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Organizational agility in the Adaptive Cycle
case study:
Konstantins BabahodzajevsArvind Bihari Mouade Boussaid Martin JornaAlexandre Pinheiro
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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
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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 iPhone
o 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”
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Thank You For Your Attention!
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Q & A
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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