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When Dilbert came to Nokia

Fascinating report shows how bureaucratic fear sealed company's fate in 2003

You may have had your fill of Nokia analysis and features, but I'd like to draw your attention to one more - one that's very special. The Finnish daily Helsingin Sanomat has published a report based on 15 interviews with senior staff. It reads like the transcript to an Oscar-winning documentary where the narrative thread is held together entirely by the talking heads.

The report is very long on detail and short on opinionising - and for those of you fascinated by technology and bureaucracy, something quite interesting emerges. What we learn is that the company's current predicament was fated in 2003, when a re-organisation split Nokia's all-conquering mobile phones division into three units. The architect was Jorma Ollila, Nokia's most successful ever CEO, and a popular figure - who steered the company from crisis in 1992 to market leadership in mobile phones - and who as chairman oversaw the ousting of Olli-Pekka Kallasvuo this year.

In Ollila's reshuffle, Nokia made a transition from an agile, highly reactive product-focused company to one that managed a matrix, or portfolio. The phone division was split into three: Multimedia, Enterprise and Phones, and the divisions were encouraged to compete for staff and resources. The first Nokia made very few products to a very high standard. But after the reshuffle, which took effect on 1 January 2004, the in-fighting became entrenched, and the company being increasingly bureaucratic. The results were pure Dilbert material.

For example, have a look at the section which starts here, with "A novel application or feature has been dreamed up that should end up installed in a phone a year from now. This is the beginning of a long day's journey to nowhere."

Innovations produced by the R&D department and designers could no longer be implemented quickly - one example should have taken just a couple of weeks, but instead took months to be incorporated into phones.

Executive managers interviewed note how the result was a large number of indifferent products.

Another consequence was also predictable. It's what political writers call the most morally corrupting effect of bureaucracies: nobody takes responsibility. With the three divisions covering their own backsides, nobody wanted to make the long-term strategic investments necessary to keep platform software up-to-date. This resulted in the Symbian user interface being neglected. Nokia had developed a touch screen UI called Hildon, which became Series 90, starting in 2001 - and that should have been the basis for Nokia's iPhone competitors today. But it was canned in 2005.

"We produced a quite enormous number of rather average products. It would have been smarter to make fewer - and better," says one interviewee.

The masterplan was ripped up by Ollila's successor, Olli-Pekka Kallasvuo, in 2007, but by then the units had become enormously wealthy fiefdoms, and many of the problems remained. Lots of people could veto a decision, but the leadership required to drive one through was absent. Nokia's product pipeline all but dried up in 2009.

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