Weekend read: Did hostile environment kill Nokia (the phone maker)?

In her 150+ years long history, Nokia, among other things, was also the biggest phone manufacturer in the world. The “fall of Nokia” is probably already a topic in business school, because it really shows how volatile the tech industry is. In about 3 years, Nokia went from the largest feature phone and smartphone vendor to selling its historic Devices & Services business to Microsoft.

With the demise of Nokia in the phone business, a lot of theories arose who is to blame, and why did it happen. Some say it’s because of Microsoft, Stephen Elop, some higher forces didn’t want a non-America OS (Symbian), etc.

Two scientists from Finland and Singapore, Timo O. Vuori and Quy N. Huy, did a paper about how the hostile atmosphere inside Nokia affected the vendor’s overall performance, and was one of the factors for the fall. As Abraham Lincoln said: “A house divided against itself cannot stand,” and that could have been the case with Nokia, the phone maker.

The paper goes deep into the psychology of the workplace, and for most people, most of the parts won’t be that interesting (including myself), so I extracted the most interesting parts related to the situation inside Nokia. The paper was created using public records and interviewing ex-employees at all levels.

  • Nokia knew about the iPhone in Fall (Autumn) 2005

Nokia’s TMs experienced high fear toward external entities in regard to both the long- and short-term survival of the organization. One described an intense fear reaction relating to long-term survival when reacting to news of the iPhone: ‘‘When [internal market intelligence] news of the iPhone arrived [in fall 2005], I asked which OS they were using. When I found out it was iOS, it made my hair stand on end. iOS was a bombshell. . . . It was shocking news. . . . iPhone was an extension of Mac—a Mac computer with radio added. They’d been building the applications and the OS for 35 or 40 years’

  • Then CEO (Jorma Ollila or Olli-Pekka Kallasvuo) pushed the team to develop touch screens

One of the first things [the CEO] brought up was the touch screen. . . . He felt it was the next big thing . . . He brought it up with the executive group every way he could. And he spoke directly with technical middle management. . . . In every single executive-group meeting, they went over our outlook with the touch screen. And this was right after he was made CEO [a year before iPhone launch] . . .

  • Insiders say that the situation inside Nokia from 2005 to 2008 was delusional

Our view of our competitors’ products’ usage was completely distorted in 2005– 2008. People didn’t know how good Android was, or the iPhone. . . . So, acertain small group knew, but it wasn’t known throughout the company how good the competitors’ products are becoming. The group of people who really knew the pain was way too small.

  • The lower and mid management had a reasonable fear from (some on) the top

[The chairman] had the habit that if someone said that ‘‘things aren’t going so well,’’ then after that the person would be doing very poorly. [The chairman] had a distinctive style so that everyone had to tell him that things were going very well. (MM#7, software) [The chairman] was very cold and it seemed to me that many Nokians feared him. (Reporter close to Nokia) The atmosphere of fear was created through speech. The worst one was the presentation that [the chairman] gave at Tampere [a city in Finland] about R&D expenses. . . . He said that his only mistake had been to give us too much money, and that despite that, our products still weren’t good enough, and we weren’t making them fast enough. On top of that, he said that if things continued as they were, 15% of the people in that seminar hall would be gone by the time he came back next year. . . . This was my first encounter with [the chairman], and it left a permanent negative feeling.

  • Lower management and engineers knew Symbian cannot be updated to be competitive, but they were afraid to raise the issues

I couldn’t say [publicly] that Symbian was no good and that we had to replace it with MeeGo as soon as possible, because I was afraid of the [negative effect on] Symbian sales. . . . Our organization had to have faith in it—you must believe in the gun you’re holding, because there’s nothing else. It takes years to make a new OS. That’s why we had to keep the faith with Symbian. (Top manager)

  • Lower and mid level managers lied to top managers about estimated product launches, features, etc., because of fear losing jobs

In those forums, there was no way you would accuse someone of not telling the truth. [Culturally, it was not acceptable to] criticize someone else’s story in any way. . . . No one wanted to fight their battles in front of [the CEO] and others, because you knew that if you put someone [else] down, they’d put you down the first chance they got. (UMM#8, software) I should’ve been much, much more courageous. And I should’ve made a lot more noise, should’ve criticized people more directly. . . . I could’ve made more of an impact. And it would’ve been breaking the consensus atmosphere. . . . Nobody wanted to rock the boat, especially [among] the middle management [level]. …I didn’t want to be labeled as a mean person who was constantly criticizing the hard work of others. . . . I should have been braver about rattling people’s cages. (MM#1)

  • Having top managers without technical background proved to be fatal for the company, as described below:

Question: Why didn’t you explain to TMs that software development would be compromised if you had to develop as many phones in the given time period as the TMs wanted?

UMM#9, software: Someone else always said yes [to unfeasible TM demands]. All I got was the information—that’s how it was. And then my responsibilities were cut. Because there was always some lunatic who promised they’d do all these ten fine and wonderful things within the timeframe given by TMs . . . even though it wasn’t true at all [that it would be possible]. . . . TMs trusted these people when they said it’s going to work out. They had blind faith. The management team . . . knew a lot of people—but they picked some young, fast-talking guy who said, ‘‘I have this little trick, I’ll fix this thing.’’

  • Symbian development team was under huge pressure

The software people tried to say that things weren’t going so well, but the pressure to give the ‘‘right’’ answer [e.g., the next software version would be ready by a given date] to top management was high. Concerns were ignored during the conversation. The interaction was fragmented. If you were too negative, it would be your head on the block. If you said something couldn’t be done, then it’s about whether we should replace you. (TM) They [higher level MMs in charge of specific aspects of software] accepted interface concepts as targets [as requested by TM] without going over whether it could be done and how fast. They accepted the concept and set the target that it’d be in stores within a certain time, so it was ‘‘go for it’’—and then the guys started thinking about how they’re gonna build it. (MM#18, software) They [TMs] thought that if they just put pressure on the product-development organization, they would execute it. So maybe the product-development area should have been more assertive and said, ‘‘What you’re asking for is impossible.’’ . . . In product development, people didn’t have the courage to say, ‘‘Listen, it’s like this. We can’t give you anything more.’’ In Nokia’s R&D, the culture was such that they wanted to please the upper levels. They wanted to give them good news . . . not a reality check

  • Nokia N8, because of the above mentioned reasons, was late a year, and the next part perfectly describes why:

The products were always late, but they were never late in [reporting] conversations. They came out one or two years late, but in conversations it was always that [our smart] phone would be ready in one or two months. And because it was said that it would be ready in one to two months, you never initiated bigger improvements that would have required six months. That would have created a long delay based on the understanding that prevailed then. You always imagined that the products would come out soon.

  • An ex-Nokia employee working for Apple compared the companies:

If you consider Apple, the TMs are engineers. They tried to recruit [a senior Nokian] to Apple. He came back from having met Jobs and everyone and he said, ‘‘Nokia is business-case driven. We make everything into a business case and use figures to prove what’s good, whereas Apple is engineer-driven. It was pure technology and the top management was immersed in the technology.’’ That’s often how it is in a product company, you have to understand how the product is built. . . . You have to make a lot of product decisions based on what’s possible and what’s not. Of course you must have stretching goals, but just deciding to build a product [will not work].

More content and analysis can be found in the full paper that can be download by clicking the link here.

According to this paper, the situation inside Nokia wasn’t so bright as it seemed from the outside, and if it is true, Nokia faced a huge external threat (Apple, Google, Samsung) without having a consolidated company and clear strategy.

A fun fact is that just 3% of the people who worked at Nokia in 2013 are still in the company, and I bet that HMD (and the current Nokia) won’t make the mistake of creating the same delusional atmosphere inside the company, that was there present as per insider between 2005 and 2008.

Also, this shows how the things in workplace can affect a company on a much higher level. What could happen if a top ranked software engineer raised their voice on the meeting and said: “We need a new OS.” Or “Nokia N97 won’t be done in 3 years, don’t launch it.” You get the point.

What do you think about these “insider” information? Where you familiar with the situation back at Nokia? Are you maybe an ex-employee who has a different view on the topic? Tell us down below.

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  • Rocky

    Wow, this story also in-line with the MeeGo story

  • Viccky Maurya

    Really interesting article. Stephen was not only the factor of Nokia demise,
    I am not in favour of elop but what that guy did at that time was not so wrong, Nokia downfall had been started when Apple launched its 1st phone.

    Nokia was also very arrogant company at that time (current Nokia chairman and then F secure head Risto had already mentioned in an interview that how arrogant Nokia was in 2005-06). Yes, it is very right that they were Business driven company not an Engineer Driven company.

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  • Viccky Maurya
    • EricLovesSymbian

      EricLovesSymbian says:

      Just read it. Read the comments too. Then realized that it’s from FOUR years ago…

      It’s fascinating to see how blind elop was and how little foresight he had. He pushed his garbage junk pathetic rancid horrible windows operating system and now, as of July 2017, latest report says it’s at less than .1% global market share!

      That means feature phones and Symbian have more users worldwide than his garbage half baked windows phone junk he pressed so hard for. What a great salesman he was, fooling people, investors, share holders, his supervisors and board members. Hey elop, next billion? Next market disruption? Sure!
      So incredibly happy to see that the burnt ashes of platform are of junk pathetic windows phone!

      Hopefully he acknowledges this and writes a public statement, saying how horrible it was! And is!

      Hopefully Sailfish operating system will pull thru and become the third operating system. And hopefully it has several elements borrowed from Symbian (like settings, themes, file manager, battery efficiency, and other Nokia optimizations)

      Hey elop, come out publicly and say how horrible windows phone was (all versions – 7.1, 8.0, 8.1, etc)

      • We see now he was wrong going with Windows Phone and he made the most stupid mistake by sending the burning memo, but Elop also did a good job in simplifying Nokia’s operation and significantly cutting down the development cycles of Products (22 months for N8 to 8 months for L800). It’s unfortunate that in the meantime Nokia’s revenue fell 66%, and smartphone sales went way down. Maybe they should have chosen Android, or kept developing Meego or a whole new OS, but money was burning out, and MS had the money. I’m glad at the end Nokia survived and is now a strong company, and we have phones back via HMD 🙂

        • The only bigger mistakes he did was choosing only WP and announcing burning platform memo imo.
          Choosing Android, WP and Symbian would have been a much better game plan. 🙂 Symbian for low end, WP for Mid range and Android for High End. This way the end consumer would have got better low end smartphones with smooth UI unlike laggy Android of that time. Microsoft could have gained market share with Lumia 6xx -8xx like phones. And Nokia would have been at the top of all manufacturers in High End category. Just imagine a Lumia 920/1020/1520 like high end android flagships. Nokia could have also made a Flagship with WP and Symbian OS’s just for fans of respective operating systems. 🙂
          I don’t understand how the board agreed with single os approach of Elop. 🙁
          OHH man i just forgot about MeeGo LOL.
          They could have released just 1 Flagship Meego Device every year for developers, fans and the whole comunity.

          • They had to make some money from doing business, too 🙂 Making phones running 4 different systems is costly. Imagine having 4 development teams making the same app for all Nokia phones (MixRadio for Symbian, Android, Windows Phone and MeeGo). 4 times the effort 😀

          • Yes you are correct and i thought about this while typing but if they could have managed it some way then by going with 4 different OS’s they could have easily gained market share. 🙂

            They didn’t have to develop things for Symbian. It was already mature and almost dead. If they spent in developing ASHA they could have put that resources in making Symbian powered budget phones (phones similar to Nokia 5233). They mostly used same hardware for every phone. 😛 Apps were ready for Symbian and OS was ready too. Who cares about updates at that price range? During that time very few people knew about OS updates in countries like India. Sub $180 phone no update needed.

            All WP related apps should have been handed over to Microsoft to develop and manage (Mix Radio, Here Drive, Here Maps). It your OS you develop. We will just create hardware. (Just to develop. all apps were still owned by Nokia) They would have done it to differentiate themselves.

            They had to make high end Android phones without any add ons like they are doing now. People had google maps. As Nokia would have been making flagships they could have made money. As Samsung was still behind Nokia at that time. Nokia was still No.1(before burning platform)

            Now remains the last one “MEEGO” where Nokia had to invest money for development.

            I know. Its easy to type here but much harder to accomplish in real life. And this is past. They should have done this they could have done that. LOL They can’t change it now. 🙂 I think i should not put such comments LOL. These are of no use to present HMD Global. 😛 hehehehe

          • EricLovesSymbian

            EricLovesSymbian says:

            Again love Nokia, you are right!

            Symbian was mature, it had it’s own ovi store, and people that knew how, were making apps for Symbian.
            Asha, waste! They should have kept Symbian as it was ahead of it’s time and a truly great platform. They could have ported something like alien dalvik to make Google apps work on it somehow.
            Microsoft and Nokia should have done exactly what you said. Nokia make the ohines and Microsoft, fix your garbage junk pathetic operating system. The market would have decided if they wanted low end Symbian, or absolutely horrible windows phones.
            Android would be the same thing. It is free! Nokia would make the phones and Android would do the software and updating stuff.

            Meego could have been the one phone per year thing. A gift from the research and development team.

            So they would only have had to spend minimal money for Symbian and meego.

            Android and windows were free to use!

            Imagine a type of environment that Nokia would have made a phone by mixing the Nokia 6, the Nokia 808, and the Nokia 1020 all together and had given us a choice to choose Symbian (with access to the Google play store), Android marshmallow, or lollipop, and a windows version (running 8.1 or 10). How incredible would this have been for all consumers … Had they had enough foresight and common sense, this could have been a reality … It would have been 2012 or 2013 and the entire world would be anticipating a phone like this from Nokia (by late 2013 or 2014).

            This would have kept Nokia in the forefront of hardware and software.

            And once every year, they throw in meego device to wow all the techies, etc.

            What a shame! What a fool elop and the board was that they didn’t think this way!

          • Viccky Maurya

            I smile whenever I read ‘Pathetic garbage junk operating system’ in your comment. 😂😂

            At that time, Nokia inside condition was very bad, no proper co ordination between Engineers,mid level executives, top senior excutives. every senior executive wanted to listen things going very good(Flaws).

            If any employee told senior executives about 4 OSes idea then he would have fired out.

          • The CEO should have decided about the 4 OSes not the employees. And after Elop came the inside environment changed a bit. 🙂

          • Viccky Maurya

            Elop was 3rd choice for CEO, What if 1st or 2nd would have became CEO???

          • Do you maybe know who the 1st and 2nd were?

          • Viccky Maurya

            The first choice was Sun Microsystems’ co-founder Scott McNealy (he declined), second was long-time Nokia executive Anssi Vanjoki (pulled down by major American investors).

          • EricLovesSymbian

            EricLovesSymbian says:

            Love Nokia, this is the most amazing thing you have ever written!
            It is thee number one most logical and responsible thing Nokia could have done.
            Everything you just said would have benefitted Nokia, shareholders, fans, the community, and Finland, all at the same time!

            Wow!

            You have more common sense than a bunch of millionaire CEO s and a multi billion dollar company!

            I agree with you wholeheartedly buddy… If they had done what you said, Nokia would either be number one, if not number two (this entire time).

            Love Nokia, you just showed that you truly want the best interest of all Nokia fans AND for the Nokia company as a whole.

            Great post buddy! I couldn’t agree more!

            Believe it!

    • I found singnsk in this link LOL. He didn’t have disqus account back then 😀 😛

      • I probably had a disqus account. We did not had Disqus on NPU itself.

  • EricLovesSymbian

    EricLovesSymbian says:

    Very nice article.
    A great weekend read.

    It is true that Nokia had a multi-factorial issue, whether internal or external. The main problem is the execution of their solution to these problems (killing off Symbian, killing off meego, going with that undercooked, junk pathetic rancid horrible windows operating system, hiring a diarrhea as a child fella named elop that would later be surrounded by controversy, saying the phone is dead BEFORE it’s released, not posting sales figures for the public to know how well Symbian and the Nokia 808 were thriving, and so much more).

    I think a more subtle approach would have been more beneficial. They knew something in 2005-2008, and in February 2012, they immediately and forcefully cut the plug on too many things. Perhaps waiting an additional 6 months to make certain announcements would have been better (since they already waited over 6 years – what would another 6 months have done?)

    But the whole elop thing really left a sour taste in our mouths. Killing off Symbian and meego and going with an American operating system …

    I don’t know… If only things were different. I really don’t know what’s right or wrong or what should have been done, but I just think the implementation of enforcing the solution was not thought thru thoroughly enough.

    • Symbian was not future proof. They couldn’t have developed further. It would have helped them for shot run though. 🙂 But killing off meego was a disaster.

  • Stinger

    Can anyone tell me how possible it is for Nokia to dust off Meego and bring it back in a flagship phone? I cannot stress enough how wonderful Meego is to use. SO intuitive. Classic Nokia ergonomics. Does anybody think we’ll see it again?

    • That’s not possible. MeeGo trademark was gifted to the Linux Foundation and some patents were given to Jolla for developing Sailfih. Android has no real alternative at the moment.

      • Stinger

        Thanks Stipe. That’s a real shame though. It was a beautiful and clean UI. Here’s hoping Nokia/HMD will do something like it in the future. (and thanks for correcting me on “MeeGo” upper case letters, ha ha)

        • You’re welcome. I have the N9 and really love the hardware and software :). It wasn’t my intention to correct you, I just wrote it instinctively hehe 🙂

          • Stinger

            I have a black N9! That phone is proof that we don’t need buttons on the front. I strongly believe Nokia would have changed the market with that phone.

            I’m eagerly awaiting the Nokia 9 because I have the N9, ha ha. I’m hoping it will be a leading design.