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Who Killed Nokia? Nokia Did

Quy Huy

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Nokia’s fall from the top of the smartphone pyramid is typically put down to three factors by executives who attempt to explain it: 1) that Nokia was technically inferior to Apple, 2) that the company was complacent and 3) that its leaders didn’t see the disruptive iPhone coming.

We argue that it was none of the above. As we have previously asserted , Nokia lost the smartphone battle because divergent shared fears among the company’s middle and top managers led to company-wide inertia that left it powerless to respond to Apple’s game changing device. In a recent paper , we dug deeper into why such fear was so prevalent. Based on the findings of an in-depth investigation and 76 interviews with top and middle managers, engineers and external experts, we find that this organisational fear was grounded in a culture of temperamental leaders and frightened middle managers, scared of telling the truth.

Deer in the headlights

The fear that froze the company came from two places. First, the company’s top managers had a terrifying reputation, which was widely shared by middle managers—individuals who typically had titles of Vice President or Director in Nokia. We were struck by the descriptions of some members of Nokia’s board and top management as “extremely temperamental” who regularly shouted at people “at the top of their lungs”. One consultant told us it was thus very difficult to tell them things they didn’t want to hear. Threats of firings or demotions were commonplace.

Secondly, top managers were afraid of the external environment and not meeting their quarterly targets, given Nokia’s high task and performance focus, which also impacted how they treated middle managers. Although they realised that Nokia needed a better operating system for its phones to match Apple’s iOS, they knew it would take several years to develop, but were afraid to publicly acknowledge the inferiority of Symbian, their operating system at the time, for fear of appearing defeatist to external investors, suppliers, and customers and thus losing them quickly. “It takes years to make a new operating system. That’s why we had to keep the faith with Symbian,” said one top manager. Nobody wanted to be the bearer of bad news. However, top managers also invested in developing new technological platforms that they believe could match the iPhone platform in the medium term.

“Top management was directly lied to”

Top managers thus made middle managers afraid of disappointing them—by intimating that they were not ambitious enough to meet top managers’ stretched goals. One middle manager suggested to a colleague that he challenged a top manager’s decision, but his colleague said “that he didn’t have the courage; he had a family and small children”.

Fearing the reactions of top managers, middle managers remained silent or provided optimistic, filtered information. One middle manager told us “the information did not flow upwards. Top management was directly lied to…I remember examples when you had a chart and the supervisor told you to move the data points to the right [to give a better impression]. Then your supervisor went to present it to the higher-level executives. There were situations where everybody knew things were going wrong, but we were thinking, “Why tell top managers about this? It won’t make things any better.” We discussed this kind of choice openly.”

This shared fear was exacerbated by a culture of status inside Nokia that made everyone want to hold onto power for fear of resources being allocated elsewhere or being demoted and cast aside if they delivered bad news or showing that they were not bold or ambitious enough to undertake challenging assignments.

Innovation impotence

The high external fear among top managers and high internal fear among middle managers led to a decoupling of perceptions between the two groups of top and middle managers about how quickly Nokia could launch a new smartphone and develop advanced software to match the iPhone. Given the optimistic signals coming from the middle managers, top managers had no qualms about pushing them harder to catch up with Apple—after all, top managers were only stretching targets. Fearful that Nokia would lose its world dominance and post weak financial results, top managers exerted pressure on middle managers to deliver a touchscreen phone quickly. They acknowledged this in interviews with us. “The pressure we put on the Symbian software organisation was insane, because the commercial realities were so pressing. You must have something to sell” said one top manager.

A leader from the MeeGo organisation, which was set to be the successor technological platform to Symbian said, “we spoke of a delay of at least six months, if not a year. But top managers said ‘let’s go, you have to run faster.’”

Beyond verbal pressure, top managers also applied pressure for faster performance in personnel selection. They later admitted to us that they favoured new blood who displayed a “can do” attitude.

This led middle managers to over promise and under deliver. One middle manager told us that “you can get resources by promising something earlier, or promising a lot. It’s sales work.” This was made worse by the lack of technical competence among top managers, which influenced how they could assess technological limitations during goal setting.

As one middle manager pointed out to us, at Apple the top managers are engineers. “We make everything into a business case and use figures to prove what’s good, whereas Apple is engineer-driven.” Top managers acknowledged to us that “there was no real software competence in the top management team”.

The final blow

Nokia therefore ended up allocating disproportionate attention and resources to the development of new phone devices for short-term market demands at the expense of developing the operating system required to compete with Apple.

The quality of Nokia’s high-end phones thus gradually declined. In 2007, Nokia launched the N95 smartphone, which had full music features, GPS navigation, a large screen (albeit not a touch screen) and full internet browsing capability. Software compromises were accepted to get it ready on time. It was a success, but serious quality problems soon emerged.

In 2008, Nokia launched its first touchscreen phone, the 5800, at a lower price point than the iPhone. It was a commercial success but it was about “one and a half years late” because of software development problems. In 2009, the N97 was launched to overthrow the iPhone, but one top manager admitted the phone was “a total fiasco in terms of the quality of the product.”

In 2010 came the purported “iPhone killer” with a touchscreen, one year later than planned, but it underperformed in usability and failed to match up to the sleek competition of iOS and Android. A new CEO—Stephen Elop--hired later that year decided that Nokia would be better off buying software from elsewhere and formed an alliance with Microsoft in 2011. As we know, this move accelerated the company’s decline and Microsoft went on to acquire Nokia’s phone business in 2013. The market value of Nokia declined by about 90% in just six years, hovering around 100 billion US dollars.

Despite its enormous R&D firepower, its technical prowess and foresight — Nokia’s patents still generated about US$600 million a year paid by its thriving rivals like Apple and Samsung — Nokia’s ultimate fall can be put down to internal politics. In short, Nokia people weakened Nokia people and thus made the company increasingly vulnerable to competitive forces. When fear permeated all levels, the lower rungs of the organisation turned inward to protect resources, themselves and their units, giving little away, fearing harm to their personal careers. Top managers failed to motivate the middle managers with their heavy-handed approaches and they were in the dark with what was really going on.

While modest fear might be healthy for motivation, using it indiscriminately can be like overusing a drug, which risks generating harmful side effects. To reduce this risk, leaders should be attuned to the varied emotions of the collective. As Huy pointed out in other research , those able to identify varied collective emotions are seen as effective transformational leaders. Leaders can develop a collective  emotional capability   in their organsations. Fear can only be a useful motivator if management can provide workers with the means to address these fears. Nokia’s top managers should have encouraged and role modelled more authentic and psychologically safe dialogue, internal coordination and feedback mechanisms to understand the true emotional picture in the organisation. They might then have been able to better gauge what was possible and what was not, and most importantly, what to do about it.

About the author(s)

is the Solvay Chaired Professor of Technological Innovation and a Professor of Strategic Management at INSEAD. He is also a director of the   Strategy Execution Programme , part of INSEAD’s suite of Executive Education programmes.

is an Assistant Professor of Strategic Management at Aalto University, Finland.

About the research

"Distributed Attention and Shared Emotions in the Innovation Process: How Nokia Lost the Smartphone Battle" is published in Administrative Science Quarterly .

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24/11/2022, 09.10 pm

I was lucky to have worked at a senior level at Nokia for 14 years from 98 to 2012.  This a load of hogwash. Seems like interviews with dissatisfied employees.  Nokia had a  very empowered people focussed culture.  The fundamental issue as i saw it was one of strategy,  systems and Structure. .  Also we stuck with the sane leadership without  rotation of key positions. There was an inner circle and the dynamic people who couldn't crack into lthat circle left the organisation. 

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29/09/2022, 03.24 am

I worked for Nokia from 2007 to 2012.

And whilst all of the above sowed the seeds of failure, the ultimate death blow was Elop. From the day he joined the discussion was Android versus Microsoft as the OS….and of course given his background we went MS. An OS that no one was developing for, that was restrictive in what it could do, and to anyone with half a brain was never going to beat iOS and Android.  That was the final nail in the coffin. 

Anonymous User

26/03/2021, 04.24 pm

The analysis of the fear can explain one part of the complex issue. I have an experience that fear can be the first force that drives an organization. And when it's the first force, it leads inevitably to worse results. When fear is a dominant force, it quickly grows exponentially. Only the staff who plays the fear game or who is in denial can stay.

30/03/2020, 07.18 pm

I think Nokia is the cause of its own fall. Lack of innovative to evolve as the world is developing. The were developing Java and Symbian phones and by the time they realised, it was too late. iPhone came with iOS. They make the phone usage user friendly (User Friendly Interface). Later, Nokia detected their faults and tried to build Androids and Microsoft but, it was too late as Samsung, Huawei already took the bait and are in competition with iPhone. I think the management of Nokia are the problems. The engineers and developers should have been more acquainted with the latest technology.

27/10/2018, 02.19 am

Verizon should takeover Nokia by doing so it would make up for the mistake it made in letting bellabs go p.s. but it won't they are 5g crazy but with nokia they can have there cake and eat it to.

26/10/2018, 12.04 pm

The analysis of the fear can explain one part of the complex issue. I have experience that the fear can be the first force which drives an organization. And when it's the first force, it leads inevitably to worse results. When fear is a dominant force, it quickly grows exponentially. Only the staff who plays the fear game or who is denial, can stay.

Dennis Schumann

01/12/2017, 05.39 am

When demonstrating a planning product (IBM) to Nokia in the late 90's I was struck by the total arrogance of management. The typical comments were "we are Nokia and don't need anything new", "We have software engineers that can do that for less". He arrogance was profound, the atmosphere in the conference was toxic and I knew that their end was just around the corner. I found this to be the same attitude demonstrated by Oracle at the same time. Is Oracle next?

15/02/2017, 03.10 pm

I worked at Nokia for 3 years before the iPhone era. The characterization of the Nokia culture in this article is completely out of line with my experience. Nokia managers had great respect for the individuals and valued information good or bad coming from the rank and file as long as it was based on solid data and reasoning.

Nokia's problem was that it had a completely inflexible global platform and the processes that went with it. Nokia was a like a very large ship that took forever to change direction. Nokia could only do as well as they could forecast trends and the market environment 18 months out. This is completely different than how Samsung operates.

The iphone and touch screen devices were a big disruption in the market. Nokia was a really efficient machine, but efficient at producing the wrong type of product. Their internal structure and way of operating made it very hard to respond to the iPhone.

12/01/2017, 08.11 pm

I joined late, in 2011, and by the time we got to 2013 there was a real "Truman Show" feeling in Nokia House, Espoo. You had to be upbeat, criticising anything even in the company's internal media earned you some serious flack. By contrast to the desired image, my worst memory of those last months were the "mitigation meetings" for the launch of the Lumia 930, we knew it had big heat dissipation problems and all the statements we had to use in public were essentially blaming the consumer's use of the device - as if customers (and, for that matter, journalists and bloggers) were incaple of comparing the phone to similar models from other brands. There was serious denial about how bad things were.

Nduvho KUtama

09/07/2016, 09.07 pm

Well articulated analysis on how fear crippled Nokia.

Fear based management is perceived as an easier way to control employees and the climate within the organization - some form of fear as a motivating factor is good but needs to be complemented by other factors and not a dominant force.

Had Nokia succeeded the crippling impact of fear would have been masked. Hence why it continuous to be a source of power for some leaders, especially when a business is competitively successful.

02/06/2016, 05.51 pm

Nicely analyzed case - however, this focuses on utter incompetence of Top Management, who can be compared to second or third generation kins of entrepreneurs who do not have any grasp of the market or product and who work on their own whims and fancies. Is it possible that the entire top management was alarmingly aloof from its product manufacturing capability (one it used to pioneer at one point in time)? While the top management is responsible for strategic direction, its the middle management which forms a crux of execution. While complacency of Top management might have been the biggest cause, however, lethargy of middle management to 'work', was a cultural shift from being a market leader to a laggard would have been a challenge (one can argue again that this trickles from the top). The latter part of your analysis does consider the EQ of top management to aptly consider the undertone of culture; which could have made Nokia more nimble and agile to counter the threat. Though 'fear' can be partially blamed, accepting the responsibility of changing circumstances and modifying work culture could be a bigger issue in such a set up.

17/02/2016, 02.16 pm

Thank you for all of your comments, which I read with interest.

Big companies are complex systems. There are many things happening and outcomes are never caused by a single factor only. Our research focused on showing how the fear dynamic influenced Nokia’s failure to respond to the iPhone threat. Many of the commentators have described additional important aspects of this process. They all worked together causing the outcome. We focused on describing the fear dynamic because it is the least well understood area of organisational failure by both managers and academics.

Not all people pay attention to or notice emotional dynamics in organizations. Experimental research has shown that people vary to a great extent in how accurately they recognize others’ emotions and in how well they are able to consider things from others’ points of view. Hence, it is natural that not all people inside Nokia were aware of the fear dynamics that we described – and that’s the reason why emotions are often difficult to manage and lead to unexpected consequences.

There are of course differences between units in organizations. We did not investigate the emotional climate in Nokia’s marketing department, for example.

The ultimate purpose of our research is to help other companies avoid harmful emotional dynamics. When I taught the case of Nokia to hundreds of senior executives at INSEAD, many of them privately told me that the same harmful fear climate we described at Nokia also existed in their companies and was harming their companies' performance. After hearing the extreme story of Nokia, they are able to do something about the climate in their companies and therefore perform better.

23/12/2015, 06.01 pm

I can't understand why several people in this group blame Steven Elop for Nokia's decline. He joined Nokia only in late 2010, when the smartphone world was already ruled by iOS and Android (with Blackberry also fading). Clearly, Nokia's decline must be attributed to decisions made prior to 2010. Even if Nokia had chosen to build Android phones post 2010, does anyone seriously believe that they could have competed with the superior cost position of the Asian manufacturers?

29/11/2015, 03.14 pm

I wonder whether any of those critical commenters above have read the original research article by the authors. The findings are the result of multiple comprehensive interviews with some of Nokia's top and middle managers and other people who were somehow involved with Nokia during the study period. The paper was published in one of the top business and management journals. I' not saying this makes their findings absolutely true, but I think they are more reliable than ex-Nokians personal experiences.

15/10/2015, 10.35 am

The comments against the author by many ex-nokian does not agree with author in anyway the reason is simple they are just not true , yeah board member were blind enough to select Elop and that is a job of Board member to select someone capablae enough, a engineer has a different prospective and he is more logical than managers but that does not mean that there is an atmosphere of threat and no respect inside company , in fact it is an fact that even after left Nokia for so long people still remembrer the core values and miss the workplace , Only a Nokian can tell it whether the article is true picture of Nokia or not

Becoming service organization was not a bad decision at all , the information given by managers to its superior was correct , all the services which Nokia was brininging to a mobile ecosystem is now a money making machine for apple and google , Nokia was not successful in converging the services and mobile together because it was a way early into the market with those services and which company does not make a mistake in implementing something new, but that does not mean that there was an atnosphere of threat or disrespect in company .

The whole point of wrting comments that the article is not true enough because most of people have their best time of life inside Nokia and the one has to be Nokian to see what it was like working in Nokia , the innovation , the passion and above all respect for each other atleast that is something which i cannot forget and just to end , i still remember the core values of Nokia even after leaving the company 4 years ago. P= "Passion for Inovation " A="Achieving Together" V="Very Human" E="Engaging you" .

04/10/2015, 10.31 am

I can shorten all this text and analyzing into few words everybody already knows: because of Elop. Elop killed MeeGo, Elop killed Meltemi, Elop chose an OS that was inferior, lacked features and was even more late in the ecosystem war than MeeGo ever was and went all-in with it. All that money and R&D muscle from Microsoft and the global market share is still hovering around 2%. I claim that even Symbian would have more market share today if it were alive and patched. Nokia's HW was definitely up to par with competition so the only problem is/was the OS and ecosystem. And lets face it, Microsoft is not exactly the most hip and loved brand in the world today.

01/10/2015, 10.30 am

Then Elop was the final nail in the coffin with his decision to bet the company on Microsoft's lousy platform. Had Elop chosen Android.....the situation could have been very different.

27/09/2015, 10.29 am

Anyone remember a Polish guy who used the nom de guerre "JPZR"? He was an employee of Nokia Core Networks but was also a fan of the Windows phones, way back in the early 2000s.

In both the Register and on internal Nokia forums, he would write that Nokia had missed the boat on this feature, that feature and so on. He highlighted many of the company's faults that are now coming to light. Unfortunately, while his message was spot-on, his delivery method was way-off: He used to rant and rave and use excessive swear words in his writings "F-ing Nokia this, f-ing Nokia that..." and so on. So he ended up being derided and ridiculed.

One serious flaw of Nokia was the milestone bonus scheme. When a project hit a milestone, it had to have so much % of the project completed. Project members were paid a % of their salary as a bonus. Naturally, figures were twisted and concessions made to make the project "meet" the required progress. As the project seemingly advanced, the deficiencies were compounded and as the final milestone was reached, there were often too many problems to allow shipping a working a product.

As for it's culture of fear, loathing and back-stabbing - Ooooh yes.

27/09/2015, 10.28 am

My research indicates that the senior management of Nokia were alerted by its competitive intelligence unit in advance about the new iPhone coming in, around 2 years before its launch but failed to accelerate the development of a good answer. By that they brought to the end of Nokia.

25/09/2015, 10.26 am

Guillermo, remember when "respect for the individual" was officially abandoned as a core value? For me that marks the day when Nokia's decline began.

25/09/2015, 10.25 am

A few example from the pre Elop era:

1. We will never make a silver flip phone (2004) 2. Android is just power point presentation (2008). 3.Making Android phones is "like peeing yourself" (2010)

the Ego-system is what killed a great place to work and invent, Elop just gave the last strike.

To try to find a single cause is not going to do it justice as there were (as often is the case) a multitude of factors.

I joined Nokia in 2006, coming in from marketing in the FMCG industry. Within 6 months, I was sure of two things: I would not last 10 years in this organization, as I did in the previous and the company would not, in the long term succeed.

The first, because it did not value people, as such. Clearly people (at Nokia) where just assets you could very well do as you pleased with.

The second, because they were the most exciting brand I have ever worked on, but the most poorly managed brand I have ever worked on.

Besides all the things you've pointed out, which might be true but I did not experience myself, there is a more fundamental issue (which is true to many tech companies). That's the fact that all of these companies are driven by engineers who think "tech first", rather than brand/consumer first.

There was a time when the market was "nascent". At that point, all you need is the right price & product with an incredible supply chain and you can wipe out your competition. Nokia did that brilliantly. And grew as a result.

But then the market matures. And thinking "tech" is no longer enough - you need the basics AND something else, which is brand strength. The companies who have been selling shampoo and instant soup have been there and found that you then need to evolve and focus on the consumer needs. On what your brand is all about.

Nokia never truly understood what a brand was all about. It spoke all the right "lingo" (top to bottom), but people's understanding was just not there. It was like discussing Africa, without ever having been there - all of the myth and very little of the true facts.

It was quite shocking for me, coming in in 2006 (way before the iPhone) to see that you had two camps in Nokia: those who'd only ever know Nokia as a company/employer and those who came from outside (Coke, Nike, Unilever, Nestlé, Ad Agencies, etc). It was interesting how no matter where you came from, if you were of "non-Nokia" origin, you ALL saw the same issues. And it was shocking how blind the top was - irrespecutful of the information flow and fears.

Personally, I know from first hand account of some of the debate with the likes of Ansi. And how he crushed people back, to the point that they left the company.

The same greatness that created the business (the likes of Ansi) was not suited to continue to grow it. But they failed to recognise that. There was a lot of arrogance internally too. Clearly. But it was a mix of factors, not as simple as a) or b).

24/09/2015, 10.16 am

As I mentioned in my earlier comment, people in different organizations within Nokia definitely had very different experiences. My view from my own experience, pre-Elop, was very much as described in this article. I had many experiences that very much mirror the scenarios described here, and I was in a group highly responsible for Nokia's next evolution planning. I can't comment on whether Elop's direction helped or hurt things from there, but from my view, the issues described in this article were already deep rooted and inherited by Elop.

20/10/2015, 10.15 am

Also instead of dictating to these aired business how to align, Nokia was too nice and allowed them all to develop their own organisations and strategy, thus totally failing to deliver this"one services" vision.

24/09/2015, 10.14 am

Weak article by someone who does not know, nor understands Nokia. The simple truth is that Nokia was destroyed by the Trojan horse Elop, so that m$ could buy the handsets division for a low price. No one will ever know what was promissed to shareholders, that they were so blinded and did not kick Elop out when it became obvious that his only role is to kill the Nokia share's price.

24/09/2015, 10.02 am

This article very much matched my experience. However, experiences varied greatly depending on which group one was in. Nokia was on a path years before Elop even joined.

24/09/2015, 10.01 am

For a very long time, Nokia was criticized by the investor community for having management that was “too Finnish”. The argument was that the Finns did not understand the US culture and as a result, the lack of success in the US market was due to a large hole in its product portfolio that was unique to the US. Nokia was diligent in “listening” to the criticism and began to place more and more “non-Finns” in executive management roles. This of course was the beginning of the end.

At the time, one of Nokia’s Core Values was “Continuous Learning”. Within this concept, the organization empowered individuals to take risks and learn from mistakes. This value was never learned or adapted by the individuals placed in leadership roles.

Another core value was “Respect for the Individual”. This concept would allow for healthy debates and even heated discussions regarding projects, concepts, business direction, etc. etc. The debates and arguments were always about business and never mean to intimidate or bully individuals.

What the article describes are typical American Corporate behaviour and sadly, this is what contributed to the demise. Too many US trained corporate managers who never truly understood or adapted to Nokia’s Values.

24/09/2015, 10.00 am

Some members of the Exec board would yell at the top of their lungs and would run people out of jobs but I remember the people who reported into them also saying that there was a reason for this behavior. That said the majority of the Exec board were not like this and at every board in Nokia a reasoned argument usually won or a reasoned consensus emerged. I've worked with several boards and did not see Nokia's as dysfunctional.

For middle management misrepresenting data to the upper managers who who would report to the board. It was also not unusual for the middle managers to notify the board member that his/her organization reported into to say that the information was "managed" to create a desired outcome. Often with forecasts or projections there is "optimism" in the pitch. What we haven't heard is middle management lying about activities with the intent to change financial results (see Volkswagon).

Nokia's management worked to correct Symbian (an independent organisation that was funded almost exclusively by Nokia). There were strategic mistakes made (s90 killed, S60/s80 merged...) but there was honest effort to make s60 viable. The 5800 was late but that's also why it wasn't a flagship.

Need to go back on this one and look at when revenue and profit started to tank and if/when it clearly accelerated. One of those intersections was when Elop proclaimed Symbian dead in 2 years.

24/09/2015, 09.59 am

You missed another crucial factor which was that during this time the company was trying to re-invent itself as a services organisation. This completely de-focussed and disrupted the traditional processes and thinking of the box-shifters in the organisation, and instead of focussing on maintaining & developing the core platform, focussed instead on the integration of music, maps, games, and messaging services, further fragmenting the Symbian operating system between devices, and thus stifling growth and innovation on the core.

23/09/2015, 09.57 am

i am not sure you have known about the culture of Nokia or not but shouting the lungs out by Manager is not a correct representation , you can put whatever theory you have but nokia was mainly killed by Stephen Elop and it was Microsoft who was behind this , and unluckily Nokia bboard members were blind enough to see the threat but we engineers have seen it . there is no point explaining it to you as you will not agree on it but i would say a nice hyped article ....

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The Rise and Fall of Nokia

By julian birkinshaw , lisa duke.

The case describes Nokia’s spectacular rise and fall, shedding light on the combination of external factors and internal decisions that resulted in the company’s handset business being sold to Microsoft in 2010.During the successful period of growth (roughly 1990 through to 2006), Nokia’s focus on design and functionality gained it a worldwide reputation. It was acknowledged as the first smartphone manufacturer. Through the early-mid 2000s it was the undisputed leader in the global mobile phone business. The case traces the first signs of trouble and the company’s subsequent decline over the period 2005 to 2010. Pressure in the early 2000s from low-end competitors led to early signs of problems. Then of course the game changed in 2007 with Apple’s iPhone and a year later with phones powered by Google’s Android operating system from HTC, Samsung and others. Nokia was initially dismissive of these new offerings but its proprietary OS, Symbian, was ageing badly and its App store (Ovi) was no match for Apple’s. In September 2010 it was announced that American Stephen Elop, formerly of Microsoft, would become CEO. Not long afterwards a partnership with Microsoft was signed which subsequently led to Nokia’s handset business being sold to Microsoft.

Learning objectives

  • Understand why good companies go bad; in other words, see how the assets that enable companies to succeed can also be liabilities when the market turns against them.
  • Provide insight into the nature of disruption in an established industry and why incumbent firms struggle to adapt.
  • Examine the different paths companies should take to respond to disruptive forces.
  • Understand the leadership challenge for executives when their performance starts to decline2. To understand the dynamics of change in a fast-changing industry.
  • Identify strategies companies can use to adapt quickly to disruptive changes.
September 2011
CS-11-031
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Nokia Change Management Case Study

Nokia is a company that has undergone significant change over the years, transforming itself from a mobile phone manufacturer to a leading player in the telecommunications infrastructure market.

This transformation was driven by a range of factors, including changes in market conditions, advancements in technology, and shifting customer needs and preferences.

However, perhaps the most important factor in Nokia’s successful transformation was its approach to change management.

In this blog post of Nokia’s change management case study, we’ll examine key strategies and tactics that the company employed to drive its successful transformation.

By examining the lessons learned from Nokia’s experience, we can gain valuable insights into effective change management and the critical factors that are required for a successful organizational transformation.

Let’s start reading.

Brief History of Nokia Journey of Change 

Nokia was a Finnish company that produced a wide range of products, including paper, rubber, and cables. It was not until the 1980s that Nokia started focusing on telecommunications equipment, but even then, it was still a relatively small player in the industry.

In the late 1990s, Nokia made a strategic decision to focus solely on mobile phones, which at the time were rapidly growing in popularity. Nokia recognized the potential of the mobile phone market early on and invested heavily in research and development to create innovative and user-friendly devices.

Nokia’s decision to focus on mobile phones paid off, and by the early 2000s, the company had become the world’s largest mobile phone manufacturer, with a dominant market share. Nokia’s success was due to its ability to offer a wide range of phones at different price points and to develop cutting-edge technology such as the first mobile phones with built-in cameras and internet connectivity.

However, Nokia’s dominance in the mobile phone market was short-lived. The company struggled to keep up with the rapid pace of technological innovation and the rise of new competitors, such as Apple and Samsung. As a result, Nokia’s market share declined sharply in the late 2000s and early 2010s, and the company eventually sold its mobile phone business to Microsoft in 2014.

Nokia refocused on telecommunications infrastructure and services. It was a again a success story. In 2015 Nokia acquires French telecommunications equipment company Alcatel-Lucent.

What are those external and internal factors that caused change?

There were several external and internal factors that led to Nokia’s change management and transformation from a mobile phone producer to a telecommunication infrastructure service provider. Here are some of the key factors:

External factors:

  • Increased competition: The rise of new competitors such as Apple and Samsung in the mobile phone market put pressure on Nokia’s mobile phone business, leading to declining market share and profits.
  • Rapid technological change: The rapid pace of technological innovation in the mobile phone industry made it difficult for Nokia to keep up and remain competitive.
  • Shift towards smartphones: The shift towards smartphones and the decline of feature phones also contributed to Nokia’s decline in the mobile phone market.
  • Opportunities in telecommunication infrastructure: The growing demand for 5G networks and other telecommunications infrastructure services presented an opportunity for Nokia to diversify and expand its business.

Internal factors:

  • Strategic decision-making : Nokia’s leadership recognized the need to adapt to changing market conditions and made the strategic decision to shift its focus towards telecommunications infrastructure services.
  • Strengths in telecommunications: Nokia had a strong history and expertise in the telecommunications industry, which gave it a foundation to build on in expanding its business.
  • Investment in research and development: Nokia continued to invest in research and development, allowing it to develop new products and services in the telecommunications infrastructure market.
  • Acquisitions and partnerships: Nokia made strategic acquisitions and partnerships to expand its capabilities in telecommunications infrastructure services, such as the acquisition of Alcatel-Lucent and the partnership with Xiaomi.

07 Key Drivers of successful change management of Nokia 

The successful change management of Nokia from a mobile phone manufacturer to a telecommunications infrastructure provider was driven by several key factors. Here are some of the most important drivers:

1. Clear Strategic Direction

Nokia’s clear strategic direction helped guide decision-making at all levels of the organization, ensuring that all stakeholders were aligned towards common goals and objectives. This helped Nokia to allocate resources more effectively, ensuring that investments were directed towards initiatives that supported the company’s long-term goals.

The leadership and employees focused its efforts on key priorities, such as developing new products and services in the telecommunications infrastructure market, and helped to minimize distractions from other activities that were not aligned with the company’s strategic objectives.

2. Agility and Adaptability

Agility and adaptability are important characteristics for organizations looking to succeed in a rapidly changing market environment. Nokia’s ability to demonstrate both agility and adaptability was key to its successful transformation from a mobile phone manufacturer to a telecommunications infrastructure provider. Nokia was able to quickly recognize and respond to changing market conditions and pivot its business towards new opportunities, such as the growing demand for telecommunications infrastructure services. 

3. Research and Development 

Nokia’s continued investment in R&D played a critical role in its successful transformation from a mobile phone manufacturer to a telecommunications infrastructure provider. By investing in R&D, Nokia was able to develop new products and services in the telecommunications infrastructure market and stay ahead of its competitors. This allowed the company to offer innovative and cutting-edge solutions that met the evolving needs of its customers. Additionally, Nokia’s investment in R&D helped the company to build a strong intellectual property portfolio, which further strengthened its competitive advantage in the market.

4. Operational Excellence 

Nokia’s focus on operational efficiency and continuous improvement was a critical factor in its successful transformation from a mobile phone manufacturer to a telecommunications infrastructure provider. By streamlining its operations and reducing costs, Nokia was able to improve its competitiveness and profitability in the highly competitive telecommunications infrastructure market. This focus on operational excellence helped the company to optimize its production processes, reduce waste, and improve product quality, which in turn helped it to deliver products and services to its customers more efficiently and at a lower cost.

5. Strong Leadership 

Nokia’s success in transforming itself from a mobile phone manufacturer to a telecommunications infrastructure provider was due in part to the strong and experienced leadership of CEO Rajeev Suri, who played a key role in leading the company through the transformation process. Suri’s leadership was critical in rallying employees around the new strategic direction and ensuring that all stakeholders were aligned towards common goals and objectives. Suri also provided clear direction and guidance to the organization, helping to steer the company through the challenges and uncertainties of the transformation process.

6. Cultural Change 

Nokia’s success in transformation is also due to cultural change. Nokia encouraged employees to be more innovative and agile in their work, fostering a culture of experimentation and continuous improvement. The company also emphasized the importance of collaboration and teamwork, encouraging employees to work together to solve complex problems and achieve common goals. Nokia invested in employee development and training, helping to foster a culture of continuous learning and development. This cultural shift helped to create a more flexible, innovative, and agile organization that was better able to adapt to changing market conditions and drive the company’s successful transformation.

7. Acquisition and Partnerships

Acquisitions and partnerships are critical tools that Nokia used to expand its capabilities and build a competitive advantage. By acquiring companies with complementary products and services, Nokia was able to expand its capabilities in telecommunications infrastructure services, giving the company a competitive advantage and helping it to build a comprehensive portfolio of products and services. Additionally, by partnering with other companies in the industry, Nokia was able to leverage the strengths of its partners to deliver innovative solutions that met the evolving needs of its customers.

Final Words 

Nokia’s successful transformation from a mobile phone manufacturer to a leading player in the telecommunications infrastructure market is a powerful case study in effective change management. By adopting a clear strategic direction, investing in research and development, focusing on operational excellence, fostering a culture of innovation and collaboration, and pursuing strategic acquisitions and partnerships, Nokia was able to adapt to changing market conditions and pivot its business towards new opportunities. Ultimately, Nokia’s transformation serves as a powerful example of how organizations can successfully adapt and evolve in response to changing market conditions, leveraging their strengths and capabilities to drive growth and success in new markets and industries.

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How Nokia Embraced the Emotional Side of Strategy

  • Timo O. Vuori

strategic management case study of nokia

Don’t dismiss the “soft stuff.”

How do emotions shape strategy making? A pair of researchers investigated this topic by doing a close analysis of Nokia’s severe strategic challenges between 2007 and 2013. As part of this research, they conducted 120 interviews, including nine with board members and 19 with top managers. They found that while emotions are often dismissed as the “soft stuff,” they have profound effects on strategy. To avoid emotions having a negative effect on strategic decision-making, managers can do three things. First, increase trust by setting clear, and healthy, conversational norms. Second, reduce emotional attachment to a failing strategy by generating many new options — not just one alternative. And third, nudge top managers to pay attention to data that conflicts with their gut feelings.

How do emotions shape strategy making? We investigated this topic when we studied how Nokia executives dealt with the company’s severe strategic challenges between 2007 and 2013. As part of this research, we conducted 120 interviews, including nine with board members and 19 with top managers.

strategic management case study of nokia

  • TV Timo O. Vuori is an assistant professor in strategic management at Aalto University in Finland.
  • QH Quy Huy is the Solvay Chaired Professor of Technological Innovation at INSEAD and Academic Director of the INSEAD China Initiative.

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Case Study 4: The Collapse of Nokia’s Mobile Phone Business

  • First Online: 30 July 2018

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strategic management case study of nokia

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This chapter provides a wisdom-oriented reading of one of the most spectacular business failures of recent times: the collapse of Nokia mobile phones between 2007 and 2015. Using executive biographies and other published accounts of Nokia’s organisational patterns, the chapter attempts to offer a more balanced explanation of the processes behind Nokia’s inability to respond to the changing industry circumstances. The following analysis pays attention to the shaping of Nokia’s organisational culture. Company and its new leadership adopted a professional, no-nonsense approach in the aftermath of the problems of the late 1980s and early 1990s. The new generation of managers believed in a rational mindset supported by a bureaucratic organisational form. Leaning on a superior technological competence within the mobile phone sector, Nokia was capable of ultimately becoming the market leader. However, in 2007, with two major players, Apple and Google, joining the business, the established rules of competitive dynamics were irrevocably changed. Focus shifted to software and applications. Nokia’s risk-aversive and closed organisational culture could not respond in a situation where an open search for new innovations and a cooperative internal working mode were needed. An analysis of the development of Nokia’s organisational psyche following the emergence of a new generation of managers and executives highlights the role of local beliefs in using philosophical wisdom in critical circumstances. Nokia and its leadership were not able to abandon the outmoded habits and structures, as these had become integrated with the very identity of the company.

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Nokia: The Inside Story of the Rise and Fall of a Technology Giant

The case examines the downward spiral of Nokia, the mobile technology giant that once conquered the world, seen from the perspective of ‘insiders’ – based on interviews with Nokia executives at top and middle management level. They describe the emotional undercurrents of the innovation process that caused temporal myopia – an excessive focus on short-term innovation at the expense of longer-term more beneficial activities. Nokia’s once-stellar performance was undermined by misaligned collective fear: top managers were afraid of competition from rival products, while middle managers were afraid of their bosses and even their peers. It was their reluctance to share negative information with top managers – who thus remained overly optimistic about the organisation’s capabilities – that generated inaccurate feedback and poorly adapted organizational responses that led to the company’s downfall. The case covers the period from the early 2000s to 2010, with a focus on 2007 (the introduction of the iPhone) to 2010, when the CEO left. Read a related Knowledge article "Who Killed Nokia? Nokia Did" by Quy Huy.

After reading and analysing the case, students will understand (i) how emotional dynamics influence hard technological and strategic decisions in organizations as they translate into challenges for innovation, (ii) how emotional dynamics can undermine innovation and performance.

  • Top and middle management
  • Mobile phone
  • Radical change
  • Strategic agility
  • Temporal myopia

Huy

Quy Huy

Timo o. vuori.

Duke

Lisa Simone Duke

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Management Decision

ISSN : 0025-1747

Article publication date: 3 May 2011

This paper aims to offer a conceptualization of how and why corporate level strategic change may build on historical differentiation at business unit level.

Design/methodology/approach

Methodologically, an historical case study of Nokia Corporation's drastic business model transformation between the years 1987 and 1995 is reported.

The conceptual and historical work results in a process model of business model change, demonstrating how central business units feed strategic alternatives and capabilities to the corporate‐level transformation process.

Practical implications

The results highlight the importance of corporate level “market mechanisms' that allow promising strategic alternatives to emerge and select out inferior options. In this process, a key mechanism is the exchange of executives and cognitive mindsets between business units and corporate headquarters (CHQ).

Originality/value

The reported research offers an original contribution by showing the dynamic interplay of cognitive and organizational change processes, and highlighting the importance of building on existing capabilities and competencies despite the pressure to demonstrate strong turnaround activities.

  • Business planning
  • Organizational change
  • Business history
  • Telecommunications
  • Corporate strategy

Aspara, J. , Lamberg, J. , Laukia, A. and Tikkanen, H. (2011), "Strategic management of business model transformation: lessons from Nokia", Management Decision , Vol. 49 No. 4, pp. 622-647. https://doi.org/10.1108/00251741111126521

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ramanajaneyulu pokathota

Nokia was a synonym for the mobile phone industry for a long time; however, when it came into the era of smart phones, the former leader was under an awkward situation. Nokia sold its mobile phone business to Microsoft on September 3, 2013. A company following Kodak with the legendary color failed in the impact of the new technology revolution. This was a typical case of the subversion of an industry; therefore, the author believed that it was necessary to analyze the process. This paper studied Nokia's decline mainly from the three parts. First of all, looking back Nokia's development process from the glory to the decline, it can be divided into three stages: the transition period, the peak period and the decline period, followed by analyzing the reasons of its decline from three parts: Nokia executives' grasp for the market, the company's business strategy and business cooperation, and finally analyzing its inspiration for modern enterprises from the marketing perspective.

strategic management case study of nokia

In this paper, we study the changing explanations of success and failure over the course of a firm’s history. We build on a discursive approach that highlights the role of narrative attributions in making sense of corporate performance. Specifically, we analyze how the Nokia Corporation was framed first as a success and later as a failure and how these dimensions of performance were explained in various actors’ narrative accounts. In both the success and failure accounts, our analysis revealed a striking black-and-white picture that resulted in the institutionalization of Nokia’s metanarratives of success and failure. Our findings also reveal a number of discursive attributional tendencies; and thus warn of the cognitive and politically motivated biases that are likely to characterize management literature. Keywords: strategic management; causal attribution; sense-making; discourse analysis; narrative; management history

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Software languages engineering: experimental evaluation, do software languages engineers evaluate their languages, evaluating the usability of domain-specific languages, iterative evaluation of domain-specific languages, use software to define silicon, 25 references, competitive strategy: techniques for analyzing industries and competitors, the dynamic capabilities of firms: an introduction, competing on capabilities: the new rules of corporate strategy., strategic planning in smes – some empirical findings, dynamic capabilities and strategic management, the core competence of the corporation, the design school: reconsidering the basic premises of strategic management, firm resources and sustained competitive advantage, market orientation: the construct, research propositions, and managerial implications, strategic management in an enacted world, related papers.

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  9. Strategic management of business model transformation: Lessons from Nokia

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  13. How Nokia Embraced the Emotional Side of Strategy

    To avoid emotions having a negative effect on strategic decision-making, managers can do three things. First, increase trust by setting clear, and healthy, conversational norms. Second, reduce ...

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    Methodologically, an historical case study of Nokia Corporation's drastic business model transformation between the years 1987 and 1995 is reported. Findings The conceptual and historical work results in a process model of business model change, demonstrating how central business units feed strategic alternatives and capabilities to the ...

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