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Warwick Business School

Assessed Essay

The Nokia Revolution: An ever changing landscape of mobile industry.

Management of Change IB96R0

MA Management and Organizational Analysis

Student Id 1161780 Words- 2648

Outline
For this essay, my approach would be to outline key theoretical underpinnings from this module to illustrate what the mobile and telecom industry has gone through over past two decades and then to analyze the case of Nokia, to highlight change mainly from a sociological perspectives by taking different managerial frameworks, we would take two approaches to highlight these institutional changes within Nokia, first the Pettigrew, (1987) article that uses CCP1 framework to provide us with contextualize/holistic overview on how to examine and analyze change and further to highlight the role of leaders to initiate change. The second one of Leana & Barry, (2000), they suggest that every organization has various pressures that they experience simultaneously; either it is to change or for stability. In the conclusion the mixture of these theoretical underpins and the actual case context will be merged to provide an overview of this case of change within Nokia.

Theoretical Underpinnings
The literature towards organizational change offers some generic definitions, for example, Van de Ven & Poole, (1995, p.512) article refers to change, as an event or an empirical observation of different dimensions for example form and quality over a period of time in an organizational entity. On the other hand Moran & Brightman, (2001, p.111) say its it is a process of renewing an organizations structure, direction and capabilities in able to adapt and serve the ever change demands of its customers by doing this change and its management, cannot be separated from organizational strategy. (Burnes, 2009, p.5). The academic literature on theories surrounding transformational leadership notably (Eisenbach et al., 1999), (Tichy & Ulrich, 1984) (Tucker & Russell, 2004) reflect how transformational leaders have induced institutional change, contrastingly Pettigrew, (1987) work talks about conceptualizing significant transformations of a firm by looking and linking at content of change with the context and the process in which change has occurred with regards to leadership behavior as one the sole protagonist in changing the firms culture, strategy, vision and beliefs. Pettigrew, (1987, p.655) article treats change as an event or an episode, as his unit of analysis in his study where change event/episode doesnt have a clear start or an end, but looks into intricate details of change itself.

Context, content and Process framework

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This contextualist model of organizational change for Vinger, (2008), appeared out of need to develop an alternative framework which would shift away from traditional reliance of text book models or more specifically Lewins three Phase model. Pettigrew, (1987) work on longitudinal case studies provided a convincing account for this view of organizational change (Walsham, 1993). His article reflects three key dimensions in understanding the implementation of institutional change, first comes context in which change occurs which is divided into two parts outer and inner, Winch et al., (2012, p.142) in their article note that outer context comprises of organizational environment like social, political & technological factors and the inner context captures cultural and structural dimensions of an organization, for second dimension Pettigrew says is the content or substance (Vinger, 2008, p.197) of change itself, i.e. what of change, Vinger, (2008) notes that content denotes aspects of the change program that need to be transformed and examined, in Pettigrews article its corporate culture, manpower and geographical position (Pettigrew, 1987, p.657) that need addressing whereas Walsham, (1993, p.191) infers that content in a change program could also be products, services and technologies. Third in the CCP framework is the process of change, Winch et al., (2012) calls it how of change in relation to managerial activities to put forth the program, while on the other hand Vinger, (2008, p.197) says this process is not linear and devoid of obstacles rather it is analytical and a dynamic process. The studies here, like Pettigrew, (1987, p.660) will explore two linked continuous processes. The initial stage would be to examine Nokias evolution from to its demise in early 2000 and the second stage would reflect the development of restructuring plans carried out by Nokia during 2009-2010 under new changes in leadership and strategy.

Case Abstract: Nokia from Evolution to Revolution


The eighties was an era to forget for Nokia, (Ali-Yrkk, 2001) in his article described that Nokia until 1980s sold all their products in the domestic market, which compounded major losses for the firm. These losses were seen by Mayo & Hadaway, (1994, p.60) because of the breakup of the Soviet Union which accounted for a quarter of the Finnish exports and further to that was the state of the Finnish domestic market which was in recession compounding all this was that Nokia, didnt have much R&D funds to develop three of their high tech businesses (telecoms, consumer electronics, and computers). For the Finnish giant, 1990s started as a decade towards internalization, exploration of new ideas and innovation (Dittrich & Duysters, 2007), by 1991 it was the second largest publically owned company in Finland (Mayo & Hadaway, 1994), and in 1992, Jorma Ollilla joined the Finnish company, his strategy
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was to synergize two divisions by merging mobile phones division with consumer electronics (Hiki, 2002, p.146) and to develop core competencies in their consumer electronic division (McCray et al., 2009) His management style according Hiki, (2002) was balanced, his approach was equally towards number based management and also focused towards productivity indicators including inspiring and motivating individuals. Fisk, (2002) calling him ideal transformational leader, who transformed Nokia from a industrial engineering company to the worlds leading provider of mobile communication devices his tenure with Nokia lasted 14 years. His approach was quite clear to attract institutional investors to the company, streamline divisions and to make Nokia a household brand by the end of the century (Fox, 2000). By 1994, it was clear that mobile telephony and personal computing would benefit from global maturity in technological standards and would be two separate standards, and it was clear that Nokia would focus on mobile telephony (Pantzar et al., 2001) by making sure that Nokia could target the mass market by creating fast product cycles, attractive designs, and mass marketing (Hiki, 2002). For Ainamo & Pantzar, (2000), this would be the zeitgeist of information age2 and was to be digital and the GSM platform proved to sufficient in reaching mass market in the business as well as in the consumer3 domains (p.20). For Nokia, mass marketing saw their products appear in magazines and on television which reified their phones into cultural artifacts, the aura of culture added an extra dimension of depth into the interaction of Nokias product design with its customer base (Ainamo & Pantzar, 2000, p.20). It was a win-win situation for Nokia as explained by Hiki. Cool designs gave another impetus to this booming industry, operators competed with each other to add new services on the GSM4 technology which lead to airtime prices plunging and consequently calls lasted longer creating an vicious circle- as costs feel handsets sales rose (Hiki, 2002, p.162) Results showed by 1994-1995 handset sales for Nokia doubled. By the late 1990s and the early 2000, Nokia, was the world leader in mobile market having 31% share and offered the widest line if models meeting every segment (Porter & Solvell, 2002, p.18).

2 3 4

Here we refer to the 2nd generation, while the 1st generation was still using fixed-lines and radio. Nokia 2110 sold more than 20 million units based on GSM technology GSM-Global System of mobile telecommunication

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The second era of strategic change with Nokia, began from 2007 when Apple released their IPhone in the market, this emergence of new segment in smartphone had created an new market valued at over $100 billion (Dingle, 2011) and Nokia had no product to contend in this market as a result considerable threat from RIMs Blackberry, and Googles Android phones have led to extensive decline in Nokias market share in smart phones (Blandford, 2011). Stephen Elop joined Nokia in 2009 in order to see another round of change and restructuring. Mr. Ollila himself in his statement welcomed Elop, Mr. Elops strong software background and proven record in change management would be valuable assets Nokia will use to complete its transformation (Clark, 2010). His first move was to dump the Nokias proprietary software Symbian which had sold more than 400 million devices in the eighties, and to have immense transparency (Burrows, 2011) which had plagued the company since Jorma Ollila was in charge. This culture of bureaucracy and complacency which stifled innovation (O'Brien, 2010) had proved divisive and Stephen Elop faces this uphill challenge which is more difficult to overcome. As (Hutchison, 2012) from WSJ says time is running out for Nokias turnaround.

Analysis
Applying this case to the theoretical foundations we get certain sociological framework towards organizational change, as mentioned previously, the use of Pettigrew, (1987) contextualist model will be utilized exploring the context, content and the process of change within Nokia. Mentioned before the content of change is the change program itself, under this for Nokia, Jorma Ollila undertook numerous steps in order to transform and restructure the company. Jorma Ollila divided the company in 2001 into three distinct divisions namely Nokia Networks, Nokia Ventures and Nokia Mobile phones. He also designed a continuous development plan consisting of three stages. The first step of the program was to have close relation with their customers and to divide other divisions and to list the company on New York stock exchange the stock to attract investors. The second step of this restructuring program was to target new developing markets of Asia-Pacific like Japan, China, and India and more recently Africa The third step internally was to have more focus on R&D and outsource their production facilities to meet demand. They set up R&D concentration in Finland, Germany, USA and in China. In the second era of change, Nokia under Stephen Elop reduced a lot of fat by significant delayering and removing upwards of 7,000 employees by 2012 and closing 4 factories as part of their restructuring plan (Lawton, 2011).This strategic focus seems to get rid of Symbian department which was redundant and resources were channeled in development of new alliances with Microsoft to create new smartphones.
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Context represents internal or external drivers to change, as Van de Ven & Poole, (1995) explain difference in the form, quality, or state over time in an organizations alignment with its external environment, whereas Cunningham & Harney, (2012, p.445) infer that these external and internal drivers can shape the impact of organization overall alignment with its environment, they list few key applicable drivers to the case of Nokia, firstly external drivers mainly market conditions from early eighties have changed a lot, this has been fueled with rapid expansion of mobile networks and ever increased globalized markets, customer preferences have also changed dramatically, they no longer want a basic communication device, their needs from basic communication device have evolved towards a mobile computing device. Competitive pressures another aspect of these external environs as Cunningham & Harney, (2012) suggest that for Nokia, even though there no significant competitive market in the 1980s and 1990 but the recent decade has suggested , pressures for Nokia to adapt to these competition has been immense. Further to this external environment we see continuous technological changes happening in this industry. Cunningham & Harney, (2012, p.445) postulate that even if the organization predicts and preempts in order to react to the external drivers as mentioned before these will always be largely coordinated by the internal drivers. As applicable in the case of Nokia, Miller, (1992, p.34) says that complacency and internal rigidity and its oppression even in successful organization like Nokia can become victims of their own success. Internal driver here stand at a fundamental level at the management competence and the culture/legacy of the company to in able to adjust and facilitate the restructuring process. These aspects of the internal drivers will be explained in the next part. So how Jorma Ollila did it? Or the process on how he changed the firm, first and foremost Jorma Ollila voiced two slogans in relation to his business policies benefit orientation and telecom oriented, focused, and global, value added (Pantzar et al., 2001). This provided Nokia with strategic vision and intent in order to grow. This vision required him to divest the tire, cable and television divisions in order to focus on mobile and telecomm. Furthermore, during his tenure Jorma Ollila set up a great management team around himself as Steinbock, (2010) calls it dream team this team was composed of young but seasoned veterans of Nokia, who had seen through the worst of the eighties with the company (Hiki, 2002, p.145) helping in gaining crucial support and approval for his strategy of turn around. Pettigrew, (1987, p.664) based on Brunsson, (1982) works argues that ideological shifts has to be completed before radical action in the change sphere can begin similarly in this case, Jorma Ollila ideological stance towards creation of the Nokia Way, made it easier to marshal employee commitments and their
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motivational energies towards creating organizational change, the Nokia way emphasized what Jorma Ollila, wanted to do with the company, Masalin, (2003, p.68) provides an overview of this approach to management which relied on customer satisfaction respect for individual consideration and continues learning, team work and empowerment these values were embedded into Nokias culture, and its organizational; competencies and mode of operations/ processes. Jorma Ollila was quoted saying While technology continues to be a key source of added value, I would like to emphasize that effective marketing and the strength of the Nokia brand creates an increasing portion of the added value. In the brief abstract of Nokia from 1980 -2010, we agree with Pettigrew, the case Nokia didnt see any occurrence of continuous incremental change process, more so certain periods provided high levels of change activity namely the ones from 1980-1990 and from 2007 to 2009. These periods were classified revolutionary by (Pettigrew, 1987, p.664) since there were significant ideological, structural and business strategy change see within Nokia. The periods of early 2000 to 2007 saw lesser extent of this changes and were called dormant stages where Nokia fumbled and lost its share in the markets. In addition, as demonstrated in the ICI case of Pettigrew, (1987) these revolutionary periods were marked with changes in the leadership, similarly for Nokia, we see changes in leadership within these periods first from Jorma Ollilla in 1980s and his transformational leadership style to Stephen Elop the present CEO from 2009. Pursuing Leana & Barry, (2000, p.753) article and their emphasis on tensions between stability and change are inevitable part of organizational life, more so in the case of Nokia, The case of Nokia was characterized by pressures towards change. Throughout the eighties, for Nokia, considerable pressures were put forth, these were mainly were manifested through Nokias considerable requirements in R&D, meeting mass market demands, and these pressures were manifested through demands of Nokias shareholders, who demanded returns and dividends on their investments. For Nokia, their mobile manufacturing division were their core competence and a competitive advantage, thus only 15-20% of the total production was outsourced (Berggren & Bengtsson, 2004, p.214). This competence enabled them to adapt in response to the changing market demands. This potential for responsiveness and considerable flexibility in their work practices facilitated shorted product life cycles and better customer orientation. However as Leana & Barry, (2000) infer this advantages were short lived and were easily imitated by others. However in contrast to (Leana & Barry, 2000) article, for Nokia, there was still considerable
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bureaucracy and centralization of control especially in the early 2000s which stifled innovation and produced a culture of complacency and ultimately lead to their demise (O'Brien, 2010). Note 1. No inference on product based changes has been made during this essay; it is acknowledged that product based changes were considerable triggers to change program itself. 2. Certain aspects of Nokias case are based on my interpretations.

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