The 5/5/99 issue of Forbes ASAP has an interesting article about Nortel. Disruptive technology is very threatening to managers at large companies, so at Nortel they have found the best way to handle it is to by pass whole layers of management. In a company like Nortel (and I'm sure this applies to Lucent also) it is very difficult to overcome the mindset of middle management , who regard disruptive technology as a threat rather than an opportunity. The technology in this case is EtherLoop, a burst way of sending simultaneous voice and data over phone lines. The problem was solved at Nortel by setting up a separate company, Elastic Networks, which in turn could develop a different culture from Nortel, a culture more in tune with IP. This encourages competition with products of the parent company.
The article also noted that some vice presidents have a slush fund that they can use to support fledgling products without going through the normal channels. [Companies should always be trying to develop a way to make their present products obsolete, because if they don't do it , somebody else will. However the natural tendency of most middle managers is to protect the familiar. They didn't get where they are by taking lots of chances, so they are not very good at rocking the boat.] It is encouraging that top management at NT is aware of the difficulty that most companies have in handling technology that will eventually impact their main product lines, and is doing something about it.
One comment about Lucent- according to Stern Stewart, it's cost of capital is 12.3%, and return on the capital is only 12.9%. Nortel isn't covered by Stern Stewart, but I sure hope it's figures are better than LU. |
