The Fear of Risk-Taking in Nokia's Marketing Strategy

The company entered into mobile vendorship in the year 1992 and enjoyed a leading position for more than a decade since then. Nokia enjoyed a loyal customer base for a long time but in the process became complacent about its market dominance. While its journey to the top was swift, its decline was equally so, culminating in the sale of its mobile business to Microsoft in 2013. Between 2001 and 2005, a number of decisions were made that set up Nokia on the beginning of a decline. Key amongst these decisions was the poorly implemented matrix structure of organization which led to departure of vital members and a deterioration of strategic thinking.

Mid-level executives who were accustomed to decentralised structure in Nokia couldn’t adapt to the change and started showing signs of insecurity and disappointment with the management. Increasing conflict and disclarity of communication flows in the matrix structure further led to frustrated employees and dissatisfied top management with the performance. With the rapidly changing market dynamics and competitive landscape following the entry of Apple’s iPhone, the market drove products, not the other way round. Software was taking precedence over hardware as a competitive feature in the industry. Symbian platform started becoming obsolete and Android followed. By 2010, Nokia’s dominant position had been decimated. To recover from the situation in the third quarter of 2010, Nokia’s board employed Stephen Elop as the CEO to re-energise the company. Elop blamed cultural complacency for Nokia’s decline: the decision making process became overly consensual and innovation became non-existent in a bureaucratic environment. After conducting a survey with Nokia’s employees, Elop realised that the employees were frustrated with the management. Under his leadership, the company entered into a strategic partnership with Microsoft to develop smart phones using Windows mobile platform since Symbian was officially dead. Elop delayered the organization and created a flatter structure to reduce bureaucracy.

The focus of the strategy was towards leadership and markets rather than bureaucracy and products. Despite all these efforts, sales continued to decline and ultimately Nokia’s mobile phone business was sold off to Microsoft in the year 2013.There were many such incidences in the organization which pointed towards the possible fall of the company but Nokia’s 'we know everything’ attitude in itself was a precursor to its decline. The company had access to touch screen technology before Apple but it killed the idea because it was an expensive device to produce, so there was more risk involved for Nokia. The company also had a chance to design an online app store which later on became a hit with Apple’s iTunes and was later mimicked by Nokia. Another major revelation made by a Nokia employee stated that Nokia rejected the proposal for a 3D user interface in its Symbian operating system in 2002 which Samsung and LG introduced in the year 2009. Nokia had many alarms which pointed towards issues in the system but the company managed to ignore all of them. Unrest among the employees and lowering performance of the company in itself clearly communicated of the downward spiral the company was entering into. Furthermore since the employee’s requests were not heard by the management and as the management started laying off employees from the company, the employees gradually developed a fear of losing job and stopped giving inputs for the betterment of the company. It was also stated by an employee that his team offered 500 proposals to improve Symbian but never managed to get any through.

Employees at Nokia played a key role in creating the precursors for the negative incident by projecting clear indications and behaviours which pointed towards friction in the organization. A change from the bureaucratic system of organization to the matrix structure posed as another precursor towards the organization’s decline. Employees could not understand work culture of the organization as it changed and hence were dissatisfied with it. Above all the internal disputes that Nokia was dealing with, was the changing competitive environment which rendered the Symbian operating system obsolete and highlighted the need of an upgrade in the hardware and software of Nokia. Furthermore, the risk aversive attitude of the top management led to a fall back in the technology which later on proved to be a breakthrough innovation in mobile handsets market which was the touch screen phones and the android operating system. There were no mechanisms put in place in Nokia to prevent such events from happening because the company highly relied on its leaders and considered the top management’s decision as the final one. The company had an extremely bureaucratic system but there was no system to scrutinize the decisions of the management. Similarly, Nokia did not have a culture of monitoring its moves and hence when the company started on the verge of decline there was nobody to track the reasons of that decline and hence it further moved towards a downturn. Nokia did not focus its product development towards changing customer preferences, rather it emphasized on developing its existing system.

Furthermore, Nokia tried to avoid risk by not implementing the technology available to it before competitors but faced a backlash because of the same when other companies came up with those technologies and snatched market share from Nokia. The crux in this case is that Nokia ignored the importance of being update with the customer expectations and estimating technological revolutions. It could also be attributed to the poor work culture or communication that even with so many talented resources working in the company, it could not identify the issues and reacted to the need for change management very late. Nokia which had been one of the leading players in the mobile industry had been very effective in terms of releasing new models and designs that could attract the global markets but over a period of time when competitors focused on changing trends and bringing innovation in manufacturing, Nokia stuck to its traditional mobile devices which stopped attracting customers after a point of time.