has changed much more in the past ten years than in its first 19, and the cellular/wireless side has changed far more than fixed wireline telecoms (which mainly sees death by Skype) and the cellphone side of wireless telecoms has changed far more than the network business. Many of the changes are utterly disruptive and true "paradigm shifts" for any cellphone maker. Motorola was spectacularly unable to capitalize on these changes during these past ten years. The sad truth is, that any telecoms executive from the US based telecoms industry will be even more blind to these changes than management at Moto has been. Get an unpoisoned mind

First things first

Then if that exec is a true pro, he or she will of course study this company and its industry and competitors and customers. The exec will look at these without prejudice. The new exec will immediately notice that America is truly the backwaters and American experts are clueless. That the most expensive experts from America, are on public record time and again, repeating positions that experts in other markets claim to be outdated view. And with the smallest bit of research into the facts, soon it will be self-evident that this is a pattern, that even for all the views where the American experts have changed their minds, they did so years after the leading experts outside of America guided them to the truth.

The new executive will not waste one penny on high-priced consultants from McKinsey or Boston Consulting or KPMG or PWC etc who are based in North America. Its as stupid as a new car manufacturer thirty years ago hiring a car industry consultant from the Soviet Union's car industry (or the Yugo plant manager, ha-ha).

No, the best experts will come from living in and serving the domestic industry in the most advanced countries - ideally several of them. They are easy to find, as most of the innovation tends to come from North Asia (Japan and South Korea) and North Europe (Finland, Sweden, Norway, Denmark) with other advanced markets being Italy, Israel, Singapore, Hong Kong, Taiwan, UK, Spain, Austria, Portugal, Ireland. A respected expert will need to have significant visibility in several of these countries, at their conferences, localized telecoms press, and of course listing telecoms players in these markets as reference customers. And the competence of supposed experts in cellular are easy to spot - just look at the track record, how long ago was the expert quoted in at least a half a dozen of these concepts I talk about in this blog. If the "expert" started to discuss multiple SIM cards and over 100% penetration rates or SMS texting as a universal service only two years ago, this is a late convert to the game. If the expert is quoted on these topics in 2002, then we have someone who has understood the change in question for half a decade already. A totally different level of understanding and competence.

A professional CEO will then start immediate actions to go study advanced markets, (perhaps on an Asian tour might want to use some of my partner companies to go see the industry leaders in Japan, South Korea, China, Singapore etc - and obviously read my fifth book Digital Korea, ha-ha) 

The smart professional executive outside of telecoms, will also soon notice that there are gurus and experts. That some are more respected than others. It will become blatantly obvious that someone like our friend Christian Lindholm is in that exclusive category - called the godfather of cellphone handset design in Finland after all - who is ex Nokia and ex Yahoo mobile, now with Fjord in England; an author and guru on handset design and who essentially created the N-Series (the nearest thing to the true global prototype of where Moto needs to aim for - not the iPhone, but the N-Series). Or closer to Moto-home, understanding next generation applications, former Motorola Chief Application Architect (and author and friend of ours), UK based Paul Golding. On mobile communities and social networking and user-generated content on cellphones our Alan Moore (another author and obviously my dear friend co-blogging here at Communities Dominate blog). And so forth. The real thought leaders, those who are actually quoted and respected by the other gurus (especially again those outside of America)

The smart executive will soon ask about why Nokia, SonyEricsson, Samsung etc have so much higher loyalty than Motorola. He or she will immediately get a couple of top end phones from these rivals for personal use to test and understand.

Then the inevitable question. Is there a killer application in this industry. And just by asking the right questions (from experts outside of Motorola's own staff and obviously outside of North America) he or she will almost immediately discover that yes, there is a relevant application, only one, and that is SMS text messaging. And that new CEO will soon forego his/her own prejudices ("I thought SMS was only for kids"), when study after study show that business users in advanced markets prefer SMS texting to voice calls and even to the wireless email on a Blackberry? and consider SMS not only the preferred communciation method but also their most valuable time management tool. And that SMS texting forms 13% of the total industry revenues - and almost 40% of the total industry profits and generates more annual revenues than all of the billion handsets sold worldwide combined (yes its true, SMS is that big).

This exec - if based in America, outside of telecoms - will almost certainly not be a current user of SMS himself/herself. That does not matter. If he or she is a true pro, he/she will immediately decide to master SMS, and force himself/herself to use it, to try to understand what the hullabaloo is all about. Within a week the new CEO will be a master of it, and using SMS both on a new Moto and one of those Non-Motorola phones, the first major insight will happen why Moto has been losing market share. The proverbial penny will drop. Moto is crap at texting. This cannot continue. Obviously customers are deserting Moto, the more the SMS addiction spreads (was that statistic 2.4 billion active users? so 74% of all cellphone users worldwide?) the more the game tilts against Motorola phones. This is the "a-ha" moment. This will also mean a total re-focusing of the company. After this observation happens with the new CEO, he or she will ban Blackberries and force all his management team to quickly get to 20 SMS sent per day, just so they too can see the light. After that, things will truly happen at Moto-Moto, Hello Moto.

A truly professional CEO will also want to understand the customer of mobile. And very soon discover that there is a Generation C (Community Generation) for which the cellphone is the defining technology (and SMS very literally the 24-hours-per-day lifeline). That CEO will want soon a solid study of Gen C and what all insights there are of this customer type and soon discover research and documents ranging from Chetan Sharma's brand new book Mobile Advertising, to M:Metrics numbers to the Wikipedia entry etc.

The media dimension of cellphones will also be of interest to any professional stepping into the industry as new CEO. Then such concepts as Mobile as the 7th Mass Media will be vital to understand. What are the unique benefits of cellphones, beyond just copying the internet or TV or print onto the phone. Again, the insights will appear, that Dot Mobi has materials around this, etc.

Moto was almost there once before

This is also an industry that changes fast, and there lies one opportunity. Moto was also very well aligned with the right moves and the right partners. Hello-Moto? Only a couple of years ago Moto had two of the best possible brands to partner with - Apple said it would do its "iPod phone" with Moto (which resulted in the disasterous Rokr) and an even greater scoop (what could be better brand than Apple in music, video, youth for cellphones? There is only one..) - MTV ! This roughly at the same time as Moto also launched the iconic Razr (it was a hot phone at its launch) and even the naming scheme (Moto Razr, Rokr, Slvr, Pebl etc) - something that Nokia soon copied (which was not due to Moto, it was due to our friend Keith Pardy moving in from Coca Cola to head Nokia's global marketing; nonetheless, Moto the prototypical engineering company did something so boldly "marketing" oriented, that even the "best marketing company in cellphones" Nokia could only follow. Good move Moto). Our friends at MobHappy blog even dubbed Ed Zander the Motorola CEO as Moto Zndr.. And all these right moves were at a time when Motorola's market share decline had been stopped and turned into a climb.

Out of all this promise, what do we have? Apple's collaboration with Moto resulted in the end, a brave, bold, visionary product, the iPhone, a paradigm-shifting cellphone. Motorola's engineers could have created the iPhone, but Moto-Management was not able to see that. What of MTV? MTV has gone from strength to strength to strength, as the most powerful broadcast brand in cellular wireless (with my apologies to Fremantle ie American Idol, Endemol ie Big Brother and CNN, all also leading edge media in mobile; and MTV being the obvious opposite of Disney, the other iconic childrens and youth brand, that mismanaged its entries into cellphones with ESPN and Disney Mobile MVNO in the USA to catastrophic effect). MTV did, after all, invent SMS based interactive TV in 2001, and has trailblazed the cellular industry with one innovation after another, from Sweden to Italy to Israel. In Belgium 16% of all cellphone subscriptions are on the MTV Belgium MVNO network. In Germany the MTV dating service is the nearest thing to UK's Flirtomatic that I've seen. In Japan MTV has already commercially deployed the wet dream of YouTube hoping some day to converge broadcast with web video with cellphone video and making money out of it. MTV Japan has that already. Out of partnering with these innovators Motorola ends up with essentially nothing.

Note that if it had been Disney and Siemens, rather than MTV and Apple, then we would well forgive Moto for not achieving a lot out of those partnerships, as both Disney and Siemens very glaringly failed in cellphones and pulled out of it (Disney now suddenly re-entering in Japan). But Moto did partner with two companies outside of cellular, which both have made spectacular advances into this industry, into new markets and most of all appealing to the youth and young adult segments. If that was what Apple and MTV were able to do, then for Moto execs just to sit in the same room with them, should have given enormous gains into the psyche of the young music and video oriented customer. That Moto was left with nothing to show for this, where the partners were so clearly "world class" - this is unforgivable, it is quite clearly management negligence. Why is this? My gut says that was not lack of knowhow or insights; it was hideous execution. If the same partners excel out of this, then the giant - Moto - itself on an upswing, should have certainly matched their levels of success.

So, clearly Moto has dug its own grave rather eagerly and messed up many great opportunities. Yet, there is good news. This kind of knowhow does not vanish. There is plenty of that knowhow still within the Moto-team if the right CEO can find it. But can it be Moto-ignited?

Oh, some readers might think this blog is an attempt by this Ahonen guy to try to get some consulting biz out Motorola. Thanks. Actually that is totally not the case. I never mention any of my confidential customers by name unless they voluntarily admit to working with me and thus become reference customers of mine. I've had that honor with Motorola several years ago already, when they graciously admitted in public that they do work with Tomi Ahonen and thus became one of my many reference customers (together with their direct rivals Nokia, Ericsson and back then when Siemens still sold telecoms networks and handsets, also Siemens was a reference customer of mine; with the "usual gang" of NTT DoCoMo, Vodafone, SK Telecom, etc). So no, I don't need to sell myself to Moto, I have many Moto-friends who know me, that we have the NDA already in place, and where and how to reach me. My friends also know I'll be there with them should they happen to want some consulting assistance. But also, in all honesty, this current predicament of finding a CEO is totally NOT a job where my consulting support could be of any assistance. Today Moto needs a new CEO, and that means very high quality headhunting support. The personality tests and interviews and whatnot - and that is not anywhere near my core competence. I can help my custoemrs make more money with mobile, thats my gig, but to help a giant corporation hire a new CEO, sorry, I wouldn't know where to start. All I could do, was to refer you to my headhunter friends, ha-ha..

So now, to conclude, when the new CEO is appointed, it will become a race against time. Motorola's market share is in terminal decline. Its staff is panicking, sending out CV's to escape the sinking ship. The customer loyalty is gone, the Razr's shine is long gone. The competitors are hungrily gobbling up market share and customer loyalty, with machine gun pace of new product launches. They almost dismiss Moto as a has-been and consider the iPhone as the only true American cellphone. The Moto-Parent will not give this Moto-Child much Moto-Time, if the CEO cannot perform a quick Moto-miracle, the unit will be Moto-sold. In that environment, the new CEO has his/her job cut out for sure, and it will not be easy. A telecoms exec from America would have too much to un-learn. But a fresh mind from another industry, who would only start with understanding cellphones in 2008, forget the baggage, and aim for a revitalization, can do it.

Thus, the very worst appointment Motorola could do, for its newly independent handset unit, is to appoint any telecoms executive from any American telecoms company. The less telecoms experience to unlearn, the better. What the executive truly needs first, is professional marketing (and business-to-business sales serving the carriers of the world as the primary sales channel). Secondly - considering Motorola's perilous position, strong finance background. Thirdly of course excellent executive management and motivational ability to re-energize the demotivated staff. And finally - an enormous curiosity into learning this industry as it is today. The right exec can turn this once proud inventor of the cellphone into a juggernaut once again. Our industry would be better for it, here's to hoping the new CEO will succeed.

Ideally, Moto should hire a top marketing oriented executive VP head from one of the four giant rivals (Nokia, Samsung, SonyEricsson, LG). I'm rather certain they can't pry a worthy one to join from them, and even then, there would be issues of culture and management style and language etc. And even then, that might not be the best choice for Moto's current needs.

But rather, I suggest to go for a fresh mind. Not one poisoned with all that faulty reasoning "baggage" of archaic prejudices of any US based telecoms exec.

Get a top CxO (CMO perhaps) from a major player in some OTHER industry in America, from a severely competitive marketing-oriented industry far removed from cellphones. Airlines. Automobiles. Home Electronics. It does't really matter. Get someone who does NOT know telecoms, preferrably not at all. But a really solid business understanding, with a heavy dose of modern marketing. And solid finance. And a proven track record of successful executive management (ie good at motivating a demoralized organization).

Comments

[Dabe Yia]

Great overview article. Almost qualifies as one of your thought papers, as it definitely has the content. Tomi, you should rant more often.

[William Volk]

My vote would be to hire someone from the content side of the business or an executive with proven consumer product successes.

[Tomi Ahonen]

Hi Dabe and William

Thanks for the comments.

Dabe - ha-ha, thanks. I like that. But seriously, obviously, just "talking to Moto" would not make a very interesting thought piece for too many in our industry (apart from Moto employees and shareholders ha-ha) but equally, the points I talk about - the 20 changes in the mobile telecoms industry that were in this rant, are all quite meaningful to all of us in this industry. I might well turn that into something. That is how all my Thought Pieces start, by the way, from an original blog - which tends to be too long - and then I perhaps return to the topic a coupla times and fine-tune it and refine it, and find the theme and topic focus and then edit it heavily down to 2 pages..

Could be, could be. Currently I'm finishing the update to 7th Mass Media thought piece, the current one is way out of date :-)

William - good point. Content side could be good knowhow and competence. But there might be the danger, that the new CEO would push mobile too hard into a media device (pocket TV, pocket radio, pocket Google?) where it really is first and foremost a communication device. SMS texting is the single biggest fault of all Motorolas, if there was one dramatic change, that is where I'd start... But yes, a content person would be far better than someone from the existing USA based telecoms players..

Thanks for writing - hey, thanks for reading that monster blog all the way to the end :-)

Tomi :-)

[Venu]

Excellent read, Currently living in Europe (lived in US 2004-2006) I do agree with most points you have raised, and I think thats why I switched from Motorola to Nokia a long time back.

Venu.. :-)

[Giff Gfroerer, i2SMS]

What also needs to be explored is the "actual" state of mind of the American consumer/mobile user. What needs to be explored is the "actual" network availability to the average American consumer/mobile user.

Moto could come out with the most fantastic, state of the art device tomorrow. However, if the general public has not been made aware, through the natural progression of technology and learning via marketing, of how to use the new features, of the need for the new features, and the savings in time of the new features, the phone becomes a N95 where we have fantastic technology/features, yet need a Ph.D. to run all of the possibilities and find them on the menu. If the network can not carry the load, what is the point? (ie. - take T-Mobile, just now rolling out 3g in the states, but then declaring it ONLY for voice and not data).

This leads us back to your point on marketing. This is where the new CEO of Moto needs to come from. America needs educational marketing to teach what is available, how to use it, and what we can do with it. America then needs affordable plans as for the most part, if we aren't using it now, why do we need it at all? Possibly just give it away as standard with any plan over a set amount like Vodaphone's 500mb of free data with every plan over 40 pounds recently announced.

What America needs is an affordable iPhone, for the masses, publicized for the masses, rich in features and not 5 year old technology as in the iPhone. Then, we need a marketing guru to teach us all why we just "can't" live without it.

Excellent Read! Thanks for the time...

Giff

[Martin Geddes]

I'd have said "Hire someone close to the customers" -- grab the CEO of one of the content businesses that the kids and twentysomethings are mad about. Also hire a seasoned COO to translate the vision into action. (Then again, nobody pays me for headhunting advice either, so it's worth what was paid...)

My top priority for Moto's handset group? To internalise the lesson from Nextel (a Moto child), 3UK (SkypePhone), Apple (Visual Voicemail) and Nokia (Ovi) that you need to build an end-to-end solution or platform for the core 'converse' and 'create' functions. Why can't I press the camera shutter button on one Moto phone and you can see what I see on yours? Make Moto phones work best with the services people actually use. Make it easy to integrate SMS with every other form of messaging and communication they're engaged in. (I'm less bullish about SMS as a business than Tomi, because it'll suffer a lot of margin pressure from IM, regulators and flat-rate packages.) Why doesn't my handset address book search also search all the socnets and services I'm a member of?

I suspect they don't have the skills and resources left to do this. There's no obvious buyer. Nobody in PE has the cash. Looks pretty grim. Head for lifeboats?

[Tomi Ahonen]

Mi Giff and Martin

Nice to see you both here at this discussoin..

Let me start by saying, that Moto cannot survive if they "pander" (Tomi's been watching too much US presidential election coverage on CNN ha-ha) to the US market. The US subscriber base is only 7% of the world. So even if they somehow stole every US customer and converted them to a superb and cheap Supa-Moto, they would still be smaller than LG in the market..

For mobile phones, far more than say the IT business or media or advertising, the North American market is nearly irrelevant, it is that small now. They have to expand abroad. Or rather, Moto has to re-capture their former market share abroad. That is why I was so dismissive of American knowhow and market maturity in mobile phones.

Giff - great point on the relative maturity (and lack of) of the American market and consumer. Moto could not release phones competing with say the Nokia N-82, N-96 and E-90 Communicator, and expect them to do well in the USA, because these hit phones in the rest of the world are not doing well in the USA (or Canada). Very good point. But also, Giff, I hear you, but observing my comment above, what Moto needs is not a CEO to succeed in the US domestic market. That could work for GM or Ford, it could work for Dell or HP or Apple, but it would not work for Moto. Their market is 93% overseas (well, counting Canada and Mexico also into the "overseas" basket, ha-ha).

Let me argue a bit with you, Giff, playing devil's advocate. Imagine SMS text messaging - still not the hit wireless service in America, but growing strong with well over half of the population already as active users. Now - if you send 20 messages per day (600 messages per month) and you pay 10 cents per message and it costs you 60 dollars per month - then you are VERY attracted to any bulk offers, 500 free messages, 1,000 free messages etc. That is the typical heavy user teenager today, any country.

But the industry does not need to teach teenagers to love SMS. Give them their low cost buckets, sell them 500 messages for 20 dollars or 15 dollars or even 10 dollars (but not for free).

BUT - teach the non-users to become users. Give THEM free intro services of 500 messages that last three months for example - but make it very clear that these are only for sign-up or to start with, as a trial offer. And after them, the normal SMS rates (10 cents per message) will apply. The average US mobile phone subscriber only sends out one message per day, so 30 SMS per month is 3 dollars. These customers will not have any kind of sticker shock, if their monthly bill is 50 dollars. They find SMS initially as a funky, quirky, but occasionally quite powerful tool. They use it more and more, and become addicted. We move them to the 1 message per day level, and then watch the usage creep up to 2 messages per day, 4 messages per day etc.

To help boost that - announce any kind of gimmick days, of totally free messages for today. Today is the eigth anniversary of our first SMS message, or today is the 1000th day since the first MMS message or whatever, gimmicky types of celebration days. TOTALLY un-announced, and then for that day, give everybody totally free SMS - including to all other networks. What this results, is after the free day, the total monthly usage level is dramatically above what it was the month before this promotion. Do this on unpredictable basis a couple of times per year (its the birthday of our new CEO, he wanted everybody to have free SMS today, etc)..

So - my point is, that if SMS is addictive, then the way to capitalize on it, is to ensure every customer pays for the service. To use free trials - just like a drug pusher - to get people hooked - but NEVER give the total service for free, to anyone. If they want to buy SMS in bulk, that is fine, but always charge. The heavy users (above 20 SMS per day) will of course seek best offers. But most habitual users - 1-2 SMS per day - will not bother to try to find big SMS bundles, and are quite happy to pay 10 cents per message. The price point is below their pain threshold.

So, I hear you that Americans could use very good access to the internet and free packages etc. But I really do love this part of mobile telecoms - we are ABLE to charge for our service. Lets not kill the cow that lays the golden eggs (or however that metaphor went, ha-ha, its late here in Hong Kong).

Martin - very good point. Close to the customer yes. But then - is the relevant customer that of the US customer, absolutely not. The relevant (end-user) customer is young, employed, living in Singapore, UK, Scandinavia, Italy, Israel, Ireland, Portugal, Austria. (Not South Korea or Japan, they are perhaps too advanced).

Who serves that customer base? A youth-oriented mobile operator brand like perhaps Orange or Virgin in the UK (or Blyk)? As opposed to the O2 as the family brand or Vodafone the business/enterprise brand? Or perhaps a youth mobile oriented mobile service like Flirtomatic or Itsmy or the mobile arm of MTV (Europe)? Or perhaps the youth brand by one of the major players, like Telenor's D-Juice? The problem is that these tend to be "relatively small" compared to the Global 500 sized Motorola.. So the CEO of a company with a couple of dozen employees or even some hundreds of employees, is not really the right size for this jump in executive responsibility. But I agree, the right CEO from this kind of space would potentially be the best.

Of the "actual customers fo Moto" ie the mobile operators in these markets - then it gets difficult. There are some good CEO's out there in the mobile operator space but also many who are struggling just to get to terms with their own home market, and would honestly be quite lost trying to adjust that competence to a global handset maker (including their long 18 month development cycles etc) which has been drastically losing market share.

But at least, if they did go for a CEO from the mobile operator/carrier community, then yes, a CEO from these advanced mobile markets, Italy, Israel, Ireland, Singapore, UK, Sweden, Norway, Finland, Denmark, Austria, Portugal - would be far better than one from the US based carriers/operators.

Then on the ideas you give, brilliant. This is exactly the kind of thinking that is needed. But even there - you don't need 12 new ideas (a couple hot ones will help) but more importantly, the Moto would need to become far better at doing its main work today, text messages, voice, camera, mobile data services, etc.

Certainly the top management of the new Moto (and indeed any major American telecoms player) needs to visit Tokyo and Seoul and see that future. What it is like visiting the KDDI experience store - where you cannot even sign up for a contract on KDDI, it is only to play with the upcoming phones for the next few months, to see them in advance, to build up that demand (and to help estimate the sales volumes of mass niche audiences for a fashion good on very short production runs..).

We have friends here at the Communities Dominate blog, like Lars Cosh-Ishii of Mobikyo and Wireless Watch Japan, who does just that kind of exec tours for Westerners to visit Tokyo and visit with the execs of the telecoms/IT/media industries. I've joined him on that kind of excursions and they are truly eye-opening for Westerners. Before that it seems like science fiction and someone else's story and someone else's market. After you see it in person, you know this is the future, and either you get with it, or you are a dinosaur. Even for me constantly peddling South Korean and Japanese stories about mobile, whenever I visit those countries (several times per year) I am still always amazed..

Anwyay, your final point Martin - ha-ha, that the money is tight, who would want to buy this relic of the past, is a pertinent one as well. It may well be a good time for the rats to head for the lifeboats, brush up those CV's..

Thanks both for writing

Tomi :-)

[Giff Gfroerer, i2SMS]

Excellent points, Tomi. I see your light. Moto does not need to capture the US market, but the foreign market. This is where a leader from outside the US could really innovate Moto...

And preaching to the choir about SMS costs. Love your ideas about promoting it. As you know from my previous posts, the US has been doing the exact opposite on SMS charges. They keep raising the rates from 10 cents to 15 cents to 20 cents per message sent. This does not nudge people into "trying" the service, but instead inhibits them from wanting to try the service.

If the American carriers lowered their SMS rates, gave it free for 3 months on any plan, gave free days, all of your suggestions, then yes, people would be introduced to this highly addictive service that is a cash cow. Get people using the service, then show them the bundled packages. That will work. 100% in agreement with you on this one. But by making it cost prohibitive, I simply do not understand this.

[Tomi Ahonen]

Hi Giff

Thanks for coming back. Yeah, we agree :-)

There is actually even a worse effect to the prices at so high level. They are now strongly promoting the spread of mobile IM (Instant Messaging) solutions. That is bad, very bad. Rather than first teaching their youth customers to become addicted to SMS, they bypass that stage, and jump directly to mobile IM. Then it means that rather than using SMS as the default learned behavior and having to change for IM, now the IM form becomes the learned behavior and SMS only the messaging option of last resort.

And even worse, any IM environment is subject to the laws of the sizes of communities, the utility increases with larger communities. If a struggling IM provider for mobile in America can't make moeny, they might go away or struggle in their pursuit of growth and profits. But if customers "flock" to IM, it makes it that much easier for the IM providers.

Yes, this overpricing of SMS is terribly shortsighted by the American carriers. I am so often so saddened when I think of the American side of our industry. There is so much potential, and it is wasted at such gargatuan scale.

Well, thanks for listening to my rant ha-ha..

Tomi :-)

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