Nokia's Upswing and Its Historical Downfall

NOKIA - OSKAR LINDMAN - (AF)

(17.7.2017)

Nokia built a huge success story with its mobile phone -sector. It became one of the fastest growing companies in the history of enterprise and extremely important for the Finnish economy. However, Nokia came down as fast as it went up. What were the possible reasons behind the downturn?

Nokia’s upswing and its downfall seek equivalent in the history of enterprise. In its glory days it accounted for a real substantial amount of the Finnish economy and new growth. For a long time, as the corporation was really successful, it didn’t invite criticism. During this time though, Nokia’s downfall started.

In the beginning Nokia was a very traditional Finnish company that used to have lots of production areas, from car tires to TVs. It’s experiments in the electronics market created a competitive advantage when it got into the telecommunications sector.

Jorma Ollila, ex-CEO of Nokia lead Shell after the fall. The saga was finalized when Nokia sold its phone production to Microsoft. CEO Stephen Elop came from the same company, voicing claims that he was in fact a planted Trojan horse.

At the moment Nokia’s patents are sold abroad and the company concentrates on networks and R&D. It recently merged with Alcatel-Lucent.

Merita Vilen left Nokia in 2006, when the company was in its heyday. She has also experience in working for Nokia in Irving, Texas. She wrote a book on Nokia called “Nokia’s Impossible Flop”. The book didn’t get that much attention which she still considers a pity.

She still remembers the first day she entered Nokia headquarters in Espoo: “I was amazed on how silent it was there. And the communication was lacking. It took me a long time just to observe and wonder the way the employees were sitting at their workstation, totally quiet and doing their own thing. How they could be motivated and committed, remained a mystery for me.”

She has experience in a few big international companies. As Finns tend to be depicted as a silent nation, Merita Vilen still wonders: “We are thinking about the most international company in Finland, and a global-level corporation, I would expect that the communication would be non-Finnish. The bosses didn’t’ communicate so well that you would expect in a good organization with good bosses. The bosses didn’t talk to teammates or the people in the organization, this was seldom seen.”

Nokia had communications teams, comms-teams, as they were called in Nokia. These teams were found all over the organization, even in the smallest of units. Merita Vilen tried to find out the number of these teams, but failed. In an electronic catalogue they were mentioned but not how many there were. These teams would take care of the same communicative tasks that the leaders were supposed to do. This worked against everything she was taught when doing her MBA in London.

Merita Vilen: “Another army of ladies were these HR-teams. They did what a good supervisor should have been doing, as in spend at least 50-70 percent of his time to support his subordinates, co-ordinate and organize the work effort. A lot of these tasks were outsourced to these HR-teams. These ladies dealt with such difficult issues what would come up inside the company.”

She would like to note though that all of the IT-systems supported HR-processes well, they were well thought through. Everything seemed to work efficiently on the organizational level.

At the time Nokia’s headquarters were based in Irving, Texas the American culture was pushing through. Communication was effective: “In America someone can not even be considered to a leadership position I one don’t have the charisma!” says Merita Vilen.

At some point in time all the efficiency would turn on itself. All teams were supposed to free the supervisor to focus on the essentials - not to lead people, but to focus on the substance itself.

Project management was also very effective. “Nokia Connecting Projects” directed internal development, processes, IT and customer care systems, Merita Vilen: “These were all done under the principles of NOCOP. There were hundreds of models of documents and strict principles. What milestones a project was supposed to reach and how to do it. What kind of documents you needed in IT-developmental projects or in R&D.”

This, says Merita Vilen, meant ”form went over function”.

Jorma Ollila, the ex-CEO, was excellent, the right man at the right spot since he lead Nokia to its upswing, but he didn’t pull out in time. It was characterized to him that project management administration was good. Merita Vilen: ”It was like plug&play, to be able to transform quickly and redirect if aims or strategy was changing. The process in itself became too important.”

Assistant professor in management at Aalto-university Timo Vuori wrote a research paper for INSEAD. They started to think about the case Nokia. What had went wrong?

They found out that the organization was partially paralyzed by fear. Structural and behavioral factors created an atmosphere where it was difficult to tell bad news. For example, some managers shouted straight out when something was progressing as planned.

But the central theoretical finding related to the role of structures: “Organizational structures that looked efficient fed into an emotional reaction that led the organization to fail because they directed middle manager’s attention on issues inside the company rather than the external environment” says Timo Vuori.

They sent back their results to the people they had interviewed and about 80% of recipients agreed with the results. This was the first research that shows how emotions can have strategic consequences. The attention-based view that the researchers applied, shows how attention directs decision making and how integrating units benefits the whole organization.

Why didn’t Nokia was able to cope with the situation, Timo Vuori?

“One can speculate, it is hard to see the whole view when living in the situation. Many interviewees said they only later they came to understand what was really happening.”

The causation according to Timo Vuori and his associate was, how the development of the smartphone operating system was affecting everything: “If there would have not been this fear, we state that more emphasis would have been put to development in the long run. One of the reasons why Nokia failed was the bad quality of the operating system. Of course, many other things, like marketing, also influenced the company’s results.”

They concluded that people should be more aware of how structural changes affect shared emotions in an organization and carefully consider decisions that create harmful ones. Emotions and leading thereof brings information for the decision-maker. Doing so created spontaneity and productive energy.

According to more recent news stories, Nokia has put lots of effort in creating organizational values and reform their corporate culture.

Lessons learnt, says Timo Vuori, are that corporate structure should not lead to such atomization so that emotions are directed inward towards the organization. There should be visibility all over the organization and outside. Mechanisms should be created so that they make the whole reality seen. This will get rid of harmful emotions that are simply too local.

As to history of Nokia goes, it remains to be seen, whether it is as a corporation be able to rejuvenate, as it has done before, from car tires and TVs to telecoms.