Nokia's Limited Vision: How Poor Planning Killed the Mobile Giant

As a teenager in the late 1990’s and a no-so-responsible college student in the early 2000’s, I have fond memories of my Nokia phones.  They were indestructible, and I was fiercely loyal to them.  I dropped them, drowned them, and abused them, but they kept turning on.  They didn’t require cases, and they got great coverage.  However, the advent of smartphones with software operating systems put Nokia on the defensive, and for fear of alienating their current customer base, they did not embrace the adoption of data as the future of communication (“Most popular examples of top companies that failed business strategy”, 2020).   

Nokia Phone, Pooh01, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=2399492

 

Rise to Stardom

In the late 1990’s through early 2000’s, Nokia had it all.  They had the best-selling mobile phone brand, net operating profits around $4 billion, and the Nokia 1100 became the best-selling phone of all time in 2003.  They dominated the cellular phone industry and peaked at a 49.4% of the mobile phone market in 2007 (Barr, 2020).  Everyone seemed to have a Nokia phone, and they gained an almost unheard of popularity.  Even Neo in the blockbuster Matrix films gets a Nokia phone, also dubbed the "banana phone," which only helped bolster Nokia's prominence.

Photo credit: Warner Bros. Pictures, retrieved from https://arstechnica.com/gadgets/2018/02/nokias-latest-nostalgia-bait-feature-phone-is-the-8110-banana-phone/

Costly Mistakes

 

However, Nokia made a series of costly mistakes that cost them their position and ultimately, forced them to sell to Microsoft.  They underestimated the impact of the iPhone.  They failed to see how important software would become on mobile phones, and how data would emerge as a leading technology in mobile devices.  

Nokia’s management adopted thought processes that could be considered arrogant.  They leaned on their position of being the industry leader for the past decade, and overestimated their brand strength (Barr, 2020).  Nokia also pushed an organizational structure that prevented middle management from telling upper management about their poor inter-departmental communication, lack of technological progress, and a sub-par operating system (Symbian) that would hinder their ability to be viable against competitors.  

 

Fall From Grace

Nokia failed to try new and innovative ideas, and stayed locked into their play it safe strategy.  They became risk-averse, and over-complicated their structure, stifling decision-making.  Also, Nokia did not focus as much on the United States as a major market as Apple and Google did with their Apple iPhone and Google Android phones.  

Another factor cementing Nokia's demise was the appointment of Stephen Elop in 2010.  He announced that they would change their operating system to Windows, at a time when the Android and iOS operating systems were clearly more dominant (Onikoyi, 2019).  What followed was one of the fastest collapses in the tech industry, and they were bought by Microsoft in 2013.   

How Could Have Scenario Planning Helped?

Scenario planning allows a company to set a proactive stance in the face of ongoing, unpredictable change.  It is a process that allows for people to imagine multiple possible futures, develop courses of action, and create informed decisions on how to act should that event occur.

Nokia had no way to know what was coming, but scenario planning could have helped them imagine situations and create solutions that would have helped them adapt to the competition, technical challenges, and market pressures they would inevitably face.  However, they chose to rely on their past forecasts and historical data, which provided them no help with an unpredictable future.

Scenario planning increases flexibility.  Nokia was notably risk-averse, but a scenario planning strategy could have allowed them to become flexible in the face of change.  It changes reactive situations into proactive solutions, and creates time for organizations to capitalize on opportunities.  

Nokia could have used scenario planning to think about their markets and asked questions like, what happens if we lose market share in the United States, what happens if we lose 10% market share, and what happens if our technology cannot keep up with our competition?  Because they did not as these questions and others like these, they were unprepared for what would inevitably come their way.

Photo Credit: Matt Ranen, retrieved from https://www.mattranen.com/how-it-works

References

 

Barr, B. (2020, June 18). Nokia: What went wrong? Medium. Retrieved November 3, 2021, from https://medium.com/thoughts-economics-politics-sustainability/nokia-what-went-wrong-c342c237a069. 

Most popular examples of top companies that failed business strategy. CBNation. (2020, June 14). Retrieved November 3, 2021, from https://rescue.ceoblognation.com/2020/06/14/most-popular-examples-of-top-companies-that-failed-business-strategy/. 

Onikoyi, O. (2019, October 2). How Nokia lost its pace in the smartphone race. Medium. Retrieved November 3, 2021, from https://olaonikoyi.medium.com/how-nokia-lost-its-pace-in-the-smartphone-race-a22c0ff1d846.

Scenario Planning vs Traditional Forecasting

Scenario Planning involves creating response plans for possible future scenarios.  In disaster recovery planning, scenario planning can be an invaluable tool where leaders imagine worst-case situations and develop mitigation plans to address them ("Scenario Planning: Full-Dress Rehearsal," 2003).  Scenario planning does not try to plan, rather, it tries to speculate possible scenarios or stories that can have any possibility of happening.  

 

Scenario planning for an organization has six steps (Tucker, 1999)

1.     Learn the future world perceptions of top decision makers

2.     Gather trends intelligence, and prioritize external forces

3.     Sketch scenarios

4.     Weigh scenario implications

5.     Consider warning indicator signs

6.     Check the organization’s relevance and vision

 

Traditional Forecasting uses historical data and observations to determine future plans.  It relies heavily on the availability of historical data and is often done either yearly or quarterly.  It assumes that the future will not be much different than the past.  Traditional forecasting can often be seen in financial sectors of businesses.  Companies often try to create budgets a year in advance based heavily on the previous year’s data.  

 

Scenario planning can be extremely valuable for determining what-if and worst-case scenarios, and help companies know what they would do in a specific event.  However, it cannot help with long term projections that a company may need to present to stakeholders.  Traditional forecasting can fill that gap, but these forecasts can be rendered worthless in the face of a major unforeseen event.  

 

In my career, I am seeing the trend moving to more scenario planning, especially in the cybersecurity realm.  We lean heavily on scenario planning when creating disaster recovery plans.  But to fund those cybersecurity initiatives, I have to use traditional forecasting to present my yearly budget and request additional capital.  

 

References

 

Scenario Planning: Full-Dress Rehearsal. (2003). Info - Tech Advisor Newsletter. 

 

Tucker, K. (1999). Scenario planning. Association Management, 51(4), 70-75.