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The Nokia ringtone was first installed on its phones in 1993 becoming one of the most recognizable and played tunes in history. Nokia probably achieved the fastest ever growth for an industrial concern and rose like a meteor to record sales in 2007 and then became a falling star almost dragging the whole company into bankruptcy by 2012.
The story has been covered worldwide and still there is much navel searching in Finland about the reasons for the fall. Gossip and conspiracy theories abound but Professor Yves Doz of INSEAD, one of the premier graduate business schools, has tried to verify the facts from interviews with former Nokia staff and relate it to management theory. Together with Keeley Wilson, a senior researcher at INSEAD, Prof Doz has written the book Ringtone — Exploring the Rise and Fall of Nokia in Mobile Phones out of personal curiosity based on his past Nokia research and so approaches the topic with some sadness. Also, impending retirement created the desire to write a book related to business history.
Nokia The Meteor: “The planetary alignment was right and we were the only ones to see it” – Jorma Orilla the former CEO of Nokia in a researcher’s interview 2005
• Success was based on just a few products
• Simple concept and excellent design
• Acquisition of Technophone in the 1991 brought a link with Japanese manufacturing skills
• The “dream team” at the top of the company.
• A large dose of luck. The competitors had not paid attention to the potential of the mobile phone market.
• Even the failure of supply during the mid-1990s was a blessing in disguise because the reaction was to simplify supply chains, reduce costs and develop accountability.
Nokia made many sound business decisions and had the strategy in place to take advantage of the emerging mobile phone market. Importantly the people had vision and sisu, the Finnish term for pure grit and hard work. However, sisu alone was not enough to cope with this rapid growth.
Nokia The Falling Star:
o Small disjointed and ineffective decisions combined with creeping rigidity reduced the response to the market.
o 30% to 40% dominant market share led to arrogance and less risk-taking.
o Middle management unable to resolve resourcing issues, and so no decision was worse than a bad call.
o Too many products created, and also delivered before completely ready leading to corners being cut.
o Several small innocuous strategic decisions. For example, because of cost Nokia dropped the touch screen compatible version of the Symbian operating system that might have placed them ahead of the iPhone. It also left the not easy task of using a specific one product operating system for 150 different machines.
o An organizational matrix put in place in 2004 left no strong arbitration to determine where resources should have been prioritized.
o Common to many businesses, the Nokia board may have relied too heavily on the management team and were not challenging enough particularly in relation to strategy.
After 2012 Nokia swiftly divested the mobile phone business and bought out Siemens. A simple and smart move. The leadership style has changed and the board management is better. Their marketplace has been consolidated with the purchase of Alcatel but there still remains so many “what if” questions.
What if Nokia hadn’t developed a fear of acquisitions in the 1980s and the fear of losing the Finnish identity? They were ideally placed to acquire SisCo in the early 2000s which looked like a most complimentary business. What if Nokia had managed to keep the agility and strategy insight that led to meteoric growth? What if more resources had been put into development of an Android compatible operating system? Why put so much trust in Windows OS and not see the platform game had been played and lost already? Windows was far from perfect particularly the long lead-in time required for developers to launch apps.
It is hard to walk around Espoo without bumping into an ex-Nokian, each with their different opinions and perspectives about the company. The book examines many more reasons for the rise and fall and certainly makes an interesting read. Hopefully, businesses of today can learn something from the Nokia mobile phone experience.
It has left a legacy of start-up culture and simple entrepreneurship in Finland but worryingly Europe does not have a large technology company to rival the North American and Asian dominance. The conditions for such an opportunity may never align again and the last word to Professor Doz, “there cannot be a comprehensive complete history, but always a perspective . . . between reality and concepts.”
Ringtone – Exploring the Rise and Fall of Nokia in Mobile Phones by Yves L. Doz and Keeley Wilson published 22nd November 2017 by The Oxford University Press.
Picture on the front page: Roentgen Ng/Flickr
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