In the 1990’s Finnish based Nokia surpassed Motorola in mobile phone sales, gaining control of approximately 40% of the world mobile phone market. Nokia’s hand sized mobile phones hit a sweet spot in the market and became so ubiquitous that people didn’t ask what kind of phone you had but rather which model of Nokia you owned. Nokia believed they could do no wrong.
In 2003 Nokia changed leadership and the new team announced a company-wide restructuring with the goal of being the world’s dominant supplier of mobile phones. With no strategy in place detailing how to achieve this lofty objective, high-level executives spun their own interpretation and engaged in an intra-firm competition revolving around three distinct strategic alternatives.
- Low cost: Should Nokia cut costs and execute a ‘low-cost’ strategy to maximize profits?
- Smart Phones: Should Nokia invest in hardware and the needed compatible operating system (OS) to dominate the emerging smart phone market? Or…
- Enterprise security: Should they invest in high-end security features and become an enterprise solution provider?
Rather than working out a cohesive, company-wide strategy, Nokia created separate business units with conflicting interests. According to many, this was the turning point. Cross business unit cooperation ceased to exist, new product development became stunted and the entrepreneurial spirit that had once been at the cornerstone of Nokia’s success was crushed. As internal infighting intensified, Nokia became disconnected from emerging consumer trends and soon Nokia’s market competitiveness softened. Meanwhile, the smartphone market was fast emerging.
In 2007 at the MacWorld conference in California, Steve Jobs, CEO of Apple, took to the stage and announced that after two and one-half years in development, Apple would be launching three breakthrough products: a phone, a music player and an internet communicator. Jobs would need to repeat the words “a phone” “a music player” and “a internet communicator” three times before his tech savvy crowd finally figured out it was one device, the iPhone.
When it comes to strategy it’s said, “it’s pardonable to be defeated…but never surprised”.1 A once market savvy Nokia was caught off guard, totally missing the importance of the newer mobile operating system technology. By 2009, with no clear strategic plan, a fragmented Nokia offered no less than 57 different, incompatible versions of its Symbian OS on their various phones. The inevitable confusion resulted in delayed product launches, frustrated customers and a demoralized staff. Their Symbian OS offer was so inferior that it was later abandoned altogether. Nokia partnered with Microsoft who, as it turned out, were equally inept at developing a mobile operating system. Rudderless, Nokia’s market share plummeted from 40% to less than 3% in a few short years, decimating Nokia’s market cap by 90%. What lessons can we learn from Nokia:
- Big Goals Require Big Strategies: Ambitious goals are meaningless without a strategy detailing “how” to achieve them. Nokia’s grand ambitions were supported by a restructuring plan—not a strategy.
- Confusion is a Sure Sign of No Strategy: Disconnected teams and unclear priorities are telltale signs of strategic failure. Nokia’s reorganization created silos and misalignment, further eroding its competitive edge.
- Leaders Make Choices: Instead of uniting behind a single vision, Nokia pursued three conflicting strategies, which fragmented the company.
Announcing splashy goals doesn’t necessarily prevent companies from creating an equally great strategy to support them, yet often it does. Big goals that are only big talk are a big distraction. Are your enterprise’s objectives supported by an equally strong strategic plan?
1. Quote from Fredrick the Great
2. The curse of agility: The Nokia Corporation and the loss of market dominance in mobile phones, 2003–2013
Juha-Antti Lamberg Sandra Lubinaite Jari Ojala Henrikki Tikkanen