Under the leadership of Risto Siilasmaa, former Chairman of the Board, and Rajeev Sur, President and CEO, the company’s way of operating became complex and rigid. One reason was internal disagreements about how products are developed, writes HSri’s financial journalist Petri Sajari.
Network devices Nokia’s problems take a surprisingly long time to alleviate.
Company estimates on Thursdaythat profitability will not improve significantly until 2023. It is a long time in a market that is changing and evolving rapidly.
The main cause of the problems is serious error estimates in the fifth generation 5g mobile phone technology.
Nokia did well in fourth-generation 4g technology, but believed for far too long that it would be able to do the same again.
The targets were in heaven until they collapsed. The competitors passed.
Government former chairman Risto Siilasmaan and the CEO Rajeev Surin under his leadership, the company’s way of operating became complex and rigid. One reason was internal disagreements over how products are developed.
It also took a huge amount of time and energy to merge the business of the French competitor Alcatel-Lucent, which was acquired in 2016, with Nokia. It was all out of product and technology development, which should have been at the center of operations all the time.
However, the deal was also important to Nokia. It gained a lot of new know-how, without which the company’s predicament could be even worse.
Business leaders know well how difficult it is to merge two large companies. There is always the danger that large mergers will create internal groupings that refuse to give up their old ways of doing things.
The business of the French company Alcatel and the US company Lucent stagnated badly after the merger. The same thing happened when Nokia and Siemens power supply units were merged.
The risks involved in buying Alcatel-Lucent were known, but unfortunately they were not adequately addressed by Nokia.
Nokia was rooted in a group of dissidents from the two companies who focused on defending their own views. At the same time, bureaucracy also increased.
Siilasmaa and Suri failed in their most important task: how to ensure that Nokia had the best 5g products. The goals were pompous, although simplicity is usually the trump card.
Fluctuating product plans and indecision are management problems that frustrated top professionals in product development.
Nokia gradually became a centrally managed company. The greatest wisdom about products and technology is less often in top management, but at Nokia, decision-making was specifically centralized at headquarters.
Many other mistakes were made. Perhaps the most special of these was the decision made in 2016 to buy the health technology company Withings for 170 million euros. Two years later, it was sold back to the founder of Withings.
Siilasmaa and Suri left Nokia last year.
Started in August as CEO Pekka Lundmark has announced that Nokia’s overhaul is a three-year project. It roughly tells you how long it will take to clean up the mess in Siilasmaa and Sur.
Increasing investment in 5g technology was already started at the end of Sur’s CEO term, but it was not enough.
CEO Lundmark’s assessment last December before the organizational reform that took effect at the turn of the year, it said a lot about what is wrong with Nokia.
“In the current organization, up to five members of the management team from different areas are responsible for the relatively simple radio network transaction. So there are obvious ambiguities in our organization and the way we operate. ”
Since the turn of the year, Nokia’s business groups have been reduced from seven to four and the number of members of the Management Team has been reduced from 17 to 11.
CEO Lundmark is supported and secured by the Chairman of the Board Sari Baldauf, which successfully led Nokia’s online business from 1998 to 2005.
The future is impossible to predict, but Nokia still has the potential to succeed.
The company has a wealth of industry excellence, products have improved, and plans seem clearer than years ago because they are relatively simple.
Nokia is now embarking on very similar reforms to Swedish main competitor Ericsson as early as 2017. Once the basics are put in place and cloud castles are scrapped, the road to new success can begin.
Admittedly, the Ericsson case shows that it takes time because a large ship does not turn quickly.
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