You Have To Be Cheapest Or Be Best

You Have To Be Cheapest Or Be Best

Another brilliant blog post by my friend Andrew Jaffee:

Motorola is one of America’s proudest brands. Started by the brothers Galvin in Chicago in 1928 as a battery company, it moved to manufacturing car radios, hence the name a combination of “motor” and “Victrola.” In 1943 the company went public, after producing the first walkie-talkie for the military and all kinds of cellular infrastructure that made possible the cell phone of today.


It pioneered developments of solid-state technology which led to the transistor radio. Beginning in 1958, it developed two-way radios for NASA space flights, allowing Mission Control to communicate with astronaut Neil Armstrong as he stepped on the moon in 1969. It began manufacturing televisions in 1947 developing the first truly rectangular color TV, a business it later sold to Panasonic.

In 1983, it came out with the first commercial cell phone, a DynaTAC 8000X. Along the way, it also invented Six Sigma, a quality improvement process Jack Welch at GE made famous.

But with all these inventions, Motorola was perpetually developing products which ultimately some other company did better-often after buying the brand, a team of engineers and their management from Motorola.

Nothing is sadder than the tale of what happened to the RAZR. This amazingly thin, handsome clamshell phone was developed by Motorola in July 2003 and introduced a year later. Shortly before that, I remember being at a board meeting of the VCU Brandcenter when Geoffrey Frost, Motorola’s marketing chief, slyly opened his fist and passed around this most intriguing jewel. Geoffrey, who unfortunately died two years later at age 56, planned and executed the “Hello Moto” campaign that launched this product, and was around long enough to see it sell 110 million units worldwide, boosting Motorola for a time to second only to Nokia in handheld phones.

But before long competitors began to come out with better features–rich 3G phones that cut into its sales. Manufacturers, including Motorola, began slicing prices in a battle for market share. Though some people still swear by it-Israeli’s former foreign minister Tzipi Lini still carries one-even before Steve Jobs introduced the iPhone in June, 2007, the RAZR was doomed.

Motorola, under CEO Ed Zander, never was able to get a second act. Today Co-CEOs Greg Brown and Sanjay Jha are trying to save the company, now based in Schaumburg, Illinois, as it moves away from producing cellphones to other phone-related technologies. But its revenues fell last year to $30 billion and it had negative net income of $4.2 billion.

This is a case where marketing can’t save a brand, no matter how revered. As Sony has discovered with micro digital music storage and delivery systems, it’s no good being almost as good. You either have to be cheapest or the best.

Cheapest means allowing price to overcome value and turning your inventions into commodities. Being best lends itself to great marketing, but only if you can maintain that top-of-the-hill technology ranking. Even Apple has had either to cut the prices of its new iPod-like devices, or keep innovating and introducing new technologies. But Apple now has another advantage that will confound competitors. It owns “best of class” ratings in two separate categories, digital music storage and delivery and 3G “smart” cell phone telephony. And all its devices synch to one another. So it’s very hard for competitors to outdistance it.

At the beginning of this decade, the field in handheld technology was wide open. There were Nokia, Sony Ericsson, Samsung and Blackberries, among others-fighting Motorola in cell phones. For Motorola to have gained the lead not only in image but volume and then lose it due to a failure in innovation and vision seems particularly unfortunate. And the blame must be laid first at the feet of Zander and his management team.

Some in the blogosphere say that the RAZR killed Geoffrey Frost through overwork. Maybe so, but one thing is certain: whatever Geoffrey did to carry Motorola to the mountain-top, it wasn’t in his remit to keep it there. The story of Motorola’s collapse only makes Jobs’ accomplishments at Apple all that more astonishing.

Motorola. What a treasure. Will it end up like Schwinn bicycles, Polaroid cameras and Frigidaire refrigerators, with a place in America’s brand pantheon-but without a dominant entry in today’s marketplace? Or is there still time for Motorola to stage a comeback? If it does, the brand’s heritage will be waiting.

By |2009-09-03T15:27:00+00:00September 3rd, 2009|0 Comments

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  1. Octavio Ramirez September 3, 2009 at 4:24 pm - Reply

    >Great article. . . .

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