A View From INSEAD
Company Strategic Planning is not the Whole Story
Company Strategic Planning
The precipitous decline of Nokia in the smart phone market serves as a salutary tale for anyone responsible for company strategic planning. However, according to a research project undertaken by INSEAD Associate Professor of Strategy, Quy Huy, and Tim Vuori from Aalto University in Finland, collective emotions, not strategy, explain the decline of the Nokia empire.
In 2007 Nokia ruled the mobile phone world with half the global share of the Smartphone market. In 2013, with sales still falling and losses still mounting, its mobile device business was sold to Microsoft. In Nokia’s defence, there is no doubt that it operated in one of the fastest changing markets in the history of business. But Nokia was famed for its strategic agility. Its executives knew that the mobile telephony, portable computing, Internet, media and applications sectors were all converging at breakneck space. If any company could be counted on to find the right approach to company strategic planning it was Nokia.
Better still, Nokia knew all the best practices of company strategic execution. It was famed for fast and agile execution in worldwide markets. But best practices can fail to deliver when collective emotions are ignored. As Professors Huy and Vuori point out, “the emotions felt by a large number of people within an organisation can determine the success of strategy implementation.” Having interviewed more than 50 of the Finnish multinational’s executives, the researchers are convinced that this is exactly where Nokia went wrong.
Silos and reverse synergy
In fact, the Nokia story follows the same template as that of other technology companies like Sony or Microsoft, huge organisations that have struggled with profitable continued growth, sustained innovation and up-coming competitors. “As the companies grew larger and richer,” say Huy and Vuori, “each department became its own kingdom, each executive a little emperor, and people were more concerned about their status and internal promotion than cooperating actively with other departments to produce innovative products rapidly. In other words, the whole became less than the sum of the parts.”
In the case of Nokia, the prevailing collective emotion was fear. The interviews reveal that senior and middle managers did not fear losing their jobs so much as losing their internal status. As a result, people would fail to share full information in meetings, agree on the surface to unrealistic deadlines and refuse to speak up about the limitations of the Symbian software platform compared to its Apple rival.
Emperors' new clothes
At the very top of the company, there was a different type of fear – of demanding shareholders, industry-disrupting rivals, falling growth, diminishing internal momentum… and public humiliation. As a result, senior executives talked up the quality of Nokia’s products and discounted publicly the many threats, while simultaneously increasing the pressure on managers further down the hierarchy. The collective fear mounted. And – as people throughout the company tried to alleviate the fear by telling their bosses what they wanted to hear – so did the false optimism. Misplaced confidence and collective complacency also began to take hold. Innovation declined in quality. So much for company strategic planning.
“Strategy is 5 percent thinking, 95 percent execution,” says Professor Huy. “And strategy execution is 5 percent technical, 95 percent people-related.” He and his co-researcher are adamant that, if Nokia’s top executives had managed emotional processes more effectively, they might still be leading the market. Nokia had bountiful talent and economic resources to give Apple and Samsung a tough fight. For example, by sharing their own fears with middle managers, they could have created a culture of honesty, where bad news might have served as a spur to innovation. In the end, it is Nokia’s internal fear and lack of emotion management that weakened the organization and made it vulnerable to competitors’ attack, similar to a person with a weak immune system that could die from a common cold.
Meanwhile, across the globe at Samsung, middle managers were facing up to the challenges of competitors. They were using Nokia and Apple products extensively to understand their own competitive strengths – and weaknesses. Top Samsung managers seemed to be inspiring internal cooperation, continuous innovation and positive emotion. The rest, as they say, is history. They should not be too cocky, however. History has a nasty habit of repeating itself.
Learning more at INSEAD
Read the full article from Quy Huy here. To learn more about collective emotions in strategy and prevent history from repeating itself in your company, consider enrolling on the Strategy Execution Programme, directed by Professors Quy Huy and Michael Jarrett and open to all executives concerned with putting company strategic planning into practice.