The unnecessary decline of Nokia

This is a fascinating essay on the disastrous, and ongoing, collapse of Nokia.  It’s intriguing to see how giving the wrong guy the power to make decisions at the wrong time can prove brutally catastrophic.  Imagine, for example, if Nokia, rather than Google, had embraced Android back in 2005.

This is not complex stuff. If your company has a strategy built on three pillars, and all three are working – congratulations! You are in the rare position of succeeding in all you do, please do promote your head of strategy and give your CEO a big bonus, you may even have a young Steve Jobs in your organization. Your company is grabbing massive market share, you make huge profits and you are growing beyond your wildest dreams. Congratulations, enjoy this, it won’t last forever.

If you have two of your three pillars working in your strategy, but one is failing, then you quietly shift away from the one failing part, you emphasize the two that are strong, and focus there. You don’t fire your strategy guy, he got it more right than wrong, and you celebrate your CEO. You then quietly, behind the scenes, do a ‘recalibration’ of your strategy, where you find a new third leg to replace the failing one, but you do this quietly, behind the scenes. Because most of your strategy is succeeding, its full steam ahead. The CEO is doing a good but not stellar job, keep him, but don’t give him any big bonuses for this performance. This, by the way, is kind of typical of most companies, part of the strategy is working but not all. This company should be profitable and growing. But its likely only to be growing at the pace of the industry, ie it would be holding its own roughly, in market share.

If you have two of your three pillars in your strategy failing and only one working, then its time to do the mea culpa, announce clearly that you are in trouble, and rapidly shift away from the two failing parts but convince your investors that yes, the one good part will keep you alive, please stay with us, this will be turned around. The strategy guy who cooked up this failing mess needs to be reassigned to non-strategy work and the CEO is probably over his head, you probably need a new CEO. But if you really belive the CEO is up to the task, he or she should be a change CEO and at this stage, the existing strategy MUST BE changed, it cannot bring success to the company if two of your three legs are failing. The one succeeding part cannot sustain you for long. This kind of company is in trouble, or on the brink of trouble, it is probably bleeding market share and probably making losses. It may even be shrinking in size already.

If you have three of your pillars in your strategy failing. All three failing, you must IMMEDIATELY STOP pursuing that strategy, as every day in it, brings you closer to death, to yes, bankruptcy, to oblivion, to complete failure, to junk status as a company, to being a takeover target. If your three pillars in your strategy are failing, you must fire immediately the strategy guy and replace not just the strategy head, but your whole strategy. If every leg of your strategy fails, then yes, ANY new strategy is better. Whatever you did before is better, whatever your competitors are doing is better, anything is better than pursuing a strategy that is 100% failing. The CEO who executed a strategy where all three legs fail, is clearly incompetent, and must be fired immediately. If the Board waits, then the Board is either asleep at the wheel, or incompetent, or in collusion with the incompetent CEO. If the Board waits in firing the CEO of a company where the whole strategy is failing – that Board must be fired instantly as well. This is elementary stuff. A company that finds its three pillars of its strategy all failing, is shrinking in size, is losing customers, is losing market share, is losing consumer and investor confidence, finds its share price rated junk, and is obviously generating increasing losses. This company is at least on the brink of bankruptcy and depending on how much cash it has on hand, it may prolong its life a little, but as long as the company pursues a 100% failing strategy – the company will kill itself.

It’s an object lesson how even the most cash-rich, market dominant company can rapidly decline.  I think it will be interesting to see if Apple or Microsoft is the first of the two 80’s giants to follow suit.  My money is on Microsoft, as long as Ballmer is running things there.