Nimbleness can be a competitive advantage, until you lose it

I was recently going through some older books and came across one called Nortel Networks: How Innovation and Vision Created a Network Giant. Larry MacDonald wrote it in 2000.

Wow. How much has changed in such a short time.

Nortel was a client of mine from 1996 until they declared bankruptcy on January 14, 2009. I experienced the rollercoaster of ups and downs, as Nortel lived through explosive growth, doubling in size, and then hitting bump after bump to suddenly arrive at a point of disappearing into oblivion.

For a company that got its start way back in 1895, surviving two World Wars, the Great Depression, numerous recessions, and at one point having a total market capitalization of over $300 billion, ending in bankruptcy doesn’t seem like an expected end.

So what happened?

At their peak, Nortel had annual revenues of approximately $30 Billion and 90,000 employees. Over the span of just a few short years Nortel completed numerous acquisitions worth billions. In 2000 alone, Nortel acquired 11 companies at a cost of nearly US$ 20 billion.

Today, almost all of the assets have been sold to other companies, including 6,000 patents that were sold for US$ 4.5 billion to a consortium, including: Apple. EMC, Ericsson, Microsoft, Research in Motion, and Sony. What was Nortel is now all gone.

There has been much written about Nortel, and likely more to come. But after much reflection on this topic, I have concluded that there is no single answer to explain why.

What I have determined is that when Nortel was at the top of its game, it embraced the value of Nimbleness.

The value of nimbleness

As a differentiating value, Nimbleness means agility; intelligence as revealed by quickness and alertness of mind.

For decades, Nortel embraced the value of nimbleness. The results showed for themselves. Reviewing the history of Nortel, its clear there were times when nimbleness was lost, or at least challenged. But then it was re-embraced and Nortel’s market leadership was reclaimed.

As a component of nimbleness, intelligence is an asset measured at a point in time. Maybe it was the combined intelligence that helped accumulate a treasure chest of patents, and the innovations they created. But when others know what you know, it’s no longer a competitive advantage. It requires constant hard work to maintain an intelligent edge.

Agility is also a value component that is difficult to sustain long term. This too requires consistent and constant hard work to maintain a competitive edge.

In other words, nimbleness is a difficult value to preserve over the long haul. It’s especially hard to maintain a culture of nimbleness when acquiring many companies over a short period of time.

A change in culture

In 2004 I was part of a small team tasked with developing an integrated messaging campaign for a revised version of Nortel’s Carrier division (selling equipment to large players, such as AT&T and Verizon). As Nortel’s market share was shrinking, for various reasons, Nortel was bringing together 4 divisions: wireless, wireline, cable, and the traditional carrier group.

Based upon numerous one-on-one interviews with key executives and leaders of the business units one thing became clear. In spite of all the amazing innovations, new products developed, and thousands of patents filed, competitive differentiation at Nortel was not a specific technology or product.

The secret at Nortel was its people.

For over 100 years, Nortel was an organization based on hard-working, intelligent engineers who valued nimbleness. Only, the culture had now shifted.

Looking at the organizational and intellectual strengths of Nortel, it could be defined as an odd combination of:

–       Dependable and reliable: always coming through in the end (“firefighting”)

–       Fast followers and risk averse: no longer proactive or leading edge

Yes, at that time Nortel was still made up of great people who produced quality product. But they had lost their nimbleness.

Today, some people say Nortel lost its focus. Others suggest they lacked credibility in the market and needed better marketing. Still others blame the leadership.

If you consider the hyper-competitive global marketplace in which Nortel was competing, there were many challenges for Nortel to face. All the major players – including Cisco, Lucent, Alcatel, Siemens, Nokia, Ericsson, Huawei, and others – were fighting it out to see who would be building the next generation Internet and future networks. One thing was clear – Nortel was no longer on top.

Nimbleness is a powerful value and can provide significant competitive advantage. But if you lose it, and don’t have a fallback plan, you can end up completely out of business. No matter how big you once were.

 

What do you think Nortel could have done to preserve their competitive advantage and remain in business?

 

Note: my observations or comments in no way dismiss the tremendous pain, anger, and frustration of former employees, shareholders, and suppliers who lost much due to the collapse of Nortel. My heart goes out to them.