Motorola misses Badly

By Ron Updated on June 4th, 2007

I just read an article stating that Motorola, the #2 maker of cell phones in the world, is preparing to cut 3,500 jobs. Motorola reported a 48% drop in fourth-quarter profit as margins in its handset business collapsed. Folks, 48% is a big miss.

The story reported, “Among other things, Motorola plans to reduce its work force, reorganize some businesses, reduce operating expenses, roll out new high-end phones and sell more of them in order to boost margins.”

I do not believe laying off workers will solve the problems ailing Motorola today. I also do not believe Motorola’s “Digital Six Sigma” program as they are referring to it now is enough to fix these issues. I am obviously not slamming Six Sigma as it is a part of my DNA. But Motorola needs to focus on one thing and that is the following formula:

Profit = Selling Price – Cost

This is not to be confused with the following formula even though it is algebraically identical.

Selling Price = Cost + Profit

The first formula is what Motorola and all for profit companies should be focusing on since the only thing a company really controls is cost. Specifically costs associated with things such as transportation, inventory, motion, waiting, overprocessing, overproduction, and defects. You may recognize these as the 7 wastes Toyota identified 50+ years ago.

Motorola recently celebrated the 20th anniversary of Six Sigma and I hope they continue their good work with the methodology. But it is my humble opinion that Motorola’s chief, Ed Zander, would become the next truly great CEO of our time if he did one thing – unleash Lean Manufacturing in its purest sense company wide effective immediately.

In fact, he could take these 3,500 middle managers scheduled for the chopping block and have them trained in all the ways of Lean, starting with a trip to Japan to see it in action first hand.

I would be willing to bet my 2007 salary that if they did this Mr. Zander would have some really good news around this time next year.

Thoughts and comments welcome. Until next time, I wish you the best of luck on your journey towards continuous improvement.

  1. Mark Graban

    January 21, 2007 - 2:08 pm

    For what it’s worth, Motorola is trying to impact the market cost by adding value/features/design to their phones. I agree with you that they shouldn’t just try to hack away costs by laying folks off.

    Did Motorola already offshore/outsource their phone manufacturing?? I would suspect they did…. so how much more do they have to cut cut cut?

  2. Ron Pereira

    January 21, 2007 - 6:12 pm

    I know they use CM’s heavily but are still very “involved” with the way things operate. Their old Libertyville plant used to be full of SMT equipment but not anymore.

    You bring a good point up in how much waste do they have to cut.

    Nokia operates with ~ 50k employees so even after Moto cuts 3,500 they will still have more.

    I would just like to see Moto get focused on Lean – especially in the front office tasks.

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