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RingtoneExploring the Rise and Fall of Nokia in Mobile Phones$

Yves Doz and Keeley Wilson

Print publication date: 2017

Print ISBN-13: 9780198777199

Published to Oxford Scholarship Online: November 2017

DOI: 10.1093/oso/9780198777199.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (www.oxfordscholarship.com). (c) Copyright Oxford University Press, 2019. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 17 August 2019

A Shooting Star

A Shooting Star

(p.1) 1 A Shooting Star

Keeley Wilson

Oxford University Press

Abstract and Keywords

No large industrial company has ever grown as fast as Nokia did in the 1990s and few have fallen quite as rapidly: Nokia’s mobile phone business went from posting record results in 2007 to almost dragging the whole company into bankruptcy in 2012. The opening chapter sets the scene with a brief history of Nokia’s journey. Three different lines of theoretical reasoning which could explain Nokia’s decline are discussed: unavoidable Schumpeterian creative destruction, organizational evolution gone astray, and a failure of managerial volition. The CORE dimensions used in the analysis of each chapter are introduced: Cognition (what leaders saw, how they interpreted it, conclusions they drew, and decisions made); Organization (operational actions, managers’ responsibilities, and relationships in the firm); Relationships (interpersonal element of how leaders complement each other, how well they work together, and the ambitions they harbor); and Emotions (critical to the quality of strategic sense-making and collective commitment).

Keywords:   short history, theories of decline, management, leadership, Nokia

In 1993, when Nokia’s ringtone was installed on its phones for the first time, few people would have expected the short melodic phrase from Francisco Tárrega’s 1902 “Gran Vals” would become one of the most recognizable, not to mention most played, tunes in history. No large industrial company has ever grown as fast as Nokia did in the 1990s and few have fallen quite as rapidly: Nokia’s mobile phone business went from posting record results in 2007 to almost dragging the whole company into bankruptcy in 2012. Like a shooting star, Nokia appeared in our sky traveling at great speed, shining brightly, and then disappearing just as fast.

In following that trajectory at such speed, Nokia is unique; an “outlier” when compared to the rise and decline of average firms which take place over much longer periods. While Internet or platform-based businesses can scale up to dizzying levels in short time frames, as a product-based industrial company, the rate of Nokia’s extraordinary growth was unprecedented. In less than a decade, the firm which few outside its home market in Finland had heard of became the dominant player in the mobile phone industry, with one of the world’s most powerful brands.

Nokia’s remarkable growth was punctuated by just three small blips. The first occurred in 1995 when growing pains in the supply chain led to problems with product availability and a consequent slowdown in sales. The second saw sales growth plateau in 2001 when the whole industry slowed following the dotcom crash. And finally in 2004, Nokia was hit by major telecom operators briefly boycotting its products in retaliation to Nokia moving into value-added services and to punish the firm for not introducing a folding phone to rival the runaway success of Motorola’s RAZR.

In 2013, with sales and margins having been falling since 2010, the threat of bankruptcy looming and management in disarray, Nokia deftly sold its mobile phone business to Microsoft. This gave Nokia the resources to reposition itself and invest in its network equipment business. After two decades of being synonymous with mobile phones, the Nokia brand all but disappeared, as Microsoft failed to leverage its acquisition to become a smartphone player.

(p.2) The repercussions of Nokia’s rise and fall were spread far and wide: investors who stuck with Nokia for too long and then sold before its refocused network business began to pull the company back to recovery, were badly hit. Tens of thousands of Nokia employees saw their jobs disappear and their stock options evaporate. Many suppliers were left struggling to find new customers. And in Finland, where Nokia’s success had for many years been synonymous with the growth of the national economy, the firm’s failure contributed significantly to the country’s economic woes in the mid-2010s.

The Nokia story is obviously a fascinating one, and in the tradition of the best “whodunit” leaves the observer intrigued to explore why and how the story unfolded as it did, and who and what was responsible for its meteoric rise and its equally dramatic decline.

From a management standpoint there are three different and obvious lines of reasoning we can draw upon to attempt to answer these questions:

  1. 1. Could Nokia’s decline have been unavoidable—just an extreme case of Schumpeterian creative destruction?

  2. 2. Was it an instance of organizational evolution and adaptation gone astray down a dead end in the face of disruption and business model change?

  3. 3. Was this a failure of management volition—the wrong strategic decisions, poor choices of organization, inadequate management processes, weak leadership, and bad timing?

Nokia’s success in the 1990s was primarily the result of visionary, courageous, and thoughtful management choices, made in a fortuitous context that had developed in Finland at a particular point in time, as digitalization and deregulation unleashed the value-creating potential inherent in mobile phones. A combination of Nokia’s entrepreneurial leadership—a team with very complementary skills—its early innovative lead in key technologies such as radio frequency, a series of smart opportunistic strategic moves since the 1960s, strong “can-do” energy, collective commitment, and effective management processes positioned Nokia to lead the charge toward the dream of mobile phones as a mass-market consumer product.

The downturn in Nokia’s fortunes in the 2000s is more intriguing and requires more complex analysis. Observing from a distance, a Schumpeterian explanation would be tempting. New competitors, primarily Apple and Google, arrived with different skills and business models that were better suited to a new software-driven, Internet-based communication industry. And then Samsung and other Asian manufacturers stole the show in hardware. Although this simple explanation is seductive, it overlooks a most critical point: Nokia was already in decline before the arrival of these new competitors.

So, if Nokia’s downfall was not just a product of Schumpeterian disruption, to what extent did adaptation running astray down a dead end play a role? (p.3) There is some face validity to this line of reasoning. Around 1990 Nokia deftly moved from analog to digital phones, captured a key role in emerging GSM (Global System for Mobile Communications) alliances, was active in Japan and the US, developed outstanding products, and quickly built and scaled up a formidable, and unmatched, global supply system. It also successfully expanded into emerging markets. It pioneered smartphones (with the “Communicator” introduced in 1996) and was among the first to offer camera phones, radiophones, and other feature-rich products.

Yet, by the mid-2000s, Nokia was reaching strategic stasis—it was hyper-stable and rigidly set on a disastrous trajectory well before Apple and Google changed Nokia’s world. This strategic stasis did not develop in a vacuum, but largely resulted from a co-evolutionary lock-in with major European telecom service operators around 3G (third-generation) telephony and the widespread introduction of data communications. In a book written with Mikko Kosonen (Doz and Kosonen, 2008) we explained how this type of stasis could easily develop as a toxic side effect of great success (and there have been similar conclusions about other firms, for instance see Collins, 2009; Sull, 2003).

The third line of reasoning—managerial errors and leadership weakness—is also a useful lens through which to observe the unfolding events. Here though, one has to be careful about undertaking “what if” reasoning with the benefit of hindsight, as to consider the road not taken calls for a form of intellectual speculation. Speeches and presentations given in 1999–2000 by key leaders within Nokia denote a keen understanding of trends and discontinuities and a well-informed foresight of their industry, implying any leadership and managerial failure was not one of cognition. However, there are a few key turning points where a different road could have been taken, or at least the dangers of the twists and turns in the road ahead better assessed.

Just as success often results from many small positive steps, the roots of failure can usually be found in multiple small mistakes, which seem manageable when viewed in isolation. However, overlooked interdependencies can result in these small errors converging to create serious problems (Perrow, 1984; Weick, 1990; Taleb, 2007). Nokia’s management failure therefore cannot be ascribed to a single “wrong” decision, but to multiple and successive decisions each of which was made for what appeared to be the right reasons but within too narrow a framing of each managers’ limited context. Systemic interdependencies that led to unfolding second- and third-order consequences of decisions were not taken into account.

The explanation of Nokia’s success and decline cannot be reduced to a single, simple answer, be it inevitable creative destruction, organizational evolution, or poor managerial choices. Elements of each of the three logics outlined above are relevant, showing complementary facets of the unfolding events and contributing to our understanding. Even though they may appear (p.4) a priori to be mutually exclusive and incompatible (having different theoretical premises), we will endeavor throughout this book to combine the explanatory power of each to describe and analyze Nokia’s success and failure in mobile phones. More broadly, by highlighting these three alternative explanations we hope to shed further empirical light on what is perhaps the most central theoretical debate in the field of strategic management: How much does management matter?

Population ecologists, in a pure Schumpeterian creative destruction logic, would argue it does not. From their perspective it is the quality of “fit” between demands from the environment and the organization that determines success—if the environment changes and that “fit” deteriorates the organization will ultimately perish (Hannan and Freeman, 1984). Management is seen as powerless, acting in a reality they do not control and perhaps do not even fathom—rearranging the proverbial deckchairs on the Titanic as the ship sails full steam ahead into an iceberg. In fact, population ecologists go so far as to argue that the actions management take to adapt organizations in the face of decline actually accelerate rather than stave off demise, as they trigger negative consequences resulting from breaking interdependencies that were never understood when the “fit” was good (Hannan and Freeman, 1984).

Students of organizational adaptation develop a more nuanced argument. The evolutionary paradigm suggests that even though managers are limited in their ability to shape how their organization evolves, they are not powerless. Organizational rules and routines largely drive how the organization adapts (Nelson and Winter, 1982). In adhering to behavioral decision-making models (Cyert and March, 1963), managers in an organization seek solutions that involve only “proximate” and incremental changes to existing routines and activities, often in a trial and error mode, with limited ex ante strategic deliberation. According to that logic, organizational adaptation is constrained by current activities and resources and is highly path-dependent.

In trying to explain the differences in firms’ performances, strategic management scholars, on the other hand, obviously give primacy to management volition. They see the organization as a tool for the CEO and key corporate executives, who craft and implement well thought-through strategic decisions working in an environment they understand. The founding “environment–strategy–structure” paradigm of the strategic management field reflects the primacy of this view (Chandler, 1962; Andrews, 1971).

It would be surprising if managers reading this book didn’t naturally lean toward the managerial volition logic, although it is interesting that in retrospect many of Nokia’s ex-leadership team now argue that Schumpeterian disruption was key to Nokia’s demise, bolstering their argument with conceptual developments about how difficult it is for an incumbent to resist disruption (Christensen, 1997). In adopting this perspective they are exonerating (p.5) themselves from responsibilities in what they characterize as an unavoidable failure.

Our own perspective in approaching the research for this book is definitely managerial. Through dissecting and analyzing Nokia’s story, our objective is to make observations of potential general value to inform management action. But we also recognize that there are insurmountable limits to what managers can do, and so we place managerial volition and action in a context where changes to the environment may ultimately render management ineffective.

With this brief introduction to the three approaches through which to view the success and failure of Nokia in mobile phones concluded, we hope to whet the reader’s appetite with a potted history of Nokia intended to highlight key points in Nokia’s journey in mobile phones.

A Capsule History

Although it could trace its origins to back to 1865, it wasn’t until the 1990s, when that ubiquitous ringtone began to fill streets and cafes from Paris to Shanghai to New York (and most places in between), that Nokia became known outside its home market of Finland. And even then there was some confusion, as many people assumed the firm with an unusual name that created these new and exciting mobile phones was Japanese. Japan being the home of innovative, well-designed consumer electronics, this made more sense than the reality of Nokia emerging from Finland, a small Nordic country which was best known for forestry products, reindeers, and Lapland—the home of Santa Claus!

Nokia’s rise in mobile phones was truly astonishing. Throughout the early 2000s, Nokia seemed unstoppable. In 2001, when its competitors stumbled as the dotcom and telecom overinvestment crises caused the industry’s first dip in growth, Nokia kept growing and capturing further market share, up to nearly 40 percent of the world market for handsets. It gained dominant market positions in two of the largest and fastest emerging markets: China and India.

Such was Nokia’s success that Jorma Ollila, the group’s chairman and CEO, became an iconic corporate leader in Europe. He was sought after at Davos, the European Roundtable, the Aspen Institute, and other high-level arenas not only as a pundit, famous for presiding over the largest European success in the ICT (information and communication technology) industry, but also for his penetrating analyses of the geopolitical and economic environments.

Innovation was at the core of Nokia’s dominance. It made its phones small and portable, invested in creating a unique brand design, and added new features so users could personalize their phones. It introduced the first smartphone (the “Communicator”) in 1996. And although Sharp launched the first (p.6) camera phone in 2001, it was Nokia’s camera phone released the following year which really changed the landscape, providing not only superior picture resolution but also picture-sharing applications that paved the way for multimedia communication.

This product innovation came from fifteen labs around the world and a number of technical cooperation projects and partnerships. In the US, for instance, its R&D (research and development) was strategically located in San Diego (the epicenter of innovation in mobile communication in the US, with the leading research university for telecom technologies and home to Qualcomm, a major innovator in the architecture of telecom chips) and Palo Alto (the heart of Silicon Valley). Year after year, Nokia overwhelmed the competition by introducing a broader array of products faster and faster, with one new product per week on average by the mid-2000s.

Beyond product innovation, Nokia’s success was supported by an innovative and highly efficient supply chain system that had been built in the 1990s. Through this, Nokia was able to achieve much lower prices from suppliers than its competitors and ramp up new production lines to full capacity in a matter of days. In the 1990s it had also mastered lean production and Japanese quality processes, and organized its integrated manufacturing around a few key regional hubs in Europe (Finland, Germany, Hungary), Asia (China), and North America (Mexico).

By 2001, Nokia’s brand had grown into one of the best known and most valuable in the world. To many inside Nokia it almost felt like the company could walk on water. It knew its industry and was at the top of its game. When Apple introduced its first iPhone (in 2007), many Nokians dismissed it as a “pocket computer with poor phone features.” Not only did they feel the product was extremely expensive and technologically represented a backward step—relying on intermediate 2.5G standards, known as GPRS, while the mobile incumbents were already rolling out 3G worldwide, and beginning to work on the next-generation 4G—they felt that Apple’s “vertical” business model (from hardware components to operating system (OS) and content and application provision) was obsolete and bound to fail. When prior to announcing Android, Google informally sounded out Nokia about the idea of a possible alliance, Nokia’s management declined to engage in a serious conversation.

However, by 2010 Nokia’s sales in the highly profitable smartphone market were struggling, while Apple, with an improved product and increased distribution, had seen sales of its iPhone soar. Google’s Android was emerging as the main platform competitor to Apple, with Samsung leading the onslaught of Android-based phone makers, followed by new entrants from China. Confusion prevailed at Nokia: product quality had deteriorated and products were being introduced late. While the limitations of Nokia’s Symbian OS were becoming more painfully obvious, a new (p.7) OS under development was making slow progress and, as a result, application developers began deserting Nokia.

In a bid to try and halt the decline, Nokia’s board fired their CEO and replaced him with Canadian national Steven Elop—a Microsoft executive who had rather unsuccessfully led Microsoft’s efforts to grow into the mobile software market. Based on what he saw at Nokia, in 2011 Elop issued an internal memo to all staff comparing the firm to a burning oil platform. Designed to spur the firm into action, this backfired as the memo was leaked to the press—the world now knew how bad things had become at Nokia. Sales of Nokia’s Symbian phones declined rapidly.

Shortly after, Nokia entered an alliance with Microsoft to use the Windows Mobile OS on its phones. However, this was beset with problems and delays and resulted in the collapse of Nokia’s competitive position. In 2013, with the firm suffering from a massive cash drain in mobile phones, and threatened with bankruptcy, a great chapter in Nokia’s history ended as it sold its mobile phone activities to Microsoft.

Although this heralded the end of Nokia’s spectacular journey in mobile phones, it marked a new beginning for its network infrastructure business, as Nokia bought out Siemens to take full control of the joint venture Nokia Siemens Networks. Shortly after, it began talks to acquire Alcatel and, once the acquisition was complete, this positioned Nokia as the world’s second-largest telecoms network infrastructure firm, just behind its old rival Ericsson.

Research Focus

Obviously, faced with such a huge research subject and vast quantities of data, if this book were ever going to see the light of day it was essential to focus our research on certain critical periods, achievements, events, and challenges where managerial action or inaction played a crucial role in shaping subsequent events.

The foundations for Nokia being able to move into mobile telecommunications had been laid by two strategies of an early CEO: one to buy consumer electronics businesses, and the second to internationalize Nokia so it was not so reliant on its neighbor and old foe, the Soviet Union. Although the later decision to focus all of Nokia’s efforts on telecommunications equipment, with a strong emphasis on mobile communications, can be formally dated to 1991, this was in fact the culmination of multiple technology development efforts, strategic commitments, organizational alignments, and key managerial appointments, some made as early as the 1960s.

The 1990s were important on a number of fronts. A young and energetic leadership team took the helm. Talented and driven, but with little managerial experience and few industry orthodoxies to slow them down, they essentially (p.8) ran Nokia like an entrepreneurial start-up. They played a pivotal role in the rapid international expansion of both sales and manufacturing, and imbued the firm with a strong organizational energy and “can-do” culture. The processes put in place during this period, in particular in response to the near breakdown of the supply chain, positioned Nokia to be able to scale up production and sales much faster than all of its competitors.

There were a number of decisions made between 2001 and 2005 that had significant consequences. The continued focus on an ever-greater user lifestyle- based approach to market segmentation resulted in product proliferation and difficulties achieving high enough levels of differentiation between products. The decision to continue investing in and using the Symbian OS not only slowed down new product development but further contributed to a lack of differentiation.

The 2004–8 period was one of strategic stasis that had its genesis in a poorly implemented reorganization into a matrix structure. The departure of key senior executives after the reorganization left a vacuum in both strategic thinking and informal yet powerful integration mechanisms. Poor implementation of the matrix combined with the introduction of short-term metrics resulted in internal competition for shared resources and further product fragmentation with a lack of differentiation.

While Nokia posted some of its strongest financial results in 2007, internally it was struggling. The period up to 2010 was characterized by management’s attempts to stem the decline. The board stepped in and for the first time in Nokia’s history brought in an outsider to head the firm. But this change in leadership did nothing to alleviate the deep problems and resulted in the sale of the mobile phones business.

The research journey to understand these important periods and critical decisions was a long and detailed one—although when Yves began his exploration of Nokia back in 1996, it was certainly not with this book in mind. For readers who wish to understand more about the research process, a description can be found in Appendix 6.

Organization of the Book

To enable the reader to explore the history of Nokia, and hopefully get a sense of the context in which events unfolded and decisions were made before our own analysis comes into play, each chapter comprises two parts. The first is a broadly chronological narrative history of the period in question. In the space given, the narratives do not pretend to provide an exhaustive history of Nokia. But neither are they just a recalling of specific events or actions. Each narrative dives into the underlying causal mechanisms behind the organization and its (p.9) workings, and the relationships between senior executives, which made effective decisions and commitments either easier or more difficult.

To avoid the risk of focusing the narratives on data which supported any preconceived ideas we might have had about Nokia’s rise and decline, we carefully separated the development of the narratives for each chapter from their interpretation, developing each of the narrative chapters before attempting any conceptualization based on the data.

The second part of each chapter is an analytical commentary based on the analysis and interpretation of data gathered for the narratives. These commentaries do not necessarily contribute “new to the world” conceptualizations, but they do draw together multiple aspects from Nokia’s experience and frame these in such a way as to allow for more generalizable lessons to be learned. Selected references to other publications are made in the commentaries—these do not aim to provide a review or synthesis of the academic literature or existing research relating to these points. The intention is that they further deepen and enlighten our own analysis and point the reader to the most relevant research findings and conceptualizations. In each chapter, apart from Chapters 8 and 9, the commentary either explicitly or implicitly analyzes events along what we call the “CORE” dimensions: Cognition, Organization, Relationships, and Emotions.

Although it is easier to discern patterns in strategic outcomes than to identify and analyze the various mechanisms that interact to create these outcomes, a narrative that ignores the details of these mechanisms would be seriously wanting. Potentially generalizable implications for action would not be reliable. So in developing the narratives we did not limit ourselves to strategic actions or discourses, but decided to dive into the underlying mechanisms, along four dimensions: the perspectives and mental models managers developed and adopted; the organization and its workings; the relationships between senior executives that impacted the ability to make effective decisions and commitments easier or more difficult; and the emotional engagement that provides the energy and will to act.

A Cognitive Dimension

In the strategist’s mind (the CEO, or part of the executive team), strategy is a theory of how to succeed. As such, it is a cognitive construct, an intellectual reasoning about the causes and effects of actions and understanding of a firm’s environment. This includes clear or fuzzy, accurate or mistaken foresight about the future of that environment. In exploring Nokia’s evolution, we need to be sensitive to what its leaders saw, how they interpreted what they perceived, what conclusions they drew, and what decisions they made.

(p.10) An Organizational Dimension

Strategy is not just thought and planning but is about action—what actually gets done. And in large, complex organizations like Nokia, strategy in action involves many people in the organization. In our exploration, we therefore develop an understanding of not only how the organization worked in implementing strategic decisions, but also the equally important but less visible area of how it generated operational actions and drove behavior, the consequences of which were strategic. An organization filters strategic choices and, in many cases, may drive actions that only get rationalized ex post as an “intellectual” strategy. It is therefore important to understand what managers did in the context of their roles, responsibilities, and relationships in an organization, not just what they thought.

A Relational Dimension

Relationships among people are thus also important. In mature, long-standing bureaucratic organizations, relationships are often codified, formalized, well established, and likely to have become routine. Managers are the proverbial “cog in the machine” of a bureaucracy with set rules and norms. But in younger, fast-growing organizations like Nokia in mobile phones, which are still being built and striving to succeed in wholly new domains, relationships need to be explored more carefully. The interpersonal dimension matters more than the institutional one—how leaders complement each other, how well they work together, and the ambitions they harbor are all important elements in exploring and explaining success or failure.

An Emotional Dimension

It is not only relationships that are instrumental in rapidly emerging businesses, emotions matter too. They are critical to the quality of strategic sense-making, as the majority of our cognition is intuitive and therefore affected by our emotions. Emotions are also vital to collective commitments where interpersonal likes and dislikes play a role. And as emotions are contagious, they influence everybody’s commitment and attitudes in the organization. Joy or fear spread easily, sometimes in the absence of good analytical justification. So, we cannot ignore the emotional dimension in our exploration.

The interplay of these CORE elements determines the ability of a company’s leadership to be strategically adaptive or to fall prey to growing rigidity and strategic stasis in the face of conflicting pressures and priorities.

(p.11) Chapter Outlines

Each chapter covers a distinct period in Nokia’s rise and fall in mobile phones.

Chapter 2: The Planetary Alignment Was Right

This chapter provides historical background on the growth of Nokia and the co-evolution of an emergent ICT cluster in Finland. It carefully distinguishes what is unique and idiosyncratic and what is generalizable from that co-evolution.

It explores how smart opportunism, rather than a grand strategy, drove Nokia’s adaptation from traditional industries to mobile telecoms and how the group took advantage of unique features of the geopolitical, institutional, and industrial contexts of Finland, post-World War II. It highlights the dominant logics and heuristics from formative experiences in the early evolution of the company.

Chapter 3: We Were the Only Ones to See It

Alone among key early competitors (in particular Ericsson and Motorola), Nokia’s executives perceived the full potential of mobile phones as a consumer product. Nokia progressively foresaw the development of a mass market. This chapter describes and analyzes how this more perceptive framing emerged over time, and why other firms (the leading incumbents at that time) did not develop a comparable framing.

Conceptually, the key points highlighted in this chapter are that innovative winning strategies result from clear, lucid, and determined strategic opportunism and are built from increasing insights as an innovation process or as new competitive situations develop, not from grand plans or a sudden awakening to a new reality. They evolve and develop incrementally and often iteratively. We also conceptualize how negotiation skills in a new consortium—GSM—opened a new strategic window. The chapter shows that the most important innovations are not necessarily technological: perhaps most critical to Nokia’s success in that period was understanding the needs of new recently licensed mobile service operators—how different they were from those of traditional incumbent telecoms and how they fostered business model innovations that helped Nokia grow globally very rapidly.

Chapter 4: A Rising Star

Nokia was able to scale up remarkably quickly in the 1990s, faster than any producer of a complicated product ever had (a mobile phone has about 200 to (p.12) 300 components and subsystems). By 1995, however, Nokia lost control of its supply chain, going through what it refers to as a “logistics crisis.” This chapter reviews and analyzes the factors that allowed extremely fast growth, and also discusses how Nokia was able to recover from the logistics crisis by bringing greater discipline to how Nokia Mobile Phones was run and greater sophistication, in particular, to supply chain management. Nokia also decided to create a New Venture organization, initially with a mission to search for a “third leg,” beyond Mobile Phones and Networks. This chapter analyzes how these developments enabled the continuation of extraordinarily rapid growth through the late 1990s but also sowed the seeds of later difficulties.

Chapter 5: Attracting the Planets

In the late 1990s, after Nokia had developed the first smartphone (then dubbed “Communicator”), executives became increasingly sensitive to the importance of operating systems. At the same time, as data communications and multimedia were gaining importance, they were well aware of the dangers of mobile phones following a similar evolutionary path to that of personal computers, in which Microsoft captured nearly all the value leaving hardware producers with very little. It was also becoming clear that more complex business models would be needed to tap into new opportunities and applications beyond voice transmission.

This chapter describes and analyzes how Nokia managed this transformation. It describes the development of the Communicator smartphone, the establishment of the Symbian OS, and the creation of an innovative camera phone. As the nature of the industry was changing and becoming more complex, it also looks at how Nokia responded by engaging with a wider ecosystem to develop the visual radio concept. These examples highlight the challenges the new world of software platforms and application ecosystems raised for Nokia.

Chapter 6: A Supernova

This chapter reviews the period 2004–6, opening with a description of problems Nokia was facing due to a boycott of its products by operators. It goes on to analyze the implications of a reorganization into a matrix structure in 2004, which led to wide-ranging top-management changes over the following two years and a subsequent deterioration of strategic thinking and strategic leadership. We also see a growing bureaucratization and loss of agility during this period, along with increasing internal competition and difficulties as Nokia grappled with the challenges of shifting from a “hardware-first” to “software-first” approach.

(p.13) Chapter 7: A Fading Star

Covering the period 2006–11, in this chapter we see how the seeds of destruction that were unknowingly sown in the early 2000s came to fruition. Nokia was collapsing from within well before Apple or Google became competitors, leaving Nokia’s new management team in a difficult position in which developing a successful managerial response to the changed external environment had become all but impossible.

Successive reorganizations, a lack of technology leadership, and the collapse of the strategy process all contributed to Nokia rapidly losing its leadership position. We look at the options Nokia’s management team considered with regard to its smartphone strategy before ultimately choosing an alliance with Microsoft.

Chapter 8: Toward a New Alignment?

This chapter covers the demise of Nokia’s phone business under the group’s first non-Finnish CEO, and the ultimate failure in strategy which led to significant losses and the sale of the phone business to Microsoft. It also describes how under new chairmanship, the board began to play a much stronger strategic role which resulted in the rebirth of Nokia as a telecoms infrastructure player.

Chapter 9: The Astronomer’s Perspective

The bulk of this chapter is conceptual more than descriptive and analytical. It focuses on the research questions raised in Chapter 1 and how analyzing and conceptualizing the story of Nokia in mobile phones helps address these and shed valuable light on their managerial implications. Of course, this also provides a way to summarize the main findings and conceptual implications from the research, and brings a logical closure to the book.


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