Online Extra: At Motorola, "a Hop in Everybody's Step"

CEO Ed Zander admits he hasn't checked every box on his to-do list. But he's happy to take credit for galvanizing innovation

A year ago, many analysts questioned whether signs of improved performance at Motorola (MOT ) were a result of CEO Ed Zander's presence or the residual effect of changes put in place by his predecessor, Christopher Galvin, the grandson of founder Paul Galvin. Back then, it was probably a little of both.

But now, after 19 months on the job, the credit for Motorola's surge indisputably goes to Zander. Not that the gregarious executive, who made his name as chief operating officer at Sun Microsystems (SUNW ), has done everything perfectly.

Wall Street still moans about relatively weak operating margins at the company -- particularly in the mobile phone division. And a few skeptics still think that Zander might be as much talk as anything else.

Still, it's Zander's gift for talk, among other talents, that is helping lift Motorola. After all, Zander is responsible for landing key marketing partnerships with Microsoft (MSFT ), Apple (AAPL ), Oakley (OO ), Yahoo (YHOO ) and Cingular.


  "There's nobody Ed can't call at the CEO level and talk partnership with," says Ron Garriques, Motorola's mobile phone chief. "Ed is on the phone and talking to the right people. He's clearly a marketing guy at heart."

The latest partnership Zander struck for Motorola is with Microsoft. The software giant, a fierce rival when Zander was with Sun, helped the outfit develop its latest mobile device, called Q. It's designed to be a technology wonder, just like the tech wizard of the same name in the James Bond movies. Will Q be the same force that Bond has been in Hollywood? Zander talked with BusinessWeek's Chicago Deputy Bureau Manager Roger O. Crockett about the strategy behind Q and other key issues.

Q: Why was the development of a mobile e-mail device so important to you when you came to Motorola?


I was really nervous because I was using them on the West Coast and I saw what was happening. I saw it happen to PCs. In the mid '90s no one ever thought of giving an employee a PC. Now, when you start at any major company, you get a portable [laptop]. It gets issued like a pencil.

Well, guess what? CIOs are starting to issue [mobile e-mail] devices because workers want to take their office with them. I began to use these devices in my previous jobs, and I said, 'Oh my God, this is going to be big!' If you track all adoptions of major technologies, when it hits the inflection point, it takes off. And that's what this is going to do.

Q: Your rivals like Samsung, Nokia (NOK ) and others can react fast, and are already introducing copies of the Razr. How do you keep your design edge?


Just as these guys are getting the fact that thin is in, we're going to take thin to the next level and hit them over the head with Slvr [a sleek device shaped like a Hershey bar, due later this year]. Candy bar-shaped phones are still very popular. Slvr is going to take the fat out of those phones and introduce [the] low-carb candy-bar phone.

Q: What about the iTunes phone? Is that going to be released soon?


We have music phones shipping in Brazil and Europe [part of Motorola's Rokr line of phones]. Apple will be featured soon and [the iTunes phone] will happen this quarter.

Q: Verizon (VZ ) says Motorola is making progress, but you have a ways to go, especially in handsets. Sprint (FON ) says the same thing. How do you respond to that?


They're right. Verizon is an incredibly great big customer. We have not done the job in CDMA [the technology used by Verizon and Sprint] that we've done in other areas. We just haven't delivered.

The V710 [for Verizon] came out a little late last year. It pained me. I've done some things right -- and some other things I haven't done right. We've done a lot of work to get our applications and the look and feel on our products right. Verizon is a company that demands excellence, and we have to ante up.... We do have to work on Sprint, too.

Q: You've chosen to launch your smartphone, Q, with Microsoft, but will you work with other partners as well?


We do have relationships with the RIM [Research In Motion Inc.] (RIMM ) folks and Good [Good Technology] folks. Those relationships are still alive and well in various stages. We've worked with Microsoft for over a year. Microsoft has been really serious about mobile. They're really committed to these things, and [to] developing a strong presence around the world.

Q: The Q phone is targeted toward enterprise users to start, but historically, Motorola has not been strong selling to the enterprise. What are you doing differently now?


We are in the enterprise market today. We have the beginnings of it. Now have to make the next step. We also have to team with systems integrators, whether it's Microsoft, Cisco (CSCO ), or whatever. We'll use our sales force, but we'll also use theirs too.

Q: What areas have you focused on to allow Motorola to make phones better, faster, cheaper?


The reason I got this job is that I focused on R&D. Does this company have the staying power and innovation to drive the next generation of innovation? If you cant innovate, forget it! Innovation is not just painting things black. The rap that Motorola had was that it had lots of stuff in the labs but couldn't get it to market. All I've done since I got here is focus on one word: innovation. We're going to put innovation back in the market.

Q: You mean introducing products like the Razr?


The Razr has actually had more impact on the company inside than outside. It has galvanized us to accept nothing less than "Wow." Whether it's in networks, home networks, or phones -- it has to be "Wow!"

Geoffrey Frost (chief marketing officer) has basically allowed us to start thinking about what the user experience should be. He's an example of the people we've brought in that have challenged our design teams to break glass. (Frost joined Motorola from Nike (NKE ) in 1999.)

Q: Motorola didn't have that when you arrived?


I think they were flat. The downturn hurt all companies. It could have had the impact of freezing organizations' ability to take risk and think out of the box. Everybody here needs to think about breaking glass. That, plus speed and bringing the customer closer.

Q: How close are you to building the culture you want because some products are still not arriving in the marketplace when promised?


It's an attitude. We're not going to do everything right. We have a ways to go. Am I done yet? In terms of cost structure, speed, execution -- not even close.

On the iTunes stuff, yeah, we're late. I wanted to introduce the Q sooner. It could have been done if there was the right emphasis on it. I review all the product schedules, and hold people accountable for dates and times. But walking through Motorola's halls, I see there's a hop in everybody's step.

Q: It seems that the tech sector is looking pretty strong right now, what is your view?


The total available market for everything in tech isn't growing as fast as people thought. In this quarter the strong got stronger. It was not uniform across all companies. You had good reports and weak ones. That happens in a marketplace that is not booming across the board.

In wireless, we're taking market share away from companies that are not as strong. But whether it's in software, enterprise hardware, computers, that's what you're beginning to see.

Q: What concerns do you have about the economy going forward?


Well, you've got the overhang of the oil [crisis], you've got terror still a concern. Those things have an impact on the markets. As a CEO, I try to read all the reports and try to get an understanding of what's going on out there. What do the changes in China currency mean? There's so many mixed signals out there.

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