Archive for February, 2011

What Has Nokia Done Right and Wrong?

11.2.2011

A colleague asked me very recently, regarding Nokia being in the headlines with Elop’s recent internal memo, what has, in my opinion, Nokia done right and wrong over these years. After all, they achieved a massively dominant position in mobile phones and are now losing it all.

 

I think they did a lot of things right in the late 1990’s and very early 2000’s.

They were the first ones to focus on customer experience. Even if the processes weren’t very refined compared to best practices today, Nokia phones were considered to be the easiest to use for almost a decade (until iPhone hit the market).

They were very good at logistics and manufacturing tens and hundreds of millions of phones. They won the cost race (and it’s the area they are still very strong, although Elop did mention pressure from Chinese now).

Symbian was a very good platform when resources (energy, memory, processing power primarily) were scarce on phones. Since it goes very close to hardware level (being C++ code), it is possible to control resource use better than in any other environment. Now that none of those things are scarce, it is too difficult and time consuming to develop anything in Symbian (against competition on iOS and Android environments).

Nokia has been focusing a lot on technical specifications (in true Finnish mentality), and many of their products are still technically superior to their competitors. Unfortunately, that was a significant competitive advantage only until iPhone changed the game.

Nokia used to have a lot of really really excellent people. Unfortunately for them, so many of them have effectively been driven out of the company by their unfortunate policies and culture.

In late 1990’s and early 2000’s, Nokia was full of “winner mentality”. They were successful and they were revolutionizing the world. They were the ones who made mobile communication so pervasive as it is today. That elevating goal was driving people and there was a lot of shared commitment to becoming and being excellent. The success and high morale was naturally masking many of the dysfunctions of the organization, which then started hurting the company when they were no longer cruising as the sole winners of the world.

 

Things they did wrong, in my humble opinion

Nokia has a pervasive attitude that creating software is very much like production. Unfortunately, nothing could be further from the truth. Production can be charactized as “same at lower price”, whereas development is “more value faster at any cost”, although “any cost” should be considered as a smart investment against expected returns. Product development is a brains game, and the best brains are costly. However, their value/cost ratio is still much better than for less excellent brains, making them still a very good deal. The Nokia attitude unfortunately discounted the value of good brains, and mistakenly considered low cost development “resources” as a good deal for them.

In this quest to lower prices, they effectively killed their brain-based subcontractors. In the stranglehold, no suppliers were able to pay for their good employees appropriately and keep them developing software for Nokia. If someone tried to maintain reasonable cost structure, Nokia cut off purchasing from them. So in their selfish greed, they effectively cut themselves off from talent and brains.

Also in their quest to lower prices, they moved to India and China with entirely wrong goals and strategy. Therefore, the code quality in Symbian is horrible and they can’t really even keep the system stable anymore. Will they do the same in Meego? Or is that the reason Meego is delivering value much slower than it should to save Nokia?

Their management organization is very bonus driven and hierarchical. People were much more interested in getting their bonus checks than caring for greater good within Nokia. If helping someone else needed compromising one’s bonus goals, the help wouldn’t really happen. Add to that the fact that often these bonus goals were misguided (see above), the effect was often really bad.

Nokia was very focused on measuring individuals and their performance, and driving “performance” with the above mentioned bonus systems. Anyone who’s seen http://www.ted.com/talks/dan_pink_on_motivation.html or read about the topic, should know that external motivator (like bonuses and carrots/sticks) are actually harmful for intellectual work, reducing people’s capability for innovation. Plus they kill the grounds for collaboration for common good.

They were constantly reorganizing, effectively preventing the formation of stable teams. Stability is pretty fundamental for high performing teams. You need to know who you work with, what are their capabilities, and learn how to work together to best benefit from each others’ talents.

In their drive to “low cost option”, they are constantly creating distributed teams and making it very difficult for people to communicate and collaborate effectively. While there are good reasons why you sometimes have to distribute a project, more often it was just in the illusionary quest for “low cost”. I hope I’ve established that quest for low cost -> low quality -> high cost or low value. 😦  (the Agile alternative is quest for value and quality -> high speed -> low cost [and not just in relative sense]).

I think it was necessary to change leadership in the company. I’ve not had any confidence in the management of Nokia for the last 5 years. Elop may be the saving grace, but we’ll yet see. He has a massive problem at his hands and a single person may not be enough. I don’t even know if he has the right ideas, but at least he was pretty frank about Nokia’s problems, so I do hope he can turn the ship away from the shoals.

I’m sure there are more good and bad things than those alone, but that’s the best I can do right now. Please add your insights to comments!!

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