AMITY SCHOOL OF BUSINESS, AMITY UNIVERSITY,

NOIDA, UTTAR PRADESH

A PROJECT REPORT On

How did lack of vision and inability to upgrade according to the latest advancement
lead to the downfall of innovative technologies organisations?

A report submitted

in

partial fulfilment

of the requirement

for the

Bachelors Degree in Business Administration

course (2017-2020)

of

Amity University (IN) London

Submitted by Submitted to

Sarthak Dr. Ian Bathgate

Enrolment no: A3906417047

 ACKNOWLEDGEMENT

I would like to have this opportunity to express my thanks of gratitude to my teacher

Dr. Ian Bathgate who helped me to complete this research project which helped me
a lot to get information about the topic.

I would also like to thank my parents and my friends for the constant support through
which I able to complete my work on time.

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 DECLARATION

I hereby declared that the research entitled “How did lack of vision and inability to
upgrade according to the latest advancement lead to the downfall of innovative
technologies organisations” submitted to Amity University [in] London is a record
of original work report smbmitted by me under the guideance of Dr Ian Bathway
Sir.
This research done by me has not been submitted to any other University for the
award of any degree or diploma.

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 RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the research

problem. It may be understood as a science of studying how research is done
scientifically. In this study the various steps are generally adopted, in studying the
research problem along with the logic behind them. The study is basically an
analytical study based on primary research and it is related to the analysis 
of the attitude of people’ towards the reasons for failure and preference level of
nokia mobiles among the consumers. .In order to conduct this study, I used
primary and secondary data.

REVIEW OF LITERATURE

The demand for smart phones is varied, thus the economy plays a crucial role in
terms of profitability for the smartphone and mobile industry. The recent
economic downturn has clearly affected all players in the industry and several
have been forced to exit. The literature review will therefore consider smart
phone research and attitude research generally and will briefly review research on
smart phone and its failure on instruction to change racial attitudes before
examining the specific literature to produce attitude change regarding race
relations.

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How did lack of vision and inability to upgrade according
to the latest advancement lead to the downfall of
innovative technologies organisations?

Nokia is a Finnish multinational corporation founded on the 12 May 1865 as a

single paper mill operation. Through the 19th century the company expanded,
branching into several different products. In 1967, the Nokia corporation was
formed. In the late 20th century, the company took advantage of the increasing
popularity of computer and mobile phones. However, increased competition and
other market forces caused changes in Nokia's business arrangements. In 2014,
Nokia's mobile phone business was sold to Microsoft.

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6
 When explaining Nokia’s fall many observers found
three reasons:
1. Nokia’s technology was inferior to Apple’s;

2. The arrogance among top level managers;

3. Lack of vision.

In order to understand its rapid downfall from its position as a world-dominant and
innovative technology organisation, Tim O. Vuori, assistant professor in strategic
management at Aalto University and Qui Huy, Professor of Strategy at INSEAD
Singapore conducted a qualitative study. The results were published in the 2015
paper Distributed Attention and Shared Emotions in the Innovation Process:
How Nokia Lost the Smartphone Battle.

The study consisted of interviewing 76 Nokia top and middle managers, engineers
and external experts and conducting in-depth investigations.

Why did Nokia fail?

This article presents one of Nokia’s reasons for failure and what you can learn to
improve your leadership.

A concise timeline of Nokia’s important moments:

 In October 1998, Nokia became the best-selling mobile phone brand in the
world;

 Nokia’s operating profit went from $1 billion in 1995 to almost $4 billion

by 1999;

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 The best-selling mobile phone of all time, the Nokia 1100, was created in
2003;

 In 2007, Apple introduced the iPhone;

 By the end of 2007, half of all smartphones sold in the world were Nokias,
while Apple’s iPhone had a mere 5 percent share of the global market;

 In 2010 Nokia launched the “iPhone killer” but failed to match the
competition;

 The quality of Nokia’s high-end phones continues to decline;

 In just six years, the market value of Nokia declined by about 90%;

 Nokia’s decline accelerates by 2011 and is acquired by Microsoft in 2013.

Nokia’s demise from being the world’s best mobile phone company to losing it all
by 2013 has become a case study discussed by teachers and students in business
management classes.

The experts’ conclusion regarding why Nokia failed to adapt and compete
is this:
Nokia’s ultimate fall can be put down to internal politics. In short, Nokia people
weakened Nokia people and thus made the company increasingly vulnerable to
competitive forces. When fear permeated all levels, the lower rungs of the
organisation turned inward to protect resources, themselves and their units, giving
little away, fearing harm to their personal careers. Top managers failed to motivate
the middle managers with their heavy-handed approaches and they were in the
dark with what was really going on.

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Microsoft learned from Nokia’s mistakes and changed its culture.

In 2014, Satya Nadella became the current CEO of Microsoft, following Bill Gates
and Steve Ballmer.

The most important change that Satya brought to Microsoft was shifting the
company’s culture. He says that his job as CEO is to create a culture that focuses
on listening, learning, and harnessing individual passions and talents. Satya also
placed employer empowerment at the core of Microsoft’s culture.

Company culture is not to be taken lightly. In fact company culture is a major

factor that contributes to the company’s development and ability to compete and
be successful.

Company culture starts at the top and grows at the bottom. It includes
mission, values, environment, ethics, expectations, overall mood, goals etc. But
unless company’s leadership fully embraces them, they are just beautiful but
empty words. Leaders must embody the company’s values and be role models
for their employees.

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. 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

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mobile phones of over 40 percent. While its journey to the top was swift, its
decline was equally so, culminating in the sale of its mobile phone business to
Microsoft in 2013.

It is tempting to lay the blame for Nokia’s demise at the doors of Apple, Google
and Samsung. 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.

Early success

With a young, united and energetic leadership team at the helm, Nokia’s early
success was primarily the result of visionary and courageous management choices
that leveraged the firm’s innovative technologies as digitalisation and
deregulation of telecom networks quickly spread across Europe. But in the mid-
1990s, the near collapse of its supply chain meant Nokia was on the precipice of
being a victim of its success. In response, disciplined systems and processes were
put in place, which enabled Nokia to become extremely efficient and further scale
up production and sales much faster than its competitors.

Between 1996 and 2000, the headcount at Nokia Mobile Phones (NMP) increased
150 percent to 27,353, while revenues over the period were up 503 percent. This
rapid growth came at a cost. And that cost was that managers at Nokia’s main
development centres found themselves under ever increasing short-term
performance pressure and were unable to dedicate time and resources to
innovation.

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While the core business focused on incremental improvements, Nokia’s relatively
small data group took up the innovation mantle. In 1996, it launched the world’s
first smartphone, the Communicator, and was also responsible for Nokia’s first
camera phone in 2001 and its second-generation smartphone, the innovative 7650.

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. 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.

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 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. But it ultimately failed due to an
inherent contradiction between the long-term nature of its activities and the short-
term performance requirements imposed on it.

Reorganising for agility

Although Nokia’s results were strong, the share price high and customers around
the world satisfied and loyal, Nokia’s CEO Jorma Ollila was increasingly
concerned that rapid growth had brought about a loss of agility and

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entrepreneurialism. Between 2001 and 2005, 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. This led
to the departure of vital members of the executive team, which led to the
deterioration of strategic thinking.

Tensions within matrix organisations are common as different groups with

different priorities and performance criteria are required to work collaboratively.
At Nokia,which had been acccustomed to decentralised initiatives, this new way
of working proved an anathema. Mid-level executives had neither the experience
nor training in the subtle integrative negotiations fundamental in a successful
matrix.

As I explain in my process trumps structure in reorganisations. And so

reorganisations will be ineffective without paying attention to resource allocation
processes, product policy and product management, sales priorities and providing
the right incentives for well-prepared managers to support these processes.
Unfortunately, this did not happen at Nokia.

NMP became locked into an increasingly conflicted product development matrix

between product line executives with P&L responsibility and common
“horizontal resource platforms” whose managers were struggling to allocate
scarce resources. They had to meet the various and growing demands of
increasingly numerous and disparate product development programmes without
sufficient software architecture development and software project management
skills. This conflictual way of working slowed decision-making and seriously
dented morale, while the wear and tear of extraordinary growth combined with an
abrasive CEO personality also began to take their toll. Many managers left.

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Beyond 2004, top management was no longer sufficiently technologically savvy
or strategically integrative to set priorities and resolve conflicts arising in the new
matrix. Increased cost reduction pressures rendered Nokia’s strategy of product
differentiation through market segmentation ineffective and resulted in a
proliferation of poorer quality products.

The swift decline

The following years marked a period of infighting and strategic stasis that
successive reorganisations did nothing to alleviate. By this stage, Nokia was
trapped by a reliance on its unwieldy operating system called Symbian. While
Symbian had given Nokia an early advantage, it was a device-centric system in
what was becoming a platform- and application-centric world. 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. By 2009, Nokia was
using 57 different and incompatible versions of its operating system.

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. At the same time, the importance of application ecosystems was
becoming apparent, but as dominant industry leader Nokia lacked the skills, and
inclination to engage with this new way of working.

By 2010, the limitations of Symbian had become painfully obvious and it was
clear Nokia had missed the shift toward apps pioneered by Apple. Not only did
Nokia’s strategic options seem limited, but none were particularly attractive. In
the mobile phone market, Nokia had become a sitting duck to growing
competitive forces and accelerating market changes. The game was lost, and it
was left to a new CEO Stephen Elop and new Chairman Risto Siilasmaa to draw

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from the lessons and successfully disengage Nokia from mobile phones to refocus
the company on its other core business, network infrastructure equipment.

What can we learn from Nokia

Nokia’s decline in mobile phones cannot be explained by a single, simple answer:
Management decisions, dysfunctional organisational structures, growing
bureaucracy and deep internal rivalries all played a part in preventing Nokia from
recognising the shift from product-based competition to one based on platforms.

Nokia’s mobile phone story exemplifies a common trait we see in mature,

successful companies: Success breeds conservatism and hubris which, over time,
results in a decline of the strategy processes leading to poor strategic decisions.
Where once companies embraced new ideas and experimentation to spur growth,
with success they become risk averse and less innovative. Such considerations
will be crucial for companies that want to grow and avoid one of the biggest
disruptive threats to their future – their own success.

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 Bibliography
1. https://www.youtube.com/watch?v=e-Cpg_KR_z4
2. https://www.academia.edu/14433835
3. https://medium.com/multiplier-magazine/why-did-nokia-
fail-81110d981787
4. https://www.newyorker.com/business/currency/where-
nokia-went-wrong
5. https://thefailurestory.com/why-nokia-failed-the-business-
failure-story
6. http://www.haasfischer.com/reasons-behind-the-failure-of-
nokia/

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