change management case study nokia

Nokia Change Management Case Study

Nokia is a company that has undergone significant change over the years, transforming itself from a mobile phone manufacturer to a leading player in the telecommunications infrastructure market.

This transformation was driven by a range of factors, including changes in market conditions, advancements in technology, and shifting customer needs and preferences.

However, perhaps the most important factor in Nokia’s successful transformation was its approach to change management.

In this blog post of Nokia’s change management case study, we’ll examine key strategies and tactics that the company employed to drive its successful transformation.

By examining the lessons learned from Nokia’s experience, we can gain valuable insights into effective change management and the critical factors that are required for a successful organizational transformation.

Let’s start reading.

Brief History of Nokia Journey of Change 

Nokia was a Finnish company that produced a wide range of products, including paper, rubber, and cables. It was not until the 1980s that Nokia started focusing on telecommunications equipment, but even then, it was still a relatively small player in the industry.

In the late 1990s, Nokia made a strategic decision to focus solely on mobile phones, which at the time were rapidly growing in popularity. Nokia recognized the potential of the mobile phone market early on and invested heavily in research and development to create innovative and user-friendly devices.

Nokia’s decision to focus on mobile phones paid off, and by the early 2000s, the company had become the world’s largest mobile phone manufacturer, with a dominant market share. Nokia’s success was due to its ability to offer a wide range of phones at different price points and to develop cutting-edge technology such as the first mobile phones with built-in cameras and internet connectivity.

However, Nokia’s dominance in the mobile phone market was short-lived. The company struggled to keep up with the rapid pace of technological innovation and the rise of new competitors, such as Apple and Samsung. As a result, Nokia’s market share declined sharply in the late 2000s and early 2010s, and the company eventually sold its mobile phone business to Microsoft in 2014.

Nokia refocused on telecommunications infrastructure and services. It was a again a success story. In 2015 Nokia acquires French telecommunications equipment company Alcatel-Lucent.

What are those external and internal factors that caused change?

There were several external and internal factors that led to Nokia’s change management and transformation from a mobile phone producer to a telecommunication infrastructure service provider. Here are some of the key factors:

External factors:

• Increased competition: The rise of new competitors such as Apple and Samsung in the mobile phone market put pressure on Nokia’s mobile phone business, leading to declining market share and profits.
• Rapid technological change: The rapid pace of technological innovation in the mobile phone industry made it difficult for Nokia to keep up and remain competitive.
• Shift towards smartphones: The shift towards smartphones and the decline of feature phones also contributed to Nokia’s decline in the mobile phone market.
• Opportunities in telecommunication infrastructure: The growing demand for 5G networks and other telecommunications infrastructure services presented an opportunity for Nokia to diversify and expand its business.

Internal factors:

• Strategic decision-making : Nokia’s leadership recognized the need to adapt to changing market conditions and made the strategic decision to shift its focus towards telecommunications infrastructure services.
• Strengths in telecommunications: Nokia had a strong history and expertise in the telecommunications industry, which gave it a foundation to build on in expanding its business.
• Investment in research and development: Nokia continued to invest in research and development, allowing it to develop new products and services in the telecommunications infrastructure market.
• Acquisitions and partnerships: Nokia made strategic acquisitions and partnerships to expand its capabilities in telecommunications infrastructure services, such as the acquisition of Alcatel-Lucent and the partnership with Xiaomi.

07 Key Drivers of successful change management of Nokia 

The successful change management of Nokia from a mobile phone manufacturer to a telecommunications infrastructure provider was driven by several key factors. Here are some of the most important drivers:

1. Clear Strategic Direction

Nokia’s clear strategic direction helped guide decision-making at all levels of the organization, ensuring that all stakeholders were aligned towards common goals and objectives. This helped Nokia to allocate resources more effectively, ensuring that investments were directed towards initiatives that supported the company’s long-term goals.

The leadership and employees focused its efforts on key priorities, such as developing new products and services in the telecommunications infrastructure market, and helped to minimize distractions from other activities that were not aligned with the company’s strategic objectives.

2. Agility and Adaptability

Agility and adaptability are important characteristics for organizations looking to succeed in a rapidly changing market environment. Nokia’s ability to demonstrate both agility and adaptability was key to its successful transformation from a mobile phone manufacturer to a telecommunications infrastructure provider. Nokia was able to quickly recognize and respond to changing market conditions and pivot its business towards new opportunities, such as the growing demand for telecommunications infrastructure services. 

3. Research and Development 

Nokia’s continued investment in R&D played a critical role in its successful transformation from a mobile phone manufacturer to a telecommunications infrastructure provider. By investing in R&D, Nokia was able to develop new products and services in the telecommunications infrastructure market and stay ahead of its competitors. This allowed the company to offer innovative and cutting-edge solutions that met the evolving needs of its customers. Additionally, Nokia’s investment in R&D helped the company to build a strong intellectual property portfolio, which further strengthened its competitive advantage in the market.

4. Operational Excellence 

Nokia’s focus on operational efficiency and continuous improvement was a critical factor in its successful transformation from a mobile phone manufacturer to a telecommunications infrastructure provider. By streamlining its operations and reducing costs, Nokia was able to improve its competitiveness and profitability in the highly competitive telecommunications infrastructure market. This focus on operational excellence helped the company to optimize its production processes, reduce waste, and improve product quality, which in turn helped it to deliver products and services to its customers more efficiently and at a lower cost.

5. Strong Leadership 

Nokia’s success in transforming itself from a mobile phone manufacturer to a telecommunications infrastructure provider was due in part to the strong and experienced leadership of CEO Rajeev Suri, who played a key role in leading the company through the transformation process. Suri’s leadership was critical in rallying employees around the new strategic direction and ensuring that all stakeholders were aligned towards common goals and objectives. Suri also provided clear direction and guidance to the organization, helping to steer the company through the challenges and uncertainties of the transformation process.

6. Cultural Change 

Nokia’s success in transformation is also due to cultural change. Nokia encouraged employees to be more innovative and agile in their work, fostering a culture of experimentation and continuous improvement. The company also emphasized the importance of collaboration and teamwork, encouraging employees to work together to solve complex problems and achieve common goals. Nokia invested in employee development and training, helping to foster a culture of continuous learning and development. This cultural shift helped to create a more flexible, innovative, and agile organization that was better able to adapt to changing market conditions and drive the company’s successful transformation.

7. Acquisition and Partnerships

Acquisitions and partnerships are critical tools that Nokia used to expand its capabilities and build a competitive advantage. By acquiring companies with complementary products and services, Nokia was able to expand its capabilities in telecommunications infrastructure services, giving the company a competitive advantage and helping it to build a comprehensive portfolio of products and services. Additionally, by partnering with other companies in the industry, Nokia was able to leverage the strengths of its partners to deliver innovative solutions that met the evolving needs of its customers.

Final Words 

Nokia’s successful transformation from a mobile phone manufacturer to a leading player in the telecommunications infrastructure market is a powerful case study in effective change management. By adopting a clear strategic direction, investing in research and development, focusing on operational excellence, fostering a culture of innovation and collaboration, and pursuing strategic acquisitions and partnerships, Nokia was able to adapt to changing market conditions and pivot its business towards new opportunities. Ultimately, Nokia’s transformation serves as a powerful example of how organizations can successfully adapt and evolve in response to changing market conditions, leveraging their strengths and capabilities to drive growth and success in new markets and industries.

About The Author

Tahir Abbas

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Lerne mit deinen Freunden und bleibe auf dem richtigen Kurs mit deinen persönlichen Lernstatistiken

Nie wieder prokastinieren mit unseren Lernerinnerungen.

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:

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.

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).

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.

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.

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.

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.

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.

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.

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:

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.

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.

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

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.

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

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

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

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:

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

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

Facilitation: Nokia supports employees during the time of change.

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

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

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 .

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

--> what should nokia have done differently.

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. 

--> Why did Nokia fail in its change management program?

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

--> Why did Nokia fail - case study?

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. 

--> What adjustments does Nokia's management need to make to its products?

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.  

--> How will Nokia's values help execute the change in business strategy?

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. 

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In1865, Nokia started as 

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

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

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Which country did Nokia originate from?

Nokia originated from Finland .

Which operating system did Nokia develop?

Nokia developed the Symbian operating system.

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

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

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

Nokia - Microsoft partnership did not succeed.

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Nokia Change Management Case Study

Company background, factors influencing organizational change, how organizational change unfolded, reference list.

Nokia Corporation is an international communication firm whose headquarters are situated in Espoo. The company is popular for manufacturing mobile phones. In addition, the company manufactures other consumer products like mobile networks, set-top boxes, and apparatus for broadband internet.

Moreover, Nokia Corporation supplies the motor industry with car speakers (Kautto 2009). Currently, the company dominates the mobile phone market with a market share of over 38.6 percent. In 2010, Nokia’s financial income was $2.6 billions. Engineer Fredrik Idestam established the company in 1965.

During this period, the company dealt with paper products, which it exported to Great Britain and Russia. In early 20 th century, the company concentrated on manufacture of wheelchair frames and rubber boots. Even today, some brands of bicycle tires bear the company’s name.

The modern Nokia Company was established in 1967. The management brought the former paper mill section and the rubber works together to establish a technological company. In 1981, a mobile network was launched in Scandinavian, prompting Nokia Corporation to manufacture its first car phones.

In 1987, the company manufactured its first mobile phone. At the same time, Nokia Corporation helped Finland, Germany, China, Poland, Italy, and Mexico to repair network for their entertainment industries (Ropponen 2008). In 2010, Stephen Elop joined the company’s management team.

Nokia Corporation merged with Siemens to form one of the biggest telecommunication networks dubbed Nokia Siemens Networks.

Currently, Nokia Corporation is among the companies that manufacture quality smart phones globally. The company continues coming up with novel inventions in line with the emerging technologies.

In 2004, Nokia Company started restructuring its operations as a way to satisfy customer aspirations. The company came up with a program dubbed “the Nokia Booster program”, which aimed at bringing together online customers and the company’s strategic development (Schienstock 2004).

A number of factors contributed to the restructuring process. Among them include desire to, attain global coverage, embrace employee empowerment, promote co-creation, and support the community.

One of the key factors that prompted Nokia Corporation to come up with the Nokia Booster program was the pressure to exploit the global market. The company was in need for establishing a single access point through which it could communicate with all its target consumers, and employees worldwide.

Prior to the program, the company relied on a communication structure where information was conveyed from the top management, down to the employees through a number of senior staff (Schienstock 2004).

Such a communication structure was slow. Consequently, the company required a communication structure that could keep pace with the contemporary marketplace.

To enhance its performance, Nokia Corporation required having a platform through which it could share its agendas with employees. Previously, employees made limited contribution to organizational policies (Krell 2000).

To make sure that employees backed the company’s agendas, Nokia Corporation had to come up with mechanisms that would captivate the employees. The company learnt that employees could be active if allowed to manage debates that fascinated them.

To achieve this, the company assigned different employees to different agendas and requested them to share the agenda with the public. This helped the company to gather information from the public, therefore, aligning its operations with customer needs.

The program helped the company to reach its target customers in remote areas where it was hard for employees to reach (Nonaka & Teece 2001).

Through the program, customers shared their views about the company and changes they wish the company to make, thus, spurring employee creativity. Indeed, the program led to numerous innovations in the company.

Management team in Nokia Corporation maintained that, for the company to perform, it required exploiting the vast experience and knowledge; its employees possessed. Nevertheless, it could hardly achieve this without fostering cooperation between the employees.

Senior managers came up with ideas concerning the innovations they would like to introduce into the company (Masalin 2003). The company then disseminated the ideas to employees and customers through the Nokia Booster program.

The program helped the company to establish a platform by which it could get opinions from all the stakeholders, therefore, coming up with products that meet all the desired specifications. Besides, the company needed to be sure that its employees are aware of the value of the projects the company initiates.

Nokia Corporation could achieve this by involving the employees in formulation and implementation of the projects (Masalin 2003). The Nokia Booster program acted as an avenue through which the company fostered cooperation between employees in different departments.

In a span of six months, the company had started witnessing inventions as employees seek to enhance organizational operations. In addition, employees shared ideas on changes they considered unfeasible, thus, helping the company pursue feasible goals only (Masalin 2003).

In 2004, Nokia Corporation made it public that it intended to begin organizational change, which aimed at helping the company meet changing consumer needs. The company reduced the number of its business units to four. It implemented the entire change within one week.

To implement the change, the company required a hundred employees taking new jobs. All the other employees retained their original jobs. Nokia Corporation reconstructed its initial modular teams (Ropponen 2008).

The company established a common platform through which all employees shared their ideas to help the company to address customer ambitions.

Ropponen posits, “The genesis of the Booster Programme, launched in late 2008, could be traced to the wide involvement of the strategy-planning process and to the flexibility and project orientation of the modular structure” (2008, p. 163).

The program started with a design team led by Ian Gee and Maximilian Kammerer. The design team argued that the traditional system of communication made it hard for the company to achieve its goals. Hence, the company required a platform that would help it involve all its stakeholders in pursuing organizational goals.

The design team resolved to organize a workshop “with team leaders followed by the much broader involvement of the whole community through an online social network community” (Masalin 2003, p. 69).

The corporation organized for workshops in different cities across the globe. At least a hundred change leaders participated in every workshop.

After the workshops, participants went back to their organizations, where they recruited employees into the adopted change processes. Online community took the centre stage in steering the changes.

This mishmash of traditional communication mechanisms and novel forms of relations established an upsurge of fervor (Masalin 2003). The Booster led to open discourse between frontline workers, community members, and managers about challenges affecting the company.

The online community furnished employees with information concerning potential changes that could benefit the company, therefore, helping them initiate innovations.

Kautto, P 2009, ‘Nokia as an environmental policy actor: Evolution of collaborative corporate political activity in a multinational company’, Journal of Common Market Studies , vol. 47 no. 1, pp. 103-125.

Krell, T 2000, ‘Organizational longevity and technological change’, Journal of Organizational Change Management , vol. 13 no. 1, pp. 8 – 14.

Masalin, L 2003, ‘Nokia leads change through continuous learning’, Academy of Management Learning & Education , vol. 2 no. 1, pp. 68-72.

Nonaka, I & Teece, D 2001, Managing Industrial Knowledge: Creation, Transfer and Utilization , SAGE Publications Ltd, London.

Ropponen, T 2008, ‘The Nokia story of using action learning’, Action Learning: Research and Practice , vol. 5 no. 2, pp. 161-165.

Schienstock, G 2004, Embracing the knowledge economy: the dynamic transformation of the Finnish Innovation System , Edward Elgar Publishing, Northampton.

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IvyPanda. (2023, October 31). Nokia Change Management. https://ivypanda.com/essays/change-management-in-nokia-company/

"Nokia Change Management." IvyPanda , 31 Oct. 2023, ivypanda.com/essays/change-management-in-nokia-company/.

IvyPanda . (2023) 'Nokia Change Management'. 31 October.

IvyPanda . 2023. "Nokia Change Management." October 31, 2023. https://ivypanda.com/essays/change-management-in-nokia-company/.

1. IvyPanda . "Nokia Change Management." October 31, 2023. https://ivypanda.com/essays/change-management-in-nokia-company/.

Bibliography

IvyPanda . "Nokia Change Management." October 31, 2023. https://ivypanda.com/essays/change-management-in-nokia-company/.

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Related Expertise: Organizational Culture , Business Strategy , Change Management

Five Case Studies of Transformation Excellence

November 03, 2014  By  Lars Fæste ,  Jim Hemerling ,  Perry Keenan , and  Martin Reeves

In a business environment characterized by greater volatility and more frequent disruptions, companies face a clear imperative: they must transform or fall behind. Yet most transformation efforts are highly complex initiatives that take years to implement. As a result, most fall short of their intended targets—in value, timing, or both. Based on client experience, The Boston Consulting Group has developed an approach to transformation that flips the odds in a company’s favor. What does that look like in the real world? Here are five company examples that show successful transformations, across a range of industries and locations.

VF’s Growth Transformation Creates Strong Value for Investors

Value creation is a powerful lens for identifying the initiatives that will have the greatest impact on a company’s transformation agenda and for understanding the potential value of the overall program for shareholders.

VF offers a compelling example of a company using a sharp focus on value creation to chart its transformation course. In the early 2000s, VF was a good company with strong management but limited organic growth. Its “jeanswear” and intimate-apparel businesses, although responsible for 80 percent of the company’s revenues, were mature, low-gross-margin segments. And the company’s cost-cutting initiatives were delivering diminishing returns. VF’s top line was essentially flat, at about $5 billion in annual revenues, with an unclear path to future growth. VF’s value creation had been driven by cost discipline and manufacturing efficiency, yet, to the frustration of management, VF had a lower valuation multiple than most of its peers.

With BCG’s help, VF assessed its options and identified key levers to drive stronger and more-sustainable value creation. The result was a multiyear transformation comprising four components:

• A Strong Commitment to Value Creation as the Company’s Focus. Initially, VF cut back its growth guidance to signal to investors that it would not pursue growth opportunities at the expense of profitability. And as a sign of management’s commitment to balanced value creation, the company increased its dividend by 90 percent.
• Relentless Cost Management. VF built on its long-known operational excellence to develop an operating model focused on leveraging scale and synergies across its businesses through initiatives in sourcing, supply chain processes, and offshoring.
• A Major Transformation of the Portfolio. To help fund its journey, VF divested product lines worth about $1 billion in revenues, including its namesake intimate-apparel business. It used those resources to acquire nearly $2 billion worth of higher-growth, higher-margin brands, such as Vans, Nautica, and Reef. Overall, this shifted the balance of its portfolio from 70 percent low-growth heritage brands to 65 percent higher-growth lifestyle brands.
• The Creation of a High-Performance Culture. VF has created an ownership mind-set in its management ranks. More than 200 managers across all key businesses and regions received training in the underlying principles of value creation, and the performance of every brand and business is assessed in terms of its value contribution. In addition, VF strengthened its management bench through a dedicated talent-management program and selective high-profile hires. (For an illustration of VF’s transformation roadmap, see the exhibit.)

The results of VF’s TSR-led transformation are apparent. 1 1 For a detailed description of the VF journey, see the 2013 Value Creators Report, Unlocking New Sources of Value Creation , BCG report, September 2013. Notes: 1 For a detailed description of the VF journey, see the 2013 Value Creators Report, Unlocking New Sources of Value Creation , BCG report, September 2013. The company’s revenues have grown from $7 billion in 2008 to more than $11 billion in 2013 (and revenues are projected to top $17 billion by 2017). At the same time, profitability has improved substantially, highlighted by a gross margin of 48 percent as of mid-2014. The company’s stock price quadrupled from $15 per share in 2005 to more than $65 per share in September 2014, while paying about 2 percent a year in dividends. As a result, the company has ranked in the top quintile of the S&P 500 in terms of TSR over the past ten years.

A Consumer-Packaged-Goods Company Uses Several Levers to Fund Its Transformation Journey

A leading consumer-packaged-goods (CPG) player was struggling to respond to challenging market dynamics, particularly in the value-based segments and at the price points where it was strongest. The near- and medium-term forecasts looked even worse, with likely contractions in sales volume and potentially even in revenues. A comprehensive transformation effort was needed.

To fund the journey, the company looked at several cost-reduction initiatives, including logistics. Previously, the company had worked with a large number of logistics providers, causing it to miss out on scale efficiencies.

To improve, it bundled all transportation spending, across the entire network (both inbound to production facilities and out-bound to its various distribution channels), and opened it to bidding through a request-for-proposal process. As a result, the company was able to save 10 percent on logistics in the first 12 months—a very fast gain for what is essentially a commodity service.

Similarly, the company addressed its marketing-agency spending. A benchmark analysis revealed that the company had been paying rates well above the market average and getting fewer hours per full-time equivalent each year than the market standard. By getting both rates and hours in line, the company managed to save more than 10 percent on its agency spending—and those savings were immediately reinvested to enable the launch of what became a highly successful brand.

Next, the company pivoted to growth mode in order to win in the medium term. The measure with the biggest impact was pricing. The company operates in a category that is highly segmented across product lines and highly localized. Products that sell well in one region often do poorly in a neighboring state. Accordingly, it sought to de-average its pricing approach across locations, brands, and pack sizes, driving a 2 percent increase in EBIT.

Similarly, it analyzed trade promotion effectiveness by gathering and compiling data on the roughly 150,000 promotions that the company had run across channels, locations, brands, and pack sizes. The result was a 2 terabyte database tracking the historical performance of all promotions.

Using that information, the company could make smarter decisions about which promotions should be scrapped, which should be tweaked, and which should merit a greater push. The result was another 2 percent increase in EBIT. Critically, this was a clear capability that the company built up internally, with the objective of continually strengthening its trade-promotion performance over time, and that has continued to pay annual dividends.

Finally, the company launched a significant initiative in targeted distribution. Before the transformation, the company’s distributors made decisions regarding product stocking in independent retail locations that were largely intuitive. To improve its distribution, the company leveraged big data to analyze historical sales performance for segments, brands, and individual SKUs within a roughly ten-mile radius of that retail location. On the basis of that analysis, the company was able to identify the five SKUs likely to sell best that were currently not in a particular store. The company put this tool on a mobile platform and is in the process of rolling it out to the distributor base. (Currently, approximately 60 percent of distributors, representing about 80 percent of sales volume, are rolling it out.) Without any changes to the product lineup, that measure has driven a 4 percent jump in gross sales.

Throughout the process, management had a strong change-management effort in place. For example, senior leaders communicated the goals of the transformation to employees through town hall meetings. Cognizant of how stressful transformations can be for employees—particularly during the early efforts to fund the journey, which often emphasize cost reductions—the company aggressively talked about how those savings were being reinvested into the business to drive growth (for example, investments into the most effective trade promotions and the brands that showed the greatest sales-growth potential).

In the aggregate, the transformation led to a much stronger EBIT performance, with increases of nearly $100 million in fiscal 2013 and far more anticipated in 2014 and 2015. The company’s premium products now make up a much bigger part of the portfolio. And the company is better positioned to compete in its market.

A Leading Bank Uses a Lean Approach to Transform Its Target Operating Model

A leading bank in Europe is in the process of a multiyear transformation of its operating model. Prior to this effort, a benchmarking analysis found that the bank was lagging behind its peers in several aspects. Branch employees handled fewer customers and sold fewer new products, and back-office processing times for new products were slow. Customer feedback was poor, and rework rates were high, especially at the interface between the front and back offices. Activities that could have been managed centrally were handled at local levels, increasing complexity and cost. Harmonization across borders—albeit a challenge given that the bank operates in many countries—was limited. However, the benchmark also highlighted many strengths that provided a basis for further improvement, such as common platforms and efficient product-administration processes.

To address the gaps, the company set the design principles for a target operating model for its operations and launched a lean program to get there. Using an end-to-end process approach, all the bank’s activities were broken down into roughly 250 processes, covering everything that a customer could potentially experience. Each process was then optimized from end to end using lean tools. This approach breaks down silos and increases collaboration and transparency across both functions and organization layers.

Employees from different functions took an active role in the process improvements, participating in employee workshops in which they analyzed processes from the perspective of the customer. For a mortgage, the process was broken down into discrete steps, from the moment the customer walks into a branch or goes to the company website, until the house has changed owners. In the front office, the system was improved to strengthen management, including clear performance targets, preparation of branch managers for coaching roles, and training in root-cause problem solving. This new way of working and approaching problems has directly boosted both productivity and morale.

The bank is making sizable gains in performance as the program rolls through the organization. For example, front-office processing time for a mortgage has decreased by 33 percent and the bank can get a final answer to customers 36 percent faster. The call centers had a significant increase in first-call resolution. Even more important, customer satisfaction scores are increasing, and rework rates have been halved. For each process the bank revamps, it achieves a consistent 15 to 25 percent increase in productivity.

And the bank isn’t done yet. It is focusing on permanently embedding a change mind-set into the organization so that continuous improvement becomes the norm. This change capability will be essential as the bank continues on its transformation journey.

A German Health Insurer Transforms Itself to Better Serve Customers

Barmer GEK, Germany’s largest public health insurer, has a successful history spanning 130 years and has been named one of the top 100 brands in Germany. When its new CEO, Dr. Christoph Straub, took office in 2011, he quickly realized the need for action despite the company’s relatively good financial health. The company was still dealing with the postmerger integration of Barmer and GEK in 2010 and needed to adapt to a fast-changing and increasingly competitive market. It was losing ground to competitors in both market share and key financial benchmarks. Barmer GEK was suffering from overhead structures that kept it from delivering market-leading customer service and being cost efficient, even as competitors were improving their service offerings in a market where prices are fixed. Facing this fundamental challenge, Barmer GEK decided to launch a major transformation effort.

The goal of the transformation was to fundamentally improve the customer experience, with customer satisfaction as a benchmark of success. At the same time, Barmer GEK needed to improve its cost position and make tough choices to align its operations to better meet customer needs. As part of the first step in the transformation, the company launched a delayering program that streamlined management layers, leading to significant savings and notable side benefits including enhanced accountability, better decision making, and an increased customer focus. Delayering laid the path to win in the medium term through fundamental changes to the company’s business and operating model in order to set up the company for long-term success.

The company launched ambitious efforts to change the way things were traditionally done:

• A Better Client-Service Model. Barmer GEK is reducing the number of its branches by 50 percent, while transitioning to larger and more attractive service centers throughout Germany. More than 90 percent of customers will still be able to reach a service center within 20 minutes. To reach rural areas, mobile branches that can visit homes were created.
• Improved Customer Access. Because Barmer GEK wanted to make it easier for customers to access the company, it invested significantly in online services and full-service call centers. This led to a direct reduction in the number of customers who need to visit branches while maintaining high levels of customer satisfaction.
• Organization Simplification. A pillar of Barmer GEK’s transformation is the centralization and specialization of claim processing. By moving from 80 regional hubs to 40 specialized processing centers, the company is now using specialized administrators—who are more effective and efficient than under the old staffing model—and increased sharing of best practices.

Although Barmer GEK has strategically reduced its workforce in some areas—through proven concepts such as specialization and centralization of core processes—it has invested heavily in areas that are aligned with delivering value to the customer, increasing the number of customer-facing employees across the board. These changes have made Barmer GEK competitive on cost, with expected annual savings exceeding €300 million, as the company continues on its journey to deliver exceptional value to customers. Beyond being described in the German press as a “bold move,” the transformation has laid the groundwork for the successful future of the company.

Nokia’s Leader-Driven Transformation Reinvents the Company (Again)

We all remember Nokia as the company that once dominated the mobile-phone industry but subsequently had to exit that business. What is easily forgotten is that Nokia has radically and successfully reinvented itself several times in its 150-year history. This makes Nokia a prime example of a “serial transformer.”

In 2014, Nokia embarked on perhaps the most radical transformation in its history. During that year, Nokia had to make a radical choice: continue massively investing in its mobile-device business (its largest) or reinvent itself. The device business had been moving toward a difficult stalemate, generating dissatisfactory results and requiring increasing amounts of capital, which Nokia no longer had. At the same time, the company was in a 50-50 joint venture with Siemens—called Nokia Siemens Networks (NSN)—that sold networking equipment. NSN had been undergoing a massive turnaround and cost-reduction program, steadily improving its results.

When Microsoft expressed interest in taking over Nokia’s device business, Nokia chairman Risto Siilasmaa took the initiative. Over the course of six months, he and the executive team evaluated several alternatives and shaped a deal that would radically change Nokia’s trajectory: selling the mobile business to Microsoft. In parallel, Nokia CFO Timo Ihamuotila orchestrated another deal to buy out Siemens from the NSN joint venture, giving Nokia 100 percent control over the unit and forming the cash-generating core of the new Nokia. These deals have proved essential for Nokia to fund the journey. They were well-timed, well-executed moves at the right terms.

Right after these radical announcements, Nokia embarked on a strategy-led design period to win in the medium term with new people and a new organization, with Risto Siilasmaa as chairman and interim CEO. Nokia set up a new portfolio strategy, corporate structure, capital structure, robust business plans, and management team with president and CEO Rajeev Suri in charge. Nokia focused on delivering excellent operational results across its portfolio of three businesses while planning its next move: a leading position in technologies for a world in which everyone and everything will be connected.

Nokia’s share price has steadily climbed. Its enterprise value has grown 12-fold since bottoming out in July 2012. The company has returned billions of dollars of cash to its shareholders and is once again the most valuable company in Finland. The next few years will demonstrate how this chapter in Nokia’s 150-year history of serial transformation will again reinvent the company.

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Organisational behaviour, change management and motivation seen in the case study of Nokia and organisation-wide changes like mergers and acquisitions, employee psycholigical contract (ADKAR, Maslow, Hertzberg, Pink)

MBA student, chichester University Addressing the individual's relationship to change and motivation can allow us to significantly reduce the impact of structural organisation-wide change on the individual worker, through this their associated teams, departments and the organisation as a whole. Applying this to real workforce situations within Nokia, where poignant situations have arisen resulting in increased change resistance due to not addressing awareness and desire creation, change fatigue and failure to address the people side of change.

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The rise and fall of nokia change management analysis & solution, hbr change management solutions, strategy & execution case study | juan alcacer, tarun khanna, christine snively, case study description.

In 2013, Nokia sold its Device and Services business to Microsoft for a??5.4 billion. For decades Nokia had led the telecommunications (telecom) industry in handsets and networking. By the late 2000s, however, Nokia's position as market leader in mobile devices was threatened by competition from new lower-cost Asian manufacturers. Apple's 2007 release of its iPhone established an entire new category-the smartphone-immediately popular with users. What were Nokia's missteps over the years? What should Nokia have done differently?

Change Management, Mobile, Strategy , Case Study Solution, Term Papers

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What is Change Management Definition & Process? Why transformation efforts fail? What are the Change Management Issues in The Rise and Fall of Nokia case study?

According to John P. Kotter – Change Management efforts are the major initiatives an organization undertakes to either boost productivity, increase product quality, improve the organizational culture, or reverse the present downward spiral that the company is going through. Sooner or later every organization requires change management efforts because without reinventing itself organization tends to lose out in the competitive market environment. The competitors catch up with it in products and service delivery, disruptors take away the lucrative and niche market positioning, or management ends up sitting on its own laurels thus missing out on the new trends, opportunities and developments in the industry.

What are the John P. Kotter - 8 Steps of Change Management?

Eight Steps of Kotter's Change Management Execution are -

• 1. Establish a Sense of Urgency
• 2. Form a Powerful Guiding Coalition
• 3. Create a Vision
• 4. Communicate the Vision
• 5. Empower Others to Act on the Vision
• 6. Plan for and Create Short Term Wins
• 7. Consolidate Improvements and Produce More Change
• 8. Institutionalize New Approaches

Are Change Management efforts easy to implement? What are the challenges in implementing change management processes?

According to authorlist Change management efforts are absolutely essential for the surviving and thriving of the organization but they are also extremely difficult to implement. Some of the biggest obstacles in implementing change efforts are –

• Change efforts are often made by new leaders because they are chosen by board to do so. These leaders often have less trust among the workforce compare to the people with whom they were already working with over the years.
• Change management is often a lengthy, time consuming, and resource consuming process. Managements try to avoid them because they reflect negatively on the short term financial balance sheet of the organization.
• Change efforts create an environment of uncertainty in the organization that impacts not only the productivity in the organization but also the level of trust in the organization.
• Change efforts are often targeted at making fundamental aspects in the business – operations and culture. Change management disrupts are status quo thus face opposition from both within and outside the organization.
• Change management efforts are made when the organization is in dire need and have fewer resources. This creates silos protection mentality within the organization.

The Rise and Fall of Nokia SWOT Analysis, SWOT Matrix, Weighted SWOT Case Study Solution & Analysis

How you can apply Change Management Principles to The Rise and Fall of Nokia case study?

Leaders can implement Change Management efforts in the organization by following the “Eight Steps Method of Change Management” by John P. Kotter.

Step 1 - Establish a sense of urgency

What are areas that require urgent change management efforts in the “ The Rise and Fall of Nokia “ case study. Some of the areas that require urgent changes are – organizing sales force to meet competitive realities, building new organizational structure to enter new markets or explore new opportunities. The leader needs to convince the managers that the status quo is far more dangerous than the change efforts.

Step 2 - Form a powerful guiding coalition

As mentioned earlier in the paper, most change efforts are undertaken by new management which has far less trust in the bank compare to the people with whom the organization staff has worked for long period of time. New leaders need to tap in the talent of the existing managers and integrate them in the change management efforts . This will for a powerful guiding coalition that not only understands the urgency of the situation but also has the trust of the employees in the organization. If the team able to explain at the grass roots level what went wrong, why organization need change, and what will be the outcomes of the change efforts then there will be a far more positive sentiment about change efforts among the rank and file.

Step 3 - Create a vision

The most critical role of the leader who is leading the change efforts is – creating and communicating a vision that can have a broader buy-in among employees throughout the organization. The vision should not only talk about broader objectives but also about how every little change can add up to the improvement in the overall organization.

Step 4 - Communicating the vision

Leaders need to use every vehicle to communicate the desired outcomes of the change efforts and how each employee impacted by it can contribute to achieve the desired change. Secondly the communication efforts need to answer a simple question for employees – “What it is in for the them”. If the vision doesn’t provide answer to this question then the change efforts are bound to fail because it won’t have buy-in from the required stakeholders of the organization.

Step 5 -Empower other to act on the vision

Once the vision is set and communicated, change management leadership should empower people at every level to take decisions regarding the change efforts. The empowerment should follow two key principles – it shouldn’t be too structured that it takes away improvisation capabilities of the managers who are working on the fronts. Secondly it shouldn’t be too loosely defined that people at the execution level can take it away from the desired vision and objectives.

The Rise and Fall of Nokia PESTEL / PEST / STEP & Porter Five Forces Analysis

Step 6 - Plan for and create short term wins

Initially the change efforts will bring more disruption then positive change because it is transforming the status quo. For example new training to increase productivity initially will lead to decrease in level of current productivity because workers are learning new skills and way of doing things. It can demotivate the employees regarding change efforts. To overcome such scenarios the change management leadership should focus on short term wins within the long term transformation. They should carefully craft short term goals, reward employees for achieving short term wins, and provide a comprehensive understanding of how these short term wins fit into the overall vision and objectives of the change management efforts.

Step 7 - Consolidate improvements and produce more change

Short term wins lead to renewed enthusiasm among the employees to implement change efforts. Management should go ahead to put a framework where the improvements made so far are consolidated and more change efforts can be built on the top of the present change efforts.

Step 8 - Institutionalize new approaches

Once the improvements are consolidated, leadership needs to take steps to institutionalize the processes and changes that are made. It needs to stress how the change efforts have delivered success in the desired manner. It should highlight the connection between corporate success and new behaviour. Finally organization management needs to create organizational structure, leadership, and performance plans consistent with the new approach.

Is change management a process or event?

What many leaders and managers at the Nokia Nokia's fails to recognize is that – Change Management is a deliberate and detail oriented process rather than an event where the management declares that the changes it needs to make in the organization to thrive. Change management not only impact the operational processes of the organization but also the cultural and integral values of the organization.

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Change Management in Nokia Company: A Case Study

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The Strategic Decisions That Caused Nokia’s Failure

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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 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.

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 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 book, 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.

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 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.

About the author(s)

Yves L. Doz

is an Emeritus Professor of Strategic Management and the Solvay Chaired Professor of Technological Innovation, Emeritus at INSEAD.

About the series

Corporate governance, share this post, view comments.

Rahul Tripathi

30/03/2024, 03.42 pm

I found this article on the strategic decisions behind Nokia's failure incredibly insightful! 📉 As someone interested in business strategy and management, understanding the factors that led to Nokia's downfall provides valuable lessons for avoiding similar pitfalls in the future. 💡 The analysis of Nokia's missteps, from failing to adapt to changing market trends to underestimating the competition, highlights the importance of agility and innovation in today's dynamic business landscape. 🔄💡

Moreover, the article offers actionable insights that can be applied to various industries, making it a must-read for anyone involved in strategic decision-making processes. 🌟 Thank you for sharing such informative content! I'll definitely keep these lessons in mind as I navigate my own business endeavors. 👍📚

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Anonymous User

16/03/2022, 10.44 am

Nokia is the one of the oldest phone and also it is existed until now

17/09/2021, 07.41 pm

Why does Nokia fail

26/06/2021, 09.54 pm

Someone really should dig into the tale of Nokia Music, that of OD2, a successful independent company bought by Nokia in 2007. In less than four years through marketing bodges, strategic failures, interference from gormless management in the USA, and even more nepotistic and mostly incompetent management in the UK, a profitable company with numerous high profile corporate customers was brought to its knees by talent free people who should never have been promoted into the positions they were in. Well worth digging into, just don't interview the management or you will never get to the truth.

03/06/2021, 01.56 am

As I read through many of these comments, the word "dillusional" kept coming to mind. For starters, Windows OS was as good as either Android or iOS. The main thing lacking were just a few more core apps. That was really it.

Sure, they could easily have run Andoid, and as soon as that idea was floated, Microft instantly shuttered their offices.

The fact that Nadella had his trojan horse Elop do the deal on Friday and hand everyone their walking papers on Monday is proof positive that Microsoft never had any good intentions for Nokia.

MS could have easily thrown one of their legions of Devs onto the task of writing apps. which would have solved the app. store issue in a hurry.

Instead, Nadella destroyed Microfts own eco-system by loosing that lucrative and Crucial market sector. A permanent wound that still haunts them to this day, and showcased Nadella as being far Inferior to Ballmer as well as Gates.

While my first inclination is to assume some nefarious reason for this, I do have to acknowledge however the old addage: "Don't attribute to maclice, what can easily be explained by stupidity"

30/10/2020, 04.23 pm

Why only Nokia there are a number of business world wide which have failed because of its own Founders/CEO/COO lapses some of the reasons which I contribute are as follows.... 1. Lack of vision future 2. Innovation in new age computing revolution 3. High Salary package 4. Founders cannot be pushed out or replaced easily. 5. Management Decisions 6. Dysfunctional Hierarchy 7. Growing Bureaucracy 8. Internal rivalry

21/01/2018, 12.17 am

Captain of the ship knows how to sink the boat. Stephen (the first non Finnish CEO in history of Nokia) joined in 2010 from Microsoft and made a deal to use Windows only despite the fact that Android was growing and already captured huge market share. There was a lot of pressure from Nokia employees to move to Android but he ignored all. He fired a lot of people. It was famous in Nokia Espo office (H/Q) that he is a Trojan Horse. He later sold Nokia mobile business to Microsoft and earned millions of dollars in the deal. Later, he joined Microsoft again. Looks like the plan was to promote Windows Mobile at the cost of Nokia (that failed badly)

Sheila Yovita

13/01/2018, 04.20 am

If the company is at crises, what should the managers do? Could it be one of the option go for advices from top management consulting firms or any other third parties that can help to formulate better strategies to save the company? Assuming they went for consulting firms, then the firms were failed to help Nokia as well?

22/12/2017, 02.34 am

I would love to also see something similar about Blackberry. They were the prime brand for many early adopters and business users of cellular phones here in the USA. Similar to Nokia they also had/have secure network platform. I wonder if their demise was also due to strategic mistakes, and if similar to Nokia they also got bogged down with tactical activities and lost sight of overall strategy.

21/12/2017, 05.00 am

I agree with everyone, broadly. Nonetheless we should NEVER FORGET that Nokia would be far far better (as a Smartphone maker), than it is today.

Another illustration of a North American Corporation that did so well from its foundational years in the 19th Century and well into its first centenary is NORTEL Networks... I read a book about the rise, growth and maturity of NORTEL and it became one great role model for me... Unfortunately, NORTEL failed to go the length any longer than the beginning of the 21st Century; NORTEL collapsed for reasons that are too embarrassing to speak openly abbout - or even in privacy!

I'm working on to establish a Corporate and Product Branding Consultancy in town (Accra, Ghana), and this article on Nokia, like others, is what I've been looking out for, to help learn and know how to start and grow an enterprise and keep it growing and succeeding decade after decade, century after century!

I'm learning!

17/12/2017, 07.59 pm

"While Symbian had given Nokia an early advantage, it was a device-centric system in what was becoming a platform- and application-centric world." Well, actually Nokia pioneered the app-centric world. Go check. Only it's User Interface didn't keep up with the emerging competition.

07/12/2017, 05.51 am

Nokia is still alive... and much more than a mobile phone manufacturer. Nokia is the biggest network equipment maker in the world, employees +100k people and ~25 billion € in revenue in 2016...

30/11/2017, 05.40 pm

Good article. Thanks.

Interesting side note: While working in Japan around 2002, I heard "on the street" that Nokia ran a research center in Japan. Intended to tap the vast and growing Japanese mobile market. They saw everything that was coming in the Western world. Good cameras. Apps. Cost effective mobile internet & services. Mobile email messaging on a mass scale. Multi media devices. Long before the iPhone was invented. Nokia deemed the Japanese market too challenging and closed their research center. Turned a blind eye. The competition was already too far ahead.

28/11/2017, 03.21 am

Another consideration is that Nokia stayed committed to hardware-based human-computer factors as differentiation far longer than it should have: optical strip for scrolling, buttons for menus, buttons for navigation, etc. What the iPhone showed is that software-based UX was the more flexible and powerful approach.

26/11/2017, 04.40 pm

Just imagine, if Nokia had seen the future and adopted Android operating systems before 2009-10, perhaps the horizons of the mobile Eco system would have been very different today. Similarly, Blackberry also failed to see the shift in the mobile market from a communicating device to a multi Media device. Phones transcended the mere communication and functional level to take control of our social lives and presence. The social sites and e commerce growth were trends and changes that both these behemoths failed to see or gauge. They still remain extremely hardware centred, building very physically robust devices but perhaps falling short on the imagination part. I think this is entirely a matter of leadership vision and imagination.

25/11/2017, 12.00 am

Unless I am misremembering, I am sure I had a Samsung phone in the early 2000s. It was nothing like the Samsung mobiles of today. It was not user friendly, the operating system was a mess and I soon went back to Nokia but it's not true to say that Samsung hadn't entered the mobile communications market, they just hadn't entered the smart phone market. (Not that I don't agree with the thrust of the article - Nokia's downfall was very much of its own making).

24/11/2017, 11.53 pm

I think a similar story can be told about Microsoft under Ballmer. What Symbian was for Nokia, Windows was for Microsoft at one time. Nadella came in just at the right time to lift the company out of that slumber and made it take a leap of faith in the Cloud world. The results are evident. Microsoft is sailing at its lifetime best share prices. On the contrary, when we look at Apple, they seem to be following the footsteps of Nokia. Slowly but surely they are becoming a victim of their own success.

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Towards Wise Management pp 163–188 Cite as

Case Study 4: The Collapse of Nokia’s Mobile Phone Business

• Tuomo Peltonen 2  
• First Online: 30 July 2018

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This chapter provides a wisdom-oriented reading of one of the most spectacular business failures of recent times: the collapse of Nokia mobile phones between 2007 and 2015. Using executive biographies and other published accounts of Nokia’s organisational patterns, the chapter attempts to offer a more balanced explanation of the processes behind Nokia’s inability to respond to the changing industry circumstances. The following analysis pays attention to the shaping of Nokia’s organisational culture. Company and its new leadership adopted a professional, no-nonsense approach in the aftermath of the problems of the late 1980s and early 1990s. The new generation of managers believed in a rational mindset supported by a bureaucratic organisational form. Leaning on a superior technological competence within the mobile phone sector, Nokia was capable of ultimately becoming the market leader. However, in 2007, with two major players, Apple and Google, joining the business, the established rules of competitive dynamics were irrevocably changed. Focus shifted to software and applications. Nokia’s risk-aversive and closed organisational culture could not respond in a situation where an open search for new innovations and a cooperative internal working mode were needed. An analysis of the development of Nokia’s organisational psyche following the emergence of a new generation of managers and executives highlights the role of local beliefs in using philosophical wisdom in critical circumstances. Nokia and its leadership were not able to abandon the outmoded habits and structures, as these had become integrated with the very identity of the company.

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McKinsey 7S model of Nokia – where the company went wrong

From a cell phone pioneer to being acquired by microsoft in 2013, nokia is a case study of organizational failure. let’s analyze where the company went wrong by applying mckinsey 7s model., mckinsey 7s model is a business framework which can be used to analyze organizational effectiveness. according to the mckinsey model, the organization is a complex ecosystem consisting of seven interconnected factors: structure , strategy , skills , staff , systems , style and shared values . .

The model is also a blueprint for organizational change. 

To show you how you can use the McKinsey model 7S for the benefit of your organization, I will analyze mobile pioneer Nokia at the time of its demise, namely 2011-2013.

Here’s a brief background story:

In October 1998, Nokia became the best-selling mobile phone brand in the world with an operating profit of almost $4 billion. The best-selling mobile phone of all time, the Nokia 1100, was created in 2003. Five years later, 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% share of the global market. 

In 2010, attempting to drive Apple out of the market, Nokia launched the “iPhone killer”. The model failed to achieve its goal and was the beginning of the end for Nokia. From that moment on, Nokia embarked on a downward spiral of low-quality phones. In just six years, the market value of Nokia declined by about 90%. The organization was acquired by Microsoft in 2013.

Now that you’re familiar with Nokia’s failure story, let’s analyze the organization before Microsoft made its move to acquire it by applying the McKinsey 7S model.

In my opinion, here are the factors that required immediate change: Structure, Style, Skills, Staff and Strategy.

McKinsey 7S model of Nokia

Mckinsey 7s model of nokia – structure  .

Nokia of the era was a top-down line structure organization.

In public speeches given by the organization’s top executives, agility and being nimble were mentioned as key competitive advantages.

But it was all talk. The organization’s top management was living in a bubble, disconnected from the company’s technology development departments. Communication was one-way and teams were not empowered to contribute to the organization’s strategy. 

To adapt to the new technological environment and compete with Apple , a powerful tech company, Nokia should have taken steps to change its structure from top-down hierarchical to decentralized and agile .

Instead of organizing employees in silos, with no communication and collaboration between them, the company should have placed its employees in teams, with every team working to achieve a common goal.

Team members should have been empowered to speak up, come up with solutions and work independently. 

McKinsey 7S Model of Nokia – Style

In McKinsey’s model style refers to culture. What was Nokia’s culture at that time?

As per the 2015 paper Distributed Attention and Shared Emotions in the Innovation Process: How Nokia Lost the Smartphone Battle , Nokia suffered from organizational fear, status ( We are no 1 ), in-house politics and temporal myopia.

Top managers had business backgrounds and lacked technological competence. Employee morale was low. 

As the saying goes, culture eats strategy for breakfast. Top management should have adopted a transformational leadership style where the leader’s goal is to transform the organization so that it’s constantly improving. 

Transformational leaders create a vision of the future that they share with their teams so that everyone can work together toward a shared goal and vision. Technology is ever-changing. Technology companies must embrace change in order to stand the test of time.

Transformational leadership would have been the best fit for Nokia because it fosters creativity and innovation through collaboration. This type of culture builds and maintains employee motivation and satisfaction and is effective in facilitating organizational change.

McKinsey 7S Model of Nokia – Skills

Nokia didn’t lack talent and didn’t have a skills gap in the company. There were no gaps in know-how or competence.

At its peak, Nokia had one of the top highly-skilled tech workforces in the world.

The company’s hardware and software engineers had designed one of the most successful and iconic cell phones in the world, there’s no doubt about it.

The problem was the top management. Between 2007 and 2010, the position of the Chief Technology Officer (CTO) disappeared from the top management team. Technical managers had left the company and new hires had no technical skills making it difficult for them to understand the technological challenges and the direction in which the company should be heading.

Conversely, top management members at Apple were all engineers. Nokia should have focused on increasing tech skills among C-level executives.

McKinsey 7S Model of Nokia – Staff

At Nokia, people were talking business instead of technology which is quite surprising for a software company.

The organization should have found ways to motivate and nurture its employees appropriately. 

McKinsey 7S Model of Nokia – Strategy

Struggling to compete with Apple and adapt to the technological developments that were disrupting the business environment at that time, Nokia top management had to choose between three strategies: optimizing costs and volume, maximizing performance, or maximizing security.

They decided to go with cost optimization which made it impossible to achieve performance in software. 

With Apple going for technological innovations and excellency, needless to say, they made the wrong decision. 

At its peak, Nokia manufactured 40% of the world’s mobiles. The company had the human resources ( skills and staff factors ) required to keep innovating and increasing its market share.

Unfortunately, the company’s leadership ( style factor ) lacked core competences and vision necessary to drive change within the company.

They didn’t allow the tech talent in the company to contribute with valuable insights to important decisions. The company chose the wrong strategy which ultimately lead to its demise.

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The Real Cause of Nokia’s Crisis

• Michael Schrage

Nokia’s technology isn’t a root cause of its current crisis. Don’t blame its engineers and designers either. The company still knows how to innovate. There’s a simpler and more strategic explanation for why this once-perennial market leader became second-rate. Nokia ignored America. The company simply refused to compete energetically, ingeniously and respectfully in the U.S. […]

Nokia’s technology isn’t a root cause of its current crisis. Don’t blame its engineers and designers either. The company still knows how to innovate . There’s a simpler and more strategic explanation for why this once-perennial market leader became second-rate.

• MS Michael Schrage , a research fellow at MIT Sloan School’s Center for Digital Business, is the author of the books Serious Play (HBR Press), Who Do You Want Your Customers to Become? (HBR Press) and The Innovator’s Hypothesis (MIT Press).

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The ghosts of ‘Wintel’: What leaders can learn from the diverging paths that made Microsoft a $3 trillion powerhouse and flatlined Intel

Steve Jobs wasn’t accustomed to hearing “no.” But that was the answer from Paul Otellini, CEO of Intel . 

It was 2006, and Intel, the global king of computer chips, was bringing in record revenue and profits by dominating the kinds of chips in hottest demand—for personal computers and data centers. Now Jobs wanted Intel to make a different type of chip for a product that didn’t even exist, which would be called the iPhone.

Otellini knew chips for phones and tablets were the next big thing, but Intel had to devote substantial capital and its best minds to the fabulously profitable business it already possessed. Besides, “no one knew what the iPhone would do,” he told The Atlantic seven years later, just before he stepped down as CEO. “There was a chip that they were interested in, that they wanted to pay a certain price for and not a nickel more, and that price was below our forecasted cost. I couldn’t see it.”

Otellini, who died in 2017, was a highly successful CEO by many measures. But if that decision had gone the other way, Intel might have become a chip titan of the post-PC era.  Instead, it gave up on phone chips in 2016 after losing billions trying to become a significant player. As he left the company, Otellini seemed to grasp the magnitude of his decision: “The world would have been a lot different if we’d done it.”

Meantime, some 800 miles north, in Seattle, Microsoft was struggling to find its role in a tech world dominated by the internet, mobile devices, social media, and search. Investors were not impressed by its efforts. No one could have foreseen that years later, a few key decisions would set the company up as an AI powerhouse and send its stock soaring. There was a time not so long ago that Microsoft and Intel were both atop the tech world. They were neither competitors nor significant customers of each other, but what New York University’s Adam Brandenburger and Yale’s Barry Nalebuff deemed “complementors.” Microsoft built its hugely profitable Windows operating system over the years to work on computers that used Intel’s chips, and Intel designed new chips to run Windows (hence “Wintel”). The system fueled the leading tech product of the 1990s, the personal computer. Microsoft’s Bill Gates became a celebrity wonk billionaire, and Intel CEO Andy Grove was Time ’s 1997 Man of the Year.

Since then their paths have diverged sharply. Microsoft in 2000 was the world’s most valuable company, and after losing that distinction for many years, it’s No. 1 again. Intel was the world’s sixth most valuable company in 2000 and the largest maker of semiconductors; today it’s No. 69 by value and No. 2 in semiconductors by revenue, far behind No. 1 TSMC (and in some years also behind Samsung ).

A Fortune 500 CEO makes thousands of decisions in a career, a few of which will turn out to be momentous. What’s easy to explain in hindsight—that Microsoft would be at the forefront of AI, that Google would become a behemoth, that Blockbuster would fade into obscurity—is never preordained. Often the fateful decisions are identifiable only in retrospect. Nothing more vividly illustrates this than the parallel stories of Microsoft and Intel. The case study of what went right and wrong at those two giant corporations offers a master class in business strategy not just for today’s front-runners at the likes of Google, Open AI, Amazon , and elsewhere—but also for any Fortune 500 leader hoping to survive and thrive in the coming decade.

Wintel’s origin story

The two companies were founded a mere seven years apart. Intel’s founders in 1968 included Robert Noyce, coinventor of the computer chip, and Gordon Moore, who had written the seminal article observing that the number of transistors on a chip doubled every year, which he later revised to two years—Moore’s law, as others later called it. Andy Grove was employee No. 3. All three are still regarded as giants of the industry.

Bill Gates famously dropped out of Harvard to cofound Microsoft with Paul Allen, a childhood friend. They were excited by the prospects of creating software for a new concept, the personal computer, also called a microcomputer. They launched Microsoft in 1975. 

The two companies’ paths crossed when IBM decided in 1980 to produce a PC and wanted to move fast by using existing chips and an existing operating system developed by others. It chose Intel’s chips and Microsoft’s operating system, profoundly transforming both companies and the people who ran them. IBM’s size and prestige made its design the industry standard, so that virtually all PCs, regardless of manufacturer, used the same Intel chips and Microsoft operating system for decades thereafter. As PCs swept America and the world, Intel and Microsoft became symbols of technology triumphant, glamour, success, and the historic bull market of 1982 to 2000.

Then everything changed.

The reign of Gates and Grove peters out

In October, 2000, Fortune ran an article with an illustration depicting Gates and Grove as monumental Egyptian sphinxes. The headline: “Their Reign Is Over.”

The reasoning: “Gates and Grove attained hegemony by exploiting a couple of key choke points in computer architecture—the operating system and the PC microprocessor,” the article explained. “But in the new, more diverse IT world wired together by universal internet protocols, there are no such obvious choke points to commandeer.”

Thus began a multiyear identity crisis for both companies. Intel’s PC chips and Microsoft’s PC operating system and applications remained bountifully profitable businesses, but both companies and their investors knew those were not the future. So what was? And who would lead this new era?

In January of 2000, Gates stepped down as CEO after 25 years, and Steve Ballmer, Microsoft’s president and a college friend of Gates, took his place; Gates remained chairman. Two days later, Microsoft’s stock rocket ran out of fuel. On that day the company’s market value hit $619 billion, a level it would not reach again for almost 18 years.

Grove was no longer Intel’s CEO in 2000, having handed the job to Craig Barrett, a longtime company executive, in 1998. But as Intel’s visionary and most successful CEO, Grove remained an important presence as chairman of the board. His health was becoming an issue; he had been diagnosed with prostate cancer in 1995, and in 2000 he was diagnosed with Parkinson’s disease. Intel’s stock roared until August, when the company’s market value peaked at $500 billion. It has never reached that level since.

But most significantly, 2000 was the year that the internet began to seem like it just might make Wintel irrelevant. 

At Intel, Barrett responded with acquisitions, many of which were in telecommunications and wireless technology. In concept, that made great sense. Cell phones were going mainstream, and they required new kinds of chips. “Craig tried to very aggressively diversify Intel by acquiring his way into new businesses,” says David Yoffie, a Harvard Business School professor who was on Intel’s board of directors at the time. “I would say that was not his skill set, and 100% of those acquisitions failed. We spent $12 billion, and the return was zero or negative.”

In the lean years after the dotcom balloon popped, Barrett continued to invest billions in new chip factories, known as fabs, and in new production technologies, so Intel would be well positioned when demand rebounded. That is a hint to one of the most important lessons of the Wintel saga and beyond: Protecting the incumbent business, even in a time of transition, is almost impossible to resist. That course usually sounds reasonable, but it holds the danger of starving the company’s future. As the great management writer Peter Drucker said: “If leaders are unable to slough off yesterday, to abandon yesterday, they simply will not be able to create tomorrow.” 

‘We screwed it up’

At Microsoft in the 2000s, “it was not at all obvious what would happen with the shape and volume of PCs, with operating system margins, or the future of applications like Word or Excel,” says Ray Ozzie, a top-level Microsoft executive from 2005 to 2010. “There was significant internal debate at Microsoft and in the industry on whether, in the future, the PC was dead, or if it would continue to grow and thrive.” Maybe Word, Excel, and those other applications that resided on your hard drive would move to the internet, like Google Docs, introduced in early 2006. In that case Microsoft would need a new business model. Should it develop one? Some executives thought so. But no one knew for sure.

During this period, Microsoft was hardly a model of corporate innovation, and succumbed to what often happens when successful companies are disrupted. Ozzie explains: “When you are rolling in resources and there are multiple existential threats, the most natural action to protect the business is to create parallel efforts. It’s more difficult to make a hard opinionated choice and go all in. Unfortunately, by creating parallel efforts, you create silos and internal conflict, which can be dysfunctional.”

As competing teams fought for primacy, Microsoft missed the two most supremely profitable businesses since the PC era: search and cell phones. Those misses were not fatal because Microsoft still had two reliable, highly profitable businesses: the Windows operating system and the Office suite of apps. But in Drucker’s terms, those were yesterday businesses. Investors didn’t see substantial tomorrow businesses, which is why the stock price went essentially nowhere for years. Missing search and cell phones didn’t threaten Microsoft’s existence, but it threatened Microsoft’s relevance and importance in a changing world, which could eventually damage the company’s appeal among investors and the world’s best employees. The reasons for those crucial misses are instructive.

In 2000 Google was an insignificant internet search startup with no clear business model, but it had an inkling that selling advertising could be profitable. We know how that turned out: Google’s 2023 ad revenue was $238 billion. The model was entirely foreign to Microsoft, which made tons of money by creating software and selling it at high prices. Charging users nothing? Selling ads? Microsoft had never run a business at all like Google’s. By the time Google’s model had proved itself, Microsoft was hopelessly far behind. Today its Bing search engine has a 3% market share across all platforms worldwide, says the StatCounter web-traffic analysis firm. Google’s share is 92%.

Microsoft’s failure in cell phones was, in a large sense, similar—the company didn’t fully grasp the structure of the business until it was too late. The company assumed the cell phone industry would develop much like the PC industry, in which sellers like Dell combined Intel’s chips and Microsoft’s software in a final product. But Apple’s starkly different iPhone business model, in which it designs its own chips and writes its own software, was an enormous hit. The other big winner in the industry, Google’s Android smartphone operating system, likewise ignored the PC model. Instead of selling its operating system, Google gives it away to phone makers like Samsung and Motorola. Google makes money by putting its search engine on every phone and by charging app makers a fee when users buy apps.

Bill Gates acknowledges that Microsoft’s miss in cell phones was life-changing for the company. Looking back on his career in 2020, he said: “It’s the biggest mistake I made in terms of something that was clearly within our skill set.”

Intel also lost the mammoth cell phone opportunity, and in a similar way. It couldn’t adapt. Intel understood the opportunity and was supplying chips for the highly popular BlackBerry phone in the early 2000s. The trouble was, Intel hadn’t designed the chips. They were designed by Arm, a British firm that designs chips but doesn’t manufacture them. Arm had developed a chip architecture that used less power than other chips, a critical feature in a cell phone. Intel was manufacturing the chips and paying a royalty to Arm.

Understandably, Intel preferred to make phone chips with its own architecture, known as x86. Paul Otellini decided to stop making Arm chips and to create an x86 chip for cell phones—in retrospect, “a major strategic error,” says Yoffie. “The plan was that we would have a competitive product within a year, and we ended up not having a competitive product within a decade,” he recalls. “It wasn’t that we missed it. It was that we screwed it up.”

Groping for a megatrend

Just as 2000 was a turning point for Intel and Microsoft, so was 2013. Broadly they were in the same fix: still raking in money from the businesses that made them great; getting into the next big opportunities too late or unsuccessfully; groping for a megatrend they could dominate. Their stock prices had more or less flatlined for at least a decade. Then, in May 2013, Paul Otellini stepped down as Intel’s CEO. In August, Steve Ballmer announced he would step down as Microsoft’s CEO.

Succession is the board of directors’ No. 1 job, more important than all its other jobs combined. The stakes are always high. How the Intel and Microsoft boards handled their successions, nine months apart, largely explains why the two companies’ storylines have diverged so dramatically.

Under Otellini’s successor, Brian Krzanich, Intel kept missing new-chip deadlines—ironically failing to keep up with Moore’s law even as competitors did so—and lost market share. The company gave up on smartphone chips. After five years as CEO, Krzanich resigned abruptly when an investigation found he had had a consensual relationship with an employee. CFO Bob Swan stepped in as CEO, and the production troubles continued until, by 2021, for the first time in Intel’s existence, its chips were two generations behind competitors’. Those competitors were Taiwan’s TSMC and South Korea’s Samsung.

In crisis mode, Intel’s board brought back Pat Gelsinger, an engineer who had spent 30 years at Intel before leaving for 11 years to be a high-level executive at EMC and then CEO of VMware . As Intel’s CEO he has announced an extraordinarily ambitious and expensive plan to reclaim the company’s stature as the world leader in chip technology.

Microsoft’s board spent almost six months finding Ballmer’s successor under worldwide scrutiny. At least 17 candidates were publicly speculated upon. British and Las Vegas bookies offered odds on the eventual winner; Satya Nadella, who recently marked 10 years as CEO, was a 14-to-1 long shot. 

Nadella has arguably been the best corporate succession choice, regardless of industry, in years or perhaps decades. Under his leadership the stock finally broke out of its 14-year trading range and shot upward, rising over 1,000%. Microsoft again became the world’s most valuable company, recently worth $3.1 trillion. Gelsinger, with just over three years in the job, can’t be fully evaluated; industry experts wonder if he’ll be Intel’s Nadella. But both CEOs offer useful examples of how to move a company from the past to the future.

Nadella orchestrated Microsoft’s dramatic turnaround by taking an outsider’s look at the company and making big changes with little drama. He began by making Office apps (Word, Excel) compatible with Apple iPhones and iPads—heresy at Microsoft, which regarded Apple as an archenemy. But Nadella realized the two companies competed very little, and why not let millions more people rely on Office apps? The move sent a message to the company and the world: The Microsoft culture’s endemic arrogance would be dialed down considerably. Interoperating with other companies could now be okay.

That was largely a new business model at the company, with many more to follow. For example, Nadella bought LinkedIn , a player in social media, which Microsoft had entirely missed, and later bought GitHub, a repository of open-source code, which Microsoft had previously despised. Both deals and several others have been standout successes. 

More broadly, Nadella brought a new leadership style for a new environment. In a company known for vicious infighting that could paralyze action, he settled long-running debates over major projects. For example, in 2016 he sold the Nokia cell phone business that Microsoft had bought a year before he became CEO, acknowledging that the company had lost the battle for phones. “People don’t quite grok why things have blossomed under Satya,” says a former executive. “His superpower is to make a choice, eliminate conflict, and let the business blossom.”

At Intel, Gelsinger also introduced culture-defying changes. The company had risen to dominance by designing leading-edge chips and manufacturing them with industry-leading skill. Amid that intense pride, the idea of creating a separate foundry business—manufacturing chips designed by others—was anathema. Yet under Gelsinger, Intel has created a new foundry business while also relying more on other foundries, including TSMC, the world’s largest chipmaker, for some of its own chips—a double shock to the culture. 

Getting a long-established company with a titanium-strength culture to adopt seemingly strange business models as Nadella and Gelsinger did can be painfully hard. Often only a new CEO can bring the openness necessary to make it happen. The same problem arises when a company needs to update its corporate strategy. Microsoft had been seeking and debating the next big thing for years, but Nadella saw that the company didn’t need to find a potentially huge new future-facing business. It already had one: Azure, its cloud computing service. Amazon Web Services was and is the industry leader, but Azure has grown to a strong No. 2 because Nadella has given it abundant capital and some of the company’s brightest workers. He also made an unorthodox investment in OpenAI, creator of ChatGPT, commiting $13 billion to the company starting before it was famous. Now Azure offers its customers OpenAI technology. In Drucker’s terms, it’s a big, thriving tomorrow business. 

Gelsinger changed Intel’s strategy even more radically. He bet heavily and successfully on billions of dollars from the U.S. government. Via the CHIPS and Science Act, Intel could receive up to $44 billion in aid for new U.S. chip factories the company is building in coming years. “As I like to joke, no one has spent more shoe leather on the CHIPS Act than yours truly,” he tells Fortune. “I saw an awful lot of senators, House members, caucuses in the different states. It’s a lot to bring it across the line.” 

A key insight is that for a major company with a history of success, like Microsoft and Intel, moving beyond an outmoded strategy and fully embracing a new one is traumatically difficult and sometimes impossible. For years both companies tried and failed to do it. A related insight: Doing it is easier for Nadella and Gelsinger because they have the advantage of being “insider outsiders,” leaders with deep knowledge of their organization but without heavy investment in its strategy; Nadella was working on Azure, not the Windows operating system or Office apps, long before he became CEO, and Gelsinger’s 11-year absence from Intel gave him license to rethink everything.

A larger lesson is that, in the stories of these two great companies, succession is the most important factor. Considering that Microsoft on the whole has fared better than Intel over the past 24 years, it’s significant that over that period, Microsoft has had only two CEOs and Intel has had five. Most people study the CEO when explaining a company’s performance, but they should first examine those who choose the CEO, the board of directors.

Looking back at these stories, asking “what if” is irresistible. What if Paul Otellini had said yes to Steve Jobs? What if any of Intel’s or Microsoft’s CEOs had been someone else? What if Intel, under a different CEO, had developed a successful GPU, the kind of chip that powers today’s AI engines (it tried)—would you ever have heard of Nvidia? Bill Gates said in 2019, “We missed being the dominant mobile operating system by a very tiny amount.” What if that tiny amount had shifted slightly? Whose phone would you be using today? 

It’s all endlessly tantalizing but of course unknowable. The value of looking back and asking “what if,” is to remind us that every day leaders are creating the future—and neglecting their duty if they don’t learn from the past.

5 lessons from the Wintel case study:

1. Success can be a company’s worst enemy. The great management writer Peter Drucker said every company must “abandon yesterday” before it can “create tomorrow.” But in a successful company, every incentive pushes leaders to protect yesterday. Intel and Microsoft struggled for years to create their tomorrows. 2. Leaders must be open to business models that seem strange. Whether giving away software or manufacturing chips designed by others as a separate business, both Microsoft and Intel faced competitors doing things differently.  3. Get everyone on the same page. Debate is healthy up to a point, but at Microsoft it continued far too long until Nadella became CEO and set clear priorities. At Intel a series of CEOs backed differing solutions to its declining business, which prolonged a muddled strategy.  4. Succession is the board’s No. 1 job, more important than all its other jobs combined. Everyone knows it, but some boards still do their job poorly. If they make a mistake, none of the other lessons matter. Considering that Microsoft has come through the past 24 years better than Intel, it may be significant that Microsoft has had only two CEOs in that period while Intel has had five. 5. Failure isn’t fatal. The Wintel story is a pointed reminder that all companies, including the best, suffer failures and fall into crises. There are no exceptions. The leaders of any company, even the grandest, must always be ready to engage the skills of organizational rescue, and know that even that can be part of greatness.

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Dubai’s Extraordinary Flooding: Here’s What to Know

Images of a saturated desert metropolis startled the world, prompting talk of cloud seeding, climate change and designing cities for intensified weather.

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By Raymond Zhong

Scenes of flood-ravaged neighborhoods in one of the planet’s driest regions have stunned the world this week. Heavy rains in the United Arab Emirates and Oman submerged cars, clogged highways and killed at least 21 people. Flights out of Dubai’s airport, a major global hub, were severely disrupted.

The downpours weren’t a freak event — forecasters anticipated the storms several days out and issued warnings. But they were certainly unusual. Here’s what to know.

Heavy rain there is rare, but not unheard-of.

On average, the Arabian Peninsula receives a scant few inches of rain a year, although scientists have found that a sizable chunk of that precipitation falls in infrequent but severe bursts, not as periodic showers.

U.A.E. officials said the 24-hour rain total on Tuesday was the country’s largest since records there began in 1949 . But parts of the nation had experienced an earlier round of thunderstorms just last month.

Oman, with its coastline on the Arabian Sea, is also vulnerable to tropical cyclones. Past storms there have brought torrential rain, powerful winds and mudslides, causing extensive damage.

Global warming is projected to intensify downpours.

Stronger storms are a key consequence of human-caused global warming. As the atmosphere gets hotter, it can hold more moisture, which can eventually make its way down to the earth as rain or snow.

But that doesn’t mean rainfall patterns are changing in precisely the same way across every corner of the globe.

In their latest assessment of climate research , scientists convened by the United Nations found there wasn’t enough data to have firm conclusions about rainfall trends in the Arabian Peninsula and how climate change was affecting them. The researchers said, however, that if global warming were to be allowed to continue worsening in the coming decades, extreme downpours in the region would quite likely become more intense and more frequent.

The role of cloud seeding isn’t clear.

The U.A.E. has for decades worked to increase rainfall and boost water supplies by seeding clouds. Essentially, this involves shooting particles into clouds to encourage the moisture to gather into larger, heavier droplets, ones that are more likely to fall as rain or snow.

Cloud seeding and other rain-enhancement methods have been tried across the world, including in Australia, China, India, Israel, South Africa and the United States. Studies have found that these operations can, at best, affect precipitation modestly — enough to turn a downpour into a bigger downpour, but probably not a drizzle into a deluge.

Still, experts said pinning down how much seeding might have contributed to this week’s storms would require detailed study.

“In general, it is quite a challenge to assess the impact of seeding,” said Luca Delle Monache, a climate scientist at the Scripps Institution of Oceanography in La Jolla, Calif. Dr. Delle Monache has been leading efforts to use artificial intelligence to improve the U.A.E.’s rain-enhancement program.

An official with the U.A.E.’s National Center of Meteorology, Omar Al Yazeedi, told news outlets this week that the agency didn’t conduct any seeding during the latest storms. His statements didn’t make clear, however, whether that was also true in the hours or days before.

Mr. Al Yazeedi didn’t respond to emailed questions from The New York Times on Thursday, and Adel Kamal, a spokesman for the center, didn’t immediately have further comment.

Cities in dry places just aren’t designed for floods.

Wherever it happens, flooding isn’t just a matter of how much rain comes down. It’s also about what happens to all that water once it’s on the ground — most critically, in the places people live.

Cities in arid regions often aren’t designed to drain very effectively. In these areas, paved surfaces block rain from seeping into the earth below, forcing it into drainage systems that can easily become overwhelmed.

One recent study of Sharjah , the capital of the third-largest emirate in the U.A.E., found that the city’s rapid growth over the past half century had made it vulnerable to flooding at far lower levels of rain than before.

Omnia Al Desoukie contributed reporting.

Raymond Zhong reports on climate and environmental issues for The Times. More about Raymond Zhong