Last week I read an interesting and well written article in the Wall Street Journal on the challenges that Alcatel is facing, titled “Alcatel Chief Is Out as Turnaround Stalls.” As you may recall, about six years ago France’s Alcatel merged with U.S.-based Lucent Technologies (former equipment division of AT&T) to create a telecom-equipment giant. Their ambitions to become a global telcom equipment leader have fallen short. Competition is tough. They compete in many lines of business, while at the same time, their revenues trail the competition, which has precluded their ability to make the necessary investments in research and development. These factors among others have translated into massive losses over the past seven years, and ultimately, CEO Ben Verwaayen’s job.
Alcatel-Lucent’s business strategy was to be an end-to-end supplier serving all telecommunications companies in the world, in virtually every markets. That means being everything to everyone, with a product line that includes everything from the submarine cables that wire together continents to the software that phone companies use to calculate and send out phone bills every month. Wow. That is a “big ass” strategic goal. In fact, I would argue it probably isn’t feasible, at least not within a high technology industry where product innovations are significant and competition is fierce.
Interestingly, when asked what the management team was going to do differently to avoid continued year-over-year losses, one of the “official” responses was “they simply have to be smarter than competitors about where they place their technology bets.” I am sure this statement sounded good in the interview, and certainly no one would argue against it. But, I am not so sure I would feel comfortable with this response if I were a member of their board of directors.
There are a few things wrong with the statement “we’ll just have to be smarter.” First, if that is all it would take, then why didn’t you do it six years ago when the merger was first completed? My next concern is that of execution. How do you lead a company to change its decision-making and business strategy by just “being smarter”? Is there a course you can take to accomplish this goal? If so, sign me up … I could always use with being a bit smarter.
The reality is that you simply can’t expect a group of employees and their managers to “get smarter” so they can make better decisions. You can lead by example as CEO, providing insights as to where new market opportunities might be, as well as to show how to operate more efficiently as an organization. I am with the belief that people are probably already doing the best work they can, or least are making the best decision they know how to … the idea to simply “make smarter decisions” is not likely.
Is it possible to embrace a new strategy and take a different direction? Of course. In fact, that is exactly what is needed. The expression of “you can’t please all the people, all the time” comes into play. Perhaps taking a perspective to consolidate and further refine their business might work better here, as a way to be more effective and focused with both strategy and execution. However, this shift would likely involve closing down divisions, which might be difficult for a French firm where strict labor laws prevent such actions.
Sadly, I suspect that if something isn’t done soon, there will be a far worse situation than just a few divisions shutting down … the entire company may go under, which certainly would be a shame. Should the management team try to make the smartest decisions to avoid shutting down? Of course. Making the smartest decisions you can is always the best course. But maybe a bit more strategy is needed than simply making smarter decisions.
Gordon Benzie is a marketing adviser and business plan writer that specializes in preparing and executing upon business plans and marketing strategies. Gordon can be found on Google+.