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 phases3.The use of Virtual Organizations4.The impact of the organizational structure on the agility

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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

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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

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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

Phase I (1988 - 1992)

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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)

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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”

Phase II (1993 - 1997)

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"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

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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)

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Organizational Structure:

Phase III (1998 - 2004)

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• 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

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Phase III: 2001 Disruption

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• 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)

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Phase IV: The 2006 Structural Change

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

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

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.

Phase V: Present

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Phase V: Organizational Structure

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• 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

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Influence of Organizational Structures

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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