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Nokias Design and Governance Issues
Introduction
The challenge for Nokia is that the growth of the telecommunications industry and the stiff competition from its rivals has led to Nokia falling behind as an industry leader. Nokia is particularly behind in the area of 5G rollout, as the company is has lost key contracts in China to rivals like Ericsson (Amine, 2021). Price erosion and loss of market share have also presented problems for Nokia in recent years. Additionally, its organizational structure is in need of overhaul. However, the main issue for Nokia is that it lacked leadership to provide a centralizing force for the loose structure. This paper looks at the firms design and structure to help show why in spite of an innovative culture, Nokia needs leaders to help harness the firms energy and human resources to create new products.
Organizational Design
The specific organizational design at Nokia is horizontal and multidivisional so as to allow maximum flexibility within the company. The structure is less formal, and employees are given autonomy. This essentially leads to a blurry chain of command. Strategic planning is overseen by the board, but operational planning is essentially loosely overseen due to the lack of centralized control throughout departments. As Roberts (2007) explains, the problem of organizational design is that strategy should facilitate the activities of the organization in the environment in which the organization operates. Design is about making sure there is a good fit for the organization, its strategy, and its environment. For Nokia, the main reason it lost market sure to Apple and Samsung was because leadership made poor choices in technology and organisational design that jointly constituted sufficient cause for the abandonment of the mobile phone business (Lambert et al., 2021, p. 574). Instead of focusing on the rising platforms of the smart phone industry, Nokia chose to invest all-in on its own outdated Symbian software platform, essentially doubling down on a product that was not working and throwing good resources after bad. Nokias poor design choices emanated from its dominant management philosophy of the era, called strategic agility (Lambert et al., 2021, p. 576). The problem was that leadership lacked decision-making and proper guidance for lower level departments: sluggish decision-making at the top and fierce internal competition between alternative technological platforms...…There were too many stop and go decisions being made, particularly with respect to alternative technologies (Lamberg et al., 2021). This led to inconsistency in organizational design decisions, which then led to path dependence and the continuation of sinking more money into the Symbian OS.
Moving forward, Nokia needs to be smart about what its vision is, and how its four groups can meld together to bring that vision to life. Leadership must be consistent but also visionary so that decision-making and organizational design are logical and supportive of the firms overall performance goals. More structured interaction among the groups and leadership, with a proper sense of what they are trying to achieve and why, will help the company.
Conclusion
In conclusion, lack of organizational design and leadership caused Nokia to make bad decisions about its OS and how to approach the smart phone industry. This led it to lose share to Apple and Samsung. The company today has new leadership and a new strategic model. However, it needs to make sure that the design fits the environment and the strategies. This way performance will be effective, and shareholder value will be created as a result of the firm…
References
Amine, Y.E. (2021). Nokia warns of challenges in 2021 as it lags behind rivals. Retrieved May 16, 2022, from https://www.insidetelecom.com/telecoms/nokia-warns-of-challenges-in-2021-as-it-lags-behind-rivals
Lamberg, J. A., Lubinait?, S., Ojala, J., & Tikkanen, H. (2021). The curse of agility: The Nokia Corporation and the loss of market dominance in mobile phones, 2003–2013. Business History, 63(4), 574-605.
Leadership and Governance. (2022). Retrieved from https://www.nokia.com/about-us/company/leadership-and-governance/#:~:text=Nokia's%20corporate%20governance%20practices%20comply,Exchange%20(%E2%80%9CNYSE%E2%80%9D).
Nokia. (2020). Nokia announces first phase. Retrieved from https://www.nokia.com/about-us/news/releases/2020/10/29/nokia-announces-first-phase-of-its-new-strategy-changes-to-operating-model-and-group-leadership-team/
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