This is an important book, detailing how Nokia changed its strategy, by exiting the hand-held mobile phone business, where it was once the global leader, for then to expand into the business of networks for supporting mobile telephony through base stations, becoming one of the global leaders here, after Ericsson and Huawei. It was thus a transformation that indeed might be considered to be one of the most dramatic makeovers in modern business today. The book, written by Nokia’s chairman, Mr. Risto Siilasmaa, illustrates how the company’s board of directors, above all lead by its chairman, played a key role when it came to successfully making this strategic transformation.
The author details this transformation, driven by his, the boards and the management’s paranoid optimism. Interestingly, much of the transformation was built on cooperation with business giants such as Microsoft, Siemens and Alcatel-Lucent. In the end, a new culture had to be created, above all, built on trust, according to the author.
The author details how Nokia came back from virtually being eliminated to a new success. Learning seems to have been a key part of this, and the author outlines how learning seems to have shaped the “new Nokia” in several ways. Thus, the power of paranoid optimism and the precepts of “Entrepreneurial Leadership” built sustainable success.
The book falls into two parts. During part one, the first eight chapters, the author discusses what might be key lessons for how a firm’s board of directors and its top management might not be able (or willing) to see danger clouds on the horizon, even when accumulating more and more! In the second part, the remaining 11 chapters, the author outlines how Nokia actually went about to reposition itself. The author had become chairman of Nokia’s board then. The author emphasizes that we might all be able to learn from this dramatic transformation process. He provides useful summaries of key learning points throughout, and also provides useful wrap-ups at the end of several of the chapters.
The author summarizes key learnings from previously having been hugely successful to becoming unable to admit or even see upcoming mistakes:
- Bad news does not reach you or your team.
- Your team does not appreciate negative news, even when based on facts.
- Ameliorating decisions are postponed and watered down.
- There is often a plan A, but no alternative plans B, C, or D!
A culture that is driven by data analysis and regular deep dives is called for!
The rest of the book, detailing Nokia’s actual transformation is indeed the part that was the most interesting to this reviewer. When taking charge in a crisis, the author, cum chairman sees ten key, critical aspects of entrepreneurial leadership:
- Hold yourself accountable.
- Face facts.
- Be persistent.
- Manage risk, i.e., with open eyes and in a deliberate, analytical way.
- Be a learning addict.
- Build a team of people you like and respect.
- Ask why.
- Never stop dreaming.
- Maintain focus.
- Look to the horizon.
The three last dimensions here might sum up what paranoid optimism entails!
The author further reflects on what paranoid optimism might entail when he looks back at the negotiations with Microsoft, which ultimately lead to the sale of the hand-held telephony business to Microsoft – a bold move indeed! Over time, it also turned out that this became one of Nokia’s best moves! Here is the essence of a successful paranoid optimist’s negotiation tactics:
- Maximize face time, in contrast to virtual communication.
- A small negotiation team.
- Meeting counterparts, i.e., chairman to chairman, CEO to CEO, CFO to CFO, etc.
- Prepare negotiation tactics in advance.
- Be systematic and clear.
- Keep the board on board!
- Maintain negotiation momentum.
- Asking boldly what is needed.
- Relationship building.
- Avoid being trapped by one’s own ego.
- Create trust.
The issue of creating trust is of course equally relevant inside the company’s own organization. Key issues here are:
- Never lie.
- Admit openly that you cannot talk about a given topic, and explain why, if possible.
- Say the maximum you can! Get across that you are doing your best.
- Discuss the upcoming process that might be taken.
So, it is all about developing an organizational culture which drives the way one is operating, built around being paranoid optimists, of course:
- Accountability.
- Scenario-based thinking.
- Trust.
- Stay calm.
- Laughter.
Nokia’s leaders deserve high marks for entering into strategic alliances with several of the world’s most prominent corporations, such as Siemens, Microsoft and Alcatel-Lucent. Here are a few observations:
NSS (Nokia Siemens Networks). This merger between the two companies’ network businesses, created in 2007, was largely driven by the fact that the investments needed in 3G and 4G was too large for each company alone. But the two companies’ cultures differed dramatically, with Siemens being much more formalistic, perhaps more bureaucratic, one might say.
Microsoft was understandably driven by its aspiration to develop a viable business for hand-held phones to realistically compete with Apple and Samsung. For them, a wholly owned strategy was probably more attractive than to build such a strategy on a joint venture with Nokia. Hence, in the end, Microsoft bought out Nokia, on quite favorable terms to Nokia, it might be said.
Alcatel-Lucent. By combining with this group, Nokia’s new entity might be in a better position to compete against Ericsson and Huawei in network businesses. But this added immense additional cultural challenges, with the company effectively now being Finnish, French, American, Chinese, etc. Only 1% of Nokia’s 1999 workforce were still with the company! But, so far, it seems to work!
In conclusion, this reviewer is left with a deep sense of admiration for what Nokia seems to have successfully done. Paranoid optimism seems to work! This seems to be a key element in successful entrepreneurial leadership! Open-mindedness, learning and a “can-do culture” also seem key – Finnish sisu!