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Nokia Change Management

Nokia Change Management

We didn't do anything wrong, but somehow, we lost."

- Stephan Elop, ex-CEO of Nokia

Once a booming company, Nokia is considered as an example of 'change management failure'. So, why did Nokia fail to implement and manage change? What caused Nokia to fall behind its competitors? Let's take a look.

Introduction to Nokia

Change is not a new thing for Finnish telecommunication giant Nokia. The company was founded in 1865 on the banks of the River Nokia, as a single paper mill operation and moved in different industrial sectors like rubber boots, cable, paper products, tires, televisions, and finally mobile phones. The company we see today that is focused on telecommunications began its journey in 1990.

The first GSM call was made in 1991 using Nokia equipment. By 1998, Nokia was the best-selling mobile phone brand in the world. In 2001, Nokia launched its first phone with a built-in camera, and by 2004, Nokia 3G phones could capture video, browse the web, download music, watch TV on the move, and more. In 2004 the Nokia corporation reduced the number of its business units to four. The change was made in a week. This was aimed at helping Nokia meet consumer needs.

The year 2007 can be termed as 'turning point' for Nokia. It is where its downfall began. No, it is not because Apple launched the iPhone, it is because the company recalled 46 million phones due to potentially faulty batteries. Nokia partnered with Microsoft in 2010 to compete with the iPhone but it did not claim Nokia its throne back. Finally, Microsoft bought Nokia's mobile manufacturing unit for £4.6 bn in 2013 just to sell it in 2016 to HMD and Foxconn.

With all these ups and downs, Nokia is far from a dead company. Nokia's phones returned to the market in 2016. Nokia is mainly concentrating its attention on telecommunication 5G equipment. In 2021, Nokia is hoping to expand its 5G network solutions in Europe and Western countries.

What is change management?

Strategic change is a change in a company's scope, resource planning, competitive advantages, and synergy. Changes can be incremental (gradual changes) or disruptive (sudden changes).

Change management is the process of managing responses to changes in the internal and external environment of a business.

It is the leadership's responsibility to lead the company into a changing phase. The organisational culture plays a crucial role in implementing change. It is imperative to say that it is not the organisation that changes but each employee in the organisation does. The vision and ability of leadership to make fast decisions help smoothen the transition.

The Nokia change management failure is a great example of what can happen if leadership resists change.

Analysis of key drivers of change for Nokia

In the case of Nokia, external influences forced the company to change. The telecommunication market was developing fast and Nokia failed to keep up with it.

The external influences of the industry included:

  1. The competitive environment

Nokia ignored the threat posed by Apple when it launched the iPhone in 2007. The iPhone did not use a QWERTY keypad but the touchscreen. The iPhone had better software compared to Nokia.

Google introduced Android in 2008. Other major players like Samsung, Huawei, and Motorola jumped on it but Nokia ignored it. Nokia did not accept android but rather started developing the Symbian operating system.

  1. First-mover advantage

First-mover advantage refers to the benefits enjoyed by the firm as a consequence of its early entry into a new market.

Nokia missed an opportunity to launch android phones and touch screen phones as well. This opportunity was captured by Apple when it launched a full touch screen iPhone.

Nokia change management failure

In the year 1998, Nokia was the largest cell phone maker and overtook Motorola. This move shocked many business gurus back then. So what happened if Nokia was the market leader? Nokia failed because it resisted the change. Nokia clung to its fundamental ways and did not change with market developments. The reasons for Nokia's change management failure are as follows (see Figure 1 below).

  1. Not accepting Android: Nokia leadership did not see the android operating system as an advancement. They believed that customers prefer QWERTY keypad phones over touch screen phones. At the same time, companies like Samsung and Motorola launched Android-based, cheap, and user-friendly phones. With the launch of Android and iPhones, the demand for touch screen smartphones increased exponentially. Nokia realized their mistake and they introduced the Symbian operating system. Symbian was inferior when launched compared to Android. By then, Samsung and Apple had made a strong impact on the smartphone market.

  1. Shaking hands with Microsoft: Microsoft partnered with Nokia to launch Windows phones when Microsoft itself was making losses. In this case, two negatives did not make a positive. Windows phones were not successful because there was nothing new for customers to switch from their old phones. The lack of innovative features made the windows phone a failure. Nokia was on brink of bankruptcy due to huge losses. On the other hand, Apple and Samsung were innovating, launching new product lines, and taking over different markets.

  2. Failed umbrella marketing strategy: Another factor that contributed to the downfall was the wrong marketing strategy.

    Umbrella branding can be defined as when a company sells different products under the same brand name.

    Samsung 'Galaxy' series is one such example of Umbrella branding. Nokia tried to do the same under the 'Lumia' series of phones but as there was no uniqueness as compared to its competitors, the Lumia series could not fetch any success for Nokia. Nokia faced problems with branding and distribution that led to practically no sales for Nokia mobile phones.

  3. Not working enough on software: Anyone who has used Nokia phones will surely vouch for the sturdy hardware of the Nokia phone. But when it comes to software, Nokia has taken a back seat. Nokia did not try to change software innovatively and quickly enough, giving other major players an upper hand in business. Android had already gone through some iterations when the first version of Symbian was launched. Employees knew Symbian would take years to catch up with Android. Employees did not convey actual problems to management because they thought their efforts would go in vain and rigid management would not heed to it.

  4. Nokia thought they were too big to fail: Nokia enjoyed customer loyalty when it was at its peak of success and believed it would still be the favorite option of mobile phone buyers. This did not happen (even when Nokia finally accepted Android). Nokia is still struggling to improve the software at its core.

  5. Not innovating enough: Apple and Samsung launch at least one flagship phone every year with some innovative advancements. Nokia is far too behind to catch up.

  6. Dysfunctional organisation: Nokia opted to be a matrix structured organization in 2004. It caused many conflicts as many managers had equal power. It led to the power struggle in some departments and complete dysfunction in others. Some executives left Nokia and many workers lost trust in management. Employees became insecure regarding their jobs and started to hide facts. Many employees knew Symbian was way behind the Android but engineers did not tell the truth to the higher management believing that it is of no use. The tagline of Nokia is 'Connecting people' but during those days it seems like employees failed to connect with each other.

Studying Nokia change management failures has helped many companies to avoid pitfalls. We can apply change management models and processes to understand what Nokia did wrong when external factors forced Nokia to change.

Change management Nokia example: Lewin's force field analysis

Kurt Lewin proposed a model, the Force Field Analysis, which provides an overview of the different factors and issues that influence change within an organization. If influencing and restraining forces are equal, then the organization is said to be in equilibrium. The state of equilibrium should be disturbed in order to bring out the change. If the analysis indicates that forces are unbalanced, then the organization should change itself.

Lewin's force field analysis is done to check whether Nokia should or should not have changed their business practices immediately in 2008 when Android was launched.

For scoring, we are using a Likert scale (1 = Weak, 5 = Strong). The forces are rated according to their influence on the company:

Forces for change

score

Forces against change

score

A volatile market (Android, iPhone)

5

Commitment towards existing stakeholders

2

Disruptive technologies (touch screen)

5

Existing customer base who preferred QWERTY over the touch screen

3

Changing trends (software-centric)

4

Current strong market position

4

Declining team morale (Fear-driven work culture)

3

Resistance due to company politics

4

Increase profitability

3

Existing organizational structures

4

Total

20

17

Table 1 - Lewin's Force Field Analysis Example for Nokia

The analysis shows that Nokia should have changed its strategy in 2008. The Nokia change failure cost Nokia its mobile phone business. The organizational culture was also toxic at that time. Leadership did not provide a way to pass information and communicate effectively among the organisation.

As change often comes with an attitude of resistance, Nokia faced resistance at every level of management.

  1. Fear of the unknown: The leadership was not transparent about the vision or goals they wanted to achieve. This instilled the fear of the unknown in their employees.

  2. Misunderstanding: No proper communication channels caused inter-departmental misunderstandings.

  3. Organisational politics and self-interest: There was always a struggle for power in the organisation. Many either resisted the change to prove the decision 'wrong' or to hold their power longer.

Nokia change management plan

In order to change quickly according to internal or external influences, organizations have to be flexible. Nokia should have embraced the characteristics of a flexible organization and made a change management plan considering the characteristics of a flexible organization.

Figure 2 shows the characteristics of a flexible organisation.

  1. A flexible workforce: this makes it easy to increase or decrease the workforce efficiently and quickly.

  2. Information management: information management systems help share knowledge quickly at scale within the organization.

  3. Research market trends: analyzing and predicting the market would have helped Nokia make the right decisions on time

  4. Internal analysis: Nokia should have conducted a deep SWOT analysis. This would have made them aware of potential pitfalls.

Once Nokia becomes a flexible organization, it can overcome resistance by using a strategy based on Kotter and Schlesinger's Overcoming Resistance to Change Model. The model includes six ways for managing resistance:

  1. Education: Nokia informs employees about changing processes by communicating effectively.

  2. Participation: Nokia gives resisting employees a chance to speak their minds, get their inputs to develop new processes.

  3. Facilitation: Nokia supports employees during the time of change.

  4. Negotiation: Nokia compromises to make some changes rather than not addressing it with their employees.

  5. Manipulation: In manipulation, employees are offered rewards to change. Nokia could have done that to make changes quicker.

  6. Coercion: When other methods are not viable, Nokia has no choice but to transfer, terminate, or promote employees.

With all the above considerations, Nokia's change management plan might have worked better.

We have discussed what happened with Nokia in the past. But what is Nokia doing after the takeover by HMD and Foxconn? Will Nokia's change management plan be successful under the new leadership of CEO Pekka Lundmark? As per the report released by Nokia in March 2021, Nokia has announced plans to reduce costs and invest them back into R&D. The future areas of focus will be 5G, cloud, and digital infrastructure.

The mobile network business group aims to top in wireless mobile networks and associated services. Nokia owns many patents related to 5G standards. In October 2020, Nokia's research arm, Bell Labs, recorded a $14 million contract from NASA to install the first 4G network on the moon. The opportunities look promising for Nokia. However, Nokia will only be able to conquer this quest if it implements a change management plan successfully.

Nokia Change Management - Key takeaways

  • Nokia ignored Apple as a potential competitor in the mobile market.
  • Nokia took a steady approach towards innovation while other competitors were fierce in bringing out new technologies.
  • Nokia did not accept Android.
  • Nokia invested a lot of resources in developing the Symbian operating system, which was lacking when compared to Android and iOS (Apple).
  • Nokia's work culture was toxic. Employees were always under the fear of losing their jobs.
  • The untimely partnership with Microsoft did not work for any side.
  • The higher management of Nokia thought Nokia was too big to fail.
  • Nokia overestimated brand value and customer loyalty.
  • Nokia had good hardware but the lack of efficient software cost Nokia its market position.
  • Nokia resisted change due to rigid organizational structure, internal politics, and the power struggle between managers.

Sources:

1. Lieberman, Marvin (2016). First mover advantage. 10.1057/978-1-349-94848-2_602-1.

2. Hofer, GW & Schendel, DE Strategy Formulation: Analytical Concepts, St. Paul, MN: West Pub. Inc., 1978.

3. Kotter, JP, & Schlesinger, LA (1979). Choosing strategies for change.

4. eWeek, https://www.eweek.com/mobile/10-reasons-microsoft-s-mobile-business-has-failed-to-take-off/

5. Satellite Today, https://www.satellitetoday.com/telecom/2021/01/04/bringing-lte-to-the-moon-nokia-exec-talks-nasa-tipping-point-contract/

Frequently Asked Questions about Nokia Change Management

Nokia failed in its change management program due to many reasons such as:

  • Not accepting Android
  • Partnering with Microsoft to launch Windows when Microsoft itself was making losses. 
  • Failed application of umbrella branding
  • Not working enough on software
  • Think they are too big to fail
  • Not innovative enough 
  • Dysfunctional organisation

Nokia made many mistakes with its change management approach at times when competition in the mobile industry was most fierce. The company ignored Apple completely and overestimated its brand value and customer loyalty, which cost it a profitable business segment. Rigid organisational structure and wrong partnership also contributed to Nokia's failure. 

Nokia should have adopted a flexible organisation system for its change management plan. A flexible organisation is made up of a flexible workforce, information management and accurate predictions of market trends for better decision-making.  

Nowadays, Nokia is opting for values as the primary factor in driving business change. These values which include 'passion for innovation' and 'being human in daily practices' bring employees together to deliver the best products to the customers. 

The company should have been more responsive to change, not underestimated its competition, and developed technology that the public needed rather than what it thought was best. 

Final Nokia Change Management Quiz

Question

Which country did Nokia originate from?

Show answer

Answer

Nokia originated from Finland.

Show question

Question

Which operating system did Nokia develop?

Show answer

Answer

Nokia developed the Symbian operating system.

Show question

Question

Name the operating system developed by Google that Nokia did not consider for its Phones.


Show answer

Answer

Nokia ignored the Android operating system that was developed by Google.

Show question

Question

With which company, Nokia’s partnership did not succeed?


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Answer

Nokia - Microsoft partnership did not succeed.

Show question

Question

In1865, Nokia started as 

Show answer

Answer

Papermill

Show question

Question

Which of the following industry sectors Nokia was not active ever?

Show answer

Answer

Machinery

Show question

Question

Why the matrix organization structure did not work for Nokia?

Show answer

Answer

Matrix organization structure arose many conflicts as many managers had equal power. It led to the power struggle in some departments and complete dysfunction in others. Some executives left Nokia and many workers lost trust in management. Employees became insecure regarding their jobs and started to hide facts.

Show question

Question

How was Nokia's work culture back then which led to intercompany conflicts?


Show answer

Answer

Nokia’s work culture was especially based on fear. There was little or no communication between employees and management. The company did not have a clear vision and change management plan in place.

Show question

Question

To which company Microsoft sold Nokia’s mobile manufacturing unit in 2016?

Show answer

Answer

Microsoft sold Nokia branded phone business to HMD global in 2016.

Show question

Question

 In Which sector Nokia is currently active along with mobile manufacturing?


Show answer

Answer

Nokia is active in 5G network equipment manufacturing and installation.

Show question

Question

Even though Nokia had good hardware for mobile phones, where did Nokia phones lack?


Show answer

Answer

Nokia phones lacked user-centric software. 

Show question

Question

How did customers respond to relaunched Nokia phones in partnership with Microsoft?


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Answer

Customers rejected the phones as Windows phones did not offer any innovative features as compared to their competitors.

Show question

Question

Which of the following is NOT the reason for Nokia's fall?


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Answer

Lost revenue

Show question

Question

NASA has granted Nokia to install the first-ever 4G network on the _____.


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Answer

Moon

Show question

Question

What is the name of Nokia’s research arm?


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Answer

Bell laboratories

Show question

Question

When was Nokia founded?

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Answer

1865

Show question

Question

___ change is a change in a company's scope, resource planning, competitive advantages, and synergy.

Show answer

Answer

Strategic

Show question

Question

Incremental changes are also called...

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Answer

gradual changes.

Show question

Question

Disruptive changes are also called...

Show answer

Answer

sudden changes.

Show question

Question

___ is the process of managing responses to changes in the internal and external environment of a business.

Show answer

Answer

Change management

Show question

Question

___ refers to the benefits enjoyed by the firm as a consequence of its early entry into a new market.

Show answer

Answer

First-mover advantage

Show question

Question

___ can be defined as when a company sells different products under the same brand name.

Show answer

Answer

Umbrella branding

Show question

Question

___  provides an overview of the different factors and issues that influence change within an organization. 

Show answer

Answer

Force Field Analysis

Show question

Question

Nokia accepted Android.

Show answer

Answer

False

Show question

Question

Nokia is considered as an example of 'change management failure'.


Show answer

Answer

True

Show question

Question

Nokia used to be the largest cell phone maker.


Show answer

Answer

True

Show question

Question

___ force field analysis is done to check whether Nokia should or should not have changed their business practices immediately in 2008 when Android was launched. 


Show answer

Answer

Lewin's 

Show question

Question

In Lewin's force field analysis, there were more forces for Nokia to change than against change.

Show answer

Answer

True

Show question

Question

Nokia should have embraced the characteristics of a ___ organization.

Show answer

Answer

flexible 

Show question

Question

Nokia does not exist anymore.

Show answer

Answer

False

Show question

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