Alcatel-Lucent confronts its cross-cultural challenges

July 31, 2008
Alcatel-Lucent logo

Alcatel-Lucent logo

Alcatel-Lucent leaders step down a year after the Franco-American merger. Various difficulties have been cited by the board, including the cross-cultural challenges after the merger

The company announcement in Paris and New York put it as follows:

Alcatel-Lucent (Euronext Paris and NYSE: ALU) today announced changes to its leadership and Board of Directors. The company also announced its quarterly results and demonstrated improvements to its operational results for the third straight quarter. The Company reported that it is making steady progress on the strategy the company laid out last fall. To pave the way for a fully aligned governance and management model going forward, the company announced the following changes to its management team and Board of Directors:
Non-Executive Chairman Serge Tchuruk has decided to step down on October 1, 2008. CEO Pat Russo has decided to step down no later than the end of the year, and at the Board’s request will continue to run the company until a new CEO is in place to effect a smooth transition and maintain the continuity of the company’s business. The Board will commence a search for a new non-executive Chairman and CEO immediately.

Perhaps the most instructive phrase is the one about ‘paving the way for a fully aligned governance and management model’.

The financial side is starkly illustrated in Bloomberg’s report of the company’s sixth successive quarterly loss. [July 29th 2008]

(Bloomberg) — Alcatel-Lucent SA, the world’s largest supplier of fixed-line phone networks, said Chief Executive Officer Patricia Russo and Chairman Serge Tchuruk quit after the sixth straight quarterly loss. The second-quarter net loss widened to 1.1 billion euros from 586 million euros , a year earlier..

Russo and Tchuruk were the architects of Alcatel SA’s November 2006 purchase of Lucent Technologies Inc., creating a company that has never earned a profit, shed 62 percent of its market value and is eliminating 16,500 jobs. Russo, 56, hasn’t said when she expects the losses to end. She will step down by the end of the year, while Tchuruk, 70, will leave Oct 1.

The market conditions have been pretty bad since the merger. Competitors have also struggled for growth. But Alcatel-Lucent had added difficulties of achieving changes relating to the American and French cultures of the partners of the merger.

The technical issues were highlighted by Ovum

Alcatel-Lucent is riding multiple horses in the wireless infrastructure segment. Today, Alcatel-Lucent is the only Western vendor to offer or develop products for all wireless technologies (GSM, UMTS/HSPA, LTE, CDMA2000, WiMAX). The only other vendors doing so are Chinese companies ZTE and Huawei, but their cost structure and access to capital are more favorable than Alcatel-Lucent’s.

Scale is vital

In telecoms scale is vital. Without significant scale, profitability suffers. In that context, mergers are presented as the best means to create scale. However, simply adding more product lines does not create scale – the vendor must also go through a painful product rationalization process before reaping scale benefits. Product rationalization has an obvious R&D cost – the need to build a common platform – but it also has a marketing cost as the vendor needs to keep customers of discontinued platforms on board. In addition, competitors will try to benefit from any discontinuities and grab market share. This is what Ericsson and Huawei did last year at the expense of both Alcatel-Lucent and Nokia Siemens Networks.

The BBC has drawn attention to the cross-cultural difficulties post-merger.

‘Cultural divide’
“We hope that a new CEO will be able to bridge the cultural divide between the Americans and the French and get all sides pulling together,” said Richard Windsor from Nomura.

But the BBC article focused on a perceived divide between the two leaders who are departing.

Mergers mean trouble

For some years the business school wisdom is that mergers tend to be triumphs of hope over rationality. Leaders are only human, after all. It is also well-known that most marriages begin with both partners believing this is for ever…

That may be taken as a pretty cheap shot, and a weak metaphor. So let’s get more specific.

Business week a month ago [June 18th 2008] had also picked up on the marriage metaphor.

Alcatel-Lucent’s Troubled Marriage

Alcatel-Lucent (ALU) is in big trouble, and Russo is catching serious flak. In France, the 56-year-old executive is viewed with suspicion as the first American, and the first woman, to head a blue-chip French company. In the U.S., she’s vilified by many former employees of Lucent Technologies, where as CEO she oversaw a brutal downsizing before its merger with Paris-based Alcatel. All that is driving speculation that Russo may be headed out the door.
The marriage of these iconic companies was never going to be easy. True, Lucent’s U.S. strength in the wireless business nicely complemented Alcatel’s global footprint and its prowess in fixed-line and broadband. But the cultures could hardly have been more different. One was hierarchical and centrally controlled, the other entrepreneurial and flexible …What may surprise critics of France’s hidebound corporations is that Lucent was the rigid one.

Remember the EADS story?
There are structural parallels in this story the those at EADS (Airbus). Both companies suffer from the weakness of the dollar; whiffs of executive wrong-doings (in Costa Rica hanging over the one company, of insider-trading in the other); problems across cultures (remember the Airbus communications issues between Toulouse and Hamburg?).

Update

In the subsequent months, Alcatel Lucent was the subject of various stories suggesting it was a possible takeover target.


Paul Walsh defends Diageo’s social responsibility

July 29, 2008

Paul Walsh, chief executive of the world’s biggest drinks company, defends Diageo’s social responsibility policies

In a wide-ranging video interview with BBC’s Robert Peston, [July 28th 2008] Paul Walsh examines the social responsibility policies of Diageo, and provides a glimpse of his leadership style.

The loyalty of a lifer

Mr Walsh is one of a disappearing breed, a corporate lifer in the fashion of Henry (Hank) McKinnell of Pfizer. His tenure as CEO is also substantially beyond that of current norms. In this interview, he did not appear to be under pressure to justify his belief in the social responsibility of his company. The question was framed around public debate in Great Britain on the vexed issues of underage drinking and its social consequences.

Not in the witness box but bearing witness

On this matter, as elsewhere during the interview, Mr Walsh was not so much in the witness box, as someone bearing witness, given an opportunity to share his personal faith in the company and its values. This is a claim that comes more easily to the corporate lifer, whose commitment has been demonstrated by decades of loyalty.

Diageo? Most of us (including many financial commentators) still refer to Diageo by its centuries-old earlier name Guinness. You can see the attraction of moving to a name that avoids preserving an image of a single-product company. The brand shift occurred at a time when creativity in branding seemed to have been at a low ebb, and when rebranding decisions tended to favour the Rorsachean over the impactful and memorable. But that’s another story.

Admitting a mistake

Watch out for how Walsh deals with a recent commercial decision. ‘We got it wrong .. we listened .. we put it right’. Walsh seems quite relaxed and invulnerable to the risks of revealing something about himself or his company.

The boys with the black stuff

Some years ago, when the company was known as Guinness, spent some time working with its marketing and corporate managers in several different countries. In those days, the culture was a remarkably coherent one. In Ireland, the job as ‘Guinness rep’ brought high social status. The parish priest was not unknown to use his pulpit to mention job vacancies in the company. But arguably, the strong and dominant image of Guinness was beginning to restrict strategic transformation.

Success was recognized through hard-won achievements as the ‘boys with the blackstuff’ spread the word and the product as successfully as their Christian brothers around the world.

But transformation to a global force has not been accompanied with the replacement of leaders who put financial ratios above the products which have been the lifeblood of the organization.

Facing the media

Robert Peston has argued that business leaders are too reluctant to put themselves forwards for public scrutiny.

In this interview he demonstrates again his claims that such exposure is desirable and valuable for the corporation.

The Need for Creative Ideas

However strong its leader, Diageo faces problems of social responsibility raised at the interview. The firm will need more than good image management to strengthen its global brand. Creative ideas will be a necessary part of the product mix.


Leadership Implications of The Glasgow East by-Election

July 25, 2008

The SNP snatches a victory in Glasgow East. There are leadership implications reaching far beyond the constituency. However, a call-in programme suggests that Gordon Brown’s problems do not reveal widespread acceptance for David Cameron

John Mason’s triumph deserves more comment than I can give it, without closer acquaintance with the local (and complex) issues. Bryan Taylor points out, for example, that the newly elected MP is a fierce supporter of Scottish independence.

Consensus from the outset was that Glasgow East by-election would be very bad for Labour. Their campaign was rocky from the start, while Salmond continued to rock for the SDP. There are important implications for Scotland which are also significant for both Gordon Brown and David Cameron, and their parties in faraway Westminster.

And so it came to pass.

Labour voters administered a kicking.

A phone-in on BBC’s five live [25th July, 2008] invited comments on the result. After about an hour, host Steven Nolan began issuing requests to hear from someone prepared to defend Gordon Brown.

Eventually, the first Labour party loyalist came on-air. I am assuming the phone-lines to viewers were primed to welcome any such a call and to rush it on-air lest someone somewhere would accuse the programme of utterly biased presentation.

What, the caller asked, should Brown have done differently. And more to the point, if not Brown as leader, who else would do better?

His challenge was put to subsequent callers. There were many suggestions of what should have been done differently:

not funding Blair’s [Iraq] war
calling a national election on his succession after Blair
not spending £50 billion on rescuing Northern Rock
not penalizing the poor through the abolition of the 10% tax rate changing the Government’s fuel taxation policies
not ruining the economy during his time as Chancellor …

The list is understandable, even if Gordon seems to have been the recipient of collective anger that might just have been shared around a bit more widely.

But the replies to the second question were even more surprising. I expected mention to be made of Alan Johnson by former Labour supporters. Or maybe David Miliband?

About the Five-Live phone-in

Before taking the story further, here is a little context. Radio Five Live phone-ins in the UK are a well-established tradition through which callers are encouraged to ‘make a point’.

In practice ‘the point’ seems often about the unfair way in which the caller has been treated by more powerful institutions or individuals. A secondary theme is that of courage in the face of adversity. In search for something extra, the story is sometimes literally of someone in extremis, demonstrating the courage of a terminally-ill person.

What’s my point? Just that the format and respondents match pretty well, providing a window into a world of individual courage, sorrow, and intensely held beliefs. The views while sometimes fascinating, sometimes painful may be thought-provoking, although unreliable material for assessing voting intentions of the wider electorate.

So ‘Who Else’ ?

Getting back to the ‘who else as leader?’ question, Salmond was mentioned as a major influence behind the SDP success.

But the phone-in was targeted at Gordon Brown. The question was who else could do a better job as PM?

Callers seemed unprepared for this. Brown? Rubbish. But who else? Duh!

Strange, don’t you think?

There was a few ‘who not’ suggestions (David Milliband, Jack Straw).

More prompting from Nolan. How about David Cameron? This produced another response I had not expected. Cameron was no more in favour from the callers than was Gordon Brown.

‘Brown’s a worm’, one lady spat out, recounting her post-budget tax burden.

How about Cameron? [slight pause].

‘He’s a worm too.’

This was a view that had remained uncontested when I exercised my democratic rights by switching off.

‘They are all the same’

What I was hearing was a collective howl of frustration against a personal enemy. Brown, New Labour, The labour party, and even politicians. ‘They’ are all the same.

Meanwhile

Meanwhile, In Germany, the crowds that turned out to hear Barack Obama yesterday had demonstrated the mirror-image of despair. They roared approval of his beautifully executed charismatic style, and his offer of audacious hope. They were young and old, black and white, in search of a politician who ‘wasn’t the same as the rest’.

But don’t ask me what they would have told Stephen Nolan about the experience.


Leadership Development: Try Harder, Want it More

July 22, 2008

Leadership courses are full of life-enhancing bits of advice. Do they work in theory? More to the point, do the courses work in practice?

The other week I came across a news article about leadership. It took a very cynical view of leadership development experiences. It was also very funny. I showed it to someone. After she stopped laughing, she went off to the photocopier with the newspaper to share a little humour with her friends. That’s how word of mouth marketing used to work.

Now, so help me, I am doing the same, assisting the virus to spread electronically.

Later

The article appeared in The Independent, [May 6th 2008] and was written by commentator Gary Mckeone. Gary had sought refuge as a journalist, after escaping from the Arts Council. As you do.

He writes from a deeply wounding personal development experience. His words make compelling reading:

…. take the leadership training course, there to make us all masters of the public sector universe. We’re gathered in a field at 8.30 one morning, with bamboo canes, a rubber band, a pencil, some string and a hard-boiled egg. Our mission – to construct a device that will propel said egg as far as possible across the field. Genius. From just such challenges are leaders forged. In the distance cud-chewing cows stare across a hedge at us. They’re laughing.

The jargon is, of course, endemic; the elephant in the room, to helicopter (apparently something to do with seeing the bigger picture) and the endless diagrams, all circles and arrows, the little yellow post-its we stick on the wall with our individual, life-changing “promise” indicating how we will be better managers: “I will talk more strategically to my staff”, “I will value the opinions of others”, “I will trust others to trust me to trust them”, “I will throw myself out of a helicopter”, “I want to be a cow”.
Enforced light relief only increases the horror. This usually happens on the last night, when a glimmer of escape fuels the frivolity. At breakfast we’re given the instruction in that “let’s-all-have-some-fun-in-a-strategic-kind-of-way” voice. We’re going to form teams, rehearse a performance piece based on what we’ve learned on our course and, after supper, we’ll perform the pieces for each other in the Rest & Reflect Room. Dear God.

Think of a never-ending nursery-school play minus the innocence. Here come five senior managers pretending to be helicopters, blades whirring, all chug-chug noises and formation flying, eyes ablaze with earnestness; they’ve gone over to the other side leaving behind any semblance of the real world; they are now leaders, their faces shining with the ardour of the convert. Their piece is a dramatization of a policy document called “Diversity and Inclusion: A Paradigm for Progress.” All irony is suspended.
We applaud vigorously; we cheer; we have to. The only way through this agony is to subscribe to the illusion. We’re all in this together. I won’t tell if you won’t. Sure wasn’t it fun? Damn the expense, we’re worth it.

Calling all leadership development trainers/gurus

There are some of us who believe that leadership develpment courses do make a difference.

Are we going to let Gary get away with this sort of stuff? One way forward is to borrow his story for your courses, on the technical grounds of prolepsis (anticipating someone’s argument to turn it to your advantage). ‘This not one of those unreflective and cringe-making courses’, you might say.

Out of the mouths of babes ..

In some contrast to the cathartic writing of Gary Mckeone, take a look at the work of someone identified only as Syd (aged 13) His inspired image seemed so apt. I couldn’t find such a nice picture involving five managers playing at being a helicopter squadron).

I stumbled upon Syd on the girlshorseclub site while browsing for images for an earlier post about intelligent horsemanship.

As young Syd (aged 13) put it:

Change is hard. Change is good. But it’s time for me and all you other riders experiencing the same thing to wake up and smell the coffee. It’s time for us to buck up and try harder.

Well done, Syd lad. At the tender age of thirteen, you have already acquired leadership wisdom, and you write clearly.

You share this month’s water-cooler moment award with Gary. Would you like to become a journalist?

Or perhaps a leadership development guru?

Or maybe put your name down for an action research PhD in business studies? There’s a nice one which is the brainchild of Laurie Taylor, Professor of Sociology, Department of Sociology, University of Poppleton, laurie.taylor@poppleton.ac.uk. For more information contact Dr Mary Taylor OBE, Centre for Academic Development, University of Poppleton, mary.taylor@poppleton.ac.uk.


Louis Gallois Outlines EADS Position at Farnborough

July 17, 2008

Louis Gallois faces the Farnborough Air show with news of a possible loss of the tanker contract with the US Airforce, and ongoing corruption investigations

Louise Gallois demonstrates desirable leadership quality in a BBC interview in advance of the Farnborough air show.

His performance is as effortlessly skilled as those expected of his company’s products. Smooth, effortless, competent, flexible (he communicates as well in English as (presumably) he does in French.

It is hard to resist lapsing into cliché, and borrowing other bits of franglais. His communiqué showed considerable sang froid.

The substance of his answers

The substance of his answers was that his company had good highly-competitive products. EADS was, and would continue to be successful.

That’s a message most leaders want to convey, most of the time. But while some leaders have to knack of sounding convincing, others do not.

Here’s the BBC video. It is only eight minutes long, and has great potential for showing as part of leadership development programmes.

The questions (by Nigel Cassidy) were hardly posed in an aggressive way. (You’d need a different style for dealing with the in-you-face blustering of a Paxman or a Humphreys). But they covered the current and recurrent issues facing the company.

Listen to the answers

On the possible loss of the lucrative tanker contract for the USAF: Not a problem. ‘we have the best airplane .. we expect to win.. and anyway, we will go to the US .. this is only one deal.’

On on-going negotiations to sell a UK production facility to GKN:

‘…tough ..always tough, especially at the end of negotiations ..I won’t say precisely when, as that restricts my negotiation possibilities’

On oil prices: Difficult, but on the medium term an opportunity for their advanced technology products.

On the rumbling corruption scandal: Not very pleasant, but in the short-term not important. ‘My [current] people are fully committed, working like hell. And there are no guilty people without a judgement, and there is no judgment’.

Try repeating these quotes. Listen to yourself. Did you sound convincing? M. Gallois did. Why? The mystery of leadership as communication remains.


AIG plumps for Willumstad: What took them so long?

July 14, 2008

Update

AIG came to the brink of disaaster in the credit crunch of September 2008. Its newly appointed leader Bob Willumstad may be just the sort of person to steer them out of the current crisis. But will he be given the opportunity?

Original post follows

Bob Willumstad at 62 seemed to have missed out on his dream of running a major corporation. Now he heads the troubled giant AIG. His track record is admirable. Which raises the question: what took appointment boards so long to pick him?

Robert Willumstad was one of the names in the hat in the leadership merry-go-round at City Group with Chuck Prince and Vikram Pandit. He then became part of AIG, another company with leadership difficulties, but still not in the top job.

The Economist

The Economist picks up the story

On June 15th [2008] Mr Willumstad was hastily installed as chief executive of AIG, following the forced resignation of Martin Sullivan after only three years at the helm. He comes with a pedigree few can match. He played a big part in assembling Citi, smoothing over difficult takeovers…But he was also good at the less glamorous stuff largely thanks to tight cost control.

He seems to have ruffled very few feathers along the way. Former colleagues put this down to a combination of unobtrusiveness and honesty. “He’s quiet but very effective,” says Jamie Dimon, chief executive of JPMorgan Chase, who worked alongside Mr Willumstad at Citi. “You get the truth with him. There’s no political agenda.”
Many Citibankers had hoped he would return to take the top job when Mr Prince resigned [November 2007 when]the board approached him but eventually plumped for Vikram Pandit. These qualities set the “quiet giant”, as the six-foot-three Mr Willumstad was once dubbed, in contrast to the blokeish Mr Sullivan and the imperious Mr Greenberg

What took them so long?

One possibility is that quiet competence is often trumped by the more visible characteristics and extraverted style associated with so-called charismatic leaders.

Leaderswedeserve has from time to time returned to the idea of the non-charismatic leader, modest and of fierce resolve. These features were considered to be under-appreciated in many successful leaders, who remained relatively invisible in the heroic accounts in the business press.

Willustad, the quiet giant, may be one more exemplar of the fifth level leader, (Jim Collins) who eventually succeeds, where more blokeish or imperious figures fail. If he does, he also illustrates how so often boards acquire the leaders they deserve.


Lessons from the Haltemprice and Howden by-election

July 11, 2008

David Davis wins Haltemprice and Howden. But there’s winning and there’s winning. What lessons can be drawn from this unusual by-election?

In the early hours of Friday 11th July 2008, the result came through. Former Home Secretary David Davis wins.

The BBC’s introductory statement outlines the result.

David Davis has eased to victory in the Haltemprice and Howden by-election with a 15,355 majority and 72% of the vote.

This seems to justify the candidate’s description that he had achieved ‘a stunning victory’.

Well, yes, but the claim was too close in time to the claims made by Robert Mugabe, a week ago, in the re-run Presidential election in Zimbabwe.

I’m not comparing the two in terms of brutal suppression of human rights. But there is a curious echo of the process in Harare now replicated in Haltemprice. Voters in both locations were deprived of a chance to vote for serious opposition candidates.

The MP the voters wanted

It could be reasonably argued that the electorate had last night regained the MP they continued to prefer. So the curious circumstances of the event did not matter.

In another way the circumstances did matter. In the short-term at least the publicity means that some importance can be attributed to the conclusions drawn over the result.

In a nutshell

In a nutshell, Mr Davis resigned in a political gesture to draw attention to his view that the country’s essential freedoms were being eroded. This implied that his own party (and arguably his own efforts as shadow home secretary) were inadequate opposition. The trigger to his resignation and reapplication to stand in his old constituency was the ’42 day detention’ vote, and the political trade-offs surrounding the narrow Government win.

Did Mr Cameron Approve?

Mr Cameron spoke in favour of Mr Davis during the campaign. But his actions belied his words. He had already acted in a way that was a clear signal of his disapproval of what was going on. He avoided leaving a hostage to fortune by rapidly appointing a replacement, ensuring Mr Davis would not return to Westminster in his former role of Shadow Home Secretary.

It is widely reported that David Davis has won considerable public admiration for his action. It is popular and regarded as courageous, even politically heroic. Such a view contrasts with a widespread presumption in the UK that politicians act primarily in self-interest. Maybe it’s worth remembering adding that a belief in the primacy of self-interest is shared by the overwhelming majority of believers in economic rationality.

The bookies (often good indicators of economic rationality) are offering odds on Mr Davis forming his own political party

Playing with the figures

Playing with the figures becomes more revealing if you go go into them in a little more detail..

Turnout was around 35%. Respectable for a by-election, but hardly evidence of an electorate that had been swept up in the single-issue campaign.

A fifteen thousand majority. Crushing in terms of the other candidates. But Mr. Davis could also be said to have lost around seven thousand voters since the general election.

Winners and losers?

The conservatives seem only to have to avoid blunders to win a crushing victory at a general election in a year or so. The by-election was only ever going to be a distraction, with some longer-term negatives if Mr. Davis attracts attention for opposing his party’s official policies in the House.

Labour and Liberal democratic party leaders alike decided not to field candidates. Their arguments fail to convince that the decisions are based on anything but rational self-interest.

Shan Oates of the Green party polled 1,758 votes. She is now technically is the leading opposition to the Conservatives (or to Mr Davis’s single issue position) in the constituency. Her opposition combined green issues with a position claiming that Mr Davis was too soft in his support for a 28 day detention period without charge.

Media romantics in the build-up to the poll were dreaming of a ‘real’ opposition vote to the futility of the entire election, and a far greater protest against the protest. That seems not to have happened.

Confused? Maybe we have to live with the idea that there are no clear winners in a thoroughly bizarre event. And I never even mentioned the platform that could not bear the weight of the twenty six candidates…

Update

Several hours after posting: Nick Robinson is cogent as ever in his BBC politics blog. He gets to similar conclusions and suggests that his analysis is making him pretty unpopular with Conservative high-ups.

Never mind Nick, if it gets too hot in Westminster, I can think of a well-known University not far from Cheadle Hulme which could use one more controversial visiting Professor.