Remember Motorola? It was great… until it wasn’t. So, why did Motorola fail?

The giant pioneer of wireless communication and leader of the early digital era? Motorola was the first provider of 2-way radio communication. In such a way, the company equipped the police and the military with walkie-talkies. 

Soon, the trend spread to dispatchers of all kinds, and the world simply became a better place to live. In a way, we probably not be able to work from the comfort of our home offices if there weren’t for Motorola.

Motorola was the inventor of the mobile phone business. And yet, Motorola solutions were soon replaced by Nokia and its huge success in 1998. So what happened?

The quick demise of Motorola solutions was not caused by a single event, but rather a series of unfortunate ones. 

Motorola – the rise and fall

Back in 1928, brothers Joseph and Paul Galvin acquired a recently bankrupted radio technology and paid only $750 for it. It was Paul who came up with the idea to make radios portable and install them in cars.

The next step was to create portable signal receivers for the police. The success was followed by FM appliances, large-screen TVs, and mobile phones. Motorola even created the very first transceiver to use in space and signed any mobile technology to appear at that time. 

The company entered the mobile phone market in the late 70s and early 80s. Their iconic DynaTAC 8000 appeared in 1984, and it was the very first flip phone the world has seen. They followed up with MicroTAC in 1989, and the world’s smallest and lightest clamshell flip phone StarTAC in 1996. 

It seemed their success has no end. They kept on hiring people and building huge factories, as well as investing in quality solutions. They even managed to establish the Six Sigma standard and ensured that 99,99% of their products had no defects at all. 

The largest mobile phone manufacturer focused on China and followed its opening to international markets in the 80s. It wasn’t easy, but they managed to convince the Chinese government to let them build factories there. This enabled them to cut costs significantly, but the price turned out higher than they thought. Chinese manufacturers were getting familiar with western production standards.

The influence of Motorola was immense. Thousands of Chinese suppliers, some of them even state-owned, adopted Motorola practices. Most of them had second and third-tier suppliers, and one could argue that Motorola played the biggest role in China’s economic growth.

At the time, Motorola was divided into two sub-companies:

Motorola Solutions for communication and Motorola Mobility for mobile phones. They operated fully independently from each other and aligned only on important matters.

The animosity was so significant that engineers from Solutions used rival phones from Qualcomm. As Motorola’s market share dropped, another mobile phone giant was conquering the market. It was Nokia.

By the end of 1997, as Gary Tooker‘s CEO mandate expired, Nokia had become the leading mobile phone producer in the world. Chris Galvin was brought in again to stabilize the situation.

The 1980s were a time of space obsession, and lots of money were invested in space exploration. Communication technologies were key, and the efforts soon gave birth to the Iridium project. The network comprised 77 satellites. It would ensure coverage wherever traditional technology fell short. Wireless phone service was about to connect the entire world.

The technology for these satellites was provided by Motorola, and it was worth $2.6 billion. The project was developed for an entire decade, only to fail miserably in 1998. Iridium could only be used with ultra-expensive phones ($3,000 per piece) and a minute cost of $7. Therefore, Iridium bankrupt after only 9 months, and Motorola had to sell it for only 1% of what it originally cost. 

As if this was not enough, 9-11 happened. These events paired with the SARS scare caused Motorola to lose even $4 billion. Galvin was desperate for solutions and fired 1/3 of the 150,000 workers. Multiple plants were closed, including the main $90 million plant in Harvard, Illinois. This, however, was not enough to save the company.

Chris now invested his hopes in the newest, digital-ready Razr mobile phone. The device was very thin and made almost entirely of metal.

The Razr phones

Unfortunately, Motorola didn’t stick on the market long enough to see the luxurious phone being launched. In 2003, the Galvin family gave up and sold their 3% company share for only $720 million.

Galvin’s leaving might have been premature, as things took a dramatic turn after only three months. Razr was enormously successful, as almost 50 million phones were sold in only two years. In 2004, the market share of Motorola was an incredible $42 billion, and new CEO Ed Zander was celebrating the success of Galvin’s idea. Razr was officially the second-best mobile phone in the world, and one of the 20 best mobile devices to ever be invented. 

However, it didn’t take long for Zander to diminish the success of the company. He made a deal with Silicon Valley genie Steve Jobs (Apple CEO) and created the Motorola Rokr. Rokr had the hardware technology of Motorola and Apple iTunes. As expected, this phone was a total success, but it didn’t break Motorola’s way. The company had neglected all its efforts to keep competition off its way. It had taught the most dangerous and savviest competitor how to make a great phone.

In 2007, Apple discontinued its partnership and launched the very first iPhone. The basis for it was nothing else than Motorola’s Razr.

Zander had made an array of mistakes. For starters, he didn’t engage with China as much as his predecessors and left the division heads to handle the job. China improved its networks to 3G, while Motorola was still producing 2G phones.

In the end, they had to offer their products at steep discounts so that they can stay on the market. Samsung and Huawei used the situation to offer cheaper phones, and they were soon leaders of the Asian market. There was nothing Motorola could do at that point to compete with them.

Zander left the leadership position in 2008. In the year to come, the mobile market share of Motorola had sunk to an incredible 6%. 

The next rescue attempt was by prominent investor Carl Icahn.

He came into the picture in 2007 and purchased 3.6% of the company. The first thing he did is to split the two company divisions into separate firms. 

The new CEO, Sanjay Jha, focused on Android phone production, which proved to be a good move. Their Droid phone was acquired by Verizon and soon sold much better than iPhone. Google used the opportunity to purchase the Mobility division, this time for $12.5 billion

It was a sweet deal for Google: Motorola would produce their next hit Nexus, and they will get access to their patents and their customer base. All Motorola products released during Google ownership sold well, and Motorola was next acquired by Lenovo for $2,91 billion. In 2014, they tried to conquer the US market with the new Razr. Due to the high price of the phone ($1,500), this attempt was not successful. 

Not long after Google sold Motorola, followed the steps of all departed tech masters, such as SGI, Atari, and Commodore. 

A brief history of why Motorola failed

Motorola didn’t move to 3G

Perhaps its biggest mistake of Motorola was that it didn’t recognize the growth of the 3G industry. Instead, they kept making obsolete 2G devices.

It wasn’t competitive enough

Many experts argue that Motorola lost most of its market share because of low investment in security. At the same time, companies such as Blackberry were taking the role. Blackberry developed software that helps companies communicate safely and securely. 

Blackberry changed the mobile phone market for good. Instead of innovating, Motorola stayed focused on the products it already had.

Soon after, Apple offered consumer devices of its own and pushed even Blackberry aside. Motorola was no longer a bench player – it had left the game completely. 

2-way radios were replaced by mobile phones

With mobile phones becoming accessible to large audiences, Motorola’s 2-way radios became irrelevant.

It wasn’t innovating

Motorola made no innovation for years. It lost its place among the 10 leading US firms, and it dropped to place 34 in 2006. 

It was poorly managed

Motorola changed more leaders in a decade than some companies for their entire existence. Poor management affected the business, and Motorola lost its competitive edge in the market.

Work culture suffered

Motorola’s leading managers didn’t make the effort of controlling all sectors, and let the local leaders do business as they please. The company had no cohesive plan for the handset and network technology. Quite soon, the two divisions were headed in two completely different directions. 

Poor decisions were made

Thanks to Motorola, Chinese companies learned how to produce mobile phones. As a result, there were more and more Asian-produced devices on the US market. 

The Apple deal was also not the smartest move ever. Motorola gave Apple the necessary knowledge on how to produce mobile hardware. 

They focused on quantity over quality

Apple directed all its resources toward the perfect iPhone, while Motorola kept working on several models at the same time. In such a way, Motorola missed valuable opportunities in the cell phone industry.

What can we learn from Motorola’s failure?

The inglorious end of Motorola mobility taught us a few very important lessons. 

Quality is key

Making a great product is not enough. You need to keep improving it and maintaining its success. This will work much better than investing efforts into multiple products or variations all the time. 

Innovation is important

You can only stand out from the competition if you keep innovating, there is no way around it.

Good marketing can be very helpful

Neither Motorola nor Nokia are on the market anymore. The two tech giants had one thing in common: they didn’t invest in marketing as much as they should have. It seemed unimportant at the time, but it is the very reason why both brands are now history footnotes.

Unhealthy work culture

Companies need to invest both time and means into creating a pleasant workspace. The lack of management and healthy working relationships can diminish even the biggest success, such as the one of Motorola.

FAQ about why Motorola failed

Why did Motorola fail as a company?

Motorola, a mobile phone market leader, failed due to multiple factors. Its inability to adapt to market trends and consumer demands was a major factor.

Strategic errors included sticking with its proprietary operating system instead of Android. Apple and Samsung were also fierce competitors.

What were the reasons behind Motorola’s decline?

Motorola’s inability to innovate and release new products quickly contributed to its downfall.

Focusing on its proprietary operating system and avoiding Android also contributed. The company also lagged behind consumer trends like smartphone adoption. The 2008 financial crisis also hurt the company.

How did Motorola lose its dominance in the mobile phone market?

Motorola lost its mobile phone market dominance due to its inability to adapt to market trends and consumer demands.

The company’s focus on feature phones and reluctance to adopt smartphones put it behind Apple and Samsung. The company’s proprietary operating system and inability to innovate also contributed to its decline.

What mistakes did Motorola make that led to its downfall?

Motorola’s reluctance to adopt the popular Android operating system was a major mistake. The company also lacked product innovation.

The company’s focus on feature phones rather than smartphones also lacked competitiveness. The company’s management also made bad choices, like investing heavily in the Iridium satellite phone project.

Did Motorola fail due to internal or external factors?

Motorola failed for internal and external reasons. While competing with Apple and Samsung, the company made strategic mistakes like sticking with its proprietary operating system instead of Android.

The company’s slow innovation and product introduction contributed to its decline.

What role did the emergence of smartphones play in Motorola’s decline?

Smartphones caused Motorola’s decline. The company’s focus on feature phones and reluctance to adopt smartphones put it behind Apple and Samsung.

The company’s inability to innovate and introduce new products quickly meant it couldn’t keep up with market trends and consumer demands.

How did Motorola fail to keep up with its competitors?

Motorola fell behind for several reasons. Its focus on feature phones and reluctance to adopt smartphones put it behind its competitors.

The company’s inability to innovate and introduce new products quickly meant it couldn’t keep up with market trends and consumer demands. Apple and Samsung were also fierce competitors.

What impact did the leadership changes at Motorola have on its decline?

Motorola’s decline was mixed after leadership changes. Some changes introduced new ideas and strategies, but others were bad decisions that hurt the company. For instance, investing heavily in the Iridium satellite phone project hurt the company’s finances.

Could Motorola have done anything differently to avoid its failure?

Motorola could have avoided failure in several ways. The company could have adopted Android earlier, which was popular with consumers. Instead of feature phones, the company could have focused on smartphones, which were becoming more popular.

The company could have invested more in R&D to develop new products and technologies. Finally, the company could have adapted faster to changing market trends and consumer demands.

What lessons can be learned from Motorola’s failure?

Motorola’s demise offers business lessons. Innovation and agility in adapting to market trends and consumer demands are key lessons.

The failure also shows the risks of using proprietary technologies and not adopting new ones quickly. Finally, failure emphasizes the importance of good leadership and strategic decision-making for long-term company success.

Ending thoughts on why Motorola failed

Motorola was one of the most successful tech companies in the world, but those days are long gone. The workplace rancor and the bad decisions pushed the company directly into irreversible failure. In a market as competitive as the tech one, companies must remain relevant and innovative. Motorola’s modern tragedy shows us what happens if these criteria are not met. 

If you liked this article about the failure of Motorola, you might like this one about the Windows phone failure.

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I'm the manager behind the Upcut Studio team. I've been involved in content marketing for quite a few years helping startups grow.