Study: 'Arrogant' Nortel proved it wasn't too big to fail

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A detailed study by a University of Ottawa, Canada interdisciplinary team has determined that a "culture of arrogance" within Nortel Networks led to the company's unceremonious collapse in 2009.

Jonathan Calof led the three-year study into what went wrong for the company, which went from the pinnacle of telecom vendors to bankruptcy in the middle to the late part of the last decade.

Among the problems, management "rarely listened to the engineers and … when they did, they did not appear to understand," a story in The Globe and Mail reported.

"Management became detached from the grassroots technology. That, to me, is one of the great disappointments of this company," Peter Chapman, a Nortel engineer and study researcher said, according to a story in the Ottawa Business Journal.

The study was culled from interviews with CEOs and senior officers "who were in the room when Nortel decided to file for bankruptcy protection," as well as about 48 percent of Nortel's officers who had been with the company at some point between 1997 and the end, a University of Ottawa press release said.

"By the time data gathering was completed, most of the major customers of Nortel from 1997 to 2009 had been interviewed," Calof said in the news release. "Hundreds of people put their faith in our team by telling their Nortel stories in hopes that they would help us learn lessons and contribute to minimizing or preventing future corporate failures."

The main lesson learned was that Nortel, as an organization, simply became too full of itself, the report concluded.

"Nortel's sense of pride might have seemed to be a strength in the early days, but it created inflexibility in the latter days of the company," the report stated. "In fact, it escalated into hubris to the extent of making it especially difficult to absorb acquisitions, to quickly respond to market needs (largely as a result of the creation of inflexibility) and to accept and understand what customers wanted (largely as a result of the delusion of 'we know better')."

Calof said that he hoped the study would "aid in educating tomorrow's leaders" about how success, without humility, can lead to disaster.

"Nortel's business model before the study period (1997-2009) clearly encouraged the development of extraordinary technology and products but in so doing inspired a sense of arrogance coupled with a lack of financial discipline," the report concluded.

For more:
- the University of Ottawa issued this press release
- the University of Ottawa released this study
- the Ottawa Business Journal carried this story
- and The Globe and Mail carried this story

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