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   August 16th, 2007 at 4:24 pm from John Roese’s Blog » Blog Archive » Nortel’s 4G Strategy

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1. John,

   It is easy to agree with a basic strategy/tactics statement as far as it goes…..but to expand a bit….

   I think your strategy is very reasonable and a lot of it will ultimately come to pass (e.g. 3G -> 4G). When you say “lower cost” however, the questions that occur to me is “how so?” and “for whom?”. I have a hard time believing infrastructure replacement is viewed as lower cost to established operators, and any increase in cost is passed on to their customers making it higher cost for them too. True OPEX may fall over the long term, but OPEX savings has *never* been a successful sales pitch in and of itself. This returns us to the pitfalls in the “Forever Green?” discussion.

   So my take away from the strategy is that the next gen will likely be deployed first by the startup or in a place where there are no dominant carriers with embedded technology buildouts rather than the established players. Which means it will not catch on as fast and will need a “killer app” or ten to drive demand. I do not think hyperconnectivity is a killer app, just the natural result of many killer apps.

   As you point out, tactics are the day to day decisions that move your business toward the strategic goal, but as important is the timing of those tactical decisions. So, assuming that no one is betting against “faster, better, cheaper?” service providers with embedded technology buildouts will delay things (as best they can) until they fully amortize that previous investment. Furthermore, they will delay things on the simple principle that once fully amortized, the previous technology is “printing money”. This is not to say they will not be working to test and influence the new technologies, they just won’t be writing big RFPs until they are sure they have completely milked the cow. Established carriers with deep pockets may be tempted to “sit” on spectrum as much as the FCC will allow them to.

   As well, tactics need to have a way to adjust to changing conditions. This means to me that developments in competitor products, competitor mergers, acquisitions, other deployment decisions by customers, regulatory changes, standards and financial market capitalization all are likely to necessitate adjusting your tactics and timing. I am not sure the nortel engine is firing on all (or even most) cylinders in this area.

   The take away I have from the tactics is that to really make the 20% R&D investment pay back one of your tactics should be to find the least cost way and place to implement the new technology in the bigger players network once they are forced to deploy it. Nortel has usually been pretty strong in the regulatory and standards arena and leveraging that is a good thing. Nortel needs to get much better at walking a mile in the customers shoes and be in much better touch with the customers financial and procurement verticals. Nortel needs to understand what competitors and customers are doing when they shed and acquire businesses and be lightning fast at correctly adjusting tactics.

   After that catharsis I am left with one burning basic question though; why would 4G strategy be articulated by carrier networks as opposed to being a more overall strategy across lines of business; - (does nortel even use that term anymore?) - Wireless, Enterprise, Msos, Carriers, Government? or markets; North America, Cala, Europe, Asiapac, ROW. It seems to me that another strategy/tactic might be to have a good end-to-end 4G product to address the LOB verticals and might also have a target market that (for example) has a young population or a less established infrastructure rather than focusing on carriers. I believe it was you who said (albeit during the protocol stack conversation) that simplicity was best driven from the edge.

   Could it be that Nortel is consciously taking a bottom up layered approach rather than approaching the problem in a vertical sense? If this is honestly the tactic, then I applaud you. This horizontal view of the problem domain and markets is always the way I have looked at the solution and in my mind it could be very successful.

   August 15th, 2007 at 3:04 pm by many

2. John,

   You had a similar long-term strategy when you envisioned UPN and Secure Networks at Enterasys. You did all the things you talked about “First, you must be passionate about it (evangelize, sponsor, fight for…) and, second, you must execute on tactics that move you closer to making that strategy real every day (build products, standardize technology, partner, test, trial, and deliver).” but nothing ever came to fruition. The “market” never saw Enterasys as anything more than a niche player.

   How is Nortel going to be different in this respect?

   August 16th, 2007 at 10:03 am by Former Customer

3. John - your definition of strategy is my definition of company vision. Vision = ‘where’ you’re going. Strategy = ‘how’ you’re going to get there over the long term, and a good strategy includes executable tactics coordinated by a roadmap.

   I think I get Nortel’s vision, but I still feel mostly in the dark on what I call strategy. Some of your tactics are clear but my inability to map them back to an encompassing strategy is behind my frustration.

   Your 5 points are good ones, but not necessarily reassuring. Point (1) could be as much of a liability as an asset moving forward depending on Nortel’s ability to effectively evolve (remember evergreen?). Also, I bet the forecast erosion curves for most of those businesses when mapped onto the growth curves of whatever Nortel has cooking behind the curtain is what keeps your boss up at night more than anything else (at least I hope it is).

   Cisco is the benchmark I’m using to assess your strategy and plans. Compared with Nortel, I find them to be almost transparent. I don’t think it’s because Cisco is less secretive, I think it’s because they have a much sharper view of strategy. On the other hand, some of your other rivals make Nortel look best in class. ALU is a quagmire of incomprehensible tactics in almost a total absence of vision and strategy.

   August 22nd, 2007 at 11:33 am by Paul Stevens

4. In reference to #2 above … First a disclaimer: I have not really had dealings with Enterasys for almost 2 years, so I am in no position to comment on their current strategy or activity; my comments here are entirely based on my historical involvement. Additionally, the focus of my comments are to illustrate a point on strategy and tactics not to debate the merits of historical events.

   It’s interesting that you bring up UPN and Secure Networks as an example of strategy and tactics. In the situation of Enterasys, the environment and situation were very different than Nortel’s. ETS was, at that time, a roughly half-billion-dollar company in the enterprise networking space and, more importantly, was attempting to recover from a pretty dramatic change in the industry landscape caused by the dot.com bubble bursting. The environment and situation required a strategy that would, first, make sure the company survived; second, that could get it back in the dialog with customers and the industry; and, finally, that could allow it to win new customers in the hyper competitive data networking space.

   We looked at that situation and created the secure networks strategy. The goal was to change the dialog around LAN infrastructure from simply “bit pipe” transport to a dialog where embedded security and intelligence would be as or more important in the buying cycle than other items. Since we had very strong security technology and understood networking well, merging the two would be a reasonable strategy. More important, the timing was right because the CIO mindset of 2002-2005 was all about solving security issues. The result was that we shifted all R&D to make a set of innovative solutions (Automated Security Manager, Sentinel, Dragon, UPN,…) that would make the company the premier “niche” player in the secure networking market. We acknowledged that the company would not be a general-purpose networking supplier and that if the customer did not care about security in their network, they would probably not choose the solutions offered.

   With that strategy in mind the tactics began. First, the company focused on R&D in this space only. By 2004, there were no non-secure networking products in the product line. Second, a brand had to be built to create mindshare. The model was to focus on the customer, industry and press. The result was that by 2004 Gartner had moved the company to the visionary quadrant of their Magic Quadrant (even though ETS was 20 times smaller than the market leader) and Forrester issued a Wave ranking positioning ETS as the leader in the secure networking market. Finally, the sales and marketing focus centered entirely on capturing customers who prioritized security as the key buying cycle (instead of convergence, capacity, or other areas). The result was that by 2006 the company had significantly better margins and was winning close to 20% of its business displacing systems of its biggest competitors.

   Was the process successful? Well, it depends on your view. Our goal at that time was to make sure the company survived after some very serious challenges. Second, we wanted to make sure we could be relevant in a market of our choosing that would be meaningful to the future of telecom. Given those goals, I think the strategy was realistic and the tactics worked. The company is now a private entity and I have lost touch with their activity today, but at the end of my tenure it existed as a viable niche player in a key segment, was breakeven to profitable, had market leadership in the niche we focused on, had a huge IPR position, had very strong differentiable and unique technical capability, and continued to serve its customers and win new deals on a regular basis. The goal was never to be the 800-pound gorilla; the goal was to be the best secure networking specialists in the world. That, I contend, was done well and validates my model of having a clear strategy, tactics to execute, and goals for success.

   If we look at Nortel, clearly it is a different game. Nortel is more than 25 times the size of ETS, is in the broad telecom market, has an R&D budget orders of magnitude larger, and a brand and scale that are at a different level. That means that our opportunity is different, but we still need to have a clear strategy and a tactical execution to get there.

   At Nortel, we are big enough, significant enough and able to shape a much larger segment of IT and telecom. We have chosen to do that (see the blog entry above) with a set of strategic focus areas. We are now executing the tactics to make that happen and that involves a sequence of R&D, go-to-market, operations and alliance moves. It is impossible to determine how it will all play out but, in general, my experience has been that the formula of having a strategy that increases the value of your business to the market you participate in and then having a focus on tactical execution over the long term are critical in operating a business to success. Sometimes the goal is to be the best secure networking niche player; sometimes it is to drive the hyperconnected world. Environment, scale, people, technology and markets may vary but that does not mean that the basics of rational orderly vision, strategy and tactical execution are not the proper way to succeed in business.

   August 22nd, 2007 at 3:28 pm by John Roese

5. John – you wrote: “At Nortel, we are big enough, significant enough and able to shape a much larger segment of IT and telecom. We have chosen to do that (see the blog entry above) with a set of strategic focus areas. We are now executing the tactics to make that happen and that involves a sequence of R&D, go-to-market, operations and alliance moves. It is impossible to determine how it will all play out but, in general, my experience has been that the formula of having a strategy that increases the value of your business to the market you participate in and then having a focus on tactical execution over the long term are critical in operating a business to success.”

   I agree that Nortel is one of the companies that “can” shape IT and Telecom, but I eagerly struggle to find evidence that you’re going to. I think Nortel has a leadership issue. The Carrier and Enterprise presidents (and their boss) are not subject matter experts in their businesses so they’ll have to use near term financials without the benefit of personal insight to make strategic decisions. Not good. The people they have reporting to them are not subject matter experts either (little/no visibility/credibility in industry forums) so it just doesn’t look like Nortel is going to hit on the ‘next big thing’ in the near term and that’s scary. The WiMax focus is good, but it isn’t enough, nor do I have confidence in the market timing or Nortel’s execution.

   We understand the difference between strategy and tactics. We also understand the difference between talking and doing. Show us some action. Please talk less about what’s going to happen or what the standards bodies have done and talk more about what Nortel has done and why we should care.

   August 30th, 2007 at 10:01 pm by Paul Stevens

6. John- with respect to the “hyperconnectivity” marketing blitz,I can understand how the ICA with Microsoft will aid in promoting this hyperconnectivity strategy within the Enterprise space as the products being developed would facilitate the long term goal of achieving “hyperconnectivity”

   However what are the strategies for hyperconnectivity outside of Enterprise,more specifically if you are touting 4G as the foundation for this strategy,can you clarify in product terms what will Nortel be able to offer to help bring 4G full circle?

   And will this be done alone or will there be collaboration in completing the pieces of the puzzle that willm bring 4G full circle?

   thank you

   August 31st, 2007 at 2:02 pm by Bill Stock

7. For me that came from “1,000 USD GDP country”. Cheap is the good news, and the best news is free. Could nortel make “special strategy” only for “1,000 USD GDP country”, let say that you sell anything in small part so the base unit consist only very-very basic hardware/software that realy-realy need to turn on. Specially in CS1000, get ride all feature, if customer want feature let they buy per feature as they needed. So Nortel can sell it more cheaper.

   October 9th, 2007 at 9:34 pm by david m gosal

8. I am writing an article on euphemisms and doublespeak and you used the seemingly concocted word “mindshare” that appears popular among marketing web sites, but does not appear in the dictionary. What does “mindshare” mean?

   February 22nd, 2008 at 1:05 pm by Craig Senior

9. Craig, if you Google “mindshare”, lots of places provide definitions. Here’s a good one: http://ezinearticles.com/?What-is-Mindshare?&id=706088

   “Mindshare relates to the extent to which a brand holds the collective attention of a given populace. The more a brand has, the stronger and deeper are the associations that people form between that brand and a particular product or service. High mindshare for a brand means that the said brand comes to mind, on average, more quickly or at a higher rank than do other brands.”

   February 23rd, 2008 at 5:08 pm by Sally M

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