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Nokia · 2005–2013

Move the Data Points to the Right

A Nokia manager remembered being told to move the data points on a chart to the right before it went to the executives. Researchers who conducted 76 interviews found that fear like this helped the world's biggest phone maker lose the smartphone race.

◷ 2 min read

A Nokia middle manager remembers how a chart could change on its way up. The supervisor would tell you to move the data points to the right, to give a better impression. Then the supervisor would take the chart to the higher-level executives and present it.

The manager described this to two researchers, Timo Vuori of Aalto University and Quy Huy of INSEAD. “The information did not flow upwards,” the manager said. “Top management was directly lied to.”

Through those years, Nokia sold more phones than any company on earth. Vuori and Huy wanted to know how it lost the smartphone race so fast. When executives explain the fall, the researchers note, they usually say Nokia’s technology was worse than Apple’s, or that it got complacent and never saw the iPhone coming. After 76 interviews with top managers, middle managers, engineers and outside experts, they reached a different answer: fear, running in two directions at once.

The people at the top were afraid of the outside world: competitors, shareholders, the next quarter’s numbers. They knew Nokia needed a better operating system than Symbian and that building one would take years. Admitting in public that Symbian was behind could look defeatist to investors, suppliers and customers. So they kept backing it, and kept pressing for new phones.

The people in the middle, mostly vice presidents and directors, were afraid of the people at the top. Interviewees described some board members and top managers as “extremely temperamental,” prone to shouting at the top of their lungs. Threats of firing or demotion were common. One middle manager suggested that a colleague challenge a top manager’s decision. The colleague said he didn’t have the courage. He had a family and small children.

The two fears fed each other. Optimistic reports went up, so the top saw no reason not to push harder. A leader of MeeGo, the platform meant to replace Symbian, recalled warning of a delay of at least six months, maybe a year. The answer from above, as that leader remembered it, was to run faster. Middle managers learned that promising early won resources. Top managers later admitted to the researchers that there had been no real software competence among them.

The phones showed it. Nokia’s 5800 touchscreen phone arrived in 2008 about a year and a half late. The N97, launched in 2009 to take on the iPhone, was in one top manager’s words “a total fiasco in terms of the quality of the product.”

In February 2011 a new chief executive, Stephen Elop, brought in from Microsoft the previous September, sent staff a memo comparing Nokia to a man on a burning oil platform. Most of the flames came from outside: Apple, Android, cheap phones from Shenzhen. One line pointed inward. “We poured gasoline on our own burning platform.” That same month, Nokia announced it would build its smartphones on Microsoft’s Windows Phone.

Vuori and Huy don’t claim fear was the only cause. They studied it because, as Huy put it, it is the part of corporate failure that managers and academics understand least.

On September 3, 2013, Nokia agreed to sell its phone business to Microsoft for €5.44 billion. About 32,000 employees were expected to move with it. At the press conference in Espoo, Elop said: “I feel sadness because we are changing Nokia and what it stands for.”

What this story shows

Pathological, Bureaucratic and Generative CulturesBad news reached the top filtered and made optimistic, or not at all. One middle manager told researchers: "Top management was directly lied to."Psychological SafetyMiddle managers who feared demotion or being shouted at stayed quiet or sent up optimistic reports. One declined to challenge a top manager's decision, saying he had a family and small children.Fear of ConflictTop managers feared looking defeatist to investors, so they kept backing Symbian in public, and middle managers feared their bosses, so they rarely pushed back. Fear on both sides made an honest argument about Symbian's limits hard to have.

Sources

  1. Timo O. Vuori and Quy N. Huy, Distributed Attention and Shared Emotions in the Innovation Process, How Nokia Lost the Smartphone Battle, Administrative Science Quarterly 61(1), 2016
  2. Quy Huy and Timo Vuori, Who Killed Nokia? Nokia Did, INSEAD Knowledge, September 22, 2015
  3. Engadget, Nokia CEO Stephen Elop rallies troops in brutally honest 'burning platform' memo (full text), February 8, 2011
  4. NBC News, Nokia standing on a 'burning platform,' CEO tells employees, February 9, 2011
  5. Microsoft, Microsoft to acquire Nokia's devices & services business, license Nokia's patents and mapping services, September 3, 2013
  6. The Guardian, Microsoft buys Nokia handset business for €5.4bn, September 3, 2013