Nokia: Where it all went wrong, by the man who made it the world's biggest mobile company
Those looking for a post-mortem examination of Nokia's rise and fall won't find it in ex-CEO Jorma Ollila's new biography, Mahdoton menestys (Impossible Success). The book, co-written with Harri Saukkomaa, focuses on Ollila's achievements, his ambitions and overcoming adversity.
Ollila joined Nokia in 1985, after several years in investment banking, rising to become the company's CFO and subsequently CEO. He remained in the top job for more than a decade, presiding over Nokia's growth to become the world's largest smartphone maker — stepping down not long before the arrival of the iPhone, which signalled the beginning of the company's decline.
Ollila doesn't mind asserting his alpha status. When Nokia started looking for foreign investment, one of the first investors was George Soros. Ollila, who was Nokia's then CFO, handled the negotiations. "Soros didn't strike me as an exceptionally tough, impressive or charismatic," he writes. Even the 'failures' Ollila discusses in the book are usually only failures to reach even greater heights. Of his initial choice to go into business after studying at London School of Economics, he writes that had his life taken a different path, "I'd surely be a professor of economics, possibly at a well-known university."
Alpha Ollila
Neither is he overly apologetic about Nokia's downfall in the first decade of the 21st century. After 2004 "we knew what was happening, but our mistake was in not being able to turn that into action", he writes. Ollila stepped down as chairman of the board in 2012, which is also where the book ends. "It's far too early to assess Nokia's recent years," Ollila writes, sidestepping the major changes that have swept the company, and the mobile market at large, of late.
Ollila stays mum on the Microsoft deal, but he does write about selling off various bits of Nokia over the years. It's hard not to see parallels in the way these sales were handled and how Nokia's devices and services unit was disposed of more recently.
The first and possibly most difficult divestment for Nokia was selling off its paper mills in 1989 — paper was one of the industries that Nokia had relied on since its start life in the early 20th century. The sale took a year and "as it was a 'sacred' part of Nokia, you couldn't talk openly about selling," Ollila writes. "Instead we talked about partnerships and working together."
The second great hurdle was Nokia's television manufacturing, which weighed heavily on the company's bottom line until 1996. Nokia's TV portfolio was too large, with too many basic models and too much R&D spread over too many locations. Writes Ollila: "Necessary but painful decisions hadn't been made, which meant that we had to do them later, when they were difficult and expensive."
Even Nokia's mobile phones business was on the chopping block for a time. Boston Consulting Group did a thorough assessment of Nokia's business in 1991 and came to the conclusion that the company wouldn't be able to compete with Motorola and the Japanese mobile makers.
Back then Nokia was still controlled by Finnish banks. They tried selling the entire company to Ericsson in 1991, but the Swedes judged Nokia's TV business as being too risky. A year later Siemens wanted to buy Nokia's cellular systems unit, but Ollila turned them down.
The company persisted with mobile, growing to dominate the field throughout the late 1990s and most of the 2000s. It was only the arrival of the iPhone in 2007 that signalled a change in Nokia's fortunes, and the massive decline in share price that followed.
Right at the wrong time
So why did Cupertino manage to overtake Espoo? Ollila's explanation doesn't differ too much from the generally held view: Apple had a superior product with superior features at a more margin-friendly price.
Even when admitting defeat, however, Ollila claims Nokia was on the verge of victory. The company's leadership knew Nokia had to transform from a mobile phones company into more of a software company, and Ollila talked about such a transition both inside and outside the company, even before the iPhone arrived on the scene.
Ollila traces the roots of Nokia's downwards trajectory back to the 1990s, when the success of Nokia 101 and the early failure of Ericsson in the mobile market taught the company not to move too fast.
In 1998, Nokia held a strategy meeting where executives contemplated expanding. The company was "thinking about the right things", says Ollila, but didn't go far enough, failing to invest profits from the mobile phone business into expanding into new areas.
"Maybe Nokia concentrated too much on cellular technologies. Maybe Nokia should've studied other wireless technologies... But renewing the entire strategy of a corporation isn't easy when you've grown into a global market leader," laments the former CEO.
External liabilities
Ollila also highlights how the company struggled to find skilled software engineers, saying there weren't enough people to meet Nokia's needs in Europe. The company hired more people in the US in 2005, but the hiring spree didn't deliver the results it had hoped for.
There were also flaws in how R&D was conducted in the software-focused age. Nokia had become a "proud company" that didn't want to emulate others, and was used to in-house innovation, he writes. Traditionally Nokia had done R&D in cooperation with universities with good results, but the company found the same model didn't work with software research.
Ollia also lays part of the blame for Nokia's difficulties at the feet of US carriers. They'd long been telling Nokia that the customers didn't want smartphones that cost more than $300 — until the $600 iPhone came along and started selling like hot cakes. "But it was a completely new thing," Ollila says.
The failure of the Nokia N97 was the last nail in the coffin. The phone's software was faulty and it had "elementary" hardware problems. The problem was that the earlier N95 was still selling, which partly made it look like Nokia's smartphone strategy was still working.
Leadership failure
Ollila stepped down as CEO in 2006, handing the reins of the company to Olli-Pekka Kallasvuo, its then COO.
"In the end, timing is all about intuition… It is never a democratic decision. The responsibility is the CEO's, and sensing the right time is the CEO's most important mission," he says.
Of his successor, he writes: "Olli-Pekka himself said he wasn't a software expert. That was true, but neither was I. Steve Jobs wasn't a pure software expert, but he understood consumers, service design and marketing," but also says that Nokia's managers were usually stuck with their predecessors' plans for a year and a half, apparently meaning that a faster transformation would've been nearly impossible.
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Kallasvuo lasted around four years, stepping down after failing to regain the ground lost to Apple.
Ollila openly admits that the man chosen to follow Kallasvuo — Stephen Elop, then of Microsoft — wasn't his first choice to lead Nokia. His preferred candidate was a number two man from a well-known American technology company, who Ollila met several times, and who pulled out after a long consideration period, citing personal reasons. "He would've been the right choice for Nokia and Nokia for him," Ollila writes, though he doesn't name the individual in question.
Two internal candidates were also considered for the job alongside Elop: Anssi Vanjoki, who was then the head of its mobile solutions unit, and Niklas Savander, of services and devices. In the end, it was Vanjoki and Elop that were left to fight for the CEO job.
Vanjoki's track record wasn't strong enough, Ollila says: he was in charge of its MeeGo smartphone OS with 2,000 people serving under him, but still Google managed to get better results with some 500 Android engineers. Days after the announcement of Elop as CEO, Vanjoki decided to step down from his role with Nokia, and now works as a professor at the Lappeenranta University of Technology, in Finland.
Ollila, meanwhile, left his position as Nokia's chairman in 2012, and is now a non-executive chairman at oil company Shell. He does, however, keep his hand in with technology — he'll be addressing Finland's tech faithful at the country's startup even Slush, and there are even rumours he has an eye on a spot on Microsoft's board.