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Assessing Nokia's Strategy
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来自 IE Business School 的课程
管理的批判性视角
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从本节课中
Case Studies
We look at the examples of two companies whose recent experiences encapsulate many of the core ideas of the course. The first is Apple, which, in the context of reporting their quarterly earnings in the Spring of 2013, committed an unprecedented amount of its capital reserves to a share repurchase scheme and dividend increase. We will look at the motivation and logic for this move. The second is Nokia (which has subsequently sold off its mobile phone business to Microsoft). We will look at how the company rose - and then dramatically fell - from its position as market leader in mobile communications.
与讲师见面
Rolf Strom-OlsenProfessor
Humanities
[BLANK_AUDIO]
So what went wrong? What's going on here?
How come Nokia goes from being this extraordinary
success story to the company that it is today?
Well, let's start with the end.
This memo written in 2011 by a fellow Canadian.
It's an extraordinary thing if you think about it, if
you read it closely, think about what this memo says.
It's in the, it's in the case, it's at the end, the burning platform memo.
2011, the CEO
of Nokia, this is a company with hundreds of thousands of employees.
Or a hundred and something thousands employees sends
out a communication to everybody, says the following.
Dear Nokia employees, here are our options: certain death
by fire, or near certain death by drowning and hypothermia.
Right?
because the platform is exploded, and there it
is and it's burning away, so you got
this choice.
Die in the conflagration or jump into the North Sea,
where your average survival time might be three or four minutes.
Now what has happened to a company, where that is
right thing to send out to everybody who works for.
What if, what is going on to your firm, where senior management communicates
to everybody our choices in the future are certain death or almost certain death.
Something has gone catastrophically wrong.
I submit as a proposition, when that is what
senior management feels it needs to communicate to its employees.
because firms do not, I'm assuming, want to be in a position where
their choices are death by fire,
near certain death by drowning, and hypothermia.
Now, as we know, the memo was simply designed to shake things up a little bit
ahead of this extraordinary announcement that Nokia was
going to be abandoning its Symbian operating system and
migrating its smartphone platform over to Microsoft.
But still, that's a really impressive way
to announce major strain, change in corporate strategy.
Many firms undertake major changes in corporate strategies.
Few firms announce that change using a metaphor of
death versus certain, near, certain death versus near certain death.
So how had it that by 2011, Nokia felt it needed to send that kind
of message out to its employees and to the marketplace?
And I'm assuming, I say the marketplace because
I'm assuming that when you send out a memo
to say a hundred and something thousand people,
you kind of know it's going to come out, right?
That's not particularly a private conversation.
Well, I want to start that story in 1999 because in 1999, if we were to look
at the sort of overview of this company,
we're looking at a really, I think an unambiguous
success story.
The fundamentals of the company are strong, the
revenues are strong, the profit margins are good.
And its profit, sorry, its market share is three
times, is bigger than the next three competitors combined.
One out of every three phones sold worldwide
in 1999 had the Nokia name on it.
That's an extraordinary achievement. A truly extraordinary achievement.
So in 1999, the company is in this great position.
Great market share, good profitability, strong product base, good relationships
with its with, with key partners with a strong global presence.
There's not, there's not a single major market out there
in which Nokia is not a, if not the dominate player.
And look at the other companies, the other brands, that it was
able to surpass, we're not talking about brands no one's ever heard of.
We're talking about companies like Siemens and Alcatel and Ericsson.
Companies with strong reputations, companies that have strong brands.
And yet Nokia is able to outpace all of those combined.
So what was it doing? What did it do as it moved forward?
What might we identify to explain Nokia's failure?
So let me stop there and ask you.
You've read this case.
What should we look at to explain how we get from 1999
and a company that's in such a good position to 2011 and
a company that looks like.
Well, the company that, that thinks it's
facing these two options, death, near certain death.
What factors should we put on the agenda to consider?
Yeah.
>> I think that they actually looked at the Apple presentation.
They knew that it was premium product for premium consumers.
And Nokia has a low cost model, and that is why
they thought that this particular product will not be a competition,
at least in the near future.
So they had some time to develop their product and
enter the smartphone market, which would have the cost advantage.
So they did see the product, they did see the innovation and the features but
they said, you know what, it's a $400
product so those consumers are not mine anyways.
>> Different market.
Yep. >> They failed to, to adapt.
In fact, in the case it says something like innovate fast, or something
like that, instead. >> Accelerated innovation.
Accelerated innovation, yes, whatever that means.
As opposed to decelerate innovation or just like driving along in the slow lane
innovation, or don't want to spend too much
money on gas acceleration or, or innovation.
Yes, yeah, one of the things we should consider is how did
the company adapt to, to this sort of environment that was around it.
And I think that goes back to the
point about whether, what are they are adapting to.
So in other words,
is this an endogenous problem in terms of corporate structure, or
is this an exogenous problem in terms of market dynamics, or both?
So yeah, that question of adaptation.
What else?
What about the strategic vision that Nokia had?
What was its, what was its strategic vision in 1999?
How did it see the company moving forward?
>> It focused on growth. >> Growth.
>> I think they had a target of 40% market share [INAUDIBLE]
>> They focused on market share. Yeah.
And I think that's
a place where we should, should consider.
When Nokia is looking at itself as a company in 1999, strong
share prices that's risen a huge amount over the last five years.
Strong fundamentals, good profit margins, and so on.
And it's thinking where are we going next.
Where is the next place for us?
The way that they answer that question is through market share.
Right. They're at 30% market share or
33% market share, and what we find is that the senior management is articulating a
strategic vision which is anchored by desire
to, to grow that market share to 40%.
Right?
To become a, to become a player such that four out
of every ten phones sold worldwide will be a Nokia phone.
It should have surprised us, I suspect, again going about, going back to this
idea that what we commonly might perceive
as a company's problems are actually not related,
I think, to the, to the reality that there are other things going on here.
It might have surprised us to learn that
Nokia did in fact achieve a 40% market share.
Did it not?
And it achieved that 40% market share
18 months after the introduction of the iPhone.
So we're not looking at a story of, of Apple.
We're not looking at a story of Android
coming along and sort of knocking Nokia off.
Nokia's problems are already detectable in 2002,
3, 4, 5.
There's an article cited in the case in 2005, I believe, Has Nokia Lost It.
Right, has Nokia lost it.
That's two years before this radical transformation
of the top tier smart phone environment.
Two years before, so well before anybody's even thinking
about moving to an Apple phone or an Android phone.
The Economist is able
to ask has Nokia lost it. Why is it asking that question?
What was it about Nokia that in 2005
prompted The Economist to ask has Nokia lost it?
Well, let's ask or let's review that question
by looking a little bit at the market.
What was this market that Nokia was in?
What are the characteristics of the market for
cellular telephony as we move into the new millennium?
>> It was increasingly competitive.
>> Competitive, so we're looking at at, increasingly competitive forces.
>> It was very trendy.
>> Trendy, in what sense? You mean, consumers are.
>> Well, they're, they're constantly looking for the new cool product.
>> Yeah.
>> And partly, that's driven by the sales channel.
So.
>> What's an example of the consumer being driven by the new, cool product?
>> The, the Razr.
When >> The Razr, yeah.
>> Everybody got rid of their Nokia phones
because they all had to have the Razr.
>> Good point.
Yeah,
okay, so this, a mojo factor, a coolness factor.
>> And that's largely driven by the fact that
the consumer doesn't bear most of the cost for phone.
It's, it's driven by the upgrade cycle, the fact
that, you know, the carriers bear most of the cost.
>> Yeah, that the phone is a loss
leader in order to get you into the contract.
Sure.
But does that mean that Nokia had a kind of a
breakdown in terms of its partnerships with its with its carriers?
>> no.
>> No.
>> But no. >> It's that
it wasn't bringing devices out into the market that seemed to be able
to to capture that kind of, that kind of, sort of consumer desire.
Yeah.
>> Perhaps we need more data for this, but
I think that they were not consumer centered enough.
>> I think that's, I think that's, there's some
truth to that but on the other hand, if we
think today now about what consumers want, a lot of
those features were originally part of the Nokia products staple.
I mean, if we say for examples,
consumers want access to their music collection backed
by a third party, or sorry, an online provider.
That's, Nokia provided that.
If we say consumers want to have a robust application
ecosystem with strong third party developers networks, Nokia did that.
Nokia brought about, you know, brought up a phone environment in which third party
developers were providing a lot of applications
to expand the functionality of the phone.
So you may be right,
but I'm not sure it's about.
It may be better to say that they, the way in which they looked at the
segments of the market, was perhaps slightly off
in terms of their reading of the consumer.
>> There was something they didn't get sometimes.
>> There's certainly something they didn't get, but what it
is exactly, I think is still a little bit elusive.
>> I think what it is, is cool.
>> Cool. >> They lost touch with what is cool.
>> They're just not cool anymore.
>> They were doing everything they needed to do, but we still
didn't, I mean I never had a Nokia phone because I never thought
Nokia was cool obviously. [LAUGH] But I mean it's like.
>> But you were like uber cool.
You were cool before it was cool to be cool.
>> [LAUGH] Most people who had Nokias had Nokia, I didn't have
a cell phone until like three years after other people had cell phones.
>> Yeah.
Yeah.
>> And by the time I got a Nokia, it was already kind
of one of the, like it already known for being the cheaper one.
>> Yeah.
>> The Razr and other things, and when you think
about the advertising behind those products, the Razr was very.
>> Yeah.
>> The iPhone took it up another notch. And Nokia never really came with it.
They had the same, like this chime is on their marketing.
That's not very cool.
>> Just, it's not appealing to your inner hipster, is that what you're saying?
>> because they didn't take it to the next step.
>> Okay, coolness factor somehow, I mean, definitely Nokia has lost its
cool, but that, I think that the, that's a trend-driven thing, right?
So what we need to do is to figure out what was going on with the trend.
Danny. >> I think
they have they insisted their own operating system, yeah?
>> Yeah.
>> Actually the market was changing. That I, I, I want to say
that Nokia was so arrogant to keep their operating system in there.
Actually the other competitors were adopting Android.
>> So you know this operating system that
they've poured billions and billions and euros into, right?
Like they
should have just been able to recognize, it's done.
Is that what you're saying?
>> The market was changing.
>> Yeah. >> But they, they.
>> They changed late with it, and they clung
onto their operating system well after it was apparently obsolete.
Yup, definitely.
>> I want to point out their organizational structure.
>> Yeah.
>> The book says despite of having invented
and developed the tablets and smartphones in the 90s,
probably the decision was not really done. >> I think it's a good point.
And I think it actually raises a much larger point,
which is often when firms encounter troubles in their market, one
of the go to responses that we have available to
us is a kind of, is the idea of a restructuring.
So it's a word we hear all the time. How often do firms restructure.
The idea being that somehow there's value internally to what
you're doing if you just, you could create the optimal
structure to move that value more effectively into the
bottom line, you would be, you'd be more robust.
And I think that in the case of Nokia we find in the, in the 2000s,
one of the places where they look for
the solution to their problems is, is structurally.
And so they try institute a more responsive structure to create, or to see
if they can rejuvenate or regenerate regenerate
some of the momentum that the company has.
Now it's certainly true that there are often times as companies grow structural
problems, but I think one of the pro, one of the issues that
we have when we think in terms of restructuring as an answer to,
to some of these issues is that it becomes a kind of panacea.
With the right structure, we'll be fine.
The problem is, and I am going to suggest to you that this is the case with Nokia.
A bad structure or a poor, poor management
structure, poor organizational structures can certainly impede operations.
But if the fundamental strategy that you have towards the
marketplace is flawed, no amount of restructuring is going to help you.
