Location: Ottawa, Canada
There have been a few comments left lately from people looking for more detail on Nortel’s overall corporate strategy and where we’re placing our bets to win in the future.
The one from Paul Stevens is a good example. “He asks: What are the bets that Nortel is well-positioned to place? What are the sizes of these market segments, and how much does Nortel expect to capture? Why will you win?”
Mark Evans – and, yes, I do read your blog periodically, Mark 
– also recently asked “What’s Nortel?”
Who better to answer those kinds of questions than my colleague George Riedel – Nortel’s Chief Strategy Officer – who took me up on my offer to do a guest blog entry. Judge for yourselves and let us know what you think…
First of all, John, thanks for the invite to be a guest blogger and for the opportunity to directly address one of the recent posts. Let me try and shed some light on the "where will the growth come from" question.
Let’s start by agreeing on a few key assumptions:
1) We have to drive for profitable growth. Nortel has publicly committed to adding 300-500 basis points a year over the next two years to go from a breakeven company to earning 13% operating margin, through a program we call “Business Transformation”. This program involves six key areas of focus targeted at both reducing OPEX and expanding gross margin to achieve the US$1.5B improvement. And this stuff is all within our control (e.g., supply chain, G&A costs, R&D effectiveness, etc). As evidenced in the financial results we issued two weeks ago, our focus on executing on this program is showing solid progress.
2) In terms of timeframes, we need to separate out the investments we are making in products/partnerships/portfolio restructuring vs. the timing of the impact on the top line. 2007 will be an important transition year for us – where because of our UMTS access exit in late 2006 we’ve communicated flat to modest decline in aggregate growth. The real point you should take away is that, as we stated on March 16, we will grow faster than the market in the key growth businesses in 07, just like we did in 2006.
3) Our key to success will be built on three tenets: i) a focus on disruptive technologies to exploit the opportunities of change (more below); ii) aggressive work with partners/ecosystems to get leverage – both in terms of solutions as well as go-to-market leverage; and iii) having the global services capability to pull it all together and help our customers make the transition to new solutions.
4) We think the nature of the "hard problems" that many of our customers are now facing are cross domain. (John talked about this in his first blog entry.) They won’t be solved by simply throwing another box at the problem. Rather, they will require an integrative approach, where the combination of experience and portfolio in a range of businesses will be needed. For us, that’s enterprise and carrier, wireline and wireless, infrastructure and applications. We think others will have to develop the same scope of expertise to be successful in areas like Fixed Mobile Convergence, SOA, Web Services, Unified Communications, Video Solutions, etc. Growth comes from being relevant in the right areas, at the right time. We think we've picked the right areas – it’s execution that will make the difference from here on in.
So ... Where will the growth come from for Nortel? Why will we win? How big could these market opportunities be?
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