Nokia: Fear Of The Future Becomes Failure

By Michael Anderson and Miranda Jefferson

How did the world’s fastest-growing telecommunications company become yesterday’s news in just a few years?

In 1990, mobile phone giant Nokia was the fastest-growing telecommunications company in the world, with a dominant position in the mass market for mobile phones. But in the period 2007-2012, Nokia went into rapid decline, culminating in near-bankruptcy in 2012. Nokia was acquired by Microsoft in 2014, ending its nearly 150-year history as an independent company. Just when global dominance was close for Nokia, something had gone rapidly, horribly wrong. What was it?

While there are various reasons for the decline of this once great company, most of the explanations come down to poor communication, hierarchical and bullying management and trading on perhaps the most basic of all human emotions: fear.

Fear started at the top with managers realizing that to compete with Apple they needed a more effective operating system, but could not admit that publicly ‘for fear of appearing defeatist to external investors, suppliers, and customers and thus losing them quickly’. The fear in this instance emerged because the ‘big picture’ of shifting market realities caused anxiety rather than opportunity. This fear turned Nokia in on itself.

The rapid evolution and market dominance of telecommunications companies like Apple and Samsung stunned Nokia, and in the face of fierce competition and innovation Nokia seemed unable or unwilling to transform its culture. Nokia’s history demonstrates evidence of creativity and collaboration in the development of many ‘cutting- edge’ products that led to its market dominance. However, Nokia’s tendency towards ‘command and control’ management created huge problems. In a recent study of Nokia’s organizational culture, Professor of Strategy, Quy Huy made this observation:
“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.”

The fear culture in Nokia was created by individuals who neglected to communicate and critically reflect. In the face of rapid change and fierce competition a company that had survived for well over a century was brought to its knees by human factors. This is often the case. Rarely is the demise or the slow disintegration of organizations caused by poor software, the wrong building or insufficient resourcing, although these can be contributing factors.

In our experience, organizations thrive or decline because of humans and their capacity to respond with agility and wisdom to change. Nokia is one case that makes our point about the ever-presence of change. Extraneous factors such as software and buildings are enablers but in the end if organizations are not wise and do not learn, they will face a similar fate to Nokia.

In Nokia’s case, not understanding the big picture created an environment of fear leading to rapid and dramatic disintegration. As Quy Huy puts it ‘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 organization turned inward to protect resources, themselves and their units.’

Nokia’s lack of understanding of the big picture and how to respond to the changing conditions within that big picture led to organizational paralysis and a reliance on old practices. Instead of putting their faith in communication and critical reflection to drive creativity and collaboration they resorted to fear and threats.

The 4C approach to transformation critically analyses the issues and then works deeply to change the culture, practices and approaches by integrating and operationalizing creativity,
critical reflection, collaboration and communication into the DNA of the organization. The 4C response to external challenges is to concentrate on explicitly building those skills. We argue that creativity, critical reflection, communication and collaboration are crucial to reframing, re-imagining and remaking our organizations and helping our community to pro-actively respond to the big picture in postnormal times. We are arguing for a revolutionary transition for organizations that move them from places that rely on business as usual, to places that begin to concentrate on creating value for their communities by making their workplaces feature co-creativity, ingenuity and imagination.

This is an edited extract from Transforming Organizations, available via Bloomsbury Press.

Nokia image by Nez, via flickr

For more information, please purchase our book, Transforming Organizations

Ready to speak to us?

Request a call

7 + 9 =

Leave your details and we'll be in touch to arrange a meeting in person or over the phone.