Financial engineering

Re-engineered to Smithereens is interesting reading. Linkedin.com pointed me to the piece via a posting there by the piece's author. I think her essay dwells a bit much on baby boomers, but maybe you have to have come from Lucent to see how losing sight of the purpose of a company can mess up the jobs of far more than one generation of (former) employees.  What the financial engineers seem to overlook is that if a company's stated mission is no grander than "Our mission is to make money for the stockholders", that that is not going to inspire many of the company's staff to rally round the corporate flag.  My undergrad degree is in Industrial Engineering and Operations Research, so I kind of can see where the numbers argue that its a great idea to sell off all the factories and outsource all the production of the company's products, but somehow along the way, the company (formerly known as Western Electric) lost the idea that the way the company earns its money is to sell products.   I'll not insist that you have to manufacture the products in order to sell them, but somehow with the factories gone, the management seemed to lose its sense of direction.  Didn't anyone understand that to sell products with a fat profit margin, you need to have products that people can't get from anyone else, not commodities.  Last year's gee-whiz item is next year's commodity (if not sooner).  Seems to me that things worked out better when the Great Depression idled the factories and management's reaction was to find ways to keep the factories working, even if that meant producing washing machines or some such things that are far out of the company's usual scope.  (Confession:  I tried to find something on the web to substantiate my assertion that Western Electric built washing machines during the Great Depression, but was surprised to learn they were making washing machines and sewing machines in the early 1920's.   Not what I expected to find   But I did find of Western Electric in the Great Depression:

The company paid its employees to make "articles in general
demand" from furniture to cigarette lighters to keep them employed,
then it distributed the goods at-cost through the company stores.

according to http://www.u-s-history.com/pages/h1802.html).  But now, in the 21st century, with no factories, the management just seems to blame the economy and look for more costs to slice ("The beatings will continue until company morale improves"). 

They sold off vast portions of the company, including the chip-business, which produces the raw materials (integrated circuits) from which innovative products can be built.   I'm a bit less comfortable with the notion that all the chips we'd ever need can be purchased from elsewhere.   If we buy commodity chips, how distinctive can our products be?   And if we pay other companies to make custom chips to our specifications, who is going to pocket the profit margin on those chips?   Surely Lucent management didn't make the humerous assumption that they are consumate deal-makers!

Lucent had some interesting starts on products that far out-distanced what the marketplace was currently demanding.    I'm thinking about the micromirror based optical router, long since canceled to the best of my knowledge.   "Nobody" needs that kind of bandwidth capacity.   Why walk away from a future market.   Wouldn't it have been smarter to help cultivate demand for more bandwidth.   Lucent had pioneered development of HDTV.    Why not work with web cam companies to bring HDTV to the PC?   HDTV video chats might step up the demand for IP bandwidth.  Youtube, I hear is already pressing the capacity of Internet service providers.   Verizon is gambling on the future by building FIOS now.   More bandwidth than the customer demands at present, but it'll take some real work and hefty investment for the cable companies to provide as much capacity as FIOS can.   Capacity isn't all that's needed to compete with the cable TV companies, but at least Verizon apparently noticed that they had competition and had to do something about it for Verizon to have a future.

(Disclosure:    I'm a Cablevision "triple play" subscriber.   I use Vonage for my home phone [though the Cablevision phone line has been useful to provide a phone for Aunt Dolly, who currently lives here].   My only monthly bill from Verizon is from Verizon Wireless for cell phone service.  [In other words, I'm not a FIOS subscriber even though they tell me it is now available in my neighborhood].  Since I am no longer employed by Bell Laboratories, I have so far managed to resist the call of the marketplace to move on up to HDTV.   I watch HBO on a plain old NTSC [that is, old non-digital] television set).

"Field of Dreams" projected the kind of thinking that Lucent management lacked.   "Build it and they will come".  But somehow Lucent was never interested in a market space until Cisco or someone had demonstrated that there was a significant market there.   That's not leadership.   "Me too" products are not a good way to bang big bucks to the bottom line.   At Lucent, the bottom line was "a lot fewer bottoms on the line".

Drew