Why did Nortel go Bankrupt? Hint: Customer Experience

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I shed a small tear when Nortel went under today, mainly because I am an alumnus of Nortel from the boom days. I still clearly hold a small place in my heart for them.
Why did it happen? Technically, a lack of liquidity to pay a $107M interest payment due on Thursday pushed them over the edge. But, how did it get to this point?

The answer is simple: customer experience. While it would be easy to say scandals, bad accounting, poor products, or lack of leadership (among other things), I think those are copout answers. Nortel has a lot of great employees and a great product portfolio. They make switches, wireless gear and routers that perform just as well as competing products from Cisco or Alcatel. The even make more “green” equipment than their competitors, which is supposed to sell like hotcakes these days. The real problem is that the customer experience for the technical buyer on the client side is lagging.

Ask any CTO from the carrier world (i.e. Sprint, AT&T etc.), and they will tell you that telco equipment breaks down periodically, just like a car or television. You can count on failure eventually. But, according to CTOs, when Nortel equipment goes down, the ‘service call’ to Nortel’s support group is more frustrating than with competing vendors. So, what happens? Nortel loses the next RFP or contract with the carrier. Students of the Miller Heiman sales process will tell you that CTO’s have a veto vote in the B2B buying process. And these CTOs exercise their right to vote!

What is causing this customer experience touch point to perform poorly, thus costing Nortel business? I can’t be sure. But Mike Zafirovski, CEO, is known as an operational genius. He has moved Nortel’s support teams to low cost centers like Turkey, Poland and India. This may be hurting response times or problem solving quality. Or, it could be an HR problem stemming from lack of employee motivation after years of problems. It could also be something else entirely. Without a CE audit and touch point analysis, I have no way of knowing.

What I do know is that CE can be found at the heart of a lot of corporate pain that is disguised as a ‘financial problem’. We need to look beyond the headlines to know the true story. Financial problems are the result of another problem: more often than not in a commodity world, that problem is customer experience. The good news? Poor CE is a solvable problem. In coming articles, I will discuss how to evaluate CE end to end, and how to focus in on the ‘hot points’ quickly to obtain immediate positive impact.

2 COMMENTS

  1. Mark,

    Unfortunately Nortel will not be the last company with quality products to fail. Your mention of the CEO’s operational genius, this emphasis stems from an era when organizational execution and efficiency ruled. No more. At least the focus of execution needs to shift, you still need quality products but at the speed of innovation you need loyal customers. Customers will put up with snafus if they believe a win-win agenda is at hand. Poor customer support certainly doesn’t send this message.

    John

    John I. Todor, Ph.D.
    Author of Get with it! The Hands-on Guide to Using Web 2.0 in Your Business.

  2. Mark: I’m looking forward to your future articles. Solving the large problem of poor customer experience can seem like trying to boil the ocean. Improving on poor experiences requires decomposing processes into pieces and events, so the causes can be tackled. That takes an analytical mind. As you point out, many organizations (and the business press) sanitize the causes of business failures as “caused by market forces,” –a coy way of simply saying that revenues were insufficient to cover expenses . . .

    Thanks in advance for taking this on.

    –AR

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