This post is probably one of longest ones in my blog. At the same time I would like to say it is the best text in my blog so far. If I would have to delete all but one text from my blog, this would stay. Please take a cup of coffee or tea next to you before you start to read this, it’s worth the time.

Disclaimer: this text is translation from Finnish text that was not written by me. The source is series of articles printed by Finnish magazine Tekniikka ja Talous in late August – early September 2012. T&T interviewed many ex-Nokians and gave us a sneak peek to inside of Nokia between years 2003 and 2012. These are exactly the people who lost their jobs during past years so them, if any, should be able to tell us who to blame for the downfall of Nokia.
Articles are in Finnish. I have combined them together and translated the text to English. But as usual, links to originals are in the end of page, so you can check the validity of the text shall you wish to do so.
All credit for the text goes to Tomi Savolainen from T&T for the hard work.

STRATEGY CHANGE THAT WAS NOT DONE IN TIME

Nokia solved year 1995 logistics crisis so well that the logistics became Nokia’s advantage against competition. Nokia sported huge global portfolio of tens of device models.
Logistics machine kept money flowing and R&D grew larger in order to feed tens of new phone models per year to this machine. Nokia could tailor products aimed to specific target groups and markets. This machine kept making money for the company for next fifteen years but Nokia’s fortune maker could not cope from the biggest disruption of the business since GSM technology.
Nokia became accustomed to be the leader that brings new success stories to the market and gets copied by others. Overconfidence filled the company. [1]

Example of this are the clamshell phones. In Nokia’s perspective folding phone gives no extra value to end-user compared to a monoblock device. In addition, clamshells had hinges that increased the manufacturing costs. Nokia built its financial results on cutting out all extra manufacturing costs so clamshells were seen as a bad business. The smaller size was just not seen as a reason good enough and the company management said clamshells are “out”.

When clamshell design became more popular, Nokia had to change their course but that happened slowly. “It was a hard bite for the organization“, says ex-manager who wishes to remain anonymous. “The stand had been that our stuff is the best.” Nokia ordered first devices from Asian subcontractor. When those were proven popular, company actually started doing them.

Nokia_7200

Problem was not as if Nokia’s organization couldn’t adapt to the clamshell production – once the decision had been made, models were easy to push into the machinery. Problem was that copying idea of others was seen as unnecessary.

Ironically, clamshells faded as iPhone entered the market. iPhone on the other hand was seen as threat to only minor part of the wide portfolio. Everyone was relieved as clamshells were out and “we were right after all”. [2]

It wa natural for Nokia mangement to think that success in mobile phone business requires huge portfolio and a structure that produces, markets, sells and renews that huge portfolio. Why would they want to risk the pattern that had worked for ten years? Durign the years of success Nokia grew, was reorganized several times but the central mode of operation was “success based on large portfolio of products”. That failed when the competitors extended from devices to apps and ecosystems. [1]

Nokia’s complex portfolio was difficult to redefine in the war of ecosystems. [3]
Nokia was capable of tailoring targeted products for different markets and user groups. The game got changed when users wanted to tailor the device themselves using applications.
Apple made huge success with a single model (iPhone) where majority of user experience focused on application store. The very first iPhone model was far from perfect on radiotechnological terms but people loved it. iPhone was pleasant to use. Nokia had a large portfolio and they assumed that iPhone is a threat to only very small part of that palette. [1]

Nokia failed to build a marketplace that would have lured in users and application developers. But alike touch screens, it was not as if Nokia did not try. They tried multiple times and failed every time.

Nokia_N-Gage

  • In 1996 Nokia launched “Club Nokia” where one could get ringtones and operator logo replacements. Later news awere added and also applications were planned to be included.
  • Site named softwaremarket.nokia.com was launched in 2001. It worked only via first Symbian device – 9210 Communicator.
  • And remember N-Gage? The gaming phone disappointment from 2003 had games sold on a memory card. Nokia was disappointed to sales of N-Gage, but first tries of selling applications had been taken.
  • Later Nokia created (among other things) download.nokia.com site, Widsets for small widget applications and sharing service Mosh.

Unfortunately outsider developers felt Symbian was a difficult platform to develop on and tools were seen as bad. Situation was worsened by the poor support from Forum Nokia, usually limited to documentation.
Nokia first tried to ease the development pain with Python-based tools. In January 2008 Nokia bought Trolltech for 104 million euros and analytics were praising the deal. Qt environment from Trolltech was supposed to make development on Nokia platforms easy. After focusing on Windows Phone Nokia sold Qt to Digia in August 2012. By then the price had gotten down to 4 million euros.

Developers and users fell in love with Apple. That started with music.

Apple changed the way music is being bought with its iPod music player and iTunes music store when store was opened in April 2003. Instead of a pricey CD you could now buy your favorite song for $0.99. By 2008 iTunes had turned into largest music retail in US.

Nokia opened its own music store at spring 2008. Nokia’s problems are well visible in the fact that the store worked only with Internet Explorer, even though Firefox was already very common at the time. At the end of year Nokia launched “Comes with music” phones where entire music collection was available for free but the phone costs more. Possibility to register to Comes with music ended at beginning of 2012.

Apple had more credible music offering. That is half a meal in music” says Iiro Jantunen. He worked for Nokia but also knows music industry from being 8 years in the board of speaker maker Genelec.
Apple’s App Store got a running start when application store was opened. That happened by iTunes update June 2008. Nokia responded with Ovi Store in May 2009. Ovi was seen as more difficult to use and apps from Ovi Store did not always work in different Symbian devices. Low usability was a common factor between several application store launches of Nokia. Those stores were not able to attract required user base in time. Ovi – later known as Nokia Store – gathered tens of thousands of apps but leading positions were safely at hands of Apple and Google, so even today very few apps reach Nokia or Microsoft store first. [4]

At the end of last decade Nokia did not try to do best possible device, they tried to optimize profits from a certain user segment. This was also said by commenters of these articles:
Every user segment got broad variety of devices, but none of the segments was made happy. Phone capabilities were put selectively to different models to maximize the revenues” says nickname “Nokipoika”. [1]

It was common practice that R&D needed to find a “customer” for any new feature to make it to production. That means some phone in production needed to include the feature. None of the risky (i.e. worksome and large) changes got to the list as there was nobody to accept them. R&D programs avoided any risks to keep schedules, thus avoiding innovation. [5]

Portfolio grew larger and single idea seems small compared to big picture.

Single innovation had very small benefit since there were so many products” said long time Nokia executive and current business owner Seppo Laukkanen in Tekniikka&Talous interview. Laukkanen was leading products and portfolios and improving practices for innovation in Nokia. [3]

Products couldn’t differentiate even between each other. People in product programs were unaware how their product is supposed to be different compared to other product” says nickname “12 years as a consultant”

Nokia refused to believe that well earning people would pay extra for a product that is seen superior“, nickname Tannenberg said.

Nokia_N93

But Nokia’s R&D was not held back only by competition between products or feature division between them. Nokia also did its best to keep operators happy and that made it difficult to bring any new services to phones. Apple came to markets with one setup and sold that to operators.

Nickname “Kokemus” (experience) wrote: “Main reason for Nokia’s collapse was ‘blind plus’ where successful company does not see the development of the dynamics of its own business, far less the things done wrong. It is entirely true that Jorma Ollila and his Dream Team built the Nokia that conquered the industry. And it is just as true that whatever was left of that Dream Team was unable to respond to change of its own industry. Eventually old industrialist leaders tried to run a company where control of logistics was no longer the advantage against others: they should have won the race for superior user experience. This was not seen in time, the culture inside company was very arrogant. People thought that they were best so they can handle this so-called crisis too.” [1]

ExNokia executive Seppo Laukkanen wrote:

It is totally different thing to define the market than be the underdog. Nokia defined the market for ten years. Copying the success of others was humiliating for people who were used to define the market – especially since they did not feel that the competitor product was in any way superior compared to their own.” [2]

Two-three years ago Nokia’s slide was explained by the lack of touch screen devices. How come Nokia did not understand the need of touchscreens? It was bad timing, lack of taking the risk and perhaps some bad luck too. Nokia developed touch screen devices already in early 2000 but abandoned the technology at the wrong moment.

Nokia_7710

First Touch screen phone was Nokia 7710, launched year 2004. It had usability and stability issues and was not a success. Nokia did reviews that showed people were not excited about touch screens. It is unknown whether the end-users were shown just the technology or the possibilities it could open up. Since product programs were – as said before – avoiding risks at all costs, decision to drop touch screens was easy. According to Helsingin Sanomat (newspaper) the decision was made in 2005 and savings were used to make non-touch products even better. [5]

LOST VALUES

Nokia did not have just problems in execution. The ex-Nokia executives that were interviewed also said that the values inside the company contributed a lot. The values were brought up even though the reporter was not asking about them.
Nokia values were helping Nokia to rise to the top which means they contributed to Nokia’s success in a way most CEOs can only dream of. Values were the base of “Nokia Way” – the way of working in the company. Lots of effort and funding was put to keep the common values alive.
“Stay humble, avoid arrogance”; old values from Jorma Ollila were coming from Finnish – and more closely Northern Ostrobothnian – background. Central value was the respect. The other values in year 2003 were customer satisfaction, achievement and renewal. Values stayed practically unchanged from year 1992.

Values created the Nokia culture. “We had the spirit of fighting and doing together” said ex-Nokia executive interviewed by T&T. People were allowed to take risks and name of the game was that no one gets punished due to their failures. People were trusting and daring. The trusting relations extended all the way to partners subcontractors but then – still during Ollila’s tenure – culture switched from “know-how management” to “execution management”.

Another ex-executive sets Norwegian Hallstein Mørk as a central person causing the change inside Nokia. Mørk came from US PC-manufacturer Hewlett-Packard year 1999 and changed the Nokia person management to be more American. Clear example of this was performance evaluation, where 20 percent were graded exceptional, 70 on target and 10 percent were graded “in need of improvement”. This lowest classification was creating a problem as it became a vague threat. Ratings were given by superiors and criteria was loose. In worst scenarios employees felt they can get the rating just for their looks.
It comes without saying that the fear of being labeled as underachiever decreased people’s will to take risks. This became especially problematic in Research & Design.

Good employees were walking out” says ex-executive.

The fixed 10% category got so much negative feedback from both the graders as the ones getting the grades that fixed category size was removed. “There was no more need to put specific percentage to underachievers, you could do it more case-by-case and more objectively” said another ex-Nokia executive.

At the same time old practices were removed or they were more unit- or case-based. One example that came up: the practice of having laid off employee’s “exit” interviews were stopped in one unit and continued in another unit. The results of the Listening to you survey that measures employee satisfaction were weakening compared to other big companies. Nokia’s results had been in top ten and that achievement was seen as important. Main pain point in survey was the respect towards individual.

A rusted chain and a lock are seen at a closed gate of the Nokia mobile phone plant in Bochum

Year 2006 Nokia told in its website that they’ll change the organization to have less hierarchical levels and more networking, agility and flexible decision-making. Unfortunately all that was already disappearing from the organization itself. Subcontractors and partners got to feel the expense control. Co-operation was made more difficult.

In every strategic meeting extremely ambitious goals were set and at same time people were reminded that they need to avoid arrogance and stay humble. Around mid-2000 those talks became different. And the inevitability of current disaster was sealed in 2008 organization change.” ex-Nokian said in Talouselämä magazine.

The change of values continued when Olli-Pekka Kallasvuo performed a renewal of values with the personnel 2007. Around the world Nokia Café – sessions were kept and values were formed and further adjusted. For finalization people were gathered to Kalastajatorppa. Real-time chat was rolling three days straight and value project nucleus moderated the questions and suggestions coming from around the world.
The values ended up to be achieving together, engaging you, passion for innovation and very human. These word-pairs required explanatory chapters and the previous key value respect was now just part of “very human”.
It may sound like nitpicking but this meant that the common values that supported work towards success were decaying.

Values were defined but they were not constantly kept alive among personnel like they were when Ollila was still CEO” said ex-executive.

Kallasvuo brought in several new leaders from US. Many of them brought different working cultures and values with them. Kallasvuo was not able to push the new values through.

Olli-Pekka lacked both charisma and substance to define the course of a big ship. Therefore every unit could define their own direction using their own values” estimated ex-executive.  [6]

SYMBIAN – SLOWLY BUILT TO FAIL

Nokia started the year 2004 with a new organisation where mobile phone business was divided to three units: Multimedia for advanced products, Mobile Phones for basic phones and Enterprise Solutions for corporate.
It became apparent that Multimedia was ran over by profit-making Mobile Phones what comes to HW decisions. The chipsets for Multimedia were so weak that the vision of pocket computers were left lacking. This was mentioned by nickname “Senior Manager, Nokia Multimedia” in T&T forum. “You can’t make a Ferrari sports model on top of Lada engine” he sums up.
On the other hand, few years later multimedia unit had so high value that it affected the organisation change.

Multimedia unit was supposed to help others too. This renewal had a nice thought behind it, but the organisation was so large that the entrepreneur spirit was not enoughsays one of the interviewed ex-Nokia executives.

This was refering to the 2008 organization change of Olli-Pekka Kallasvuo which has been blamed to be root cause of many things. In reorganization the decision-making was spread around, made more unclear and therefore the larger context got damaged.

Stiff project model and over-cautious management stopped any open-minded ideas that could have actually created something new” says nickname “fly in the ceiling”. [3]

Programs inside the company were competing against each others. Best positions in next reorganization were given to managers from the unit that made best success. This is not completely unheard of, many large companies have similar practices, but in Nokia the competition became the goal as itself and company level goals were left behind. Nokia Management did not deliver a clear common goal so in the end e.g. Multimedia had different login to each of its services. [3]

…strongly politicized middle management slowly creeped in. It focused on internal competition instead of co-operation. — And since the money was still flowing in, middle management had all the time to focus on their own personal interests.

Biggest reason [for downfall] was exceedingly stiff project management model and management that vowed for manufacturing process efficiency. It is difficult to create anything new in those conditions, far less something extraordinary.” [3]

In 90’s Nokia made the most user-friendly UI, bypassing Ericsson and Motorola with it. In 2000’s I was myself having hard time to find features from a Symbian product. — Competitors brought in operating systems that were not difficult to use and at same time were easier to write applications for. Success needs listening to the end-user and modifying products to match that.” wrote nickname MK.

It is so obvious it makes me shiver. Anyone who was there living the life of Silicon Valley in early 2000 with Steve Jobs knows this full. I was there. Nokia had one man there to follow the trends. A good man, but not a man to notice any trends coming up. I was in deliveries and suffered since reports lacked the essential: technophones and their markets had changed already before 2000. Those reports did not say that work, leisure and interaction are moving towards idea where everything is fun and simple. Even working had to be fun.” said nickname Inssi65. [7]

Nokia wanted to guarantee a continuum for the familiar UI in order to keep old customer base from escaping. In addition to that Nokia had the largest support for different languages, which meant that the UI needed to work well with different letters and glyphs.

S60 had the leading user experience when it entered the market. Slowly icons became dull and Apple created a wow-effect with their UI made from scratch” says Laukkanen.

Nokia had the organization structure of an electronics company, not that of a software company. In fact Nokia really did not have a chance to learn to be a SW company, as was said before. [3]

The attraction of Nokia’s smartphones faded away when iOS from Apple and Android from Google grew more popular. Compared to competitors, Symbian looks was frozen to a helplessly outdated situation. When Symbian Belle update rolled out, it was praised but it Belle came out way too late.

Ex product development manager from Nokia explained this to T&T:

It was not that UI design or development would have been asleep. Problems were very well-known and we knew how it [Symbian UI] is broken and how to fix it. But we could not get that through the product development machine. SW development investments were focused on under-the-hood functionalities and Symbian UI was therefore left without needed modernization for a long time.

Altering Symbian UI was heavy task as changes were also needed to lower layers of the SW. People commenting the articles felt that Nokia forgot the end-users and eventually devices became too difficult to use. Additional slowdown was caused by SW solution which aimed to use as little phone memory as possible. Estimate given to T&T was that any change to Symbian took 2,5 times as long as changes done to competing operating systems.

As an operating system Symbian is way older than iOS or Android. Symbian is based on Epoc32 which was developed by Psion for PDAs in mid-90’s. In year 2001 the name was changed to Symbian and Nokia presented 9210 Communicator – the first Symbian phone.

Nokia_9210

Symbian had two keyboard-based UI styles, Series 60 and Series 80. Nokia also used touch-screen based UI style (Series 90) but only one product made its way to shops. That was previously mentioned Nokia 7710 which launched 2004. Device was not a success.
According to T&T sources Nokia made conclusion that they do not have the resources to develop touch-based Symbian platform. For next three years touchscreens were only seen in Maemo(Linux)-based internet tablets.

Nokia_770

During year 2008 Symbian returned to touchscreens with new phone Nokia 5800, project name “Tube”. Symbian version in use was Series 60 that had touch screen improvements. Similarly Nokia enhanced Series 40 to support touch screen for its Asha-line. First full touch Ashas were shown to public in 2012.

Nokia 5800 could not deliver all the expectations poured to it. 5800 was clearly inferior to iPhone but Symbian was still the Nokia’s choice for smartphones. What was told to T&T is that Lee Williams (responsible of Symbian 2006-2009) repeatedly assured to Olli-Pekka Kallasvuo that next Symbian model will solve the problems. After 5800 problem solver was supposed to be N97. After N97, it was supposed to be N8.

People working for Williams knew that development work was slow. Either Williams had wrong understanding of the doings of his own organization or he held the info back and did not share it to Kallasvuo. Eventually Williams moved to steer Symbian Foundation in 2009. Symbian was unable to catch the competition and Later Williams left Symbian Foundation “due to personal reasons” and strongly criticized Elop for ramping down Symbian in CNet interview in April. [7]

FROM SYMBIAN TO MEEGO – OR THEN NOT

Nokia developed Symbian successor from Linux-based Maemo. In 2010 name was changed to MeeGo as Intel joined to partnership with Nokia. Part of the development resources were tied to N900 – the first Linux phone made by Nokia. At the same time R&D worked on next phone models – of which only N9 made it to shops. Project name “Columbus” did not even get model number whereas N950 was only shared to developers. T&T interviewed manager who said MeeGo development lacked common direction.

There was no clear focus inside the company and different teams and managers had their own vision of it. The UI was redesigned three times and that alone caused a delay of at least half a year. Pre-installed browser was originally supposed to be Firefox but Nokia later dropped it and decided to make its own browser. Another slow-down was the Intel co-operation which can be credited for another half a year of delay.

Nokia N9 (the device) was apparently ready almost a year before Meego (the OS) was ready for production. Russian blogger Eldar Murtazin reported that at fall 2010 and our sources confirm this. In the end MeeGo was seen as “the OS that is too slow to develop”.

Some time later Steven Elop made his famous choice between Android, Meego and Windows Phone. [7]

LONG PATH TO RAMPDOWN

Editor note: the following news article is not from the T&T magazine, it is from Salon Seudun Sanomat, 25th of November 2012. I added it as it strongly contributes to the subject.

Salo factory was closed in June 2012 but the fate of it was on the table for long time before that. Ilkka Juva worked in financial leadership of Beijing and Europe factories, Salo included. He said that the calculations for closure of the factory started already in last decade.

I started making calculations in 2007, but I got ready material from the previous person in the position.

At the same time City of Salo was building more apartments for Nokia employees. Juva thought Nokia should inform the city about possible closure of factory. He would have done it himself but was not allowed to do so.

“That was inside info and besides the law for layoff negotiations limited possibilities to communicate outside. You could not tell the city to back up with the economic plans as things are about to get ugly, no matter how much you wanted to.

Juva resigned at summer 2010. Factory was not yet decided to be closed but the knowledge about the pending fate was heavy to carry. However Juva did not break his NDA. The decision to speak up came last Sunday when Juva read Salon Seudun Sanomat and noted interview of Hannu Krogerus. In the interview Krogerus gave hard time to Nokia and the increasing Asian focus of the entire industry.

Reading Krogerus encouraged me to speak. I am very much in the same lines with him. Nokia made many unpatriotic decisions.“, Juva said. [8]

REFERENCES:

[1] http://www.tekniikkatalous.fi/nokia/nain+nokia+aliarvioi+applen/a832994

[2] http://www.tekniikkatalous.fi/nokia/markkinajohtaja+nokia+reagoi+kilpailijoihin+liian+hitaasti/a833368

[3] http://www.tekniikkatalous.fi/nokia/vanhan+menestyksen+viilaus+tappoi+nokian+innovaatiot/a832137

[4] http://www.tekniikkatalous.fi/nokia/nokian+sovelluspaikat+jaivat+yrityksiksi++musiikki+siivitti+applesta+sovellushitin/a831703

[5] http://www.tekniikkatalous.fi/nokia/nokia+hylkasi+kosketusnaytot+liian+aikaisin/a831625

[6] http://www.tekniikkatalous.fi/nokia/nokian%20alamaki%20alkoi%20kun%20pohjalainen%20johtaminen%20muuttui%20amerikkalaiseksi/a833928

[7] http://www.tekniikkatalous.fi/nokia/meego+jai+liian+kauan+symbianin+varjoon/a833013

[8] http://www.sss.fi/uutiset/418808.html

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