Answer the case study:1.Assess the main strategic action taken by each NOKIA CEO. What actions created enduring sources of competitive advantages? What actions ( or lack of action) contributed to NOKIA'S fast decline?2. What decisions would you have made differently and when? Why? Tensions within matrix organisations are common asdifferent groups with different priorities andperformance criteria are required to workcollaboratively. At Nokia,which had beenacccustomed to decentralised initiatives, this newway of working proved an anathema. Mid-levelexecutives had neither the experience nor trainingin the subtle integrative negotiations fundamental ina successful matrix.While Nokia posted some of its best financial resultsin the late 2000s, the management team wasstruggling to find a response to a changingenvironment: Software was taking precedence overhardware as the critical competitive feature in theindustry. At the same time, the importance ofapplication ecosystems was becoming apparent, butas dominant industry leader Nokia lacked the skills,and inclination to engage with this new way ofworking.As I explain in my book, process trumps structure inreorganisations. And so reorganisations will beineffective without paying attention to resourceallocation processes, product policy and productmanagement, sales priorities and providing theright incentives for well-prepared managers tosupport these processes. Unfortunately, this did notBy 2010, the limitations of Symbian had becomepainfully obvious and it was clear Nokia had missedthe shift toward apps pioneered by Apple. Not onlydid Nokia's strategic options seem limited, but nonewere particularly attractive. In the mobile phonemarket, Nokia had become a sitting duck to growingcompetitive forces and accelerating marketVisit INSEAD Knowledgehttp://knowledge.insead.edu02Copyright © INSEAD 2021. All rights reserved. This article first appeared on INSEAD Knowledge (http://knowledge.insead.edu).e Strategic Decisions Thatchanges. The game was lost, and it was left to a newCEO Stephen Elop and new Chairman RistoSiilasmaa to draw from the lessons and successfullydisengage Nokia from mobile phones to refocus thecompany on its other core business, networkinfrastructure equipment.What can we learn from NokiaNokia's decline in mobile phones cannot beexplained by a single, simple answer: Managementdecisions, dysfunctional organisational structures,bureaucracy and deep internal rivalries allgroplayed a part in preventing Nokia from recognisingthe shift from product-based competition to onebased on platforms.Nokia's mobile phone story exemplifies a commontrait we see in mature, successful companies:Success breeds conservatism and hubris which,over time, results in a decline of the strategyprocesses leading to poor strategic decisions.Where once companies embraced new ideas andexperimentation to spur growth, with success theybecome risk averse and less innovative. Suchconsiderations will be crucial for companies thatwant to grow and avoid one of the biggest disruptivethreats to their future – their own success.Yves Doz is an Emeritus Professor of StrategicManagement at INSEAD. He is the programmedirector for the Managing Partnerships andStrategic Alliances programme.Follow INSEAD Knowledge on Twitter and Facebook.Find article athttps://knowledge.insead.edu/strategy/the-strategic-decisions-that-caused-nokias-failure-7766 The moves that led to Nokia's decline paint a cautionary tale for successful firms.In less than a decade, Nokia emerged from Finlandto lead the mobile phone revolution. It rapidly grewto have one of the most recognisable and valuablebrands in the world. At its height Nokia commandeda global market share in mobile phones of over 40percent. While its journey to the top was swift, itsdecline was equally so, culminating in the sale of itsmobile phone business to Microsoft in 2013.in the mid-1990s, the near collapse of its supplychain meant Nokia was on the precipice of being avictim of its success. In response, disciplinedsystems and processes were put in place, whichenabled Nokia to become extremely efficient andfurther scale up production and sales much fasterthan its competitors.Between 1996 and 2000, the headcount at NokiaMobile Phones (NMP) increased 150 percent to27,353, while revenues over the period were up 503percent. This rapid growth came at a cost. And thatcost was that managers at Nokia's maindevelopment centres found themselves under everincreasing short-term performance pressure andIt is tempting to lay the blame for Nokia's demise atthe doors of Apple, Google and Samsung. But as Iargue in my latest book, "Ringtone: Exploring theRise and Fall of Nokia in Mobile Phones", thisignores one very important fact: Nokia had begun tocollapse from within well before any of thesecompanies entered the mobile communicationsmarket. In these times of technologicaladvancement, rapid market change and growingcomplexity, analysing the story of Nokia providessalutary lessons for any company wanting to eitherforge or maintain a leading position in theirindustry.were unable to dedicate time and resources toinnovation.While the core business focused on incrementalimprovements, Nokia's relatively small data grouptook up the innovation mantle. In 1996, it launchedthe world's first smartphone, the Communicator, andwas also responsible for Nokia's first camera phonein 2001 and its second-generation smartphone, theinnovative 7650.Early successWith a young, united and energetic leadership teamat the helm, Nokia's early success was primarily theresult of visionary and courageous managementchoices that leveraged the firm's innovativetechnologies as digitalisation and deregulation oftelecom networks quickly spread across Europe. ButVisit INSEAD KnowledgeThe search for an elusive third legNokia's leaders were aware of the importance offinding what they called a "third leg" - a newgrowth area to complement the hugely successfulhttp://knowledge.insead.edu01Copyright e INSEAD 2021. All rights reserved. This article first appeared on INSEAD Knowledge (http://knowledge.insead.edu).mobile phone and network businesses. Their effortsbegan in 1995 with the New Venture Board but thisfailed to gain traction as the core businesses rantheir own venturing activities and executives weretoo absorbed with managing growth in existingareas to focus on finding new growth.happen at Nokia.NMP became locked into an increasingly conflictedproduct development matrix between product lineexecutives with P&L responsibility and common"horizontal resource platforms" whose managerswere struggling to allocate scarce resources. Theyhad to meet the various and growing demands ofincreasingly numerous and disparate productdevelopment programmes without sufficientsoftware architecture development and softwareproject management skills. This conflictual way ofworking slowed decision-making and seriouslydented morale, while the wear and tear ofextraordinary growth combined with an abrasiveCEO personality also began to take their toll. ManyA renewed effort to find the third leg was launchedwith the Nokia Ventures Organisation (NVO) underthe leadership of one of Nokia's top managementteam. This visionary programme absorbed allexisting ventures and sought out new technologies.It was successful in the sense that it nurtured anumber of critical projects which were transferredto the core businesses. In fact, many opportunitiesNVO identified were too far ahead of their time; forinstance, NVO correctly identified “the internet ofthings" and found opportunities in multimediahealth management – a current growth area. But itultimately failed due to an inherent contradictionbetween the long-term nature of its activities and theshort-term performance requirements imposed onit.managers left.Beyond 2004, top management was no longersufficiently technologically savvy or strategicallyintegrative to set priorities and resolve conflictsarising in the new matrix. Increased cost reductionpressures rendered Nokia's strategy of productdifferentiation through market segmentationineffective and resulted in a proliferation of poorerquality products.Reorganising for agilityAlthough Nokia's results were strong, the shareprice high and customers around the world satisfiedand loyal, Nokia's CEO Jorma Ollila wasincreasingly concerned that rapid growth hadbrought about a loss of agility andentrepreneurialism. Between 2001 and 2005, anumber of decisions were made to attempt torekindle Nokia's earlier drive and energy but, farfrom reinvigorating Nokia, they actually set up thebeginning of the decline.The swift declineThe following years marked a period of infightingand strategic stasis that successive reorganisationsdid nothing to alleviate. By this stage, Nokia wastrapped by a reliance on its unwieldy operatingsystem called Symbian. While Symbian had givenNokia an early advantage, it was a device-centricsystem in what was becoming a platform- andapplication-centric worlSymbian exacerbated delays in new phone launchesas whole new sets of code had to be developed andtested for each phone model. By 2009, Nokia wasusing 57 different and incompatible versions of itsoperating system.To make matters worse,Key amongst these decisions was the reallocation ofimportant leadership roles and the poorlyimplemented 2004 reorganisation into a matrixstructure. This led to the departure of vital membersof the executive team, which led to the deteriorationof strategic thinking.

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Answer the case study: 1.Assess the main strategic action taken by each NOKIA CEO. What actions created enduring sources of competitive advantages? What actions ( or lack of action) contributed to NOKIA'S fast decline? 2. What decisions would you have made differently and when? Why?