The moves that led to Nokia’s decline paint a cautionary tale for successful firms.
In less than a decade, Nokia emerged from Finland to lead the mobile phone revolution.
But as I argue in my latest book, “Ringtone: Exploring the Rise and Fall of Nokia in Mobile Phones”, this ignores one very important fact: Nokia had begun to collapse from within well before any of these companies entered the mobile communications market.
In these times of technological advancement, rapid market change and growing complexity, analysing the story of Nokia provides salutary lessons for any company wanting to either forge or maintain a leading position in their industry.
The search for an elusive third leg Nokia’s leaders were aware of the importance of finding what they called a “third leg” – a new growth area to complement the hugely successful mobile phone and network businesses.
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Their efforts began in 1995 with the New Venture Board but this failed to gain traction as the core businesses ran their own venturing activities and executives were too absorbed with managing growth in existing areas to focus on finding new growth.Between 20, a number of decisions were made to attempt to rekindle Nokia’s earlier drive and energy but, far from reinvigorating Nokia, they actually set up the beginning of the decline.Key amongst these decisions was the reallocation of important leadership roles and the poorly implemented 2004 reorganisation into a matrix structure.It was successful in the sense that it nurtured a number of critical projects which were transferred to the core businesses.In fact, many opportunities NVO identified were too far ahead of their time; for instance, NVO correctly identified “the internet of things” and found opportunities in multimedia health management – a current growth area.A renewed effort to find the third leg was launched with the Nokia Ventures Organisation (NVO) under the leadership of one of Nokia’s top management team.This visionary programme absorbed all existing ventures and sought out new technologies.It rapidly grew to have one of the most recognisable and valuable brands in the world.At its height Nokia commanded a global market share in mobile phones of over 40 percent.To make matters worse, Symbian exacerbated delays in new phone launches as whole new sets of code had to be developed and tested for each phone model.While Nokia posted some of its best financial results in the late 2000s, the management team was struggling to find a response to a changing environment: Software was taking precedence over hardware as the critical competitive feature in the industry.