Is Motorola Stuck in the Dip?

Good isn't good enough. Motorola will need to commit to putting out that crucial last 5% to be the very best

Remember the Razr phone? A few years ago, it was the hottest cell phone in the world. Thinner, cooler, better… millions of Americans just had to have one. There were hundreds of cell phones to choose from, but many of us bought a Razr. It was the "in" product of the moment. As a result, Motorola (MOT) sold tens of millions of phones and hit a home run. No, make that a grand slam.

Whenever we buy something, anything, we search out the best in the world. Whatever "best" means to us, we're rational consumers and if we think the combination of quality, value, availability and experience is the best, we grab it. And for a lot of us, the Razr was the best, so we took it.

Why Good Isn't Good Enough

Fast forward to today. Motorola makes a huge variety of phones, but no one is waiting in line to buy any particular model. The company is under price pressure because if all the phones they make are good enough, hey, we'll just buy a cheaper one. When everything seems similar, smart and busy people seek out the cheapest alternative. That's why Carl Icahn, the corporate raider turned shareholder activist, has been agitating for change at the company.

Ed Zander, chief executive of Motorola, must be getting used to this. The same thing happened at his last employer, Sun Microsystems (SUNW). Running a hardware technology company is a big deal. You need thousands of people (expensive ones). You need to keep a lot of inventory (expensive inventory) and the factories you must build to exist in the industry are more expensive still.

Showing up is expensive and difficult. Every single day, just opening the doors costs a fortune. The same thing is true wherever you work. Maybe it's not on the same scale as Motorola or Sun, but the effort involved in building and running an organization is huge. It's easy to settle and convince yourself that what you're offering is the "best" you could do at the time.

Average Is for Losers

The shame of it is this: You can do 95% of what you need to do and still fail to be chosen by the market. You can do all the essential things and still not be the best in the world. In fact, most of the time, companies get stuck being average. We do all the work we're required to do, do all the investment, take all the time…and we're stuck right next to our competition, battling it out for market share.

There are 10,000 musicians out there working just as hard as Gwen Stefani or Cat Power. But you've never even heard of them. Why? What separates the hits from the merely hardworking? Hint: It's not the amount of work. It's not the infrastructure or how much attention is paid to a particular feature.

It turns out that being more average than the next guy is a recipe for failure. Sure, plenty of companies plod along being just average, but they're failures because they never even come close to realizing their potential.

Embrace the Dip

How does a company break out of that rut? The most effective strategy is the Apple (AAPL)/Ferrari/Google (GOOG)/Burton Snowboard/New Yorker magazine approach. Once you realize that everyone else is already committed to the first 95%, embrace the fact that all the benefits—and all the profits—come from the last 5%. That's the 5% devoted to style or to risk or to quality. That last push, the part that gets you through the hard part (what everyone else in your industry is doing just to get by), is what I call the Dip.

The Dip isn't a bad thing, it's not a thing to be feared. The Dip is the barrier between the misses and the hits, between the average and the exceptional. The Dip is the ally of anyone seeking the benefits that come from being at the top of the market. If what you're doing today is just as difficult as it was yesterday, you're probably not in a Dip. The Dip is the hard part, the part where most people quit.

The only way to get through the Dip is to be willing to quit when it's clear the alternative is to be stuck. On the Toyota (TM) assembly line, company policy is to stop the line completely rather than install a part that's not perfect. Any person on the line is empowered to make this call. In fact, every person on the line is required to make this decision. This willingness to quit (or at least stop the production line) is the secret to Toyota's quality story. Because Toyota would rather stop making a car than make an imperfect car, they end up making better cars. At Apple, the poster child of marketing writers everywhere, Jobs' mantra for the iPhone was to make no phone at all rather than make a boring one. If Apple couldn't negotiate the Dip, Jobs was willing to quit. In fact, he was insisting.

Motorola Gets It

The good news for Motorola is that it understands the Dip. Even better, the company realizes that it doesn't have to win only the biggest battles. The latest Motorola promotion (done in conjunction with Verizon Communications (VZ)) makes their new line of phones the obvious choice for some teenagers. Nearly instantaneous music downloads are available during a nationwide Fergie tour as a way of establishing to this coveted audience that there is one, and only one, best choice for them. In a very different niche, Motorola's (RED) promotions are the most successful of those run by any company. They've raised tens of millions of dollars to fight poverty in Africa by creating a branded phone that is irresistible to a segment of the population. For these people, there is no second choice, no point in shopping around. Either they have a (Product) Red phone or no phone at all.

Every consumer has a choice. Every corporation that buys insurance or supplies or hires workers has a choice. That choice is wide and getting wider. Google brings us nearly infinite choice, and people are taking advantage of that every day.

The new imperative is really simple: average is for losers. Either you're making something that people consider the best in the world, or you're not. It seems to me that you work too hard to just settle.

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