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Motorola vs Apple: Planning for

disruptive innovation
By
Max Oldham
Title:
Business Plan for The Long Board Harness

Authors:
Max Oldham (N0436759)
Submitted for the Design Masters Module:
DESN40151: Design Management 201617
Submitted to:
Nottingham Trent University
College of Art and Design and the Built Environment
&
School of Architecture, Design and the Built
Environment
Date of Submission:
22nd March
ABSTRACT

Motorola where the once the pioneers and top


innovators of the cellular industry. Today they
are almost non-existent, having split and sold
the company on to Google and Lenovo. How
has such a company gaining such in the past
ended up almost broke? It comes down to how
they handled the disruptive innovation of the
smartphone in 2007. They not only were
unprepared but did not join the smart phone
revolution.

To make matters worse for them they had a


hand in helping one of their most competitive
companies gain huge success. This company is
Apple. Just two years before the smartphone
took off in 2007, Apple and Motorola
collaborated to produce a new phone. Motorola
had given secrets in design away to Apple
without realising. Apple who were well prepared
for smart phone technology, applied the design
knowledge given to them by Motorola and two
years after their collaboration, released the first
iPhone.

This was a series of events that lead to Motorola


being left behind pushing out generations of old
phones and watching stocks plummet whilst
Apple has risen to the top of the industry,
becoming top innovators.

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TABLE OF CONTENTS
TABLE OF FIGURES ............................................................................................................................ 3

1.0 INTRODUCTION .............................................................................................................................. 4

2.0 MOTOROLA..................................................................................................................................... 5
2.1 Introduction

2.2 Internal Management Struggles

3.0 APPLE .............................................................................................................................................. 7


3.1 Introduction

3.2 Management Comparison

4.0 DISRUPTIVE INNOVATION STRATEGY COMPARISON .......................................................... 9


4.1 The Smartphone Arrival

4.2 Motorola/ Apple Collaboration

4.3 Market Prediciton and Strategy

5.0 CONCLUSION ............................................................................................................................... 10

REFERENCES ..................................................................................................................................... 11

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TABLE OF FIGURES
Figure 1. Original Design Model vs. Adaptive Design Model (Clarkson and Wynn, 2005) ............................ 5

Figure 2. Elements of a PDS (Pugh, 1991)................................................................................................... 5

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1.0 INTRODUCTION
A disruptive innovation is an innovation that creates a new market and value network and eventually
disrupts an existing market and value network, displacing established market leading firms, products
and alliances. The term was defined and phenomenon analysed by Clayton M. Christensen beginning
in 1995 (Wikipedia, 2017a). The disruptive Innovation this paper will reference is the arrival of the
smart phone. When the smart phone hit, the market is disrupted the current mobile phone market
resulting in a decline of sales in regular mobile phones. The two companies this paper will compare
both made very different management decisions.

The two companies in question are Motorola and Apple. Motorola where behind the start of the
cellular industry and created the Razr, the most innovative phone on the market just 3 years before
smartphones took off in 2007. However, Motorola have since been forced to split and sell the
company on. In contrast to this, Apple could not have more success on todays phone market, selling
almost 212million units on the phone market in 2016 (Statista, 2017). The decline in Motorola and
Increase in apple can be pinpointed to what Motorola consider as the worst business decision they
have ever made. A collaboration with apple to produce an ITunes, mobile phoned called the Rokr. Two
years later the Smartphone had begun to introduce itself into the market and Apple launched its first
IPhone. This was the start of Apple rise to market domination and Motorolas failure. (Fishman, 2014)

The papers aim is to expand the series of events during this collaboration and analysis the design
management decisions made by both companies both before and after the Rokr was launched.
Comparing how they had prepared for smartphone technology and how they handle it once it had
disrupted the market. Thus informing on better business strategy and company structure.

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2.0 MOTOROLA
2.1 Introduction

Motorola was founded in 1928. The first breakthrough the company made was commercializing the
first mass-market radio. They become a company of innovation and introducing many consumer
electronics into the market. In 1984, Motorola introduced the first piece of cellular technology onto
the market, the DynaTac. With that the cellular market exploded, not just around the country but
within the industry and company too.

Motorola continued to enjoy great amounts of success in the cellular industry. In 1994, they had risen
to 23rd on the fortune 500 list with a revenue of 22billion. 60% of the phones sold in the USA where
Motorolas. Due to internal struggles Motorola dipped in profits until once again they revolutionised
the cellular market. In 2004, they launched an innovative new product. This was the Razr. It was a
sleek and stylish and changed the way people looked at phones. By 2006 over 50million Razrs had
been sold. So how has a company who has enjoyed incredible success and innovation in an industry
they are credited for starting, reached a point where the company has been split and sold on to google
and Lenovo? (Fishman, 2014). The timeline events discussed can be referenced below in fig. 1

Tech and
Telecomm
crash begins Rokr launched
DynaTac Razr Launched
with Apple
Launched
Company Split
and sold
Figure 1 Motorola Timeline (Fishman, 2014).

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2.2 Internal Management Struggles

A major influence on the decisions that lead to Motorolas failure were the internal structures and
management tactics. As Paul and his brother Joe built the company, they created an environment
that drove people to invent and fail and learn and invent again. Motorola became known for its culture
of risk taking, its investment in training and development, and its almost fanatical insistence on
respectful dealings among employees (Fishman, 2014). This was during the early years when the
company was only focused on products for public safety and defence. This was a management ethic
that meant the company worked very well internally. It could be theorized, if they had stayed with
this sort of management they wouldnt have eventually ended in failure.

This management change occurred in 1990 with the retirement of CEO, Bob Galvin. He was hailed as
one of the greatest American industrialists of the 20th century. He controlled the company very well
and often made decision that the lead the company towards success, like expansion into the Chinese
market. This was a move he had planned but was waiting for the right moment. This was the reform
of the Chinese market. As well as timing, he made the decision that despite knowing china would
somewhat replicate the companys technology and compete with Motorola. He also knew the size of
the Chinese market meant that even a small share in it would be worth it. Bob Galvin was a man of
strategy and provided a working structure to the company.

Two years before his retirement he saw the gap in the cellular market and committed $100million into
the development of a cellular device, the DynaTAC. As discussed in 2.1 this lead to the start of the
cellular industry. Even though this started Motorolas success, it introduced a toxic element into the
company management culture. It was the start of the end for Motorolas ethic of corporate structure
and strategy. The success of the DynaTAC drove the company towards the cellular industry and away
from public defensive and safety. Without Bob Galvin manning the helm, this divided the company.
Internal competition began, sometimes resulting in screaming matches between CEOs. Mike DiNanno
a former head of many divisions in Motorola described it as Top management believed in letting the
sector guys run the businesses their way. If that rubbed others the wrong way, tough luck, resulting
in no cohesive plan for network technology and handset technology. The two operated totally
independently, in totally different directions. (Fishman, 2014). This resulted in a complete change in
the management ethic that was once upheld by Bob Galvin. This was an influencing factor on the
decisions expanded on in section 4.0, that lead to the failure of Motorola, following the smartphone
revolution.

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3.0 APPLE
3.1 Introduction

Apple is an American multinational technology company founded by Steve Jobs, Steve Wozniak and
Ronald Wayne. Starting out as Apple computer Inc., they first found success launching the Macintosh
personal computer. In 2007 Apple shifted its focus from computers to consumer electronics, renaming
itself Apple Inc. This decision gave them the ability to expand their range of products and launch the
first IPhone that same year. A decision that is attributed to the success they have today, currently
having a net worth of $495 billion. (Wikipedia, 2017b) Apples timeline is shown below in fig 2.

Figure 2 Apple timeline (ABC news, 2011)

Apple launch the Rokr with


Motorola

Although their products expand much larger than t cellular devices, they have a big share in the cellular
market today. They are even behind one of the most iconic smartphone to be created, the IPhone. In
2016 is was reported that 43.5% of Americas smartphone users, used an IPhone (Statista, 2017).
Shown in fig. 1 and 2, Apple once collaborated with Motorola back in 2004. This was before the
smartphones entered the market and they had launched the first IPhone. It was a collaboration that
was just the start for apple, whilst it was the beginning of the end for Motorola.

3.2 Internal Management Comparison

In section 2.2 it is discussed that Motorola had once been a very structured and organised company
but had started to struggle internally after the launch of their first phone. This influenced poor
management and decision making when smartphone technology disrupted the market. It could be
argued that this happened in reverse for Apple. They hit internal organization struggles early and

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learnt from it, evolving into a well-structured and strategic company, before smartphone technology
hit the market.

In 1981 Apple when public and broke the fortunes 500 list with in 2 years. This was their first period
of success. Steve Jobs, Apples chief visionary, brought in John Sculley from Pepsi-Cola to act as new
chief executive. Due to poor sales of their next Macintosh and members of the team complaining
Steve Jobs was pushing them too hard, it wasnt long before a power struggle erupted between Sculley
and Jobs. Alan Deutschman a journalist who worked with Apple Stated that Steve Jobs had this
company-within-a-company that became pitted against other parts of the company that actually
made money. (quotation) In 1985 This internal power struggle resulted in Steve Jobs leaving Apple,
claiming he had been forced out. It had not only resulted in the resignation of Steve Jobs but a Major
organizational change and the way Apple made management decisions.

The difference between Motorola and Apple were how they both reacted to these internal
management problems. In the case of Motorola, they never recovered from the divide in their
company, in terms of how they dealt with management. Although they found further success before
smartphone technology disrupted the market, the idea of fighting for power instead of organized
management never left the company. In fact, just like Apple they later forced out a key member of
their company, CEO Chris Galvin in 2004. His replacement was the member of Motorola who to made
the decision that began their failure. This was to strike a deal with Steve Jobs from Apple to produce
the Rkor. Expanded on section 4.2.

Whereas after Apple had suffered from a divide in the company and Steve Jobs resigned, they realized
this was not the management strategy they wanted. They began to struggle after Steve Jobs had
resigned and realized that the best way of dealing with it was to go back to their old management
strategy. Something Motorola never did. They brought Steve Jobs new company and within a year
Steve Jobs was back in Apple as CEO. Apple once again had Steve Jobs visionary mind and structure
organization in the company. This resulted in better preparation for the smartphone technology
market disruption. This was shown in decisions made by Steve Jobs, such as working with Motorola,
from which they benefited greatly.

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4.0 DISRUPTIVE INNOVATION
STRATEGY COMPARISON
4.1 Smart Phone Technology

Although Smart phone technology was around years before it launched itself into the market, when it
did hit the market, it made a huge impact. This impact can be traced back to 2007 when apple launched
their first IPhone, google announcing the Android operating system and Microsoft show casing their
windows phone. This is when smart technology in phones really hit the mass market. It was an
innovation in technology that would eventually on go to dominate the cellular market making regular
phone technology seem obsolete. It was the reaction and preparation to this disruptive innovation
that cause Motorola to fail and Apple to become successful.

4.2 Motorola/Apple Collaboration

Referenced in section 3.2, Motorolas CEO, Chris Galvin was forced out the company by the board of
directors in 2004, ending the Galvin family legacy at Motorola. Shortly after the company faced some
success through the launch of the Razr, which was an innovation amongst the cellular industry,
referenced in section 2.1. Celebrating this was Chris Galvins replacement Ed Zander. He was the
former COO of sun microsystems, based in the Silicon Valley. With the success of the Razr the stock
price of Motorola double in his first two years. He made a poor management strategy and rode the
success for too long, which could have been influence behind the worst decision he could have made.
Instead of using the success to further innovate and produce another product in house, he waited for
the success of the Razr to peak and form a deal a friend in the Silicon Valley, Steve Jobs. A Collaboration
he would later regret. Together they produce a Motorola, ITunes phone named the Rokr and launched
it in 2005. Just as former CEO Bob Galvin had taught the Chinese market to compete, referred to in
section 2.2, as had Ed Zander with Apple. The difference was not only had Ed Zander not realised he
had inadvertently taught apple their secrets in making phones but he had taught a company that was
more much capable of innovating and competing. (Fishman, 2014)

Apples much more innovative and organised management meant they could better harness
smartphone technology and apply what they had learnt in their collaboration with Motorola. This
resulted in them launching their first iPhone two years later and experiencing success, whilst Motorola
where still pushing variations of the Razr and hitting profits of an all-time low.

4.3 Market Prediction and Strategy

The reason this deal was Motorolas downfall was twofold. First of it was a distraction that caused
Motorola to overlook the oncoming smartphone and two they gave away their design knowledge to
a competitive company who did see the smartphone coming. This was a strategy credited to Ed Zander.
Despite no reports of the company ever looking at smartphone technology before 2007, Ed Zander
insists that he saw it coming, claiming Motorola didnt have the right team to understand such
technology and suppliers were too slow. (Fishman, 2014).

This is due to poorly handling organisational changes. when Bob Galvin retired referred to in section
in 2.2. Motorola said goodbye to many of their key engineers. Something similar happened again
whilst Chris Galvin was in charge. Due to the tech and telecomm crash in 2000 he was forced to let a

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third of the companys workers go. Instead of recovering from this Motorola used it as one of the
reason to force Chris Galvin out the company, referred to in section 4.3, never recruiting the standard
of team they had before the layoffs, that could have matched Apples.

Ed Zander also never engaged with the Chinese market as Bob Galvin had done years before. He left
the details to his division heads and country managers. Had he Engaged with the Chinese market he
would have better learnt about smart technology and known they were upgrading to 3G. Motorola
didnt have a phone with 3G capability. The Chinese market was a market that had been totally
overlooked and ended up making the final push towards Motorolas failure. (Bruce, 2014)

Whether Motorola saw the smartphone coming might not have mattered due to the poor strategy
they had in place. Without having recruited the right team or sufficient market engagement, meant
they werent equipped the arrival of smart phone technology.

Unlike Motorola, Apple had a very innovative and fast paced engineering team, and a CEO with vision
and understanding of market capability. Despite smartphones not taking off until 2007, Apples
research into such technology can be traced as far back as 2003. The engineering team had started to
consider the use of touch devices and Steve Jobs had announced at an all Digital things conference
that cell phones where going to be the next big device to consider. (Wikipedia, 2017c) Apple had not
only successfully predicted on coming technology, they made themselves experts in the market and
assembled an innovative, technical team that could deal with it. This is down to the strategic and
organised management supplied by Steve Jobs. Something Motorola were missing.

5.0 CONCLUSION
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It was not the internal management struggles each company faced but the ethic they developed from
them that influenced their reaction and preparation for disruptive innovation. Disruptive Innovation
that resulted in either their success or failure.

As Apple were a much more organise structure and a CEO who had the knowledge to make the right
decisions, they were ready for smartphone technology. Motorola had let their internal struggles
become the nature of their management and decision making. It left them with an in-experienced CEO
who couldnt make the right decisions and not enough staff who could understand smartphone
technology.

Although each company had previously gone through internal struggles, it wasnt until the
collaborative product launch that the effect their management styles were having on the company,
came to light. Motorola had gained huge success with the Razr just two years before the deal with
Apple. This over shadowed the management problems they were having. They had just fired their CEO
and were dealing with a decreased work force. Their success blinded them and lead them into the
deal with Apple, where they were stuck focusing on the current market whilst everyone else was
looking forward.

Organizations in today's hypercompetitive world face the paradoxical challenges of dualism, that
is, functioning efficiently today while innovating effectively for tomorrow. Corporations, no matter
how they are structured, must manage both sets of concerns simultaneously. (Paap and Katz 74-85)
Motorola did not take overcome the challenge of dualism. They innovated only with the current
market in mind. This did bring them success; however, it was not success that lasted. Designing with
tomorrow in mind was a management style Apple had rightly adopted.

REFERENCES
READING MATERIAL

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Wikipedia.com. (2017a). Disruptive Innovation. [online] Available at:
https://en.wikipedia.org/wiki/Disruptive_innovation [Accessed 11 Mar. 2017].

Fishman, T. (2014). What Happened to Motorola. Chicago Magazine. [online] Available at:
http://www.chicagomag.com/Chicago-Magazine/September-2014/What-Happened-to-Motorola/
[Accessed 11 Mar. 2017].

Statista. (2017). Apple iPhone sales by year 2007-2016 | Statista. [online] Available at:
https://www.statista.com/statistics/276306/global-apple-iphone-sales-since-fiscal-year-2007/
[Accessed 12 Mar. 2017].

Statista. (2016). US IPhone Users As Share Of Smartphone Users 2014-2016 | Statistic [online]
Available at https://www.statista.com/statistics/236550/percentage-of-us-population-that-own-a-
android-smartphone/ [Accessed 12 Mar. 2017]

Wikipedia.com (2017b) Apple Inc. [online] Available at: https://en.wikipedia.org/wiki/Apple_Inc.


[Accessed 11 Mar. 2017].

Bruce. 2014 "How Not To Lead". adamsmithesq.com.[online] Available at:


https://adamsmithesq.com/2014/09/how-not-to-lead/ . [Accessed 15 Mar. 2017.]

Wikipedia.com. (2017c). History of iPhone. [online] Available at:


https://en.wikipedia.org/wiki/History_of_iPhone [Accessed 11 mar. 2017]

Paap, J., and R. Katz. "Anticipating Disruptive Innovation". IEEE Engineering Management Review
32.4 (2004): 74-85. Web.

IMAGES

Front cover Apple Image Pixelube,. Apple Logos Image. 2012. [online] Available at:
http://www.pixelube.com/2012/03/apple-logo-back-to-the-future/ [Accessed 16 Mar. 2017.]

Front Cover Motorola Image Logo<,. Motorola Logo. 2017. [online] Available at:
http://logok.org/motorola-logo/ [Accessed 16 Mar. 2017.]

Figure 1, Motorola timeline Fishman, Ted. Motorola Timeline. 2014. [online] Available at:
http://www.chicagomag.com/Chicago-Magazine/September-2014/What-Happened-to-Motorola/
[Accessed 11 Mar. 2017].

Figure 2, Apple timeline ABC News,. Apple Timeline. 2011. [online] Available at:
http://www.abc.net.au/news/2011-08-25/steve-jobs-timeline/2855158. [Accessed Web. 13 Mar.
2017.]

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