Organizational agility in the Adaptive Cycle

case study:

Konstantins BabahodzajevsArvind Bihari Mouade Boussaid Martin JornaAlexandre 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

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

Why NOKIA?

About NOKIA

• Finnish multinational communications and information technology corporation

• 122000 employees across 120 countries

• Annual revenue of € 38 billion

2

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)

Five Phases of NOKIA

3

• 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

Phase I (1988 - 1992)

4

Cause:

• Collapse of Soviet Union

• CEO committed suicide

Change:

• Split-up into handset and network businesses.

• Fully digitalization of networks(Pioneer)

Phase I (1988 - 1992)

5

• 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”

Phase II (1993 - 1997)

6

"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

Phase II: Logistics Crisis

7

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

Phase III (1998 - 2004)

8

Organizational Structure:

Phase III (1998 - 2004)

9

• 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:

Phase III: 2001 Disruption

10

Phase III: 2001 Disruption

11

• 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

Phase IV: (2004 - 2008)

12

Phase IV: The 2006 Structural Change

13

• Couldn't compete with disruptive innovations by competitors in the smartphone marketo iPhone

o Android

• New competitors arrived in the networks marketo ZTE and Huawei (China)

Phase V: Present

14

• 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.

Phase V: Present

15

Phase V: Organizational Structure

16

• 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

Virtual Organization

17

Influence of Organizational Structures

18

Nokia’s Process over time

1988- CEO Committed

Suicide

1991-Collapse of the Soviet

Union

1988 1993 1998 2004 2008

Fully digitalization of the networks

Split-up into handset and

network businesses

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

Implementation of an integrated ERP system

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

1998- Process and establishment of NVO

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

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

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

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