Nokia’s case of a rapid rise in the mobile phones market with the subsequent quick decline within two decades is among the most prominent examples of how key strategic decisions can lead to a downfall of a large corporate entity. The case is of greatest importance since it illustrates the major roles of innovation, leadership, organizational culture, and structure because these very characteristics of a company can either create a massive competitive advantage or failure. The given comparative assessment will primarily focus on Nokia and its prime competitor Apple with an emphasis on the topology of innovation, leadership, and organizational structure as well as culture.
Topology of Innovation
It should be noted that Nokia failed to maintain its market leadership directly due to the inferiority of its products when compared to Apple smartphones. Prior to the rapid rise of the latter company, Nokia was on the edge of innovation, and it is stated that “by 2007 Nokia produced more than half of all mobile phones sold on the planet, and its Symbian mobile operating system commanded a 65.6 percent global market share” (Cuthbertson, Furseth and Ezell, 2016, p. 111).
In other words, Nokia’s products and the company were heavily dominating the entirety of the mobile phones market. However, innovation requires resources and time in order to be sustainable, which is why Nokia was unable to compete with Apple. The sources suggest with a rapid increase in demand for Nokia’s phone came a need for efficient manufacturing on a mass scale. Therefore, Nokia made a decision to primarily focus on manufacturing process optimization, which led to fewer resources being allocated towards innovation (Doz, 2017). In other words, Nokia became overconfident in its product, where innovation became secondary.
However, Apple, especially at its inception, was the epitome of innovation. The latter not only affected hardware itself, such as sensors and minimal button interface, but also the very notion of a smartphone. The company “realized it wasn’t just about the mobile device itself, it was about leveraging software to create a platform for developing compelling mobile experiences” (Cuthbertson, Furseth and Ezell, 2016, p. 111).
Thus, Apple did not merely sell phones but rather its complementary software, music, computing, applications, and movies. Unlike Nokia, Apple began to “perpetuate a virtuous cycle of making the iPhone attractive to customers over multiple life cycles through ever-expanding feature sets” (Cuthbertson, Furseth and Ezell, 2016, p. 111). Therefore, it is evident that the topology of innovation was at its peak at Apple, whereas Nokia disregarded innovation as non-important, where the latter company mistakenly prioritized manufacturing.
Nokia’s rapid rise to the top in the mobile phone market in the early 2000s was primarily due to its courageous and entrepreneurial leadership and management. However, the company became a victim of its success, where its supply chains became vulnerable due to an increase in demand. The leaders of the company established the business model, where the emphasis was put on incremental success rather than leaps on innovation (Doz, 2017). Although the latter is more demanding in terms of resources, the strategic decisions should have been aimed at such a framework, especially in an industry of technology and computers.
For example, it is stated that “beyond 2004, top management was no longer sufficiently technologically savvy or strategically integrative to set priorities and resolve conflicts arising in the new matrix” (Doz, 2017, para. 13). In addition, Nokia’s leaders were also partly occupied with a search for the “third leg,” which means that the company was trying to diversify and enter new markets without properly addressing all of its current weaknesses, such as overreliance on its efficient manufacturing with a focus on incremental improvements.
Apple’s leaders solely focused on the smartphone or mobile phones, and adjacent innovative actions were centered around these products. The leaders did not make any attempts to enter new markets or diversify without ensuring that their dominance is properly and sustainably supported. Even today, during its peak, Apple is still careful and reluctant to enter markets vastly different from the current one (Cuthbertson, Furseth and Ezell, 2016). The majority of its products still fall in the same category of hardware, software, and platform. Major innovations can only be observed in a narrow set of products. Apple’s leaders strategically value quality and consistency over efficient production and new market explorations.
Organizational Structure and Culture
The overall organizational culture prior to Nokia’s downfall contained a set of negative elements and barriers, which reciprocally discouraged innovation and generated organizational fear. The latter is mainly due to a highly hierarchal structure of the company, where novel and innovative ideas could not reach the top management. It is stated that few years before Nokia’s failure, the company’s leaders were highly temperamental, and thus, middle managers were frightened by them, which led to dishonesty and hindered communication (Brand Minds, 2018).
Top managers were also incompetent in recognizing and acknowledging their failures publicly since they were “afraid of losing investors, suppliers and customers” (Brand Minds, 2018, para. 7). In addition, top managers did not have any form of technical knowledge and competence to be able to properly understand the specificities of proposed innovative ideas, which led to poor judgments and strategic decisions.
In contrast, Apple’s organizational culture is primed for creative innovation, where employees are encouraged to communicate their innovative ideas. The company established specifically designated communication channels to allow all worker input to be recognized and rewarded if they prove to be plausible (Cuthbertson, Furseth and Ezell, 2016). However, the organizational structure of Apple is similar to Nokia’s, which means that it is also hierarchical. It is common for large enterprises to become rigid, inflexible, and hierarchal, but Apple is able to recognize these limitations of its size, which is why the majority of barriers, which can prevent the flow of information and ideas from the bottom to the top, are either eliminated or reduced.
In conclusion, Nokia’s major downfall can be attributed to the topology of innovation, leadership, and organizational structure and culture, which are mostly well-established at Apple. In the case of innovation, Nokia prioritized manufacturing efficiency over it, which rendered its production-related enhancements useless since the product was no longer demanded. However, Apple constantly innovates and creates an environment to encourage such a process. In regards to leaders, Nokia’s top management was technically incompetent, temperamental, and focused on diversification and new market entries without sustainably dominating its own market.
Apple’s leaders recognized the importance of focus and product quality over other goals, which explains its current unparalleled success. In the case of organizational culture, Apple prioritizes creative innovation and creates communication channels to enable bottom-to-top delivery of information, whereas, at Nokia, organizational fear took place. However, both companies are structurally similar since they are both hierarchical, which can be attributed to their sizes.
Brand Minds. (2018) ‘Why did Nokia fail and what can you learn from it?’. Multiplier. Web.
Cuthbertson, R., Furseth, P. I., and Ezell, S. J. (2016) Innovating in a service-driven economy: insights, application, and practice. London: Palgrave Macmillan.
Doz, Y. (2017) ‘The strategic decisions that caused Nokia’s failure’. Insead. Web.