There are two ways to learn: do the mistakes yourself, or listen to those who made them and try to do better. The Wall Street Journal gives us a shot at the second solution, with an interesting article on Nokia’s fall from a $300 billion company to 1.83$ a share (6.85b valuation). Several lessons can be drawn:
Most of the time, the people who can innovate are already there. They are just buried deep into the organization, unable to rise to the top and catch decision maker’s attention:
“More than seven years before Apple Inc. rolled out the iPhone, the Nokia team showed a phone with a color touch screen set above a single button. The device was shown locating a restaurant, playing a racing game and ordering lipstick. In the late 1990s, Nokia secretly developed another alluring product: a tablet computer with a wireless connection and touch screen—all features today of the hot-selling Apple iPad.”
Do not let today’s profitable products define your strategy when market conditions are changing very rapidly. What is true today might not be true in two years. Those who are on top have little to gain, but a lot to lose. They will make more conservative decisions to try to protect their assets instead of looking ahead. Because looking ahead is looking beyond themselves:
“In late 2004, U.S. manufacturer Motorola scored a world-wide hit with its thin Razr flip-phones. Nokia weathered criticism from investors that it was expending too much effort on high-end smartphones while its rival ate into its lucrative business selling expensive ‘dumb’ phones to upwardly mobile people around the world. [The new CEO] merged Nokia’s smartphone and basic-phone operations. The result, said several former executives, was that the more profitable basic phone business started calling the shots.”
Don’t ever let success make you arrogant. Because arrogant means blind:
“Nokia engineers’ “tear-down” reports, according to people who saw them, emphasized that the iPhone was expensive to manufacture and only worked on second-generation networks—primitive compared with Nokia’s 3G technology. One report noted that the iPhone didn’t come close to passing Nokia’s rigorous “drop test,” in which a phone is dropped five feet onto concrete from a variety of angles. Yet consumers loved the iPhone”.
Business is a lot of work, intelligence, network and money. But luck and timing play a huge role too, and these you can not control:
“‘We had exactly the right view of what it was all about,’ says Mr. Ollila, who stepped down as chief executive in 2006 and retired as chairman in May. ‘We were about five years ahead.’”
Keep things simple. If there are more than 3 persons to make a decision, start to wonder what went wrong:
At some companies, such decisions might be made around a conference table. In Nokia’s case, the meeting involved gathering about 100 engineers and product managers from offices as far-flung as Massachusetts and China in a hotel ballroom in Mainz, Germany, two people who attended the meeting recall.
In time of crisis, making radical shifts and getting rid of past products can save your life. Nokia did it once in an impressive fashion:
“Nokia has a long history of successfully adapting to big market shifts. The company started out in 1865 as a lumber mill. Over the years, it diversified into electricity production and rubber products. At the end of the 1980s, the Soviet Union’s collapse and recession in Europe caused demand for Nokia’s diverse slate of products to dry up, leaving the company in crisis. Jorma Ollila, a former Citibank banker, took over as CEO in 1992 and focused Nokia on cellphones.”
Nokia has a great team working hard to put the company back on track. Their newest phones are surprisingly cool. Let’s hope a european company can stay in the hunt in the highly competitive mobile handsets market.