Nokia, at the height of their powers dominated the telecommunication industry, controlling 51% of the global market share of mobile phones in 2007 (OConnor, 2017). But the technology giant saw a fall from grace in the 2010s as the rise of technological giants such as Apple and Google, along with a series of poor decision making saw the end of the golden era for Nokia. In a highly competitive industry, Nokia became too conservative and stable and economist Hyman Minsky put it “Stability breeds instability. The more stable things become, and the longer things are stable, the more unstable they will be when the crisis hits” (Minsky, 1993). There are various problems that were encountered in their rapid decline, whilst also numerous change strategies that could have been implemented along with recommendations for the senior management at Nokia.
lOMoARcPSD|10803158 Nokia, at the height of their powers dominated the telecommunication industry, controlling 51% of the global market share of mobile phones in 2007 (O'Connor, 2017) But the technology giant saw a fall from grace in the 2010s as the rise of technological giants such as Apple and Google, along with a series of poor decision making saw the end of the golden era for Nokia In a highly competitive industry, Nokia became too conservative and stable and economist Hyman Minsky put it “Stability breeds instability The more stable things become, and the longer things are stable, the more unstable they will be when the crisis hits” (Minsky, 1993) There are various problems that were encountered in their rapid decline, whilst also numerous change strategies that could have been implemented along with recommendations for the senior management at Nokia Problems that Nokia experienced: The brand’s downfall stems from various factors both controllable and uncontrollable Here are four factors that have been highlighted in various academic articles: Failure to diversify: The 1990s to late 2010s were a golden period for the telecommunication giant, as they dominated all markets they participated in, through various models of mobile phones that targeted various consumer groups Coupled with this, Nokia’s research and development team sought the consumers’ needs and preferences and applied strategies to target as many customer segments as possible Although, Nokia’s wide customer segmentation approach ultimately saw its fall from global leaders to near bankruptcy In an interview, professor of strategic management Yves Doz, details Nokia’s main focus was to identify a strategic way that would allow for an increased complex range in terms of physical hardware with aspirations of maximising consumer segmentation globally with different customer preferences (INSEAD, 2018) As highlighted in videos 1,2,3 and as part of the YouTube series Nokia The rise and Fall, several of the models featured in the 1990s include Nokia 6110, 2110 and 1011 along with the Nokia N-gage 6650 and 7650 in the turn on the millennium Many thought that the large product range would maximise market share and users, although inefficiencies were highlighted, as the lack of functional communication across their broad range ultimately saw a decline in sales and market share The lack of innovation and forward thinking hindered Nokia’s potential to dominate the market as a shift from hardware to software platforms in the early 2000s saw competitors seize the opportunity to increase their market share Nokia’s management targeted nurturing dozens of product lines with emphasis placed on wide diversification of the market segments, instead of focusing on delivering quality products with various inbuilt functions that could still be applicable to various demographics As a result, internal competition amongst project managers created tension thus scattering authority and blurred responsibilities Hence, Nokia’s strategic positioning suffered as business activities and products weren’t aligned, pertaining to different products receiving little to no support from senior management (Cold Fusion, 2015) Matrix Structure In 2004, Nokia adopted a matrix organisational structure in hope of increasing innovation The matrix structure entails the organisation having two chains of command, with one controlling the functional lines of the organisation whilst the other controls the client, project and product lines Within these two commands they are often segmented further into geographical locations (Stuckenbruck, 1979) Conflicts arose from the reorganisation, one of those been that several managers have equal authority which led to a power struggle, hence several key members resigning (Cold Fusion, 2015) Tensions are often common within the matrix structure as different groups with various priorities and products are required to work collaboratively to ensure the most favourable outcome for the organisation Ultimately, this structure proved an anathema as the organisation had been used to decentralised initiatives Further to this, Nokia had succumbed to internal conflict through product development matrix as product line development managers clashed with financial executives as they struggled to allocate the already scarce resources available (INSEAD, 2018) The abundance of product development programs coupled with insufficient software platforms meant that decision making slowed and seriously affected team morale As Yves Doz emphasised in the interview, Nokia placed too much emphasis on the customer-supplier relationship hence neglecting the marketing, sales, manufacturing and software development (INSEAD, 2018) The disparity in knowledge among mid-level managers meant that the lack of experience nor training ultimately proved to be corrosive to the organisation when implementing the matrix The scattered and ambiguous chain of command amongst top management meant an inability to effectively outline priorities, strategic direction and decisionmaking processes One of the core components in ensuring a successful matrix structure is a collaborative workplace with employees integrating negotiating skills whilst remaining empathic and patient throughout the decision-making process Thus, this matrix is considered a timeconsuming exercise that requires active participation from all employees The ever-evolving nature of the technological industry meant Nokia’s inability to successfully implement the matrix damaged their relationships with customers forcing the customer to competitors Software Issues: Nokia pioneered the telecommunication industry in 1998 with the introduction of innovative software, Symbian, which led to a highly successful period in the global market As highlighted in the YouTube videos, Symbian was revolutionary in terms of interfacing and mobile platform software (Cold Fusion, 2015) The device-centric system gave Nokia an early advantage although the changing nature of the market to application-centric saw the fierce competition become more dominant as Symbian’s faults were evident By 2009, 57 of Nokia’s products were using incompatible versions of the outdated system (Farré, 2020) The already struggling organisation saw further delays through its production lines as new phone launches didn’t meet deadlines and new sets of codes had to be derived for each phone model The Nokia case summary details that Nokia struggled to remain competitive into the late 2000s as software as opposed to hardware proved to be the critical competitive factor in the market The lack of applications and user interface Symbian possessed saw Apple’s IOS, and Android dominate market share in the late 2000s (Farré, 2020) Additionally, the YouTube series identified the extensive manufacturing costs along with its inability to function on the newer 3g network saw Nokia lose even more market share Nokia’s inability to allocate R&D resources efficiently saw phones such as the Touch Screen 5800 fail miserably against the iPhone (Masalin, 2017) Nokia had become a sitting duck in the mobile phone market and accelerating market changes proved to get the better of them Given Nokia had remained pioneers of the industry and focused more on software development, they could have maintained their stronghold on the market instead of lagging behind competition Inability to seize opportunity coupled with non-existent long term strategic vision: Nokia’s inability to meet consumer preferences is highlighted through its lagged innovation and product development according to the YouTube series Their failure to innovate, lead them to fall behind market leaders such as Apple and Google at the high-end of the spectrum whilst losing out to competition such as Huawei and HTC in the lower segment Frank Nuovo, former VP and chief design officer of Nokia stated that “Nokia was a substantial company that maintained its position but failed to innovate for new opportunities” (Grundberg & Troianovski , 2012) Further, Nuovo’s comments to the Wall Street Journal identified that Nokia had developed a touch screen smartphone and tablet a decade before Apple’s iPhone burst onto the scene (WSJ, 2012) The lack of urgency and desire to innovate the mobile market restricted their potential to grow in the highly competitive market Rather than promoting the launch of new products, internal competition and division got the better of Nokia, as visionless and indecisiveness management focused on dominating market share as opposed to innovating the market Nokia focused thoroughly on supplier relationships CEO of Qualcomm (chip manufacturer) stated that when he provided Nokia with a potential competitive advantage, he found extended delay times on strategies and innovating products (INSEAD, 2018) Further, he explained that Nokia would spend the best part of a year analysing the opportunity for the market and by the time the decision was made the opportunity had passed Fear driven management coupled with hesitancy meant that Nokia was always playing catchup with competitors The greater problem that Nokia faced with the inability to innovate the market and it wasn’t going to be solved by throwing money at it The heavily criticised short-term vision of the company states that “my primary focus… is to take care of the short term… make sure that execution is flawless” (Nokia, 2011) The mistake by Elop was too much emphasis placed on short term goals when in facts they should have derived a long-term strategic vision and changes to culminate prior success The decreasing market share and lack of innovation saw Nokia incur a loss of $2.96 billion in 2012 (Waddell et al, 2019) Change Management Strategies: As highlighted above, Nokia’s dysfunction within the organisational hierarchy saw fear driven management along with internal division and struggle It would be recommended that Nokia adopt a layered change approach through the implementation of several models and strategies to ensure collaboration and cohesion is maximised Action Research Model: The action change model focuses on implementing and planning change, which requires initial research in order to guide the organisation to the desire change This model creates a cyclical process where preliminary research regarding the desired needs of the organisation is identified and through the feedback loop an iterative process between three components: gathering information, making changes and gathering additional information This model requires cohesion and a high level of collaboration between members of the organisation, as a large importance is placed on data collection and diagnosis prior to the implementation of any intended change actions that may occur The model is a useful method as it facilitates organisational change and involves customers throughout the process from problem identification through to the problem-solving process The systematic approach will improve Nokia’s preparedness in proactively responding to change by anticipating change in advance Figure highlights the cyclical process of the Action Research Model which is composed of eight steps that a company can work through internally or with a change agent (Waddell et al, 2019) In applying this model to the Nokia case study, Nokia has conducted large volumes extensive of R&D in hopes of improving current and existing products Nokia has failed to implement this research both in a timely manner and effectively, hence struggling in their current market conditions If Nokia successfully apply contemporary adaptations to the action research to achieve positive change, the existing structure of R&D will effectively promote this model as the large volumes of analysis and research are already undertaken within the organisation Further, this model promotes a collaborative spirit as it requires members to actively revaluate the development of products and change in turn minimising the internal rivalries that currently exist Cross departmental communication will also benefit from the implementation of this model as it ensures all management is working towards behavioural change Figure 1: Depicts action research model processes External Change Agent: Another appropriate strategy that could be implemented is an external change agent, an external specialist that has expertise in coordinating, facilitating and implementing change within an organisation In order for incremental change to be maximised it is essential that the relationship between senior management team leading the change and the external agent is coherent (Lunenburg, 2010) A change agent poses expertise that is often unavailable internally and hence will have a more objective perspective in the developmental process (Lunenburg, 2010) In relating a change agent to the Nokia summary, a change agent will have been able to bypass the internal politics and conflict that were introduced by CDO Curtis, which saw delayed production times and failed market success (Cold Fusion, 2015) Further, the introduction of an external change agent will assist in identifying problems that exist in the internal and external business environments’ which have been overlooked due to their failing market success Hence, avoidable problems will be minimised before it is too late as the objective approach taken by the agent will give management a new perspective Bringing in an external agent will also increase collaboration among employees, as they will be more inclined to share feedback on potential changes and not be influenced by internal politics That been said, external change agents pose disadvantages to the organisation as they lack knowledge on past history, personnel and company operations which can prove critical to change Gaining knowledge and becoming familiar with the organisations’ process can be a timely process and hence implementing an agent can be cost ineffective However, in the case of Nokia, the advantages outweigh the disadvantages in terms of introducing an agent to facilitate change (Lunenburg, 2010) Adaptability Culture and Charismatic Transformation The YouTube series identifies the organisational culture of Nokia as a vital issue reported by employees as internal competition and blurred responsibilities are emphasised rather than collaboration amongst departments This is the major factor Nokia failed to innovate the market and grow like its competitors Declining growth figures coupled with losses underline the need for a cultural transformation within the organisation The introduction of an adaptive culture into the workplace focusing on the external environment with both flexibility and customer segmentation emphasised is one strategy the Nokia could adopt Given the volatility of the technological market globally, the imperative change is essential in ensuring customer demands are met to maximise sales Thus, by aligning the organisation with the industry and ensuring collaboration with internal departments, Nokia will be one step closer to a charismatic transformation (Weddell et al, 2019, p 55) A charismatic transformation is suited to an organisation that is struggling with market conditions with little time for extensive participation but extensive support for change within This model suits Nokia as it supports the transition of change whilst also aligning with the demands of the technological industry Implementing radical change to Nokia’s organisational structure and operations in an appropriate timeframe will set Nokia on track to increase their market recapitalisation Recommendations for Nokia’s Senior Management Organisational Restructure from matrix to hierarchal As identified in the summary, one of the key issues in the late 2000s was Nokia’s organisational structure Senior management chose to follow a matrix structure which wasn’t appropriate for the type of organisation which led to communication and functional issues throughout the organisation The matrix structure is known for problems in both managerial and team roles as they are often not clearly defined One recommendation for Nokia to improve communication channels along with other problems would be to transition from a matrix structure to a hierarchal structure Apple Inc., a competitor of Nokia, is a perfect example of an organisation that has successfully implemented a hierarchal structure to maximise profits and sales The hierarchal structure poses many benefits to a product-based organisation such as Nokia By functioning with a hierarchal structure, Nokia can expect high functional division characteristics along with a weak matrix which promotes high inter-divisional collaboration As Nokia is a multinational organisation ensuring collaboration across cultures and product divisions is critical to the organisation’s success Further, a more horizontal structure will allow for more efficient communication channels as well as greater flexibility between departments The hierarchal structure revolutionised Apple into a successful multinational organisation through effective and rapid innovation to meet customer demands, something Nokia failed to in the late 2000s Had Nokia’s senior management implemented a hierarchal structure emphasising the importance of collaboration and cross communication between product-based division, Nokia could have increased their technological innovation and competitive advantage in delivering products to the telecommunications industry Additionally, the structure would promote clear lines of authority and reporting, whilst providing a clearer understanding of roles and responsibilities and developing clear paths of developments prospects to move up the hierarchy, hence motivating employees The hierarchal model is a perfect fit for the fast-moving telecommunication industry, as the rapidly changing components would see a seamless transition for Nokia Adjusting the product range Another issue identified in both the summary and YouTube videos was Nokia’s inability to efficiently allocate resources as they had too many products been developed at the same time, hence creating ineffective products This issue also led to Nokia suffering from communicative issues as internal problems arose which resulted in loss of sales (Cold Fusion, 2015) A way senior management could be to revaluate their strategic position is through product portfolio simplification Nokia could model potential transformation of products to derive a plan to deliver products to a more segmented market with greater marketing capabilities Further, with less product lines, Nokia will be able to invest more money into R&D for these products to ensure they remain innovative and anticipate the customer needs to regain their market share Nokia’s competitor Apple successfully implemented this approach as they focused on laptops, iPhones and iPads initially with few products in each range Apple achieved commercial success and business productivity through their simplified product range as it promoted collaboration in the workplace Furthermore, Nokia will be able to focus on innovation through R&D as the simplified range will allow for more resources to be concentrated In conclusion, Nokia’s swift decline in the telecommunication industry cannot be justified by one wrong decision, it was a culmination of poor management decisions, struggling internal rivalries and a dysfunctional organisational structure A once successful company bred conservatism and hubris among employees which lead to poor strategic decisions Nokia failed to adapt to the external business environment, lagging behind competitors and ultimately losing market share Had Nokia implemented change strategies highlighted above, restructuring organisation structure and product development Where once companies embraced new ideas and experimentation to spur growth, with success they become risk averse and less innovative Such considerations will be crucial for companies that want to grow and avoid one of the biggest disruptive threats to their future – their own success Bibliography Bouwman, H., Carlsson, C., Carlsson, J., Nikou, S., Sell, A., & Walden, P (2014) How Nokia failed to nail the Smartphone market Brussels: 25th European Regional ITS Conference ColdFusion (2015, January 16) HOW Did Nokia Fall? 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