In the 1990s and 2000s, the Finnish company Nokia was a global phenomenon. It grew to be a technology giant, leading the change in how people used mobile phones. Nokia was the number one mobile maker and probably the first phone that many people owned. Today, the days of glory for Nokia are long gone: it has been outpaced by its more successful contenders since a long time ago. There is a lot of doubt about whether Nokia will ever be able to conquer the global phone market once again. This paper discusses the case of Nokia’s downfall in terms of leadership, motivation, and human resource problems and provides recommendations for improving its current situation.
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Analysis and Recommendations
To say that Nokia is falling apart would not be an exaggeration, and numbers and figures only prove this conclusion. Nokia’s Lumia phone line that promised to revive the company did not stick with the customer. The global sales of smartphones in Q3 of 2012 reached a whopping 170 million of which only three million, or barely 1.5%, were Nokia Lumia. Apart from that, between Q2 and Q3 of 2012, the Finnish company had been losing software developers and cutting jobs at a concerning rate. The total number plummeted from 60,995 to 43,630 in the matter of a few months. At present, the former mobile phone market leader does not even own its own headquarters anymore: the company agreed to sell and lease them back for 170 million euros. Nokia is barely in control of its own destiny: it appears that the most likely outcome is its acquisition by Microsoft or Apple rather than further existence as an independent entity. The future looks bleak: even when companies make a U-turn and crash the market again, they never quite regain their power.
The case of Nokia is quite curious: its numerous missteps that eventually brought about its downfall offer valuable lessons for managers. The first major mistake is quite obvious: the Finnish company was too late with innovating its operating system. By 2011 when Nokia finally decided to switch to its newer proprietary OS MeeGo, the market had already been dominated by Android OS and Apple’s iOS. The time when Nokia could gain its momentum was in 2008: back then, Android just entered the market while Apple was in the early stages of its journey. Three years later, the momentum was lost, and Nokia found itself directionless.
The too late switch to a better OS was not a simple miscalculation. It was the company’s active reluctance to embrace change and face the new market challenges. Resistance to change is nothing unusual: as Robbins and Coulter (2017) point out, change means replacing the known with the uncertain. Another cause of resistance that applies to Nokia’s case is the fear of losing what is already possessed (Robbins & Coulter, 2017). Nokia’s story of success and rapid growth has made the organization too rigid for a big change whose outcome could have compromised its key assets and future prospects. Another common cause is a company’s leaders’ beliefs that change is incompatible with the current goals and priorities, which will be explained later in the context of Nokia’s case.
Organizational change is defined as both the process that transforms a company’s aspects, such as work practices, technology, and others and the effects that the change has on the company. Robbins and Coulter (2017) name the following factors that may drive organizational change if paid proper attention to: changing consumer needs, governmental laws, changing technology, and economic changes. Among those factors, changing consumer needs and technology are probably the most relevant to Nokia’s situation. While the market for smartphones was rapidly changing due to the introduction of new technologies, Nokia was still clinging to its old solutions. Its developers were often frustrated with how phone-centric the company’s approach was. It seemed as if Nokia was operating in a bubble: it kept pushing the idea that phones sell, and its previously spotless reputation with the customer will seal the deal again and again.
Apple understood customers’ changing preferences much better and did not fail to deliver. By the early 2010s, buyers wanted more from their phone: essentially, they wished to have a mini-computer that they could put in their pocket. Apple did exactly that by giving its product more computing features: it had a functioning web-browser and applications. Besides, the US-based smartphone company worked on improving the user interface: the physical keyboard was removed and replaced by a single button and a large touch screen. At the same time, Nokia’s latest models suffered from the rigidity of the OS Symbian and its unnecessarily cumbersome user interface. Phone buyers were overwhelmingly preferring touchscreen to Nokia’s conventional phone keypad and slide feature. To sum up, Nokia’s contenders both met and formed users’ preferences while Nokia operated on its own false assumptions.
Surely, organizational change does not solely rely on external factors. Robbins and Coulter (2017) point out internal forces such as new organizational strategies and changing attitudes within the company. From Nokia’s case, it becomes clear that the company had attitude and vision problems. First and foremost, it was not thinking big enough and therefore, failed to see where ignoring the changes in the tech world would lead it. Secondly, the very approach to changes was far from ideal and staggered the company’s development.
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Robbins and Coulter (2017) outline two different approaches to change: the calm waters metaphor and the white waters metaphor. In the case of the former approach, managers see the market situation as primarily stable. They put a lot of effort into upholding the status quo while changes are seen as local, incidental, and occasional. Typically, managers who follow the calm waters approach dislike change: to them, it is an unfortunate aberration that disrupts their plans. The white-water rapids metaphor, as described by Robbins and Coulter (2017), paints a very different picture. It sees change as an indispensable characteristic of the market. Managers who follow the white-water rapids approach do not resist change: they know how to make the best of it.
The calm waters metaphor applies to the case of Nokia: the Finnish company enjoyed its steady growth in the market share and popularity for years. As a result, Nokia has grown dependent on its status quo and would only make insufficiently small improvements to its hardware and even smaller changes to its software. The white-water rapids metaphor describes Nokia’s primary contenders: Apple and Samsung. They figured out that small, incremental changes would not be enough to build a strong presence on the market, so they went for disruptive innovation to which Nokia proved to be reluctant.
It should be noted that Nokia’s technologies were not all bad. After all, were they that cumbersome and inconvenient in the first place, they would not win so many customers in the 1990s and the 2000s. In actuality, for years, Nokia was good at inventing new features, and it owed its ability to its highly qualified, hardworking staff. The Finnish company was a pioneer at what is seen as mainstream today: camera phones, music mobiles, apps, and tablets. However, all these creative endeavors and future-gazing fell flat in the absence of strong leadership.
According to Robbins and Coulter (2017), a leader is a person who can influence others and who has managerial authority. The authors describe many leadership theories of which the most applicable to Nokia’s situation is probably Fiedler’s contingency model. The contingency model shies away from making judgments about which leadership style is the most effective. Instead, it highlights the individuality of each situation in which a person or a group of people has to take on the leading role. Fiedler’s central idea is that effective group performance is contingent on the degree to which a leader’s style, control, and influence match the situation at hand. Other important concepts put forward by Fiedler are leader-member relations and position power.
Looking at Nokia’s case, it is easy to notice a gap between the company’s leaders and developers. The latter constituted a capable team that was quite good at predicting future trends and pointing them out to the managers. However, the managers seem to have preferred the autocratic leadership style where they shut down any suggestions that would contradict or challenge the company’s vision. Robbins and Coulter (2017) further outline such characteristics of autocratic leadership as dictating work methods, centralizing decision making, and limiting employees’ participation. As mentioned above, Nokia was defining itself as explicitly phone-centric, and developers’ warnings about the changes in the tech world fell on deaf ears. The dynamics within the company escalated to the point where technical employees no longer wanted to speak up to avoid making managers upset or frustrated. Leaders, on the other hand, were happy to be blissfully ignorant at the cost of the company’s future profits.
Trust between leaders and members is one of the biggest leadership challenges in the 21st century. Robbins and Coulter (2017) write that building trust and credibility within a company is not easy, and the relations between leaders and members can be extremely fragile. According to the authors, the ability to build trust comes from within: a good leader needs to have sufficient personal traits. Those are:
- integrity (honesty and truthfulness);
- competence (technical and interpersonal knowledge and skills);
- consistency (reliability, predictability, and good judgment in handling situations);
- loyalty (willingness to protect a person, physically and emotionally);
- openness (willingness to share ideas and information freely).
Surely, at the moment, it is difficult to have any visibility on the power dynamics that have been unfolding at Nokia. However, based purely on the case description, it seems that Nokia’s leaders lacked competence, consistency, and openness. Firstly, the managers’ reluctance to change the tech revolution on the phone market might have had roots in their own poor knowledge of trends and understanding of the threats and opportunities. Nokia missed out on at least two opportunities: first, to properly develop MeeGo and second, when the first option was no longer making sense, adopt Google’s Android. As for consistency, apparently, Nokia’s leaders were not able to provide good judgment in handling situations such as the one described above. Lastly, probably, the greatest misstep was the managers’ reluctance to embrace openness and promote the environment in which people with sufficient expertise could share ideas about their domain.
Given the rut that Nokia is in now, it is extremely difficult to provide any sound recommendations. The best-case scenario for the Finnish company is not trumping Samsung and dominating the market like it used to but staying afloat and making consistently good products. In light of the events described in this paper so far, the first recommendation would encompass the various techniques that would help Nokia bring about organizational change. The three types of organizational change need to happen – in regards to structure, technology, and people.
Structure-wise, Nokia should strive for being more horizontal, which would allow greater flexibility and rapid communication between teams. As for technology, it would be beneficial to shift the focus from hardware to software. Lastly, Nokia might want to change a few people in its managing positions if their actions have so far proven to be detrimental to the company’s success. However, the much-needed transformation can only happen if Nokia overcomes its reluctance to change. As noted by Robbins and Coulter (2017), a lot of reluctance takes place due to misinformation and gaps in communication. In this case, education on the causes and effects of each potential decision that Nokia may make might help.
The second recommendation concerns human resource management practices at Nokia. It would be not surprising to learn that the toxic atmosphere caused by poor leadership demotivated the staff. Robbins and Coulter (2017) state that motivation has been found critical to any venture’s success. Today, one of the widely recognized ways to motivate employees is through empowerment. As Robbins and Coulter (2017) note, empowerment is a philosophical concept that can be interpreted in various ways depending on the context. In the case of Nokia, empowerment should mean the promotion of personal input from professionals.
The empowerment dilemma comes down to the issue of control. It is quite challenging to find the middle ground between autocratic leadership that stifles any creative expression and the laissez-faire attitude that leaves many issues unattended. Management is not omnipotent, but it can and should steer the company in the right direction. At the same time, Managers need to understand that their expertise is limited and that they have a valid source of knowledge within their company. Apart from that, another good idea could be building interdisciplinary teams to unite the forces of professionals from different paths of life. If this advice is put to use, then Nokia departments will cease to be insular and independent. Instead, they will actively communicate and exchange ideas.
The third recommendation regards the interpersonal component of the equation. Even if each employee is individually motivated, there might still be a problem with getting along with others and making one’s ideas heard. There are concrete techniques and practices that help with maintaining good interpersonal relationships within a company. Some of them are formal: for instance, Nokia could benefit from running surveys on a regular basis that would gauge job satisfaction as well as collect suggestions. Others rely on unstructured activities such as team-building sessions in which employees and managers get to know each other better.
The fourth recommendation draws on the first, second, and third recommendations and ties them together. Local changes to Nokia are not enough: they need to be part of the overarching corporate culture – a set of relevant rules and values. Robbins and Coulter (2017) explain that in today’s chaotic world with cutthroat competition, an innovation-supportive culture is as crucial as ever. An innovation-supportive corporate culture means that a company acknowledges continuous innovation as its priority. It is a prerequisite for competing and leading the change in the tech world. Surely, innovation requires more commitment from managers and employees as usual, and it is essential not to drive the latter to the brink of a burnout. To prevent this from happening, the corporate culture should also value employees’ well-being as well as have a reward system in place. In summation, Nokia needs a cultural change and a frame of reference to benchmark its decisions against.
In a matter of a decade, Nokia has lost its status as the first and most popular mobile-maker in the world and essentially lost any sense of direction. At the moment, the company is bearing enormous operational losses, selling its buildings, and cutting jobs. Nokia is an example of how a company with a great capacity for making good products has found itself in a tight place due to the lack of good leadership. The recommendations for Nokia would include an organizational change in regards to its structure, technology, and people with removing rigid hierarchies, focusing on software, and finding better leaders respectively.