Could Nortel benefit from Cisco's learning curve?

Cisco middle-upper management are the biggest barrier to change as the company undergoes a process of continuous improvement, according to a story that appeared yesterday in The Star, Malaysia's most widely-read English-language daily. In the story, headlined "Firms need to re-engineer their core business to stay afloat," writer Suraj Raj cites Randy Pond - Cisco Executive Vice President of Operations Processes and Systems as saying that companies that have survived the long haul had implemented a process of continuous improvement.

Randy Pond
The story cites Pond, who is leading a comprehensive business transformation across Cisco, as saying that change was difficult to implement - especially among the employees. According to the story: "While employees at the grassroot level were upbeat about the transformation process, Pond said Cisco failed to recognise that it was the middle-upper management that was the biggest barriers to change." Pond is quoted as saying: "We are now measuring our leadership team on whether they are embracing change at the speed that meets business needs."

According to the story in The Star, Cisco started its transformation program without external stimulus, such as pressure from the market or economy. Pond said such stimulus would "stir passion around it so that we can move employees the way we want them to go." When contacted by yours truly regarding the accuracy of The Star's story, a Cisco spokesperson said he believed the 5 direct quotes attributed to Pond were accurate. However, Cisco added that the editorial content and conclusions drawn by the story's author were open to interpretation. The story is timely given the massive drop in Nortel's market cap. Perhaps Nortel should have taken a feather from Cisco's cap and reengineered its core business even before its troubles began. Last Friday, Nortel CTO John Roese outlined the new focus at Nortel:

"Our decision to divest the MEN business is an outcome of a process that has been going on for the last two years to determine where this company can best compete and where the greatest opportunities lie. Although we've clearly tried to make all of our businesses successful, it has become increasingly clear in today's economic environment that it is no longer practical to pursue that strategy. We need to choose a focused and prioritized set of markets and technologies in order to de-risk our opportunities to grow."
"Although we have great technology in MEN – world-leading technology, in fact – the reality is that our optical business is a very different one than most of Nortel's other businesses. As an infrastructure business, its operating model (including processes, value proposition, and focus on "heavy iron") differs significantly from the operating model of the rest of Nortel. Moreover, we expect these models to diverge even more in the next several years, which would add further complexity to our overall operations."
"While the decision to divest MEN was not an easy one (particularly given its technology leadership and its extremely talented workforce), it is the right one if our goal is to focus the company on a more specific set of high-growth, solutions-oriented, next-generation experiences – such as next-generation carrier and next-generation enterprise."
"The intent to divest MEN is also not out of alignment with what we've been saying for the past two years – specifically, that the future of this company is around solutions, is more about software than hardware, and is more around value to the end-user, with a higher level of interaction with customers. For the last two years at least, including at our Financial Analyst events (the most recent which was in June this year), we have be talking about this strategy."

Roese added: "Nortel has been through these changes before and has continually and successfully reinvented itself. In fact, in the early 1900s, Nortel was the world's largest manufacturer of sleigh bells of all things." Related stories: Blogger warns: "Nortel doesn't make it out alive" Once north of $300B, Nortel's stock market capitalization plummets under $1B Is Cisco the Madonna of networking?

Is there much that Nortel can learn from Cisco's business transformation?

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