Lonely at the Top

by Dave Michels

We live in disruptive times.

Technology is changing faster than ever before, the economy has been tough – plagued with war, scams (Enron, Madoff, etc.), and global recessions. World disasters have quite literally made conditions hostile (earthquakes, floods, tsunamis, hurricanes).

Nonetheless, our expectations on valuations are unchanged, and if we don’t get them – we look to the top – the CEO. It seems CEOs just aren’t what they used to be.

Of course there are a few stars – Steve Jobs being one – but they are one in a million. They defy all the odds and make every decision look obvious. Jobs also raises doubt about his peers and left some huge shoes to be filled by his successor. Many people are quick to compare Microsoft’s Steve Ballmer with Steve Jobs, but it isn’t a fair comparison. Jobs was a founder and one of the most successful and innovative CEOs we have ever seen. Jobs took a nearly bankrupt- left for dead – company and made it the most valuable company in the world. Jobs turned computing, cellular, Hollywood and the music industry upside down. No contemporary CEO compares well to Jobs.

Investors compare all that to Ballmer and ask why didn’t he do that? Microsoft was there first, Microsoft has more cash and more apps. It was already in the mobile business and was in fact accidentally involved with thin client desktop replacements called netbooks. Apple’s success makes Microsoft look dumb! Ballmer responded to the iPod with Zune – and failed – much like at least twenty other CEOs tried in vain to respond to the iPhone. But Apple’s success was highly unlikely. It isn’t reasonable to hold other CEOs to that standard. It is like asking Batman why he can’t fly like Superman does.

Forbes is into CEO bashing lately.

In this post “Oops! Five CEOs Who Should Have Already Been Fired (Cisco, GE, WalMart, Sears, Microsoft)” They attack two telecom players, Cisco and Microsoft – or more specifically Chambers and Ballmer.

on Chambers:

Mr. Chambers appears to have been great at operating Cisco as long as he was in a growth market.  But since customers turned to cloud computing and greater use of mobile telephony networks Cisco has been unable to innovate, launch and grow new markets for cloud storage, services or applications.  Mr. Chambers has reorganized the company 3 times – but it has been much like rearranging the deck chairs on the Titanic.  Lots of confusion, but no improvement in results.

On Ballmer:

So today Microsoft, after dumping Zune, dumping its tablet, dumping Windows CE and other mobile products, is still the same company Mr. Ballmer took control over a decade ago.  Microsoft is  PC company, nothing more, as demand for PCs shifts to mobile.  Years late to market, he has bet the company on Windows 8 – as well as the future of Dell, HP, Nokia and others.  An insane bet for any CEO – and one that would have been avoided entirely had the Microsoft Board replaced Mr. Ballmer years ago with a CEO that understands the fast pace of technology shifts and would have kept Microsoft current with market trends.

Microsoft is being criticized because Ballmer is still there, but on the UC side, there’s been changes. Microsoft Corporate Vice President Gurdeep Singh Pall who spearheaded OCS and the launch of Lync moved to Skype briefly and now works with Bing!

Last month, Forbes allowed a competitor to write an advertorial attacking Cisco and Polycom: “5 Reasons Cisco And Polycom Are In Trouble In Telepresence

telepresence has grown into a 4 billion-dollar per year industry. Today, however, the juggernauts of the market, such as Cisco and Polycom, are being outmaneuvered by a number of upstart companies…Cisco, Polycom and others have held on to a multi-billion dollar industry replete with proprietary systems that require organizations to spend sometimes millions of dollars per installation.

This post, as I commented there, is horseshit. However, times have changed as a no-name startup can attack the bellwethers from a respected podium. Microsoft, Cisco, and Polycom have in common lackluster stock performance – at least compared to Apple. But was their performance reasonable without the Apple comparison? Cisco went from zero UC market share about a decade ago to an industry leader. It has been ahead of the pack in video, and powers most of our connected society. Microsoft’s performance with Lync has also been impressive with strong penetration into the F500 (for Presence/IM). Windows 7 is broadly embraced, and Office continues its dominance in productivity applications. It’s recent acquisition of Skype, its new cloud services, and it’s tablet/Windows8 strategy indicate the company still knows how to make big bets.

Who’s left?

Kevin Kennedy at Avaya remains, despite being included in CNN/Money’s list of the top 20 money losers last year.  The company’s largest investor is Silver Lake which has a track record for turning profits on established brands, most recently Skype. That kind of loss and publicity can hurt the prospects of a CEO, but not only is he still there, the company is making some big moves:

  • Major changes to the leadership team including Gary Barnett, Marc Randall, Brett Shockley, Sandra Devine, and Todd Johnstone.
  • In March announced its intent to acquire Radvision – completely revamping and strengthening its video conferencing capabilities.
  • Unveiled its new cloud initiatives
  • Now embracing the iPad.
Avaya is working to align its new management, integrate Radvision and its video into its Avaya’s core offerings while concurrently building a new professional services capability and getting into networking.

Mitel and ShoreTel made recent CEO changes.

Don Smith ran Mitel for about 10 years and managed Mitel’s Inter-Tel acquisition and the IPO – neither of which had the happy endings shareholders were expecting. Don remains on the Board, but Rich McBee took over as CEO in Jan 2011 – his first time in the CEO chair. McBee wasted little time in flipping Mitel’s channel strategy and effectively undoing the Inter-Tel acquisition. Recently he declared intent to sell off Mitel’s distribution division. He also made several changes including hiring Phil Keenan (Polycom) to head up sales. The company has returned to profitability.  Mitel is working to improve its name recognition, strengthen its channel, and exploit its advantages in private and public cloud technologies.

ShoreTel appointed Peter Blackmore as its new CEO in December of 2010. Since ShoreTel had been successful with recent growth, Blackmore was quick to downplay major changes. He did, however, inherit the acquisition of Agito and a need to strengthen the company’s international expansion. Most recently, ShoreTel jumped with both feet into the cloud with its recent acquisition of M5 – some might say he bet the company on it. That integration, along with ShoreTel’s plans to expand internationally and into larger companies while also increasing core UC capabilities including broader support for SIP will keep Blackmore busy. He also needs to find a new SVP of WW Sales as Don Girskis recently departed the company.

It’s a tricky business. Voice was the core of UC just a few years ago, but now it is just a part of the communications pie. Each vendor is scrambling to fill in the whole pie which includes presence, video, extensibility, contact centers, social networking, messaging, and endpoints (these are the factors that the TalkingPointz reports evaluate). The technology is shifting as are the customer expectations and user requirements. The CEO has to navigate competing interests with tight budgets in a market with tepid demand.

I was pretty sure Apotheker was destroying HP, but I am not so sure about the CEOs mentioned in this post. I generally think Ballmer should go, but the fact he’s still there suggests that Bill Gates is comfortable with him staying and this gentleman yields to Mr. Gates. The fact Cisco isn’t earning like it was seems hardly a reason to oust Mr. Chambers. Andy Miller at Polycom is harder to defend. The positive reaction to selling off Spectralink and Kirk clearly confirms how neglected they were at Polycom, and I know he’s made some enemies with some important partners. I still think Polycom would be better off teaming up with a SEN or Avaya (that ship sailed), but perhaps those options were never viable.

It strikes me that being the CEO of a UC vendor in this time isn’t an easy job. I do have some great advice for each of them, perhaps I should post it here as they probably follow this blog (if not, they should be fired). By the way, I write from the sidelines – I have no financial interest in any of the companies mentioned in this post.

Unfortunately, we tend to decide if our past decisions (such as CEO appointments) were correct based on their results. Outcomes are irrefutable, however, decision making is actually somewhat separate from outcomes. We make decisions based on the best available information we have at the time. Sometimes they are right and sometimes they are wrong – any good CEO will tell you that decisions have to be made before risks of a bad decision are eliminated. When things turn sour, we tend to say it was a bad decision – but was it?

Try it this way, if you order fish at a restaurant that makes you terribly sick – was it a bad decision to order the fish? Most would say yes, but maybe it wasn’t. How about if it was a well known restaurant, known for this fish? how about if this fish at this restaurant is your favorite meal? The point is putting too much emphasis on outcomes is a flawed approach. Decisions have risk, and sometimes that risk rears its ugly head. The decision was made knowing there were risks, so why was it a bad decision?

The iPhone was a huge risk -Apple had never made a cell phone, it was a known fact that power users preferred keyboards, there were multiple technologies in the iPhone that were unproven, it was locked into a single carrier, it did not support Microsoft Exchange initially, and the phone was about 5 times more expensive than any competitive product. There were lots of reasons the iPhone could have failed. It obviously succeeded and Jobs gets full credit.

But not everything was in his control. AT&T could have destroyed it with bad service. Manufacturing defects could have hurt it. Some of the new technologies such as the capacitive touch screen could have failed. RIM might have responded quicker and more effectively. The question is this: if something beyond Apple’s control had caused the iPhone to fail – would Jobs still be heralded as a brilliant CEO for bringing it to market?