The Demise of History

The final chapter in the scramble to create one sustainable business from among the former giants?

The final chapter in the scramble to create one sustainable business from among the former giants?

As the small print that investment managers are mandated to publish on their adverts warns, past success is no guarantee of future returns.

Only two decades ago, the world’s telecommunications technology industry rested proudly on the shoulders of a small number of giants on two continents: Lucent and Nortel in the US and Canada; Alcatel, Nokia, Siemens, Ericsson (and arguably Marconi) in Europe. Combined, these behemoths shared over 700 years of history traceable back to Alexander Graham Bell, the inventor of the telephone, himself. But business is business and balance sheets place limited value on the romance of past glories. The advent of the Internet changed the rules at the turn of the new millennium. Legacy got confused about whether it was an advantage or a millstone around the necks of those that had created it.

In 2006, Nokia and Siemens merged their telecoms equipment businesses to create Nokia Siemens Networks. In the same year and for similar reasons, Alcatel and Lucent marched up the aisle and, for richer or poorer, adopted the double-barrelled ‘Alcatel-Lucent’ moniker. The logic appeared sound: weakened and vulnerable because of change, each needed economies of scale. Investment bankers and senior executives got rich by arranging the weddings. Tens of thousands of lower paid but skilled and experienced engineers were sacrificed for ‘cost synergies’.

But the mergers were dogged by cultural incompatibilities, management infighting and government interference in what had become a rapidly changing technology industry with strong and emerging competitors, some from Asia. French water and American oil proved a contrarian cocktail at Alcatel-Lucent. Nokia, meanwhile, was so dominant in the global mobile phone market that the network infrastructure business was considered a second tier unit within the group.

The newly-wed couples limped along for the best part of a decade, but arranged marriages don’t always enjoy fairy-tale endings. Siemens was the first to walk, exchanging its share in the joint venture for €1.8 billion of Nokia’s cash. Nokia went on to offload it’s troubled handset business to Microsoft. In what now looks like the final chapter in the scramble to create a single, sustainable network equipment business from the remains of many former giants, Nokia this week mounted a (seemingly amicable) acquisition of Alcatel-Lucent.

In the 20 years since these companies led the industry, we have experienced what can only be seen as its most dynamic period of development, expansion, innovation and opportunity in more than a century. Telecommunications has evolved from a mundane support role to the starring role in our lives. The rise of mobility, the Internet and broadband data have, by any standard, been meteoric. However, for the industry’s former giants, the opportunity turned out to be a tragedy of Shakespearean proportions. The tragedy was carved, in large part, from arrogance, complacency and carelessness.

If what remains of Nokia manages to navigate the outstanding regulatory and shareholder obstacles and it buys Alcatel-Lucent, the transaction will effectively consign the majority of the telecoms equipment industry’s most famous brands (all but Ericsson and Nokia) to the history books. Nokia’s chairman and CEO explained this week that an enlarged organisation would trade under the Nokia brand. So RIP Alcatel. RIP Lucent. Space will need to be found in the same cemetery where Nortel (bankrupt in 2009), Siemens (walked) and Marconi (acquired mostly by Ericsson in 2006) brands were laid to rest in recent years. The Alcatel brand may limp on in the low-cost smartphone market after TCL licensed the brand’s use when it bought the loss-making device unit in 2004.

The market will determine whether the proposed deal will be successful or not. But for me, it represents a squandering of history, of value, of careers and opportunity on a scandalous scale. Can anyone imagine a global automotive industry without Ford, General Motors, Volkswagen, Mercedes-Benz? That is the future for telecoms technology.

The lesson is not new but it is important. Change will happen. History, success and size provide scant protection when it does. Established businesses must embrace and lead industry change. Or change will eat them.


Advertising’s mini crisis – not enough geeks

I’d neither met nor heard a ‘prophet’ speak before so my expectations were heightened when I learned that David Shing would address the third annual Media360 Summit in Hong Kong. Shing, or ‘Shingy’ for short, is an Australian-born, New York City-residing ‘digital prophet’. Blessed with the gift of prophecy, I like to think I’d choose to not work for a living and play the stock market for fortune and fun. Shingy, however, has chosen to ply his gift at AOL, a company that might best be described as a former global media goliath that misread the future, endured steep decline and never really recovered it’s former glory.

The advertising agency in Asia displayed a crisis of confidence at the Media360 Conference

The advertising industry in Asia displayed a crisis of confidence at the Media360 Conference

The Media360 Summit, hosted by Campaign magazine’s Asia Pacific edition, brings together the crème de la crème of Asia’s advertising industry – from the media themselves and the advertisers to the media buyers, creative-types and a handful of technology businesses that code the algorithms that somehow enable advertising to sell us stuff online.

During one of the panels, Bret Leece, chief analytics officer at media strategy consultancy Initiative Global, talked about a recent advertising campaign for a major car manufacturer that exposed US consumers to different content depending on where they live and the weather in their location on the day they saw the online advert.

If the weather was cold and wet, the consumer might see an advert for a rugged 4X4 highlighting road safety in difficult driving conditions. In sunny California, meanwhile, viewers might view a convertible model bathed in sunshine winding its way along Highway 101 on the California coast.

Implementing the campaign brought together the creative and geek teams to deliver what has long been promised: advertising personalised to the individual. However, Leece also admitted that the incremental cost of customising content was not justified by the campaign’s improved results.

Despite this exciting new era of personalised adverts, the mood in the room was sombre. Judging by the discussions, the advertising industry (in Asia at least) is enduring something of a crisis of confidence. Clients, it seems, no longer want to pay for the value that ad agencies deliver anymore. The advertising agency business model has been castrated by the combined evils of the global recession and the participation of procurement departments meddling in commercial contractual terms.

Adding insult to injury, the industry is struggling to attract the geeks who can do computer coding that is core to an ad man’s arsenal today. The geeks find Mountain View more attractive and lucrative than Madison Avenue.

Like many industries, advertising is struggling to adapt to the machine-centric world of programmatic advertising where algorithms match advertisers’ needs for an audience with online media. The business of advertising in the digital age is increasingly dependant on machines to make decisions and do the work previously carried out by people. To borrow from Warren Bennis, a pioneer in the field of leadership studies, the advertising agency of the future may have two employees: a man and a dog. The man will be there to feed the dog. The dog will be there to stop the man from interfering with the machine.

The room needed a lift and Shingy was there to provide it. The former artist turned clairvoyant bounced into a room full of Armani, Ferragamo and Prada-clad executives donning sneakers, a black suit customised with white stripes of paint and a Pete Burns hairdo (c.1984). Prophets, it seems, need a style that says they’re unlike everyday (designer) mortals.

If Asia’s advertising industry was hoping Shingy would deliver the foresight of salvation, it was little wiser after his sermon. Shingy is an affable, energetic and irreverent chap who delivered a well-constructed 45-minute presentation that was high on entertainment and humour but, disappointingly, low on visionary foresight.

But maybe the advertising industry can learn something from David Shing: it takes a high degree of self-confidence to label yourself as a ‘prophet’. Maybe the advertising industry needs simply to be bolder rather than more corporate and to take itself a little less seriously: a more relaxed advertising industry might be more attractive to the geeks.


Situations Vacant

Depending on how you choose to look at it, China is either an ancient civilization or a 30 year-old economy. If you’re in the international PR industry here, the country’s more recent history dominates your workload more than the Han Dynasty or Confucianism but history and tradition do make occasional appearances.

30 years is as long as contemporary China has been working towards fully paid-up membership of the global economy. Over that time, it has embraced state controlled capitalism and made remarkable progress in looking outwards. Yet despite events such as the recent high profile flotation of Alibaba on the New York Stock exchange, or Lenovo’s acquisition of IBM’s PC and server business units, the number of businesses founded in China going global remains relatively low. There are many reasons for this, including a lack of mutual appreciation of the similarities and differences between China and the western world.

I’m pretty sure that my PR colleagues in China would forgive me for describing the international PR industry here as less developed than London, New York or Silicon Valley. While western corporations have enjoyed a longer run at building global businesses and PR industries, the international aspects of the industry in China only began to develop over the last decade. The lack of experience shows.

China needs western PR skills to help it globalise

China needs western PR skills to help it globalise

The United States and China are the world’s top economic superpowers today. They appear divided by ambition and a shared interest in globalisation and growth. Each is emboldened by self-confidence and inhibited by an astonishing naivety of the other.

When Chinese officials returned to Beijing after agreeing to bail out the US economy in 2008, they would have been well advised to return to their offices to file their expenses. Instead, they called a press conference to let Chinese citizens know just how far the global economic pendulum had swung in Beijing’s favour. Similarly, the United States’ efforts to effectively block Chinese commercial interests from competing openly in western markets has led to what can only be described as a series of tit-for-tat reprisals. Ultimately, no one wins that game.

China needs more experienced western PR skills with both the knowledge and confidence to provide informed advice to help Chinese institutions embrace the global economy. Chinese business executives need senior western PR advisors to let them know how their actions and reactions will be interpreted in the west. At the same time, western institutions could do worse than take advice from those PRs with a working knowledge and a cultural appreciation of China and Chinese ways.

As an international exchange programme, it could help create opportunity and purpose, and support the development of the next phase of the global economy, as well as valuable future careers for global communicators.

It has proven challenging to encourage experienced PR people from western markets to live and work in China. This despite roles that come with attractive expatriate benefits with a global market leader and interesting issues to manage. For some, children’s schooling or partner’s careers means it’s just not practical; for others, there’s fear of the unfamiliar and discomfort with the difference.

Maybe I over-estimated the inherent sense of adventure that experienced comms folk possess.

Come on in. The water’s lovely.