Dissecting Nokia's Business Model

Introduction

This report is conducted to analyse and examine the change management of Nokia, one of the top mobile manufacture. The report will go through the information of the Nokia about their background and history. The problems of falling behind in the world competition are also pointed out. From these problems, it is the time for Nokia to working on their change process. Nokia implemented the change on the important aspects of the organisation by the direction of its new CEO.

Background of the organisation

Nokia Corporation or Nokia is a well-known Finish multi industrial company, founded in 1865 from a single paper mill operation (Bennett and Pohjanpalo, 2017). Since the telephony began, Nokia started to step into the telecommunication world. And when Europe deregulated the industry, Nokia decided to made the mobile and telecommunications as their core business with a great number of achievements in human history such as the first fully-digital local telephone exchange, first car phone, first GSM (Global system for mobile communications) call … (Schrempf, 2011). By 1998, Nokia was the world leading brand in mobile phone devices for decades. The ambition of this innovation leader had been shown more clearly by evolving and expanding their business. joining with some giant companies like Siemens, Microsoft … With the vision of transforming the way people and things communicate and connect, running by thousands of people across over 100 countries, Nokia Corporation was an iconic model of a successful organisation in their shining era.

Impetus for the change

According to Aubry et., driven forces. In this case, the problems Nokia faced can also be divided into 2 categories: internal and external forces. At that time, Nokia were facing the world innovation competition with new companies. Technology is one of the fastest growing elements in this modern world (Hallingby, 2016). Many great innovations and achievements were presented to improve the human life, especially in the mobile and telecommunications. With the appearance of smartphones, the competition in the market became more intense between the device manufacturers. In 2007, Apple introduced their first multi-touch smartphones with unique operating systems (OS)and a mobile platform named App Store later. No longer after that, Android OS also was created along with the Play store platform. These new OSs with its platforms were the new revolutions at that time and customers started to adopt it. By 2010, these two dominated the market. As the largest mobile devices manufacturer, Nokia believed all the new products they introduced were the latest technology and ignored the presence of Apple and Android OS. However, they didn’t plan that this emergence had led to the change of the demand and behaviour of customers. Nokia sales kept falling and lost their first-ranking in the industry (Violeta and Camelia, 2016). For the internals forces, Nokia got a great history as a Finnish organisation, especially its top management. With the people from the same background and generation, the culture and leadership in the organisation became conservative, lack of great innovations and their bureaucratic culture in the rapid changing world (Violeta and Camelia, 2016). Nokia sales kept falling and lost their first-ranking in the industry due to their conservative with the growth of technology.

Analysis and evaluation of the change process/program

Organisational change refers to a long-range effort to improve an organisation’s problem-solving capabilities and its ability to cope with changes in its external environment with the help of change agent (Đurišić-Bojanović, 2016). According to Dittrich and Duysters (2007), Nokia has gone through several organisational changes since their establishment. And one of the current major change in this organisation was their devices and services partnership with Microsoft, the American technology ‘giant’. The change process at that time was critical for Nokia when their profit and market share continually declined. Before going with the deal, Nokia appointed Stephen Elop as their CEO to drive the company through the hard time.

To analyse this change process, the Kurt Lewin’s change model will be used in this part. This model includes three stages: Unfreezing, Changing and Refreezing (Medley & Akan, 2008). The reason of using this module is because this is a planned change when Nokia got a change agent, Elop as a CEO determined and prepared the process for the organisation.

Unfreezing

Unfreezing is the first step of the process. This is the time for the organisation to prepare for the change by starting to recognise the forces for the change and also against it. Driven forces make the group members become dissatisfied with the status quo of the organisation and get ready for the change time. However, there are some obstacles forces to change when it restrains the change process (Maon, Lindgreen & Swaen, 2009). In the Nokia case, applying the Lewin’s force field model is the suitable overview to understand the current state of the organisation. Figure 1 will show this analysis.

From this module, it is clear to see that driven forces outweigh the restraining forces which means change was seriously needed for Nokia. The large amount of difficulties that Nokia was facing made their business suffering and it was the time for Nokia seeking a way to move forward, improving their effectiveness in the mobile devices industry. For restraining forces, these are the problems against the change process occurred in the organisation. To commence the change, Nokia and the management had to reduce the change resistance. Change process could not carry on without a change agent. Change agent is a leader of change who can be internal or external in the organisation (Zbieg, Batorski & Zak, 2016). As the first non-Finish leader in the organisation history, Elop acted a change agent and soon started the change process by issued a burning platform memo openly showing to his employees about the serious strategic challenge they facing. The memo also called everyone to contribute their opinions to undertake change. This was a great move of Elop to overcome the resistance when employees were aware of their new CEO and the organisation current state. Later, employees were noticed about the process of change. Here is a summary of Elop memo:

“We fell behind, we missed big trends, and we lost time. At that time, we thought we were making the right decisions; but, with the benefit of hindsight, we now find ourselves years behind.

“There is intense heat coming from our competitors, more rapidly than we ever expected. Apple disrupted the market by redefining the smartphone and attracting developers to a closed, but very powerful ecosystem.”

“The Shenzhen region of China is able to produce phones at an unbelievable pace. By some accounts, this ecosystem now produces more than one third of the phones sold globally – taking share from us in emerging markets.”

“Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem.”

“We poured gasoline on our own burning platform. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times. We had a series of misses. We haven’t been delivering innovation fast enough. We’re not collaborating internally.” (Anthony, 2012).

Changing

The mid-step in Lewin model is changing or moving. It is the time for applying and implementing the plans, the actions for change. The change tools in this stage covers many aspects of the organisation.

Business strategic

Days later after the memo, Elop announced the new strategy for Nokia when shifting its current OS to Microsoft’s Windows and they became the partnership in mobile and services. Partnership is one of the tools in organisational change. It will match up well in all areas of those organisations and allow them being mutually beneficial (Schuster & Holtbrugge, 2014). This partnership was a big surprise for everyone internal and external of Nokia as well as Microsoft. Confusing and worrying about the big change did happen to everyone involved in the change. However, as a decision maker, Elop believed the joint was the opportunity for them to work together, bring more innovations and creating a differentiation in the market. The two combined their strengths in mobile and services. Nokia Maps, for example, would be at the heart of key Microsoft assets like Bing and AdCenter, and Nokia's application and content store would be integrated into Microsoft Marketplace. As the new goals, a new ecosystem of mobile devices was expected to be a revolution and success for two in a near future (Carter, 2011).

Organisation structure

After the partnership agreement, Elop started restructure Nokia. He chose to delayered management structure, bringing a flatter one to the organisation. The new management layer will be called as the Leadership team instead of Executive Board. Delayering is about removing levels of management of the organisation in a high competitive environment (Pai, 2015). In this case, it is important to have delayering as the change tool as Nokia original structure was complicated and slow in making decision. The new changed would help them to increase the efficiency and productivity. Elop also changed the operational structure of the mobile and services division by dividing it into two core units which are smart devices and mobiles phones. These units have their own responsibility for their performance focusing the full customer experience. The divisions were small in size and enabled faster response in targeting markets that were vastly different with respect to feature demand and usage. There were some more units also formed to support and collaborate the core units towards the goals (Eddy, 2011).

Human Resources

When appointing the new CEO, Nokia had made the first move in term of leadership. An outsider like Elop could bring a new atmosphere to the organisation and shake up the way Nokia doing their business. Later, with an improved organisational structure, Elop putting in some new faces in the leadership roles to help him drive the business such as Marry McDowell in Mobile Phones, Jo Harlow in Smart Devices ... (Eddy, 2011).

In the effort of cutting cost budget, Elop chose to delayer the organisation and close some facilities in the world. This also means that thousands of people would be layoff. And to do this task right in preventing the disappointment and furious, Elop and team tried to develop a program that help and guide these employees before and after the layoffs process. Later, they introduced the Bridge program which assists them to depart the employees by multiple ways (McKinset Quaterly, 2016).

Refreezing:

The last stage of Lewin change model is refreezing which is about change slowing down and new strategies becoming standard practice. Rewarding will be in place when the organisation reached the desired situation (Baldomir & Hood, 2016). After the major change process in the organisation, Nokia’s market share started to recover and soon their Window Mobile replaced Blackberry as the third ecosystem in the market. However, the team kept taking more actions to focus its product offering, product competitiveness and improving the profit seriously.

Recommendations

From the previous part, it can be seen that the change program was huge for Nokia when affecting all aspects of the organisation from strategies to humans. Changing was expected to help Nokia get more opportunities to gain back their market share and improve the profit, bringing new range and differentiation for customers. However, the real outcomes were not completely like the expectations. To be able to achieve the better results, it is recommended that Nokia should realise and apply the change earlier. At the time for change, it was late to process when Apple and Android were taking the dominance in the market share. If Nokia realise their problems earlier, they could have time to prepare more carefully and radically. Next, when having new and non-traditional leader in the organisation, especially CEO position, Nokia should acknowledge and inform its people clearer. They must point out what the benefits and outcomes are expected by having a non-Finish CEO like Elop to bring to the organisation. The more positive thing employees see, the less resistance of change from them ().

Conclusion

Nokia was the most famous mobile device company in the work. But over a period of time, Nokia stick to its old traditional way when the world and competitors kept changing and creating new trends. As the consequences, they lost their market share and profit fell rapidly. They started change. However, the fundamentals of the change process had not been effectively drawn out by the organisation. Nokia attempts for reviving its current state and get back to the mobile market failed because of lacking strong plan and stakeholder engagement. This is a lesson for Nokia and also other organisations when going for change which always have to be prepared and incorporate by everyone in the organisation to move forwards.