Nokia

CMR 398, 5/01/08
S p r i n g 2 0 0 8 | V o l . 5 0 , N o . 3 | R E P R I N T S E R I E S
California
Management Review
The Dynamics of Strategic Agility:

Nokia’s Rollercoaster Experience
Yves Doz
Mikko Kosonen
© 2008 by The Regents of

the University of California
This document is authorized for use only in Deepika Dixit's CE-MBA 2023- Deepika Dixit-2 at BML Munjal University - School of Management from Mar 2024 to Sep 2024.
The Dynamics
of Strategic Agility:
NOKIA’S ROLLERCOASTER
EXPERIENCE
Yves Doz
Mikko Kosonen
T
o CEOs, strategic agility is a conundrum. Being strategic evokes
peering far into the future, making strong choices and holding firm
commitments, unwaveringly deploying resources to implement
them, and having every senior executive single-mindedly and indi-
vidually dedicated to achieving them. In contrast, being agile evokes staying
nimble and flexible, open to new evidence, always ready to reassess past choices
and change direction in light of new developments, and willing and able to turn
on a dime. In an agile company, top management constantly adjusts courses of
action and development trajectories and does not satisfy itself with periodic
strategy reviews. Agility is at an increasing premium. A former president of
Nokia captured the point succinctly:
“Five to ten years ago, you would set your vision and strategy and then start fol-
lowing it. That does not work any more. Now you have to be alert every day,
week, and month to renew your strategy.”1
Indeed, strategic agility has become a real-life, hard-to-resolve contradic-

tion for corporate leaders and their executive teams. Strong strategic commit-
ments may help companies gain momentum toward ambitious objectives, but
paradoxically may also lead a company to develop inertia or to be wrong-footed
when technological disruptions occur, market circumstances change, or unex-
pected competitors appear. They are vulnerable to discontinuities.2 Some fade
away, some are acquired or disappear (Digital, Polaroid, and Wang), others go
through massive downsizing, extensive turmoil, and transformation (IBM,
The authors are indebted to José Santos for comments on an earlier draft and helpful suggestions
about how to develop our argument. They are also grateful to Dominique Héau and Muriel Larvaron
for their helpful comments and to two anonymous California Management Review reviewers for an
insightful critique and very valuable suggestions.
CALIFORNIA MANAGEMENT REVIEW VOL. 50, NO. 3 SPRING 2008 CMR.BERKELEY.EDU 95
The Dynamics of Strategic Agility: Nokia’s Rollercoaster Experience
Kodak, and Ericsson). In this article, we focus on how to prevent stagnation and
painful transformations so that companies do not become elephants that need
to learn to dance.3 Yet maintaining flexibility may well prevent companies from
making the kind of commitments that build strong strategic advantage, and may
relegate them to permanent mediocrity and decline.4 That’s the strategic agility
conundrum.
In the rich context provided by a detailed longitudinal analysis of the
experience of Nokia in mobile communications over the past decades, we exam-
ine the foundations of strategic agility and the dynamics of maintaining strategic
agility.
Strategic agility results from the combination over time of three major
meta-capabilities that provide its foundations:5
▪ Strategic Sensitivity (both the sharpness of perception and the intensity
of awareness and attention) combines early and keen awareness of incipi-
ent trends and converging forces with intense real-time sense-making in
strategic situations as they develop and evolve. Strategic sensitivity is
fostered by the combination of a strong externally oriented and internally
participative strategy process, a high level of tension and attentiveness,
and a rich, intense, and open internal dialogue.
▪ Leadership Unity involves the ability of the top team to make bold
decisions fast, without being bogged down in “win-lose” politics at the
top. The leadership team’s unity allows decisions to be reached at light-
ning speed once a strategic situation has been understood and the choices
it opens or closes have been intellectually grasped. These decisions stick.
Commitments are not delayed by personal insecurities and political stale-
mates at the top; nor is their implementation subject to personal agendas
and private disagreements that would slow down or scuttle the effort.
Even when wholehearted, commitments are still only as good as the
resources put behind them.
▪ Resource Fluidity involves the internal capability to reconfigure
business systems and redeploy resources rapidly, based on businesses
processes for operations and resource allocation, people management
approaches, and mechanisms and incentives for collaboration that make
business models and activity system transformation faster and easier.
Each of these three meta-capabilities results from a set of management practices
developed and honed over time. These are summarized in graphic outline form
in Figure 1.
What is important to note, however, is that all three are required to
enable a company to be strategically agile (i.e., in Figure 1, it needs to be on
the upper right back corner); one or two will not suffice. Obviously, making
good decisions will not suffice if the organization cannot implement them. In a
more interesting way, developing one capability to excellence while neglecting
the others may lock a company into a sub-optimal pattern. To take just one
example among many lopsided configurations (that one can consider and think
96 UNIVERSITY OF CALIFORNIA, BERKELEY VOL. 50, NO. 3 SPRING 2008 CMR.BERKELEY.EDU
FIGURE 1. The Key Dimensions of Strategic Agility
Resource Fluidity
• Dissociating Strategy from Structure Leader
ship U
• Mobilizing People • Mutu nity
al De
• Modular Processes Cabinet pendency and
Responsi
• Work bvility
ing Toge
as a Tea ther
m
• Leade
rship Sty
Capabil le a
ity of th nd
e CEO
Strategic Sensitivity
• Open Strategy Process
• Heightened Strategic Alertness
• High Quality Internal Dialogue
through), let’s review briefly the consequences of emphasizing resource fluidity,

which a lot of business process re-engineering projects typically attempt to
accomplish. If successful, such projects contribute to resource fluidity: they
allow a company to organize, launch, scale up, and run new growth initiatives
and new businesses, and may make its core business(es) more agile. However,
making resources more fluid may well have toxic
side effects on the other two key components of Yves Doz is the Timken Chaired Professor
strategic agility. Resource fluidity in the absence of of Global Technology and Innovation at
leadership unity may simply lead to more infight- INSEAD, France, and visiting Professor
at the Helsinki School of Economics,
ing among senior executives for resources. In the Finland. <strategicagility@insead.edu>
absence of strategic sensitivity—and of collective
Mikko Kosonen is Executive Vice
open dialogue around strategic issues—such con- President of SITRA, The Finnish
flicts may well remain unspoken and unfettered. Innovation Fund, and former CIO/CSO
Even in the best of circumstances, the comfort of of Nokia. <strategicagility@insead.edu>
having agile and fast processes may well make

executives oblivious to the need for strategic sensitivity and may lead them to
place too much faith in their fast reaction capability. In sum, increasing resource
fluidity may lead to a deterioration of the other two sets of capabilities and make
the regaining of strategic agility more difficult. One can think of other lopsided
configurations that are similarly problematic, not simply in that they do not
provide for strategic agility, but also make its subsequent development more
difficult.
Although they were developed inductively from our research and vali-
dated in research on a wider sample of companies,6 we use the three meta-
capabilities outlined above to help us explain the evolution of Nokia.
Nokia’s Experience:
Riding the Rollercoaster of Strategic Agility
Over the past twenty years, as it built and sustained its leadership in the
mobile communication industry, Nokia at first displayed great strategic agility for
an “old” company born in the 1860s. As it succeeded, the operating demands of
fast growth threatened this agility. In subsequent years, Nokia was torn between
making the firm commitments needed to secure and sustain market leadership
in a period of extraordinary growth and maintaining the agility it needed given
the very new and uncertain nature of its core business. This dilemma was accen-
tuated by significant discontinuities such as the advent of the Internet, or the
convergence between communication and entertainment, and the possibility
of entirely new mobile services. Nokia’s experience involved its shift from the
strategic agility of the early days of its mobile phone business to a more organi-
zationally embedded form of strategic agility.
Phase 1 (1988-1992): Strategic Agility at Work

At the end of the 1980s, Nokia’s top management saw itself as facing a
period of upheaval. From its century-old base in forest products, rubber, and
cables, Nokia had grown into a diverse conglomerate. Some moves had resulted
from diversification stemming from Nokia’s deep-rooted emphasis on technology
and innovation. For instance, from making insulated cables in the 1960s, Nokia
entered the telecom industry like many other electrical equipment firms. It went
from selling cables to telecom companies, to developing switches, and then to
acquiring a mobile handset maker (Mobira) in the 1970s. However, by the late
1980s, Nokia was in deep trouble. Its ambition to internationalize and diversify
led to costly acquisitions in consumer electronics and in computers. To an
extent, the success of its telecom business in the Soviet Union justified the
moves, but Nokia’s management underestimated how intensely competitive
these businesses were, and it overestimated the quality of its acquisitions (in
particular, SEL in Germany for consumer electronics and Ericsson-Data in Swe-
den for computers). The fall of the Soviet bloc in 1989, followed by that of the
Soviet Union two years later, shattered the company’s fragile strategic founda-
tions. Nokia had exploited Finland’s status as a neutral gateway to the Soviet
bloc supplying high-tech electronic goods (in exchange for the raw materials it
used to make tires, plastics, and other chemical products) and had benefited
from the “dual use” trade restrictions increasingly affecting other technology
companies. Now, Nokia’s unique diversified conglomerate logic collapsed.7 In the
short run, Soviet demand plummeted, halving the size of its telecom business
overnight. In the longer term, the market imperfection that gave Nokia its
advantage would not return; it had resulted from the Cold War. Nokia now had
its back to the wall. Top management was in disarray and ownership in turmoil.
Following the suicide of its CEO in late 1988, and difficulties in its various busi-
nesses, Nokia struggled to rebuild a top management team. Its major sharehold-
ers were at loggerheads over the future of the company (even for a while trying
to sell it to Ericsson as a last resort).8 Only some equity restructuring among
Finnish banks provided a measure of continuity.9
Nokia’s focus on digital mobile communications was the result of the for-
tuitous convergence of foresight about some key discontinuities and of various
personal insights, not of a systematic formalized approach to strategy formula-
tion. As early as the mid-1980s, Nokia’s telecom business group’s senior man-
agement, fortuitously prepared by Nokia’s experience, became aware of two key
impending discontinuities.
First, governments were likely to invite new entrants to provide mobile
services on a commercial competitive basis. Mobile networks would not have
quite the same “natural monopoly” characteristics as the fixed lines networks
of incumbent telecom authorities. Nokia’s management—neither hampered nor
blinded by strong relationships with these incumbents, and comparatively inex-
perienced internationally—was able to take a detached objective look at these
differences in economic characteristics and anticipate a different industry struc-
ture. With its long experience of serving small but demanding local operators in
Finland, and with recent market liberalization,10 Nokia happened to know how
to provide cost-efficient end-to-end solutions to small operators who did not
have the big R&D centers of incumbent telecom monopolies. Nokia also could
implicitly anticipate the likely needs of new commercial operators (although the
strategic value of that experience would become apparent to its leadership only
later).
A bright young business planner suggested, and got support for, the
regrouping of base stations and switches (which had been in two separate busi-
ness groups, Phones and Network Infrastructure) into a new Cellular Network
division within the Network Infrastructure group. This left Handsets as a sepa-
rate business group (which grew into Nokia Mobile Phones). This aligned
Nokia’s organizational set up with emerging strategic opportunities and allowed
for more fluid resource allocation to these opportunities. Rather than pitting the
“old” against the “new” in separate units vying for resources, the new organiza-
tion allowed resources to flow more easily from analog telephony to digital tele-
com, making it easier to develop end-to-end digital network solutions. Handsets
would also be seen as a business in their own right, not just as network
“terminals.”
Second, full digitalization of networks was seen as likely. Back in the
1970s, with limited financial resources and technical skills, Nokia could not
afford to do its own semiconductor designs when it developed its first wire-line
switching system. It had to rely on early Intel processors and had to develop
digital switches with modular designs around small processors at a time when
competitors were still developing proprietary hybrid circuits and switches

around mainframe computers. Nokia’s telecom group’s management became
more strongly aware of the implications of digitalization than did its compet-
itors.11 From that early experience with standard Intel processors, management
was also confident that Nokia, despite its small size, had the skills to develop
digital switches for mobile systems and could adopt modular architectures with
standardized interfaces.
By understanding these two discontinuities, and how the company could
benefit from them, Nokia was encouraged to commit early to the emerging pan-
European digital GSM mobile communication standard, to focus on base station
development in the GSM European R&D alliance, and to eagerly start building
relationships with the newly franchised independent mobile network operators.
By the early 1990s, when the GSM market took off and Nokia had already reg-
istered its first major sale to a new operator (Radiolinja in Finland, in 1989)
these commitments became clearly justified. This led Jorma Ollila, the newly
appointed CEO of Nokia, to explicitly focus on mobile communications. This
meant that Nokia would shed not only the traditional paper, rubber, and chemi-
cals businesses it had already started divesting in 1989 (and would finally com-
plete by spinning off Nokia Tyres in 1995), but also the computer business
(which it sold to ICL-Fujitsu in 1991) and consumer electronics.12 By 1992,
under Ollila’s direction, Nokia had articulated its “Vision 2000” as a global com-
pany, focused on telecom, and providing high value-added products. This pro-
vided the foundation for Nokia’s growth.
Two other early insights, of a more individual nature, were critical to
Nokia’s strategic agility in the early 1990s. First, playing around with better
and better Mac computers, Nokia’s young management team understood that
with a user-friendly interface and really good design (like Mac computers),
mobile phones could become mass consumer products rather than mere net-
work “terminals” (the terminology is revealing here) as its incumbent competi-
tors believed. This was an insight, or a personal conviction, that competitors did
not share. Major commitments to user interface, design (including collaboration
with a leading design institute in California), and brand followed. They gave
Nokia a head start in the emerging mobile telephony mass market—particularly
in the eyes of consumers. Second, and again contrary to all incumbent competi-
tors, Nokia realized it did not need to deploy full-fledged subsidiaries all around
the world to pursue rapidly emerging foreign markets. Where state-owned tele-
com monopolies had bargained for local investments in exchange for their
orders, newly licensed commercial operators did not really care. Coincidentally,
one of Nokia’s key leaders was doing a Ph.D. dissertation in a major European
business school and was working on “born global” new companies. Another
executive, also writing a Ph.D. thesis, was researching how to internationalize
system businesses and adapt them to differentiated local demands without losing
economies of scale and global integration. Their research provided important
blueprints for Nokia’s fast international expansion.
In sum, in the early 1990s Nokia enjoyed strategic agility both at a corpo-
rate and a business group level. The corporate level portfolio logic made resource
fluidity easier. However, it still called for leadership unity, which emerged from
the turmoil at the end of the late 1980s, when management and ownership
stabilized, and Ollila got to lead the whole company and build his own team.13
Strategic sensitivity was high as well: with their backs to the wall, leading a com-
pany on the verge of collapse, a bunch of young bright people with a lot at stake
but little to lose had an intense awareness of the need for a new strategy. As
Jorma Ollila put it years later, “The planetary alignment was right but we were
the only ones to see it.”14
Early and collective foresight, rooted in Nokia’s experience in some areas
and inexperience in others, made its leadership particularly sensitive to the liber-
alization of markets and digitalization of technologies. Further, personal insights
led to an innovative framing of its market (as a consumers’ market) and of the
possibility of a “lightweight,” agile, and efficient global organization. Given the
history of the company and their own personal experiences, Nokia’s executives
could perceive and frame, largely in real time, the nature and magnitude of the
huge opportunity its competitors failed to see until much later. Further, Nokia’s
framing was dependent on the composition of its management team (different
members each bringing specific insights), on its fortuitous experience with
smaller operators in Finland, and on its lack of experience of the traditional
international telecom equipment markets.
The reorganization into separate network and handset businesses pro-
vided the resource fluidity needed at the business group level, while the bold
choices made at the top to move from a broad conglomerate to a clear strategic
focus demonstrated resource fluidity. In sum, in the early 1990s Nokia had in
place all the elements of strategic agility interacting successfully to take the com-
pany in a new growth direction. Although the build-up of perceptions, the
awareness of trends, and the development of competencies and resource fluidity
were all slow processes over several years, they came together in a short strate-
gic window at the start of the GSM mobile telephony. Ollila, his shareholders,
and the new management team ended a period of instability and turmoil at the
top.
Phase 2 (1993-1997):
From Strategic Agility to Systematic Planning
Although Nokia’s vision provided a clear direction, it was not enough to
drive growth. It had to be complemented by systematic annual planning detail-
ing the technology and product roadmaps. Production and sales volumes needed
to reach Nokia’s increasingly ambitious market penetration targets and present a
consistent set of expectations to investors. Nokia was now chasing rapid market
growth. In 1995, however, Nokia Mobile Phones (NMP) suddenly faced major
difficulties in operations, logistics, and sourcing. Component availability difficul-
ties that had already surfaced a couple of years earlier, as the company was
growing in leaps and bounds without integrated supply chain management,
got suddenly worse, triggering a domino effect in the whole supply chain. NMP’s
inability to balance demand and supply quickly led to high inventories and cus-
tomer dissatisfaction. This crisis was soon dubbed the “logistics crisis” as a multi-
tude of interdependent weaknesses behind the problem had to be given a simple
label in order to calm down the financial markets. The reality was more com-
plex. NMP had not been able to develop its organizational structures, manage-
ment systems, and competences to keep pace with growth. Growing complexity
in the product architecture and in the variety and volume of products in multi-
ple production and distribution centers just couldn’t be handled with traditional
means. Its profitability, along with the whole Nokia group’s share price, declined
severely. The crisis increased leadership unity in NMP and within corporate
management, as it was seen as a “growing pain”—a toxic side-effect of exploding
growth—not as a failure of management. It required a quick redesigning and
operational implementation of a new, more-disciplined and structured approach.
It showed the importance of end-to-end transparency in the supply chain and
led to the implementation of an integrated “single instance” ERP (Enterprise
Resource Planning) system. The experience reinforced the perceived need for
discipline in planning.
Nokia was shifting from the opportunistic agility of the early 1990s into
a more formal process of managing growth toward the end of the decade, at
the risk of letting strategic rigidity set in. Strategic sensitivity was weakened by a
growing sense that third-generation (3G) telephony was the answer to the emer-
gence of the Internet and the growing importance of data communication. This
belief was reinforced by Nokia’s growing dependence on fewer bigger customers,
who themselves were making huge commitments to buying 3G licenses, as the
mobile service industry started to consolidate and integrate internationally, and
as major telecom incumbents realized the importance of mobile communication.
Major customers were starting to hijack Nokia’s strategy process.15 The growing
autonomy of the business groups threatened leadership unity. The response to
the logistics crisis provided greater resource fluidity in principle, but only for
mass-produced products, and memories of the crisis led to greater care, but also
to rigidity, in planning. Nokia was threatened with an early onset of strategic
rigidity.
This tension between strategic planning and opportunistic strategy emer-
gence has persisted at Nokia ever since. The fast increasing pace of new model
introduction and price erosion, on the one hand, and the voice-data digital con-
vergence (blurring industry boundaries) on the other hand, have forced Nokia
to keep putting a high emphasis on both disciplined execution and experimenta-
tion at the same time in the same core business. Nokia cannot sustain its margin
leadership without flawless execution (to reap scale advantages) and a continu-
ous flow of bold innovations (for new high-end devices and services). New
experiments have to be immediately globally tested and, if promising, quickly
scaled up to high volume. The innovative use of mobile phones makes conven-
tional market research particularly ineffective and the success or failure of spe-
cific application unpredictable. Yet, the dependence on global (often teen-age)
fashion trends and technologies called for fast global product introductions.
Phase 3 (1998-2004):
Maintaining Strategic Sensitivity and Enhancing Resource Fluidity
Concerned that a full focus on its core business would miss new growth
opportunities, Nokia started setting up new ventures, addressing two very differ-
ent—and, to an extent, inconsistent—demands. It began with an “intellectual
leadership” exercise carried out in 1995, which started in a slightly desultory
way. Following the success of “Vision 2000” as a rallying process in 1992, yearly
mobilization campaigns had been launched. Intellectual leadership was picked
up as a theme for 1995 as a way to counter the risk of complacency that came
with success and to incite everyone to look and think beyond immediate opera-
tional issues. Although delayed by the urgent focus on operational matters that
the logistics crisis called for, the “intellectual leadership” exercise led to the cre-
ation of new ventures as a vehicle for scouting out and learning about new
opportunities and for widening the vision and interests of the company. Helped
by a few external consultants, but relying on Nokia’s own employees, the intel-
lectual leadership exercise brought about a more open strategy process that
planted seeds of cognitive change in what was otherwise becoming a narrowly
focused, operations-driven organization.
A second set of demands drove new ventures: to find a “third leg” (a new
big growth business in addition to Mobile Phones and Networks) for Nokia. The
logistic crisis made top management aware of the risks of relying on two related
core businesses. Nokia’s corporate logic remained, somewhat oddly, that of a
conglomerate. Between its two core businesses there was no resource realloca-
tion nor shared resources (except for a brief experiment to overlay a regional
structure across the two businesses in Asia and North America). Their business
models differed, customers bought networks and handsets differently, and their
relative profitability and growth also differed.16
In that conglomerate logic, however, it soon became clear that building a
new business from scratch, no matter how great the opportunity that might be
found, would take too long to make any significant difference to Nokia’s risks
and returns or to its stock valuation given the two core businesses’ amazing
growth. In fact, the very scale of the ambition had had a paralyzing effect on
venture teams, who knew they could not grow a big enough business fast
enough to meet expectations, no matter what. Their mission was impossible.
Without skillfully leveraging Nokia’s core business strengths and assets, there
was no way a new business could be scaled up to meaningful size fast enough.
However, it then would not be independent enough to provide a separate “third
leg.” As this reality dawned on Nokia’s management, the ambition progressively
became more modest: to contribute to the strategic evolution and renewal of the
core businesses, not to create independent renewal options.
Despite the ambiguity in its objectives, the cut in its ambitions, and the
limited success of most ventures, the process and the establishment of Nokia
Venture Organization (NVO) as their home in 1998 renewed Nokia’s strategy
process in three ways. First, it brought a continuous and simultaneous strategy
development and implementation logic to Nokia and made it legitimate. The
new venture process was not tied to Nokia’s annual planning cycle, nor driven
by the needs and performance of the two core businesses.
Second, as a result, it was not hostage to rigid planning procedures and it
accepted the value of emerging insight and sense-making as a guiding principle
in strategy development for new businesses. NVO became a ground for experi-
menting with strategic agility principles within Nokia, countering the natural
drive of the core businesses toward greater strategic rigidity as their growth
gained momentum and their business processes matured. The corporate vision
now provided direction to both the “disciplines” with which core business was
managed through annual plans, and to the “freedom” new ventures enjoyed
through a continuous flexible process.
Third, two new forums for dialogue were created: the Nokia Strategy
Panel (established in 1996 to focus on company-wide business development
opportunities and ventures) and the Business Development Forum (a discussion
and decision preparation arena to elicit commitment from business unit leaders
to corporate-wide strategic priorities and specific cross-unit initiatives, and to
prepare topics and decisions for the Strategy Panel). The latter, in particular,
started to involve a much larger number of Nokia mid-level executives in the
strategy discussions, opening the process to new minds and creating time and
space for in-depth substantive strategy dialogues. The establishment of the Busi-
ness Development Forum, in particular, much improved the Nokia-wide strate-
gic dialogue. Executives and experts from all over the company now felt that
for the first time in years Nokia had a way to address openly the most difficult
strategic issues. The style of Nokia’s president, who chaired the Business Devel-
opment Forum, made difficult discussions easy. He allowed people to speak up
and skillfully directed the discussion in a productive manner. In sum, NVO and
the various dialogues built around the venturing process maintained a minimum
level of strategic sensitivity, not just at the very top, but through the manage-
ment ranks, and started to formalize the dialogue and reflection that had
occurred naturally in the small company of the early 1990s, but no longer
existed in the big organization of the late 1990s.
Still, even with a more modest corporate venturing ambition, the cost
of an emergent open process mandated to seek new business opportunities was
that new ventures were often seen as too distant from the company’s core busi-
ness to gain significant attention and elicit true support from top management.
In other words, these ventures did not have a sufficiently clear fit with the core
business trajectory to give them sustained importance in the eyes of top man-
agement. Many of the thirty-eight ventures started between 1997 and 2001
were discontinued, some because they were not going to lead to a successful
business no matter what the conditions, others for a lack of fit with the core
businesses. Today, only mobile television and enterprise business offers can be
traced back to the venture group.
In the meantime, NMP started addressing the future digital voice-data
convergence challenge on its own. In 1997, it formalized a mobile data unit
in its R&D labs, building on an earlier “bootlegged” effort that had yielded the
company’s first “communicator” (which sold poorly but nonetheless increased

Nokia’s confidence in the future market potential of mobile data products). Both
NVO and these efforts contributed to widen its range of interests and its field of
vision.
In a situation where renewal efforts were taking place both in NVO and
in core businesses, relying on top management as the only integration mecha-
nism between the two meant that Nokia’s strategic decision makers were unable
to recognize and nurture all the subtle and fast-changing interdependencies
between ventures and core businesses at the level of detail needed. For instance,
WLAN (Wireless Local Access Networks) was long considered only a minor
alternative wireless access technology (the natural cognitive lens of Nokia man-
agement who had created the GSM standard), when its main business implica-
tion was—as later became apparent—the new Internet-based business model.
By then, in the tough circumstances that followed the dot-com crash, the WLAN
effort and many other ventures had been canned and competencies dispersed.17
Beyond differentiation and reintegration difficulties, the fact that they were
small, vulnerable to changing corporate fortunes, and very rarely led to true
renewal opportunities meant that corporate ventures had a growing opportunity
cost. The value of their learning role was also challenged.18 In a fast-changing
environment, in particular when first-mover advantage in a “winner takes all”
race tends to decide the outcome of a competitive situation very early in the
game (even before all the stakes can be discerned), the opportunity costs of
being wrong—or even just too early—with a venture may be very high. There is
no longer time to experiment. An approach based on broad experiments, such as
ventures used as scouts in all directions around the core business, may no longer
suffice.
So, despite all the activities undertaken to address renewal from different
strategic perspectives (venturing in NVO and NMP’s own efforts) and operational
perspectives (common business infrastructure development), very little core
business renewal actually happened in Nokia until mid-2001. Beyond the cog-
nitive seeds the ventures provided, and the more organizationally embedded
strategic sensitivity the venturing process fostered, once again necessity had to
be the mother of invention. It took another disruption (the stalling of growth in
the mobile phones market in May 2001) and the fast-evolving commoditization
of the mobile communications industry to trigger action.
Commoditization had been envisioned much earlier as a threat, primarily
from Japanese electronics groups. Since the Japanese threat never materialized,
Nokia slipped into a form of strategic hubris that led it to discount the commodi-
tization risk. The growth stall forced Nokia to adjust its cost structure in line with
lower growth and to start actively looking for new growth alternatives. Com-
moditization forced the company to look for new ways to neutralize or eliminate
the threat caused by competitors using their proprietary software platforms (e.g.,
Microsoft) and hardware platforms (e.g., Qualcomm) to attempt to capture most
of the value from an otherwise commoditized industry.
As a result, NMP split its core mobile phones business into nine different
market-segment focused “value domains,” each chartered with a growth man-
date. Half the value domains were existing mobile phone market segments,
defined to help Nokia defend its leading market position. Half were based on
new business opportunities developed in NMP and in NVO to exploit the emerg-
ing digital convergence opportunity in mobile entertainment, imaging, and the
enterprise sectors. Each of the value domains were to exploit economies of scale
and expertise from NMP’s common regional sales and marketing organization,
common Operations, Logistics and Sourcing, and common Technology Platforms
organizations. In addition, a whole new horizontal capability was built and a
business was initiated to promote open Mobile Software.
By 2004, NMP’s nine value domains were clustered into three main busi-
ness groups, Phones, Multimedia, and Enterprise Solutions (which also brought
resources from the NVO group) with the purpose of providing further momen-
tum to grow business development. These were supported, but also challenged,
by horizontal groups for sales and marketing, operations, sourcing, logistics, and
technology platforms.19 In this interdependent structure, resource commitments
and other strategic decisions had to be agreed upon between business groups
and horizontal resource group heads. Proposals would come from value domain
executives with a deep understanding of specific market segments or from plat-
form executives close to functional and technical knowledge. They would then
be refined and provided with resources (or not) in a matrix dialogue and a set of
negotiations over resource allocation. In the process, some individuals and teams
had lateral integration roles and others had differentiation roles leading individ-
ual business units. At the board level, individual roles were primarily defined as
“vertical” or “horizontal” but some Executive Board members could double up
as head of a business and of a Nokia-wide activity (such as brand building).
Interdependence in action, resource commitments, negotiated access to
resources, and multiple roles within the top management team all contributed
to resource fluidity—but not immediately. Working effectively in this new orga-
nizational context took time for executives to learn. Only after two years or so
were true improvements starting to take place.
Since the logistics crisis of 1995, Nokia had built and progressively refined
and honed common modular business processes, management tools, and IT
infrastructures, including a single instance ERP transaction system developed
with SAP. This organizational system allowed Nokia to dissociate individual
executive and responsibilities (“who led and oversaw what”) from underlying
businesses processes and IT systems. So, instead of developing distinct systems
for individual organizational units and their leaders, as it had done till 1995,
Nokia developed them to support any high-volume product business (including
Nokia Networks products). As a result, Nokia was able to reorganize (reallocate
cost and profit center boundaries and executive responsibilities) quickly without
having to touch the underlying business processes and IT infrastructures.20 This
allowed resources, once committed, to be deployed effectively and quickly
toward new opportunities, or to be withdrawn fast from floundering areas. In
other words, resource fluidity, a second major vector of strategic agility, was
largely achieved during this phase.
Phase 4 (2004-2008): Building Leadership Unity

Having led autonomous business groups and units through a period of
exhilarating growth, the more seasoned Nokia executives found it less motivat-
ing to operate in the new highly interdependent matrix. Many resigned in 2004-
2005 and moved on. Although the process had been going on for a decade, the
2004 reorganization revealed the extent to which leadership unity had eroded.
With the benefit of hindsight one can see that multiple causes drove this decline
in leadership unity. One was simply size, both the NMP and the Nokia Networks
heads had to focus on their businesses, their staff and employees, and the
increasing attention they received from stock market analysts. Markets also
diverged. NMP increasingly supplied phones according to multiple standards,
GSM-based phones becoming a less dominant part of their offering, whereas
Nokia Networks remained focused on GSM and 3G exclusively. Once the 3G
standardization battle was won in the late 1990s, there were less shared big
strategic challenges remaining between the two groups. They still benefited from
coordinating product roadmaps and feature introductions, but this became more
regular incremental work between them. The persistence of a conglomerate
mindset at the top also led business group heads to make strategic commitments
on their own as their businesses grew and became more independent.
In August 2005, Nokia’s Board appointed Olli-Pekka Kallasvuo as Nokia’s
CEO as of June 2006. Jorma Ollila became non-executive Chairman, a move
that gave Kallasvuo the chance to build a new top team for the increasingly
integrated company. A series of Executive Board retreats in 2006-2007 provided
an opportunity to collectively address the internal governance processes and
norms of the “new” Nokia.21
In the summer of 2006, Nokia announced it was merging its network
business with that of Siemens to form Nokia Siemens network. In addition to
increasing scale economies in the consolidating network equipment area, this
allowed Nokia to build a more closely integrated device and digital services
company.
Toward the end of 2006 Nokia’s new management concluded that the
business models for the three areas (phones, multimedia devices and enterprise
solutions) were not that different after all, blurring the boundaries between the
three business groups. They also discovered that success in each business area
increasingly depended not just on good devices, but also on services and applica-
tions. As a result, at the beginning of 2008 all products were regrouped in one
Device Unit while all consumer and enterprise related application software and
services were organized in a new Mobile Software and Service Unit. Both of
these were served by a common Markets Unit including all sales and marketing,
logistics, and operations functions.
This new, more-integrated Nokia organization further increased the need
for good collaboration within the top team. Its members could not longer run
their own “fiefdoms” but were now each responsible for one key dimension in
the overall success of Nokia. Secondly, they had to manage contradictory goals
on a continuous basis. Maximizing the success of a device business called for
subordinating services and making them proprietary. Conversely, maximizing
the growth of the new services businesses called for open platforms and selling
services and software to all, including device competitors. When managed well,
this healthy tension benefits the whole company as it leads to deeper dialogue
between the two units.
To enhance collaboration and true dialogue at the top (which was easier
for a new top team as they had not been working together as autonomous sub-
unit leaders), Nokia’s top team members adopted a simple practice in which they
not only shared each other’s goals in detail but they also wrote and shared their
expectations from each other. This made all members realize how deeply depen-
dent they were on each other—which further enhanced leadership unity. In
2007, Nokia also engaged in “value jam”22 exercises to involve all employees
into the definition of and commitment to new values.
Summary and Discussion

Nokia’s experience through the four phases described above is depicted
graphically in Figures 2 and 3. In sum, there was early strategic agility combin-
ing foresight and insight into a unique framing of the true potential of mobile
telephony in the late 1980s and early 1990s (Phase 1). Strategic agility was then
threatened by the explosive growth of the core business. The somewhat fortu-
itous inception of new ventures (Phase 3) maintained a minimum level of
strategic sensitivity and, via the various forums created around NVO, started to
embed strategic sensitivity in a wider cadre. This was all the more important as,
at the time, it would have been easy for Nokia to focus entirely on operational
issues and to be mesmerized by the hype and conventional wisdom in the Euro-
pean telecom industry about the dominance of 3G standards, networks, and
applications. Instead, although marginal to the core businesses, NVO was able to
maintain sensitivity to other developments, particularly around the rise of the
Internet. However, it took another crisis (the market slowdown and the growing
threat posed by Microsoft and Qualcomm) for cognition to turn into action. In
addition to the patient efforts to build common “business infrastructure,” Nokia
gradually improved resource fluidity by putting in place a simultaneously differ-
entiated and integrated multidimensional organization and by implementing a
matrix resource allocation processes. Top management discovered, however, that
short of achieving leadership unity, this would remain an empty promise. Phase
4, following the opening provided by the departure of several of Nokia’s key
leaders and the appointment of a new CEO, has essentially been characterized
by actions to build leadership unity.
Figure 2 provides a graphic summary of each meta-capability (sensi-
tivity, fluidity, and unity) and provides an aggregate summary of key change
periods and inflexion points in that evolution. A few observations are important
here. First, strategic agility often declines over long periods unnoticed. The
FIGURE 2. The Evolution of the Various Dimensions of Strategic Agility at Nokia, 1990-2007
100
Intellectual Leadership
Exercise and New Ventures
• Short-term Growth Focus Value Domains

Dependency on Key Operators;
Focus on “3G” Expectations • Commitment to “3G”
• Industry Leadership Dotcom,
0 Telecom Industry Crash
1990 1995 2000 01 2005 2007
Resource Fluidity
100
Fast Uncontrolled
Volume Growth
Learning to Operate
in an Interdependent
Logistics Crisis Building Modular Organization
Reorganization into
and Responses “Business Infrastructure”
Four Groups and
Processes
“Horizontal” Resources
0 Leadership Reviews
1990 98 2000 2005 2007
Leadership Unity
100
Integrated
Organization
Stock Options
Clearly Differentiated but Top Team Rotation New Top Team
No Longer Constructively
Interdependent Roles Reorganization
0 between Top Team Members
1990 1995 98 2000 2005 2007
management actions that would reveal such a decline—a major strategic redirec-
tion, for instance—were neither called for nor attempted, and thus this loss of
agility was not apparent. This was evident in both in the erosion of strategic
sensitivity between 1995 and 2001 and in the slow erosion of leadership unity
through the 1990s. The three curves in Figure 2 are revealing: all three meta-
capabilities are slowly being eroded through the 1990s. With regard to strategic
sensitivity, the key issue is that a winning strategy (as celebrated by Nokia when
it wrestled worldwide industry market leadership from Motorola in 1998) turns
into principles and beliefs, which are then treated as truth and are no longer
challenged. The primacy of 3G as the solution to voice-data convergence went
unchallenged in the late 1990s, with all sorts of consequences, including under-
estimating the potential importance for the Internet of IP telephony, and of
alternative access technologies (such as Wifi, WLAN, and WiMax). The intellec-
tual leadership exercise provided the means to stem the decline of strategic sen-
sitivity, at least temporarily, and provided a starting point for new ventures.
These were not really going to reverse the decline of strategic sensitivity in core
businesses, largely because they were too “far” from the core activities. Self-
renewal of the core business would start only later, post-2001, although the
experimental development of new innovative data and imaging products under-

taken in the 1990s would come in handy in the 2000s.
Perhaps more important than the substance of their projects, new ven-
tures contributed to a more open, freer, more involved context for in-depth
strategy dialogues. In other words, the value of ventures was more in counter-
acting the predominance of core businesses’ operational excellence than in the
products or business renewal opportunities they provided. Broadening cognition
and resisting the narrowing down of the field of strategic attention were their
main contributions.
Resource fluidity also decreased after 1990. Growth brought a focus on
planning and predictability, and the logistics crisis of 1995 had a paradoxical
effect. Although the tools and processes put in place in principle enabled more
fluidity, the “lessons learned” called for more predictability, better product and
volume planning, and closer relationships with key customers, all of which had
a tendency to curtail resource fluidity. So through the late 1990s and early
2000s, resource fluidity had de facto the opposite effect. Poorly prepared to oper-
ate in a collaborative matrix environment (where the performance of individual
business groups was now largely determined by how effectively they accessed
horizontal common resources such as software development or sales efforts),
key executives stiffened in a partly defensive mode. The complex and conflicting
nature of some interdependencies—and the ongoing lack of clarity about where
the boundaries lay between what belonged to “vertical” businesses or to “hori-
zontal” capability groups—fostered resource allocation rigidity, rather than fluid-
ity. Only slowly did resource fluidity improve post 2005, with an essentially new
senior management team progressively learning to operate in a new, more inter-
dependent organization. Put differently, the interplay between organizational
design choices and the ability of an executive team to put an organizational
design to good use, once implemented, conditions resource fluidity.
Thirdly, leadership unity also declined. Part of the decline resulted from
market evolution, for instance, from valuing end-to-end offers to attempting to
demand “deals” between Handsets and Network Infrastructure, which led to
conflicts between the two core businesses. Some of it was attributable to the
differential in the success of the respective businesses, where the size and prof-
itability of NMP slowly came to dwarf that of Nokia Networks over time. Some
of it stemmed from the natural tendency among leaders of core successful busi-
nesses to gain autonomy, self-confidence, and strength and thus to seek less
support from others as their business matured. This also heightened the tension
between a corporate management trying to keep a substantive role for itself and
business groups questioning the value of common services and processes. A
number of “engineered” steps played a role in lifting leadership unity (such as a
rotation in the distribution of roles among top team members in 1998 or the
issue of significant stock options aligning individual rewards to collective corpo-
rate longer-term success), but only a change in the composition of the top teams
and its norms for working together could prompt a true rekindling of leadership
unity.
FIGURE 3. The Roller Coaster of Strategic Agility Nokia, 1990-2008
Resource Fluidity 1990
2008
1995
2000 2005
Leade
rship
Unity
2004
Strategic agility for a firm is like cardiac fitness for a human being: if heart
disease sets in from lack of exercise, cardiac fitness will be lost and any effort to
engage in strenuous exercise will reveal—painfully and dangerously—the deteri-
oration in health. Similarly, remedial action seldom has an immediate impact.
Through the prism of cognitive shifts, organizational evolutions, changes in the
top management team’s composition and relationships, and emotional engage-
ments, remedial actions (like changes in lifestyle in combating a heart condition)
only take effect over time. In other words, building the capability to be fast and
strategically agile is a slow process.
A second key observation, depicted in Figure 3, is that the three meta-
capabilities underlying strategic agility operate in a multiplicative interaction
over time. If leadership unity is not fully in place—as at Nokia in the early
2000s—the full benefits of agility cannot be achieved even if the other two
are present to a relatively strong extent. In short, the formulation is:
Agility Sensitivity Unity Fluidity
It is not one of substitution or trade-off. Lopsided attention to one meta-

capability to the detriment of the others may make the subsequent development
of these capabilities more difficult.
Regaining Strategic Agility

Success and market leadership often turn strategic agility into strategic
rigidity.
Cognitive Broadening
Through the 1990s and into the early 2000s, Nokia was characterized by
a tension between the focused cognition on operational success in the core busi-
ness and the broadened cognition of planting seeds of renewal. The narrow
focus jeopardized strategic sensitivity, while the broadened focus fostered strate-
gic sensitivity.
Corporate ventures, and their informal equivalent within NMP, allowed
experiential learning around, and away from, the core businesses. Some of these
ventures were positioned, and justified, as fitting with the core 3G trajectory of
Nokia’s development. They obtained commitment and resources, but in fact
were used to explore new growth avenues.23 By giving enough independence to
the ventures, Nokia allowed them to explore these new avenues, sometimes at
the cost of being seen as too far from the core business to be relevant.24 NMP’s
own initiatives were seen as closer to the core business and received stronger
commitments—NVO was less integrated.
The relative informality of the process and the variety and number of
ventures launched over a relatively short time frame called for intense discus-
sions. The structuring of these discussions around the forums described earlier
allowed for a richer strategic dialogue among a wider group of executives and
professionals than just top management or a separate venture group. In the
NMP process, the dialogue was even more direct and intense as the innovative
efforts were run informally within the same organization as the core business,
under the sponsorship of the executive also leading Sales and Marketing for
Europe (Nokia’s core region at that time). The ongoing strategic dialogue around
ventures maintained a level of strategic sensitivity across a broad cadre of people
who might otherwise have been fully absorbed with operational concerns. The
co-existence within NMP of pressures for operational excellence and of seeds of
renewal created a healthy tension.
Although the belief in 3G primacy was strong and central, it was not
totally overwhelming. Sometimes, as with WLAN, Nokia was too early, losing its
interest to this technology for a while only to learn later that this was indeed an
important area. Sometimes, as with the first “communicator,” products did not
succeed commercially, but the learning and understanding they brought were
acknowledged and used subsequently.
The lack of urgent need for new business creation and the benign neglect
from which ventures suffered were, in a way, blessings in disguise, at least once
the dream of the “third leg” was abandoned. It allowed ventures to play a learn-
ing role, to be able to frame and reframe their nature, objectives, and the learn-
ing they brought.
While a few companies manage to formalize such flexibility—IBM is one

example—most fail to achieve the required levels of both differentiation and
integration between ventures and mainstream businesses to extract the potential
of new ventures. We also observed in companies we researched that they clus-
tered new ventures and new development initiatives to both build critical mass
and provide enough of a force to bend the course of the core business toward
new opportunities. This is usually achieved via the strategically synergistic (and
strategically integrated) use of internal development, alliances, and acquisitions.
Acquisitions may become not only seeds of change, but also new business devel-
opment platforms.
Despite the accumulation of broader cognitive understanding, strategic
agility can be achieved only insofar as flexibility and resource fluidity are also
built into the organization. The monoliths of core businesses need to be broken
down into smaller units that can be more flexible in adjusting to markets.
Organizational Flexibility
In NMP, the organizational “breakthrough,” both for strategic sensitivity
and resource fluidity, was the setting up of market-facing “value domains.” Of
course, the idea of organizing in a way that reflects customer needs and market
segments, rather than products and/or functions, is not exactly new—and Nokia
was certainly not a leader. In fact, the slow decay of strategic sensitivity and
the limited achievement of resource fluidity may be traced to the organization’s
focus on products. Within that limited focus it was quite agile, churning out
new products at an ever increasing pace, but not in a very strategic or market-
oriented way. Letting the customer-facing side of the organization become flexi-
ble, while keeping core technical resources common across value domains, was
a key step toward flexibility.
Flexibility and fluidity in resource deployment was also achieved in
most of the companies we researched through a multidimensional organization,
with each dimension catering to a different set of priorities. For instance, Cisco’s
ostensibly functional organization is intersected by competency organization,
industry “councils” and “boards” bringing in customer segmentation, and
regional “theaters” putting forward a geographic dimension. Concern for these
various dimensions, each represented by different executives, leads to resource
allocation decisions—and the strategic choices they reflect—being made in
different ways, depending on who “weighs in” on a particular issue. A loose
metaphor would be the aerodynamics of modern aircrafts: airliners are designed
to be hyperstable, designed to stay on a straight flight path even when no con-
trols are exercised—like a traditional hierarchical organization. Multidimen-
sional organizations are more akin to fighter planes: unstable by design so they
can be agile and carefully balanced from decision to decision in the same way
that fighter planes are kept in the air by the constant adjustment of their flight
controls by powerful computers.
Such agility is achieved, however, only to the extent that key managers
are up to the working of a multidimensional organization. Leaders who have
enjoyed the autonomy of independent business groups do not adjust easily, nor
necessarily have the required skills to do so.
In the absence of a clear understanding of what norms and behaviors
of collaboration were needed to be effective in a matrix organization, processes
that would foster strategic agility may not take hold. Rather than dialogue and
cooperation, participants in matrix decision processes may be hostage to a “tour-
nament culture,” where norms of rivalry take precedence over norms of collab-
oration. A culture of fair process and norms of reciprocity are essential for a
multidimensional organization to contribute to strategic agility.
Relational Renewal
Strategic agility seldom can be regained without changes in the distribu-
tion of power and influence in the organization. Yet patterns of leadership dis-
unity are quite resilient once they have set in. Breaking these patterns, as we
saw in Nokia’s case, calls for a shift in roles and often in composition of the top
team. As we observed in 2004, the more interdependencies in the organization,
the less business group heads were able to run autonomously independent fief-
doms.
Nokia, however, found that interdependencies can only be as useful as
their management allows. As it painfully discovered, interdependencies can turn
against strategic agility if they are a source of delay, confusion, and wavering
commitments. Interdependencies require transparency of performance, achieve-
ments, and capabilities. Second, having interdependencies contribute to strategic
agility requires that they contribute to the depth and breadth of the strategy
dialogue and also contribute to the quality of collective decisions and to commit-
ment to their implementation.
It is important to have time together as a top team, avoiding excessively
structured and overcrowded agendas and leaving time for dialogue. Using fast-
paced top team meetings to simply register decisions or review performance
will not suffice. Further norms of interactions need to change to foster an open
informal dialogue. Norms can be made to change by doing away with the props
of formality, from dress code to the use of PowerPoint slides. Lou Gerstner at
IBM is known for having removed slide projectors from meeting rooms. Mutual
understanding beyond the specific issue at hand is also key to the informality of
dialogue. The more transparency in how each individual top team member
keeps score (including the usually private drivers of self-esteem, the intrinsic
rewards of leadership, and the individual’s inner driver), the greater the ability
to function as a team that fosters strategic agility. Lastly, separating persona from
position is another enabler, so team members can disagree on issues quite
openly without seeing themselves challenged personally.
Of course, such interdependencies and norms put very different demands
on leadership skills, and they call for broader boundaries in comfort zones than
are typically seen in hierarchical organizations. Not everyone will adjust—in
particular, the more-successful, more-autonomous leaders who have built core
businesses. The fact that a wave of departures followed the 2004 reorganization
at Nokia is hardly surprising.
Emotions: The Missing Dimension?

Emotions are a powerful source of energy—and apathy—in organizations,
yet their importance often goes insufficiently recognized.25 Although strongly
present within Nokia, their role was indeed less explicit. When confronted by
the logistics crisis of the mid-1990s, Jorma Ollila evoked the memory of the
“winter war,” when small platoons of Finnish troops had stemmed a full Soviet
onslaught in 1939. The pride of building a global leader from the northern
fringes of Europe undoubtedly played a role in shaping Nokia’s identity in the
1990s, in particular after its near collapse at the beginning of the decade. Yet by
the early 2000s, positive emotions had turned negative, partly because of the dip
in growth at NMP in 2001 and the financial difficulties at Nokia Networks in
2001, but more critically because many in Nokia’s rank and file could see that
the company was searching for differentiation and integration at the same
time—a difficult exercise in any organization and made more difficult by the
now deficient leadership unity.
The new top team, the articulation of values, the visibly enhanced leader-
ship unity, and the new organization put in place at the beginning of 2008
should all contribute to rekindle an emotional commitment. However, it’s too
early to be conclusive.
The sequence of actions to regain strategic agility that we observed at
Nokia is shown in Figure 4, regrouped in the three dimensions of cognition,
organization, and relationships among members of the top team. While the
three meta-capabilities defined, illustrated, and analyzed in our description of
the story of Nokia are not directly actionable, the actions listed in Figure 4 are
closer to a managerial action agenda—a prescription for regaining strategic
agility.
Although the alignment between the cognitive, organizational, and rela-
tional components of this agenda and the three meta-capabilities is not tight,
we can see in the patterns of evolution of the three capabilities a set of cognitive
actions. These action are stemming the loss of strategic sensitivity, encouraging
the development of common business processes and resource fluidity, and mak-
ing deep changes in the top team and its relationships, strongly contributing to
the restoration of leadership unity.
Conclusion
The strategic agility conundrum cannot be eliminated; agility and strategic
commitments remain inescapably contradictory. Despite this, organizations can
groom themselves to both make strong strategic commitments and also have the
awareness, the will, and the flexibility to change these commitments as needed.
Pushing the efficiency frontier between the strategic commitment to operational
excellence and the agility that strategic renewal calls for must be a leadership
FIGURE 4. Regaining Strategic Agility: “The Core” Framework
Organizational
• Unpacking core businesses into
smaller market-facing units
• Putting the organization “off-balance”
by making it multidimensional and
unstable by design (so it can be
stretched and steered)
Cognitive • Building common core business Relational
process/activity system architectures
• Planting and nurturing seeds of • Fostering leadership development • Using a multidimension organization
change via ventures and experiments and people mobility to put members of the top team
• Encouraging the expression of new ideas under pressure
• Providing for strategic dialogues • Reintroducing interdependencies
in roles and responsibilities
• Reframing new opportunities away from
the limelights, on their own merits • Creating time for dialogue
• Learning from innovative experiences Emotional • Changing norms of interactions
with new products and new businesses to foster more informal exchanges
priority. The experience of Nokia suggests that not only does strategic agility
decay naturally—the curse of successful firms—but, more importantly, regaining
strategic agility requires concerted action on the part of top management. Strate-
gic agility is perhaps the most demanding item on the leadership agenda for
CEOs.
Notes
1. Pekka-Ala Pietilä, quoted in Olli-Pekka Kallasvuo’s interview, Financial Times, December 4,
2006.
2. C. Christensen, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail
(Boston, MA: Harvard Business School Press, 1997).
3. L. Gerstner, Who Says the Elephants Can’t Dance (New York, NY: HarperBusiness, 2002); Y. Doz
and M. Kosonen, Fast Strategy: How Strategic Agility Will Help You Stay Ahead of the Game (Lon-
don: Wharton School Press, 2008), chapter 3.
4. M. Raynor, The Strategy Paradox: Why Committing to Success Leads to Failure (New York, NY:
Currency, 2007).
5. Although we report here in detail only on Nokia, and have inductively articulated the three
foundations, or meta-capabilities, outlined here from the analysis of Nokia, we have used
several other similarly detailed process studies of individual companies, in the spirit of theo-
retical sampling, to test and further develop and validate these three foundations. The com-
panies researched in depth, in addition to Nokia, were Cisco, Hewlett-Packard, IBM, Intel,
and SAP, all leading incumbents in segments of the ICT industry. We further triangulated
our findings with interviews at other companies, such as Accenture, Canon, Oracle, Sony,
STMicro, and others.
6. For a detailed analysis of these capabilities and of their component forces, see Doz and
Kosonen, op. cit.
7. With the Cold War, and in particular after the invasion of Afghanistan by the Soviets, West-
ern countries led by the United States increasingly restricted exports of dual use (ostensibly
civilian but with potential military applications) electronics to Russia and Eastern Europe.
8. Ericsson turned down their offer, to much later regret.
9. M. Häikiö, Nokia: The Inside Story (Helsinki: Edita, 2001).
10. Finland had a rather unusual network operator industry structure where alongside a big
national operator, Sonera, it also had a large number of regional or even municipal local
APPENDIX
Nokia’s Corporate Organization
Pre-2004
Corporate Leadership
Nokia Nokia
Nokia
Mobile Ventures
Networks
Phones Organization
(NGP)
(NMP) (NVO)
Corporate Functions
2004-2007
Corporate Leadership
Business Groups
Enterprise
Networks
Solutions
Phones
Mobile
Media
Multi-
Customer and
Horizontal Groups
Market Operations
Technology
Platforms
Brand and design/Developer support

Research and venturing
Business infrastructure
Corporate Functions
Current Group Executive Board
Services
&
Software Nokia
Markets Siemens
Network
Devices
Corporate Development Office

Corporate Functions
operators who had been started independently in various parts of Finland. It also deregu-
lated early and allowed competitive entries into telecom services in the 1980s.
11. Necessity being the mother of invention, a lack of resources became a blessing in disguise
in more ways than one: it also allowed Nokia to piggy-back on Intel’s drastic reduction in
processing costs, when competitors remained stuck with their own low-volume/high-cost
proprietary circuits. This contributed to make Nokia’s fixed-line telecom business successful
in the 1980s.
12. Häikiö, op. cit., pp. 100-103.
13. Häikiö, op. cit.
14. Authors’ interview, Jorma Ollila, former CEO, Nokia, October 31, 2005.
15. C. Christensen and J. Bower, “Customer Power, Strategic Investment, and the Failure of
Leading Firms,” Strategic Management Journal, 17/3 (March 1996): 197-218.
16. In fact, whereas the two businesses had worked synergistically early on to offer end-to-end
solution, mature major customers now made network equipment orders contingent on the
large volume provision of Nokia’s latest new handsets, at prices lower than NMP could have
obtained otherwise. This obviously made the relationship between the two businesses more
arduous.
17. For a similar situation, where early commitments to an infant market led the early investors
to subsequently dismiss the opportunity offered by that market when it finally took off, see
T. Noda and J. Bower, “Strategy Making as Iterated Processes of Resource Allocation,” Strate-
gic Management Journal, 17/7 (Summer 1996 Special Issue): 159-192.
18. R.G. McGrath, T. Keil, and T. Tukiainen, “Extracting Value from Corporate Venturing,” MIT
Sloan Management Review, 48/1 (Fall 2006): 50-56.
19. Nokia Networks was not integrated as tightly to the new structure as its business model was
seen not to benefit as much from the common horizontal resources.
20. In this approach the “macro” organizational structure of organizational units, hierarchical
roles, and the like does not affect the transaction patterns. Only when business models
change fundamentally and the structure of activity systems is also transformed do the trans-
action systems need to be different, as with Nokia’s current moves into internet-based ser-
vices.
21. As part of that set of executive retreats, our role changed, and so did the nature of our
research and of our relationship with Nokia as a research site. We shifted from being
researchers whose findings were not communicated to the company’s top management to
being what is often labeled as action researchers. In a more precise language, we shifted
from observers and analysts to experimentalists.
22. Nokia borrowed the page from IBM’s book. See P. Hemp and T. Stewart, interview with Sam
Palmisano, “Leading Change When Business Is Good,” Harvard Business Review, 82/12
(December 2004): 60-70.
23. For an interesting discussion of these issues in a different context, see C. Gilbert,
“Unbundling the Structure of Inertia: Resource Versus Routine Rigidity,” Academy of Manage-
ment Journal, 45/5 (2005): 741-763.
24. In our research, we observed more formal processes and explicit management of the evolu-
tion of ventures, for instance at IBM. For information see B. Harreld, C. O’Reilly, and M.
Tushman, “Dynamic Capabilities at IBM: Driving Strategy into Action,” California Manage-
ment Review, 49/4 (Summer 2007): 21-43.
25. Doz and Kosonen, op. cit.

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CMR 398, 5/01/08

The Dynamics of Strategic Agility:

© 2008 by The Regents of

Indeed, strategic agility has become a real-life, hard-to-resolve contradic-

CALIFORNIA MANAGEMENT REVIEW VOL. 50, NO. 3 SPRING 2008 CMR.BERKELEY.EDU 95

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FIGURE 1. The Key Dimensions of Strategic Agility

through), let’s review briefly the consequences of emphasizing resource fluidity,

having agile and fast processes may well make

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Phase 1 (1988-1992): Strategic Agility at Work

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CALIFORNIA MANAGEMENT REVIEW VOL. 50, NO. 3 SPRING 2008 CMR.BERKELEY.EDU 99

competitors were still developing proprietary hybrid circuits and switches

company’s first “communicator” (which sold poorly but nonetheless increased

Phase 4 (2004-2008): Building Leadership Unity

Summary and Discussion

• Short-term Growth Focus Value Domains

1990 1995 2000 01 2005 2007

1990 98 2000 2005 2007

experimental development of new innovative data and imaging products under-

FIGURE 3. The Roller Coaster of Strategic Agility Nokia, 1990-2008

Resource Fluidity 1990

It is not one of substitution or trade-off. Lopsided attention to one meta-

Regaining Strategic Agility

While a few companies manage to formalize such flexibility—IBM is one

Emotions: The Missing Dimension?

FIGURE 4. Regaining Strategic Agility: “The Core” Framework

Brand and design/Developer support

Current Group Executive Board

Corporate Development Office

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