Context
In 2007 Nokia sold more than half of the world's smartphones. The iPhone came out the same year, and the first Android phones appeared in 2008. The market shifted from the device to the ecosystem: the operating system, the app store and the developers.
Symptom
According to research by INSEAD and Aalto University, Nokia's engineers understood that the company's own operating system, Symbian, was falling behind the new platforms. Yet in reports to management, project deadlines looked achievable, even though teams were months behind.
Cause
The study by Timo Vuori and Quy Huy (Administrative Science Quarterly, 2016) describes a shared fear across the company. Top management feared external competitors and shareholders, while middle managers feared top management and their colleagues and did not dare pass bad news upward. Information about the real state of affairs did not reach the people who made the decisions.
The fork
Guard the lead and the company's own platform, or admit that the rules of the market had changed and rebuild while there were still resources.
Decision
The decision came late. In February 2011 the new chief executive, Stephen Elop, compared the company's position in a letter to employees to a burning oil platform and announced the move to Microsoft's Windows Phone.
Execution
By declaring the old platform obsolete before the new phones came out, the company lost sales of its current models. Lumia phones on Windows Phone did not attract enough apps or buyers.
Outcome
By 2013 Nokia's share of the smartphone market had fallen to a few percent. In September 2013 the company announced the sale of its phone business to Microsoft for about $7.2 billion. Nokia continued as a maker of telecommunications equipment.
What it means for you
A company changes as fast as bad news reaches the people who make decisions. If employees are afraid to tell the truth, management learns about a problem from the reports, when it is too late to change.
- When did you last hear bad news from an employee before it reached a report?
- What happens to a person who reports that a project has failed?
- Which of your past successes keep you from seeing changes in the market?
We would start by talking to people two or three levels below management and comparing their assessment of key projects with what the owner sees.
Key dates
| Year | Event |
|---|---|
| 2007 | Nokia sells more than half of the world's smartphones; the iPhone comes out |
| 2008 | The first Android phones |
| 2011, February | Elop's "burning platform" letter; alliance with Microsoft |
| 2013, September | Sale of the phone business to Microsoft announced |
Sources
- Timo O. Vuori, Quy N. Huy. *Distributed Attention and Shared Emotions in the Innovation Process: How Nokia Lost the Smartphone Battle*. Administrative Science Quarterly, 2016: Source
- INSEAD Knowledge. *Who Killed Nokia? Nokia Did*: Source
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