PowerPoint - Adaptive Cycle

Organizational agility in the Adaptive Cycle case study:

Konstantins Babahodzajevs Arvind Bihari Mouade Boussaid Martin Jorna Alexandre Pinheiro

Introduction Explaining organizational agility through the use of a case study about NOKIA.

1. Evolution in five phases (1988 – 2012) 2. Adaptive Cycle according to the phases 3. The use of Virtual Organizations 4. The impact of the organizational structure on the agility 1

Why NOKIA? Nokia went through significant changes in the recent years and fits well with the different phases in the Adaptive Cycle.

About NOKIA

• Finnish multinational communications and information technology corporation • 122000 employees across 120 countries • Annual revenue of € 38 billion 2

Five Phases of NOKIA

I. Crisis era (1988-1992) II. Entrepreneurial era (1993-1997) III.Equilibrium era (1998-2004) IV.Transition era (2004-2008) V.Crisis era 2 (2009-2012) 3

Phase I (1988 - 1992)

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Nokia underestimated how intensely competitive the telecom business was Nokia had ambition to internationalize and diversify Nokia expanded by making new acquisitions, based on their large telecom business in the USSR

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Phase I (1988 - 1992) Cause: Collapse of Soviet Union CEO committed suicide

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Change: Split-up into handset and network businesses. Fully digitalization of networks(Pioneer)

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Phase II (1993 - 1997)

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Production and Sales needed to meet Nokia financial targets Nokia Mobile Phones faced major difficulties in operations,logistics and sourcing The supply chain wasn't prepared for the demand, propelling them into a "logistics crisis” 6

Phase II: Logistics Crisis "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 management." Importance to redesign the supply system to more disciplined and structured approach

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Implementation of an integrated ERP system Nokia realized that a more formal process of managing growth was required 7

Phase III (1998 - 2004) Nokia was concerned that it would miss new growth opportunities. So they came to two conclusions:

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Intellectual Leadership was introduced in 1995 that led to the creation of new ventures and research and established in 1998 Nokia Venture Organization as their home Nokia realized they needed a third core business, however this was considered to be too daunting of a process. Instead they focused on strategic evolution and renewal of the core business 8

Phase III (1998 - 2004) Organizational Structure:

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Phase III: 2001 Disruption

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Market growth slowed down in 2001

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Competition became more severe

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Market share dropped from 35% to 30% from 2002 to 2005 This lead to a new organizational structure, segmenting into nine value domains:

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Phase III: 2001 Disruption

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Phase IV: (2004 - 2008)

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Seasoned leader executives resigned, due to the new interdependent matrix

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structure

The different domains started losing their capability to cooperate together In 2006 the management team was rebuilt and Nokia announced it would merge its network division with Siemens 12

Phase IV: The 2006 Structural Change

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Phase V: Present

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Couldn't compete with disruptive innovations by competitors in the smartphone market

o o

iPhone Android

New competitors arrived in the networks market

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ZTE and Huawei (China)

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Phase V: Present

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Nokia responded to the smartphone threat, however they did not respond to the services delivered next to the smartphones. Symbian OS did not have an app market like Google Play or the App Store.

Symbian OS was not built for touchscreen navigation, this resulted in Nokia having to play catch-up. In the networks market, the new competitors have competitive pricing. 15

Phase V: Organizational Structure

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Virtual Organization

• Nokia has a virtual organizations policy since 2008

• Close cooperation with Microsoft, where Microsoft develops the software (Windows Phone 8) and Nokia focuses on the devices

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Influence of Organizational Structures

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Nokia’s Process over time Fully digitalization of the networks

1995-Realization that the supply chain wasn't prepared for the demand Intellectual Leadership was introduced

1988- CEO Committed Suicide

2004-Seasoned leader executives resigned, due to the new interdependent matrix structure

2006- Nokia announced it was merging its network business with Siemens

1998- Process and establishment of NVO

1988

1993

1991-Collapse of the Soviet Union

1998

Implementation of an integrated ERP system

Split-up into handset and network businesses

1996-Two forums were created: The Nokia Strategy Panel and Business Development Forum

2004 2001-Market Share drop. NMP split its core mobile phone business into 9 different marketsegment focused “value domains”

2008 2009- Creation of the “Ovi Store”

Thank You For Your Attention!

Q&A

References

• “The Dynamics of Strategic Agility: Nokia’s •

Rollercoaster Experience”,Y.Doz and M.Kosonen ,California Management review Vol 50, no. 3, 2008 John P. McCray, Juan J. Gonzalez, John R. Darling, (2011),"Crisis management in smart phones: the case of Nokia vs Apple", European Business Review, Vol. 23 Iss: 3 pp. 240 - 255