“We didn’t do anything wrong, but somehow we lost,” said former Nokia CEO Stephen Elop, wiping a tear from his eye, announcing Microsoft’s 2013 acquisition of Nokia.
So why did Nokia go bankrupt and then Microsoft bought it? There’s no denying that Nokia was once the world’s largest mobile phone giant, which seemed like it could never be defeated in the 1990s and early 2000s.
Nokia phones are used by so many people that they are still legendary today. No one guessed and thought, why Nokia went bankrupt.
However, Nokia’s might began to wane when Apple introduced the iPhone in 2007. Its name is now reappearing through HMD Global, which holds the license for the brand, but the former Nokia was a different company.
What exactly caused the collapse of Nokia’s dominance in the mobile phone industry? Why did Nokia go bankrupt? This question has attracted the attention of many researchers and academics to be used as a case study
Why Nokia Bankrupt?
Of course, there are many factors that are quite complex. However, some researchers highlight three main things from the company’s internal factors, namely the quality of technology that is inferior to Apple, the arrogance of the managers, and the weakness of the company’s vision.
The three points were further detailed by Tim O. Vuori, assistant professor of strategic management at Aaltoo University and professor of strategy, Qui Huy, from Singapore’s INSEAD business school.
They wrote a scientific paper entitled Distributed Attention and Shared Emotions in the Innovation Process: How Nokia Lost the Smartphone Battle.
In this study, researchers conducted interviews with 76 top- and middle-level managers and Nokia engineers. They also interviewed external experts and carried out in-depth investigations.
Horrible Work Culture
In their study, Huy and Vuori found that a “gloomy” work culture was one of the reasons why Nokia went bankrupt. At that time, the leaders were called quite temperamental and frightened middle-level managers.
They are afraid to report the real situation, because of the threat of dismissal. Especially about the sales report that failed to meet the target. On the other hand, Nokia executives were afraid to admit the true quality of the Symbian operating system that Nokia devices ran at that time.
They are worried that if they admit this, investors, suppliers, and especially users, will leave Nokia. But they are aware, it takes a long time to build an operating system that can match or exceed the quality of Apple’s iOS.
At the same time, upper-class managers intimidate middle-level managers, accusing them of not being ambitious enough to achieve their goals.
The threat prompted mid-level managers to lie to higher ranks because they thought there was no point in telling the truth.
Nokia’s top managers are said to be technically incompetent, which affects how they judge the quality of their technology in setting targets and decisions. Meanwhile, at Apple, the leadership positions are filled by engineers.
One of the blunders ever made was, Nokia officials decided to allocate resources to develop new mobile devices, to meet market demand in the short term.
Instead, they do not use it to achieve long-term goals, such as developing a new operating system.
Failed to Innovate
It could be said, internal politics, became one of the main factors that caused Nokia to go bankrupt. Employees weaken each other and make the company more vulnerable to competition.
Top-level managers fail to motivate middle-class managers. They chose to use a tough approach without knowing what was really going on.
The culture of “fear” that has existed has influenced the interactions between Nokia employees. Gradually, a phenomenon called “temporal myopia” emerged as a result of several factors accumulating.
In simple terms, temporal myopia is defined as the inability to consider long-term outcomes, when making choices. Human factors coupled with economic and structural factors finally made it difficult for Nokia to innovate.
Like large companies in general, Nokia also has corporate values, namely Respect, Challenge, Achievement, and Renewal (respect, challenges, achievements, and renewal).
However, Nokia employees think their bosses have failed to uphold these values while running their operations.
Learn to Listen
This study shows the importance of keeping emotions together among employees. Poor employee management can have an impact on a company’s strength to compete, as happened to Nokia, according to the How Nokia Lost the Smartphone Battle study.
According to Leadership Consultant Amalia Sterescu, organizational leaders must dare to break the status quo in order to adapt. Leaders must also have a collaborative style and leave the “close the door” culture, aka not accepting collaboration with other parties.
“Leaders must learn how to properly listen to their customers, partners and employees,” said Amelia, summarized by KompasTekno from Medium Brand Minds, Tuesday (30/3/2021).
Amalia added that emotional intelligence is needed by leaders to make decisions, especially when the workforce consists of various generations, including millennials and generation Z.
“In the end, leaders must master how their power is to be responsible when making bad decisions, failed innovations, lost market share, while status, roles, and bonuses will also be lost,” explained Amelia.
Nokia then withdrew from the mobile phone business after its hardware division was acquired by Microsoft in 2014 for a dowry of US$7.2 billion (around Rp. 96.8 trillion). Then in 2016, Nokia brand license was bought by Chinese company, HMD Global
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