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.