Posted: April 20th, 2022

Nokia, today’s telecommunications networking

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ARTICLE
STRATEGY
Can Nokia Reinvent
Itself Again?
by Rita Gunther McGrath
STRATEGY
Can Nokia Reinvent Itself
Again?
by Rita Gunther McGrath
APRIL 16, 2015 – Research Paper Writing Help Service
Nokia, today’s telecommunications networking
company, has made corporate transformation into an
art form. Established originally in 1865, as a paper
mill, it became a public company in 1868. Over
ensuing decades, the company expanded into an
ever-more-bewildering array of product categories.
Often entering new categories through acquisition, at
one point it made rubber boots and tires; telephone
and power cables; even household products like toilet
paper (I’ve seen them myself). But it was power
generation that helped Nokia survive its first
existential crisis: in the aftermath of World War I, the
company threatened to go bankrupt and was acquired
by a significant customer, Finnish Rubber Works, in
order to maintain its power supply. (That’s where the
rubber boots came from.)
In the following decades, the company operated as an
industrial conglomerate, with different divisions
operating more or less independently and without
too much rhyme or reason under one roof (it is hard
to make the connections between footwear, gas masks, and robots). As the company explored new
markets, it began to make additional investments in pre-cellular mobile radios and other
componentry in the emerging market for mobile communications.
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By the late 1980s and early 1990s, the highly diversified company had once again gotten itself into
real trouble, helped not one bit by a deep recession in Finland. Another existential crisis was well
underway. Friends have told me that the company even tried shopping itself to rival Ericsson, to no
avail.
In 1992, new CEO Jorma Ollila and his team made a decision that is iconic in the world of corporate
reinvention, going all-in on the emerging telecommunications markets. The company (finally)
divested its paper plants, downsized its consumer electronics, and within a couple of years sold its
power unit, television, and tire and cable units. The ensuing focus on creating a leading position in a
rapidly growing global market created legendary results, with Nokia soaring to the number-one
position in the mobile phone category throughout the nineties.
Interestingly, as a member of the Executive Committee later told me, the decision was far easier than
the choices the company faced as it enjoyed spectacular success later on. “We had virtually no good
options [then], so it was relatively easy to move forward aggressively into the mobile business,” he
told me.
Of course, we know what happened next. Despite a record of success that is the envy of many a
corporate chieftain (41% market share globally? that’s unbelievable), Nokia’s leadership failed to see
the potential of the smartphone business, with its “Internet in your pocket” allure. They didn’t
introduce smartphones to the market (which, ironically, they had actually developed) but even
worse, they lumped the regular mobile phone business and the smartphone business together in the
same division. What that led to is familiar to any student of corporate entrepreneurship: the big,
established business basically rolls right over the emergent ones, with the result that when
competitors such as Apple and Samsung took the world by storm with smart phones, Nokia was
caught …at-footed.
After struggling unsuccessfully to regain its former glory, the firm has once again made an existential
choice, selling the entire mobile phone division to Microsoft, where its software and brand are slated
to disappear. Three businesses are left – the networks business, which serves many of the world’s
major telecommunications companies, a mapping business, and Nokia technologies, which
(astonishingly) is once more tiptoeing back into the consumer electronics space with an Androidpowered tablet it plans to sell in China.
But lo, do we see the re-emergence of the company’s fabled ability to reinvent itself? News that Nokia
is considering acquiring Alcatel-Lucent might well be part of an effort in that direction. The two
companies would create enough heft to challenge Ericsson and China’s Huawei. In addition,
combining their technologies would fill in gaps in their capability portfolios that could make the
combined company a major player in the fastest-growing parts of the tech world, such as on-demand
streaming and cloud computing. The possibility of making its telecommunications business into a
major focus is reinforced by recent rumors that it might sell off the mapping business.
3
The playbook sounds familiar. Select an area of focus, ideally one that is poised to grow rapidly.
Figure out how to create the scale and capability to succeed in that area. Sell off those businesses that
are distractions from this focus. Be prepared to make some pretty di‡cult decisions. Perhaps history
will repeat itself in Nokia’s favor.
Rita Gunther McGrath, a Professor at Columbia Business School, is a globally recognized expert on strategy in uncertain
and volatile environments. She is the author of the book The End of Competitive Advantage (Ace my homework – Write my essay – Harvard Business Review
Press).
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H020M2 REPRINT
HBR.ORG PUBLISHED
ARTICLE STRATEGY APRIL 16, 2015 – Research Paper Writing Help Service
Can Nokia Re-Invent Itself?
Rita Gunther McGrath’s
STRATEGY
Can Nokia Re-Invent Itself?
Rita Gunther McGrath’s
16 APRIL 2015 – Research Paper Writing Help Service
Nokia, the world’s largest telecommunications networking company, has elevated corporate transformation to an art form. It began as a paper mill in 1865 and became a public company in 1868. Over the years, the company expanded into an ever-expanding range of product categories.
Often entering new categories through acquisition, it once manufactured rubber boots and tires, telephone and power cables, and even household products such as toilet paper (which I’ve seen in person). However, it was power generation that enabled Nokia to survive its first existential crisis: in the aftermath of World War I, the company faced insolvency.

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