New study underscores reasons behind Nortel's failure

A new study out of the University of Ottawa finds there isn't only one defining factor that led to the demise of former telecommunications giant Nortel.

By 2009, Nortel was in ruin -- changing business environment, poorly aligned strategies, and management decisions had led to catastrophic results for what was once the ninth most valuable corporation in the world.

"Decisions made in the '70s and '80s actually contribute to it," said lead researcher and Telfer School of Management professor Jonathan Calof. "Decisions in the 90s, in the 2000s. Failure is temporal, so for God's sake, don't look at the last man standing and say 'it's all your fault.'"

"We find that failure is complex," he added. "It took a combination of many environmental factors, plus the resilience factors... to result in this black cloud being formed and mismanagement of the black cloud, eventually overwhelming Nortel."

The study included more than 100 lessons learned from Nortel's demise. Eleven of them were highlighted, including understanding your competitive advantage and protecting it; watching the bottom line, not just in bad times but also in good times; and that boards are the last line of defence and as such should make evidence-based decisions.

Former Nortel CEO Jean Monty said he was satisfied with the study. He said he was surprised to see how many factors contributed to the corporation's failure.

"It's a little bit of all of them together that make the company fail, and that I think is something that I would not have figured out at the outset of this study," said Monty.

"I think the lessons learned will be helpful, not only to other people in the technology business, but I think it can have an impact on a broader spectrum, probably through the business schools," added Monty.

The study looked at Nortel's activities from 1997 to 2009 and included interviews with CEOs and several senior officers who were present when Nortel decided to file for bankruptcy protection in 2009.

To read the full study, click here.

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