The Nokia Story

The Nokia Story

If you grew up in the 1990s, you’d be very familiar with Nokia mobile phones. Throughout the early 2000s, Nokia maintained a significant lead over its competitors (Motorola, Samsung, and Ericsson) by investing heavily in R&D and marketing to ensure their products appealed to the masses. Founded in 1865, Nokia started its foray into the telecommunications industry in the 1990s. In 1996, Nokia released its first smartphone and created a prototype touchscreen shortly after, both of which were huge hits. The mobile giant’s most popular models included Nokia 5510, 3210, 1100, and 1110. What made these mobile phones so popular were their reliable, indestructible, and easy-to-use designs that you could flip into your pocket. Not forgetting their behemoth battery life!  

Nokia’s earliest designs were all about function; black rectangles with tiny screens and a mass of buttons. Having said that, Nokia was not afraid of making statements – it introduced square phones with an amazingly cool flip-out QWERTY keyboard, a handset with a circular keypad, a twisting phone, and the fashionably eccentric “lipstick” phones. Remember the simple, but the very addicting game – Snake? It won a massive audience for Nokia that it was made a standard feature. Nokia’s signature ringtone also helped popularise the idea of a melody as a call alert.

Despite having the largest market share in mobile phones at its prime, Nokia’s prowess came to a halt as Apple and Android phones entered the market as industry players in 2007. At its height, Nokia commanded a global market share in mobile phones of over 40 percent. Even though its journey to the top is swift, the decline is equally so, culminating in the sale of its mobile phone business to Microsoft in 2013.

Challenges Faced by Nokia Company

Nokia’s decline in its mobile phone business cannot be explained by a single, simple answer – management decisions, dysfunctional organisational structures, growing bureaucracy, and deep bilateral rivalries all played a part in preventing Nokia from recognising the shift from product and design-based competition to one based on applications and operating systems. 

In 2004, there was a reallocation of important leadership roles and a poorly implemented organisational change into a matrix structure. Tensions within matrix organisations are common as different groups with different priorities and performance criteria are required to work collaboratively. At Nokia, where they have been accustomed to decentralized initiatives, this new way of working proved to be challenging.  

The reorganisation led to the departure of vital members of the executive team, which led to the deterioration of strategic thinking. Nokia’s top management was no longer sufficiently technologically savvy or strategically integrative to set priorities and resolve conflicts arising in the new matrix. Increased loss reduction pressures rendered Nokia’s strategy of product differentiation through market segmentation ineffective and resulted in a proliferation of poorer quality products.  

Nokia relied too heavily on their brand, believing that consumers’ loyalty would ensure a quick transition into the new market of software and apps. Furthermore, software was taking precedence over hardware as the critical competitive feature in the industry. The importance of application ecosystems was becoming apparent, but as the dominant industry leader, Nokia lacked the skills and inclination to engage in new ways of working. By 2010, the limitation of its Symbian operating system had become painfully obvious and missed the shift towards apps which was pioneered by Apple. 

It did not help that Nokia’s leader instilled organisational fear into its lower management levels. This prevented managers from telling the truth about their inferior Symbian operating system and limited cross-functional cooperation which impeded any technological progress that could have benefitted Nokia’s long-term goals.

Takeaways for the Digital Era

Nokia’s mobile phone story exemplifies a common trait we see in mature, successful companies – success breeds conservatism and hubris. 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 the use of the biggest disruptive threats to their future – their success.  

In our fast-changing world, we may be seeing more and more cases like Nokia’s. As disruption accelerates, companies will increasingly have to reckon with the unravelling of entire business models, if not entire industries. Resilience is especially important today because the business environment is becoming more dynamic and unpredictable from accelerated technological evolution and greater interconnectedness of the global economy to broader issues such as rising inequality, and climate change.

According to a study by Gallup1, here are 4 strategies to build business resilience before the next disruption:

1. Reimagine your customer experience  

Leaders must display ambidexterity by adapting to consumers’ needs without compromising overall brand consistency. This requires an intense focus on the customer service experience.  

2. Reshape your workplace culture to ensure that it is an ally to disruption 

Organisations with strong cultures are built to withstand disruption – their leaders and teams know their purpose and call on it in every decision they make. This makes their resulting behaviours more stable even as they react to new circumstances.

3. Refresh your leadership development plan and reinforce leadership’s core values

Leaders can’t predict how a crisis will impact their teams, but they can be prepared to bring their best leadership selves to the table.  

4. Continuously reignite your workforce

Best leaders are continually reimagining their workforce experience, improving workplace culture, refreshing their leadership development and reigniting their workforce strategies.  

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