Nortel failed amid 'culture of arrogance'

Canadian telecom giant Nortel collapsed because of losing the confidence of its clients amid a culture of “arrogance and hubris” according to a study by researchers at the University of Ottawa.

Canadian telecom giant's demise studied by Ottawa research team

A University of Ottawa research team did a three-year study of the demise of Nortel looking back over the last 12 years to pinpoint its failures. (Canadian Press)

Canadian telecom giant Nortel collapsed because of losing the confidence of its clients amid a culture of “arrogance and hubris.”

That's the conclusion of a research team at the University of Ottawa's Telfer School of Business that spent the last three years looking at the demise of the company.

Nortel filed for bankruptcy in 2009, but five years later executives, former employees and academics are still debating what caused its demise.

The Ottawa team studied Nortel's activities from 1997 to 2009, interviewing most of its major customers as well as former executives and insiders.

In an interview with CBC’s The Lang & O’Leary Exchange, University of Ottawa associate professor Jonathan Calof says the researchers found Nortel’s fall was rooted in a culture that lacked resilience.

And more to the point, they never listened to their customers.

"They didn’t ask a lot of the right questions. They weren’t prepared to hear what came back and they lacked the ability to implement much of what they were saying," Calof said.

"They lacked the resiliency to deal with what they were hearing in the environment."

Nortel had great technology – much of which underlies today’s telecom environment. In fact their patents, sold in 2011, continue to generate cash for spinoff firm Rockstar.

The problem was a management that did not adapt to a new environment, and had lost the confidence of customers by 2006, Calof said. He called this lack of confidence the "black cloud."

"At the end of the day what brought them down was in 2006, at least in the telco space, the confidence in Nortel was so shattered in their long-term ability, in terms of the comfort in dealing with them, in terms of management financial capability, that even something as good as LTE they weren’t prepared to bet on," he said.

Calof said his study has dozens of lessons for the technology sector, and for troubled smartphone company BlackBerry.

“I am dying to do a study like this on BlackBerry,” he said.