Three_Horizon_Growth_Strategy_for_Google

Executive Summary and Recommendations Nokia a Finnish multinational communications company with 130,000 employees in 120 countries and sales in more than 150 countries, designs and develops mobile devices in the communications and the converging Internet industries. Nokia has been a leader in mobile phones. However its hegemony is being challenged with stiff competition from Apple's iPhone, iPad and smart devices running Google's Android operating system. As a result it has nearly lost 39% of its market share to its competitors and its brand value has been reduced. Worse still increasing awareness and education levels in its current target market (low end phone users) is causing users to pick Android and Apple devices as their “next” device. Nokia's fundamental objective is to increase their market share, as measured by sales revenue, in the global mobile devices market by 20% over the next 3 years. This report aimed at the board of Nokia (Global) proposes an organisational structure to support its (proposed) positioning strategy of “providing tablets and complete customised application solutions on these tablets to enterprises to seamlessly meet their needs for productivity applications, communications and compatibility with legacy systems”. The recommendations are: Transition Nokia into a hybrid structure with differentiation of the different engineering functions integrated in a reciprocal fashion to allow maximum collaboration within the several groups. Set systems and processes in place to transform Nokia's clan and hierarchy culture into an adhocracy culture with an external market focus. Improve HR and people management to attract and retain the best talent and also increase alignment between the needs of the people and the organisation. Replace or transform Nokia's risk averse, leadership to be market aware, risk tolerant and aggressive with a clear focus on results and deliverables. Develop and improve its control systems to influence organisational behaviours to be aligned with the organisational strategy. Nokia's proposed positioning strategy is to provide high performance tablets to large enterprises globally with customised application solutions to meet the enterprises' needs for productivity, communications and compatibility with legacy systems. Nokia will accomplish this by first standardising the tablets' design and form factor and reducing the number of tablet releases annually (this will result in a unified brand messaged to its customer). A standardised tablet design (as Apple has proven) will ensure consistency and reduced defects (due to rapid and possibly erratic changes in its product design). Second, the tablets will be supplemented with an application (app) development platform on which both internal and third-party developers can develop apps and target them to specific enterprises to suit their needs. Thirdly instead of competing with vendor partners, Nokia will develop relationships with them to develop necessary apps (such as security, CRM etc) on top of Nokia's app platform to fill any gaps in services provided by Nokia to enterprises. Finally, Nokia will strengthen its IP (Intellectual Property) management framework to better defend and commercialise it. Nokia has the required capabilities Using functional analysis, Nokia's required strategic capabilities to deliver its PS as: Technology and Product design: Design, Hardware engineering, Software engineering (for Operating Systems, OS, App Store, and Applications development), Research Scientists. Sales and Marketing: Customer and vendor relationship management, market research and advertising, Production and Operations: Supply chain, sourcing, warehousing, distribution, cost efficient manufacturing and online App Store management. Non-core capabilities that Nokia requires (but are still essential and must be high quality) are customer support, recruitment, training, general admin and legal. As a side note even though IP management is essential to Nokia, it is not critical to delivering its PS. This is because Nokia's IP is NOT in the business of patent trolling (ie creating vague patents purely for purposes of licensing rather than supporting tangible implementation of the inventions). Recommendations Nokia has all the required capabilities to deliver the positioning strategy (as evidenced by their current organisational structure and operation in the markets). However due to changes in the competitive landscape the current organisational strategy is misaligned with the PS. The following recommendations are proposed to realign the internal systems, culture, people, leadership and structure to equip the capabilities to deliver the PS. Recommendation 1: Transform Nokia's structure into hybrid structure to support efficient manufacturing and innovative (software) platform development. Nokia's current organisational structure is centered around products (ie low-end phones, smart phones, internet services, symbian, MeeGo etc). Before Apple's stellar entrance into the market, it was common for telecommunications providers to subsidise handsets while locking down on the features running on the phones. This meant handet vendors had to offer a variety of devices to target particular functions and niches (eg phones geared towards “meetings”, phones targetting “games”, phones targetting “socialising” etc). Apple's disruption in this market had meant a prolification of apps on a single phone. A single smart-phone was no longer specific to a single subset of funcionality but instead was “all things to all people”. This change in the competetive landscape meant that Nokia's organisational structure, erected around products, would not allow the convergence onto the single platform to lead the new era of smart-phones with unified purposes and thus misaligned with the PS. Instead it still continues to have several product divisions, often competing with each other. This is further reinforced by its clan culture that promotes internfal focus over an external one. The recommendation is for an organisation that is structured around functional divisions. However the key difference from a classical division based structuring is how the different divisions are integrated. The recommended organisational structure is: The differentiation by functional divisions increases motivation and performance. Collaboration (within the “yellow” regions) is increased in the form of reciprocal integration across the divisions. For instances the technical divisions (while directly reporting to the CEO) also closely collaborate with each other when coming up with new products and designs (eg features offered by the Nokia OS may both influence and be influenced by hardware constraints and design and also by Nokia Apps that need to be developed). At the same time, to ensure market focus, the technical divisions' close collaboration with Marketing ensures that technical outputs are aligned with the needs of the market (eg via market research). Sales and Marketting collaboration is required to ensure that brand being communicated is aligned to the products offered to Nokia's customers and vice versa. Close collaborate and integration across the several divisions ensures teamwork and that outputs are aligned to the PS with a focus on the external market, while at the same time differentiation based on functional divisions promotes an adhocratic culture of innovation. Finally, both mechanistic and organic sub-structures also exist in the organisational structure. Areas requiring standardisation and stability will be mechanistic in structure (eg operations, manufacturing, warehousing etc), where as the technology, marketing and legal areas will employ organic structures. Risks and limitations: The first risk is of possibly opposing concerns and priorities across divisions. For instance legal may be concerned with the patentability (and defence) of certain IP that may or may not be applicable by the technical divisions. Similarly marketting may require features or impose deadlines that may not be realistic from a technical perspective, which may impact product quality and satisfying customer expectations negatively. There is no easy strategy to mitigate this. Only communication of priorities and values and collaboration can overcome this. Again a market focus and transparency can communicate these priorities to the appropriate groups across divisions. Secondly there is the risk of productivity being eroded if close collaboration degenerates into “too many emails and meeting”. This too depends on the situation. For instance, collaboration between sales and marketting could involve less frequent meetings to set agendas and deadlines, where as collaboration between technology and marketing could be more frequent but less intense (for the purposes of product and quality assurance). Finally the proposed structure may be met with resistance with several members of top management as it involves the absorbtion of several existing business units into new ones (eg a single Nokia OS to replace/assimilate the several platform initiatives etc). This can be overcome again with leadership backing and with the use of change agents to drive the benefits of alignment with the PS. Recommendation 2: Foster an adhocracy/market culture that encourages innovation driven by an external market focus. Culture plays an important role in ensuring the capabilities are best utilised to deliver the PS. Excellence and operation efficiencies residing within each of the product groups is not enough. All aspects of the organisational culture must be aligned. Nokia's current culture is unsuitable and is misaligned with the PS. Nokia culture has an internal focus with elements of hierarchy and clan cultures. As is typical of a clan culture, Nokia has focussed on developing a flexible and humane work environment to empower employees and facilitate their participation, commitment and loyalties [Cameron and Quinn 2006]. Similarly the hierarchical aspects of its culture ensure smooth and efficient operations with reduced uncertainties in manufacturing, production and supply chain. These have served Nokia well during its period of market dominance (in mobiles) and the hierarchy aspects of its culture are still conducive to its operations that are standardised and require predictability (like manufacturing, warehousing etc). However as the competetive landscape has changed with more entrants in the mobile phone market, and with a change in the customer demands (from wanting 'commotidized function specififc phones' to 'smartphones with standardised form factors with customisable third-party apps'), intenally focussed cultures are less appropriate. Its internal focus has resulted in teams engaging in redundant (and often conflicting) initiatives (eg its investment in multiple platofrms like MeeGo, Symbian, Qt etc). A lack of external focus may perhaps explain why Nokia has long avoided satisfying market demands of enabling a web browser on its phones. The recommendation to overcome the effects of an internal focus is by utilising leadership styles, KPIs and a focus on teamwork and innovation focussed on the market needs. One of the most elegant ways by management and leadership of influencing cultural change is by setting examples. Management must be willing to embrace and publicly reward efforts (by individuals and teams) on efforts focussing on customer needs and meeting of deadlines. KPIs (reinforced by proposed control systems) must be aligned towards customer needs. One way would be to again base rewards and bonuses on meeting of deadlines as well innovation rather than team well being alone. In order for the members of the organisation to know exactly what is expected of them and their new behaviours, training would be very useful in communiting the expectations as well as in instilling new behaviours. Despite an external focus on the market and a need for a adhocracy culture, it should offer profit sharing instead of individual bonuses to encourage and promote team work. Nokia is not new to change. It has radically changed course several times since its beginning (in the late 1800s). Symbols and stories from Nokia's past could be used effectively used to demostrate Nokia's dire need for change (ie it “standing on a burning platform”), thereby communicating to all its employees the desired culture and its benefits. In many ways the culture of an organisation reflects its founders and leadership teams. It may even be required to replace the leadership team (and remove agents opposing change) if the leadership is obstinate about an internal focus (this is discussed later). Risk and limitations: Changing an organisational culture is very difficult and very slow. It represents a very significant shift to all involved in it. It cannot be achieved without significant and long-term buy-in by all involved otherwise the attempt may result in employee dissatisfaction and resistance to change. This can be mitigated in part by regular communication of the values and benefits of the change while simultaneously engaging change agents to support and drive the cultural shift. Another way to support the change process is with small steps and celebrating regular victories in the market, thereby vindicating the need for the cultural change. Recommendation 3: Revise HR and People management practises to attract and retain best talent. Nokia's key groups are shown below classified by their strategic centrality (horizontal axis) and uniqueness (vertical axis): |Alliances/Parternships |Knowledge-based Employment | |Lawyers |Leadership, Top management, Research Scientists, Sales, | | |Marketing | |Contract Work |Job-based Employment | |Admin, Support Staff, Factory Assembly, maintenance. |UI Designers, Accounts Managers, Vendor relationships | | |managers, Hardware and Software Engineers | Current people management does not support enough discretion or input into decision making from R&D, sales or marketing teams. As a result a focus on the market is not easily attainable. This has resulted in market needs being ignored several times (again by knifing initiatives to bring an internet ready phone to the market before the iPhone). Recommended People Management Leadership, sales, marketing and research teams are strategically important as well as unique and are core to Nokia. Nokia's PS is built around the values added by this group of individuals (ie research in tablet design, sales and marketing for vendor and brand management). Hence they are best utilised with knowledge-based employement. HR must heavily invests in their training and development, especially in skills specific to the firms. Since they possess valuble and unique knowledge, the structures must also flexibility and adaptibility (the collaboration acrosss the technology, marketting and legal units allow this). Their participation in decision and job descretion are very conducive to maximise their contribution and align their goals with that of the organisation. To support development and use of firm specific skills, appraisal systems must focus on development and feedback and reward schemes must emphasis long-term commitments (eg in the form of stock options and long term goals). Engineers, account managers and designers are strategically central. However their uniqueness is limited. Hence they are based utilised with Job-based employment. Usually Nokia will not need to provide firm specific training but it is still in Nokia's best interests to ensure that attrition is low in this group (to keep they away from competitors). While pay could be based on market rates, incentives could be set on near term (but frequent) productivity targets. Job rotation across technical areas (such as OS, Apps etc) could provice further avenues for self-actualisation. Lawyers are important for Nokia, however they are not strategically central because IP for Nokia is a matter of defence rather than purely as an offensive vehicle. Nokia is trying to be in the business of delivering high quality tablets, instead of generating large volume of patents to extort licences from third-parties. However, the skills of the IP teams are highly valuble and unique and will be utilised through Alliances or Partnerships. Nokia will have to invest in relationships more than in training for those in this group as the emphasis is on collaboration and sharing of non-firm specific knowledge. Appraisal systems and incentives would revolve around the quality and quantity of information sharing and relationship building (eg advice on IP and legal matters etc). Finally high quality support and productive factory staff are not strategically central nor unique on their own but merely an entry to play and can be utilised in a contract-based fashion. So Nokia can focus on the economic needs of the contract workers (Roussau, 1995). The outcome for Nokia is standardised processes, procedures, rules and regulations. Autonomy of these workers would be minimal. Remuneration may even be wage based or based on completion of specific tasks. The above people management recommendations must be supported by a strategically proactive HR that focusses on hiring (before need arises) and retaining the best talent (from being poached by competitors), being market aware and identifying possible M&A possibilities and continually tracking the state of the capabilities with the marketplace and the PS. The biggest risk is that HR's autonomy and proactiveness may not have leadership buy-in. This is best addressed with a transformation of the leadership as described in the next recommendation. Recommendation 4: Transform top management and leadership to support the proposed culture. Nokia's trouble arises from mismanagement rather than lack of innovation. Nokia's current leadership exhibits all of the strategic leadership dimensions (Bolman and Deal 1997) however they are misaligned to deliver the PS. The main failing of the Structural aspects of current leadership is in lacking an understanding of the mobile and tablet market (perhaps due to beliefs or invalid market research systems). They still feel it is about flooding the market with a multitude of devices rather than developing an overarching uniform platform. The current organisation structure still revolves around this outdated understanding of the market. This flows onto a lack of appreciation of the relationship between structure, stategy and the market. Adversly this affects behaviours by focussing on cost cutting and reducing training instead of supporting innvotive efforts already in place. The recommendation to improve this dimension would be for leadership to first “do their homework” and understand the environment, to formulate an appropriate strategy and to device the structure that supports the strategy. It is essential (for leadership) to regularly experiment with the structure to ensure environment fit is being achieved (ie be flexible so that a centralised structure at tough times and decentralized structure at good times is possible). The risk with excessive dependance on this dimension is that issues that fall outside the rational scope of tasks, processes, org charts etc may be ignored, resulting in derailment by symbolic, political and HR barriers. This can be mitigated by regularly getting acceptance and forming task forces to address major issues. Gaps in the HR aspects of current leadership manifest themselves in the form of insufficient communications, reduced respect for the individual needs and lack of empowerment. Nokia's clan culture has historically focussed on its people's well being. However, poor market performance has resulted in vague and uncertain communication and cost cutting, adversly affecting empowerment and satisfaction of its people. The recommended HR leadership approach is to support empowerment, open communication and self-actualisation (by listening to their needs and goals and communicating concern and empathy). This is effective when leadership believes that its people have the autonomy and discretion to perform their jobs well. Also leadership must be “accessible and visible” to its people to display confidence regarding the future. The risk of an excessive HR bent may mean ignoring the realities of time and resource scarcity and pandering to the growth and collaboration needs of individuals. Avoiding this needs leadership understanding, belief in the strategy and balancing the needs of the individual and the organization Nokia is no stranger to politics. The political aspects of current leadership mean projects that are often conflicting or redundant cannot easily be scraped. Conflicting agendas also has resulted in Nokia being unable to support the proposed structure (which was proposed to the support the PS). Strong political leadership will be required to drive the proposed structure. The recommended political leadership qualities are recognition of the key players (eg the existing OS leaders of Meego, Symbian, Qt etc), building ties with them and managing conflicts effectively (ie their transition into a unified OS platform group with compromises). Nokia's leadership can achieve this by building and using power carefully and understanding that not every group's wants can be satisfied but instead crafting reasonable compromises. The risk in this is that compromises may not be achieved easily and several players may simply block initiatives with “inaction” or strong ties. To get past this strong board backing must be sought with effective relationship building. Also too much politicking may miss opportunities for collaboration and rational discourse. Nokia's current symbolic leadership aspects could be too strong and outdated to deliver the PS. Nokia has changed course several times in its history, however its stories from its history are nudging itself into an internal focus and preventing it from listening to the market (as a result of pride). The recommendation to overcome this is to focus on the building a new “story” and using past successes merely as reminders of Nokia's abilities. If necessary the most appropriate parable to cohesively rally the troops would be that of the cornered mouse or the “man standing on the burning platform”! The risk is that an over-reliance on symbolic leadership may cause more harm than good if the sysmbols are vague, unclear or contradicting. Recommendation 5: Develop and improve its control systems to influence organisational behaviours and boundaries. Like its leadership dimensions, Nokia has elements of the four control systems (Simons 1995) in place but the are misaligned with the PS. The recommendation here are focussed around systems to drive and support the recommended culture of externally focussed innovation. Given the current internally focussed clan culture, the current control systems measure metrics around individual business units rather than providing a holistic view (as is required for a adhocractic culture). Nokia's current belief systems support innovation, however they need to be adjusted so that innovation is focussed on the needs of the market. However belief systems must also be used to drive behaviour focussed on operational efficiencies in the warehousing and manufacturing areas. Current diagnostic systems focus on the wrong metrics such as progress across more products (ie more devices and more platforms). With a change in the strategy (fewer types of hardware but with a unified and more versatile software platform), diagnostic systems must change to measure qualitative software and hardware issues, along with quantitative sales and marketing targets. Currently boundary systems are dormant as the belief systems themselves are stiffled given the organisational structure and leadership. However with the proposed organisational implementation, boundary systems must ensure ethical behaviour by sales and marketting teams (to prevent individual competition over collaboration) and engineering rigor and discipline. This (coupled with market oriented diagnostic systems) will ensure that the efforts by sales and marketting are directed towards market capture rather than internal competition based on commission maximising. This will also ensure that customers' high expectation of the brand and the product quality is maintained. Finally all these need to be supported by and support the interactive systems that capture both a micro and macro view of market conditions and changes to the competitive landscape (eg reputation, competitors, new technologies, customer demands etc) and communicating them to all levels of the organisation. Interactive systems track strategic uncertainties (such as customer tastes, market conditions etc). Simply tracking these is useless if the other three control systems do not encourage reacting to these changes or encourage misaligned reactions. Similarly how managers react to interactive systems can influece the other systems (eg managers who react to market data with openness rather than fear encourage belief systems that embrace innovation and risk-tolerance). A key risk with changes to the control systems is the cost associated with their implementation. These systems do have long term benefits and cannot be skimped on. Also the benefits of the systems (and changes) must be communicated to all key stake holders and participants to ensure resistance is minimised. Success stories in the industry (and examples of failures of inaction) can be used effectively to communicate the benefits. As with all other parts of the organisational implementation, the systems themselves must be continually reviewed in light of both internal and external contexts and must be altered to suit the conditions. For instance, boundary systems may themselves be tightened or loosened based on market conditions (bad times vs good times). The flexibility is easier to achieve if these expectations are built into the belief systems! Conclusion The recommendations in this report provide the building blocks of organisational change to ensure alignment of the systems, structure, people, culture and leadership with the capabilities to the positioning strategy. The recommendations revolve around a change in the organisational structure to balance differentiation of skills and the integration across units to ensure collaboration and innovation. Cultural recommendations are geared towardss more external focus to ensure alignment of individual and organisational needs. HR processes must be improved (or developed) to allow management of people based on their uniqueness and value. Systems must also be improved or changes to promote the right behaviours and tracking of metrics as required by the desired adhocractic/market cultures. Finally leadership, the main element underpinning the above changes, must be developed as proposed across all the four disciplines. Organisational changes are hard to implement and ever harder to measure and track. 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