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Nokia Corporation: Lack of Rational Decision Making & Effective Communication
Avanita Kotni
Westcliff University
ORG 500: Organizational Behavior
David Johnson, Ph.D.
February 25, 2024
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Nokia Corporation: Lack of Rational Decision Making & Effective Communication
Nokia Corporation, a Finnish multinational corporation, was founded in 1865 (Nokia, 2024). It
was known for its industrial expertise in telecommunication, information, technology, and
consumer electronics for mobile phones. Nokia was the global leader in manufacturing mobile
phones and offered its customers in more than 150 countries a range of solutions and services for
mobile devices. The company’s global annual revenues were Euro 41 billion by the end of 2009,
and Nokia’s global device market share is about 33% and its converged device market share
about 41 % for Q2 2010 (Chikezie, 2011). Nokia had four business groups: Mobile Phones,
Multimedia, Enterprise Solutions and Networks.
It was a direct driving force in this development with the standardization of its Global System for
Mobile Telecommunication (GSM) supplied in 1991 to nine other European countries; while
since 1991 the standard had gone global across the following years (Carral & Kajanto, 2008). In
2007 Nokia stood as 6th most respected brand in Finland and the brand is valued at Euro 29.5
billion and is listed as the number eight most valuable global brand in the Interbrand business
week (the first non-US company to achieve the fit) (Chikezie, 2011).
The Issues Facing Nokia Corporation
Nokia’s loss of dominance in the mobile market after 2007 is one of the most significant failures
in modern business history. The company started to slip behind when Apple and Samsung took
control of the pie of the smartphone market. Due to the overwhelming competition and
innovation, Nokia had decided to quit the smartphone market (cite). The primary issues
identified in the context of organizational behavior are deeply rooted in leadership inability,
inaction and organization’s lethargy to innovation. By 2004, however, top management wasn’t
technologically literate enough to understand or remain strategically integrative enough to set
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priorities or arbitrate the conflicts generated by the new matrix (Azoulay, 2023).
Eventually by early 2010 this same company, Nokia, with a 50% market share shrunk to less
than 5%.It failed to ride on the bandwagon of Android. At the time mobile manufacturers were
busy in improvising and developing smartphones, Nokia refused to budge. Then Samsung came
along and launched a far more affordable and user-friendly range of phones with its Android
Operating System. The use of Symbian Operating Systems in Nokia phones have further failed
to create a good ecosystem with not many applications for its users, on top of the technical faults
in the operating system which slowed down the applications’ developers (Laamanen, Lamberg &
Vaara, 2016). In the case of Nokia’s mobile phone decline, there’s no single cause but many
management decisions, dysfunctional organizational structures, excessive bureaucracy and
intense internal rivalries contributed to Nokia not seeing how the industry shifted from the
domain of products to the domain of competition on platforms (Laamanen, Lamberg & Vaara,
2016).
The back-to-back reorganizations of the management and the repeated waves of staff defections
create endless ambivalences for the interns. Many managers at Nokia at that time were
enveloped in a culture of organizational fear. Nokia’s organizational fear had a concrete basis in
a tradition of temperamental bosses and fearful upper-middle managers. Fearful, indeed. Middle
managers did not dare to tell the truth due to fear of being fired (Peltonen, 2018). The executives
were afraid of being the first to acknowledge that Symbian – the company’s proprietary mobile
operating system – was essentially outdated and outclassed by Apple’s iOS. They were afraid of
losing investors, suppliers and eventually customers (Doz & Mikko, 2008).
High management terrorized the middle management with accusations that they did not have
ambitions high enough to attain their own goals. High management was lied to by the middle
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management, which considered informing the truth a pointless exercise. High management
lacked technical competence, which had a major impact on how long-term goals could be set;
after all, high management at Apple were all engineers. Instead of investing in goals for the longterm horizon (for instance, developing a new operating system), Nokia management invested in
devices for new phones that (in their view) the market mandated in the short term (Peltonen,
2018).
The Theoretical Concepts Associated With These Issues
As per McShane and Vilnow, the concept of rational choice paradigm is the “The view in
decision making that people should—and typically do—use logic and all available information to
choose the alternative with the highest value.(McShane & Vilnow, 2020, p. 196)”. The two
organizational behavior principles touched upon here are the shortcomings of leadership in
decision processes as well as the lack of constructive communication up and down the hierarchy.
A rational development paradigm for decision-making in an innovative and creative context is
essential in staying ahead in a rapidly changing market. Leadership choices should have
analyzed their emotions of early preferences, the changes in the market environment and made
choices accordingly (McShane & Vilnow, 2020). The reallocation of roles undertaken by
Nokia’s leadership, as well as its poorly executed reorganizations, led to internal tensions and
strategic myopia.
Transformational leadership focuses on defining clear strategic priorities, reinforcing strategic
agility to be able to react rapidly to changes in the market, and pushing employees to innovate
and foster change. The other concept that is relevant to the case study here, is the lack of
effective communication and defined channels led to internal confusion, conflict in management
responsibilities and hindrance to decision-making processes (Vuori & Huy, 2015). As quoted by
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Kevin O’Brien in the New York Times, “Nokia in a sense is a victim of its own success,” said
Jyrki Ali-Yrkko, an economist at the private Research Institute of the Finnish Economy. “It
stayed with its playbook too long and didn’t change with the times. Now it’s time to make
changes. (O’Brien, 2010)”. Nokia would have been better served with transformation efforts
geared toward improved decision-making and strategic agility.
Recommendations
Keeping in mind the setbacks and the need to address them swiftly, instead of the closed
innovation model, which was practiced by Nokia, it must move to an open proposition. Its
leadership should lay out a strategic plan to commercialize the ‘idea’ and ‘knowledge’ not just
the product set for commercial purposes. Nokia should have created a ‘capability’ in terms of
engineering as a route to a set of performance building blocks, and an excuse to exploit some
mixture of the firm’s existing internal and external capabilities. Nokia top management instead
didn’t follow the paradigm shift to a new innovation culture of openness and dynamic
capabilities, and a new strategic framework that includes all stakeholders (Aspara, et. al., 2011)
Learning from its failures fast or from other organizations’ failures to mitigate risks, damage and
make better products. Detailed project planning consisting of mitigation plans would set the
organization up for progress. Adequately rewarding or incentivising staff, with the right
measures for the right behaviors and contribution. Train middle managers to be better leaders so
that they can challenge top managers for a right decision, in the best interests of the organization
(Peltonen, 2018).At the end of the day, leaders must master the art of owning up to bad choices,
failed innovation, lost market share, all while risking their standing, role and bonuses.Nokia
managers should have deployed long-term vision, where they start from market need and
produced a great operating system by research and development investment Collaborative
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leadership will become a must, closed door policies will perish quickly – innovation processes
will be allowed to germinate at all levels though leaders will have to relearn how to listen (again)
to their customers, partners and employees (Vuori & Huy, 2015).
The company must frequently be involved in team building activities; activities should start from
departments, sections and then the entire organization at a certain point in time. Whenever
undertaking team building activities, the management must try to avoid being formal by
interacting with their subordinates; they must interact at an informal level this will help
communication and sharing of thoughts. The primary objective of becoming an agile leader and
adaptation in a faster way with the changes that accompany the company's supply chain is highly
important (Ketchen & Hult, 2007).
Nokia management needs to create policies that will make this communication continuous for
staff and their leaders so that Nokia can keep up with the increases in technological development
because every day new policies and new technological channels of communication are invented.
It should cope up with these technologies and channel them in its efficiency (McShane &
Vilnow, 2020). If there are leaders of opinion already established, management should address
them personally to change their attitude. Leadership should be open to take up strategic
experiments and help develop a conceptually rich by entrusting responsibilities to its team as
well as hiring talent to meet its transformation requirement (Brannen & Doz, 2012). The core
task of all CEOs in innovative firms is, therefore, to marshal stakeholders to engage in honest
and authentic collaboration with one another to deliver valuable and innovative outputs for their
customers. The bottleneck for strategy implementation is 95 per cent people, and only 5 per cent
technical. In fact, managing collective emotions is a decisive success factor for implementation
of strategy (Vuori & Huy, 2015).
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Summary and Conclusion
Overall, Nokia’s crisis was a turning-point that prompted the company to reimagine its future by
implementing fundamental strategies. In today’s date it is focusing, among other things, on
developing so-called leading-edge technologies such as 5G networks, Internet of Things (IoT)
solutions and smart sensors for the swiftly emerging smart cities marketplace. It is in the journey
to reposition Nokia as a player in tomorrow’s technology space. Leaders can enrich their
organization’s emotional intelligence, which will help better gauge what is possible, what isn’t,
and most importantly, what to do about it. Corporate language matters in every strategic context.
Notably, language might be a key to responding successfully to organizational change, be it
market-driven or technical (Brannen & Doz, 2012).
A holistic approach to business model transformation, understanding the customer needs and a
strong organizational culture influences operations/policies and daily procedures. With all of
these factors working under the organizational culture, eventual business success is assured.
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References
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