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 .

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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

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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

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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)

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Phase I (1988 - 1992) • 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 • • Change: Split-up into handset and network businesses.

Fully digitalization of networks(Pioneer)

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Phase II (1993 - 1997) • 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”

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

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

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Phase III (1998 - 2004) Organizational Structure:

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Phase III: 2001 Disruption • Market growth slowed down in 2001 • Competition became more severe • 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) • Seasoned leader executives resigned, due to the new interdependent matrix 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

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Phase IV: The 2006 Structural Change

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Phase V: Present • • Couldn't compete with disruptive innovations by competitors in the smartphone market o iPhone o Android New competitors arrived in the networks market o ZTE and Huawei (China)

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Phase V: Present • 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.

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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 1988- CEO Committed Suicide 1995-Realization that the supply chain wasn't prepared for the demand Intellectual Leadership was introduced 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 1998 1991-Collapse of the Soviet Union Split-up into handset and network businesses Implementation of an integrated ERP system 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 market segment 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