All companies make mistakes but success – especially huge success – can blind companies to their mistakes until it’s too late to recover. Risto Siilasmaa, Chairman of Nokia, shares hard-earned lessons from Nokia’s near-death experience in 2012: How to recognise and prevent the toxicity of success.
When I joined Nokia’s board of directors in 2008, Nokia was on top of the world. In the late 1990s, Nokia had emerged from obscurity to become a powerhouse in the hottest new industry of the time: mobile phones. Its phones had cutting-edge technology and sexy designs, and people around the world were gobbling them up. The company owned over half of the global smartphone market. It had better brand recognition than Toyota, Intel, Walt Disney – better even than McDonald’s.
Four years later, Nokia was fighting for its life. Blindsided by the iPhone and Android operating system, the company that once sold more cell phones than anyone else in the world had lost over 90 percent of its value. By the time I was appointed Chairman in May 2012, we had announced two profit warnings in three months. The value of the entire business was less than the value of our patent portfolio. Many industry analysts were predicting that Nokia might go bankrupt.
It’s easy to say that Nokia was caught by surprise. But that’s not true. Nokia was very early with all the technologies that ended disrupting us. For example, we invented the App Store – and Apple is still paying us licensing fees. We had some of the first touch devices, including a separate operating system for touch devices, which was discontinued. In 2006, an internal brain trust was asked to name the ten things that Nokia would miss next. Number one on the list was an iPod with mobile connectivity, which is basically an iPhone.
So we can’t say we didn’t foresee all of this. We did. We just didn’t act. What made us so slow to understand the threat and unable to mitigate it?
A significant factor was the toxicity of success. All companies make mistakes but companies blinded by their own success may be unable to admit or even see those mistakes and therefore become culturally unable to recover. Put another way, overwhelming success can lead to the assumption that past success guarantees future success. Call it arrogance or complacency: Either can be fatal.
About the Author
Risto Siilasmaa is the Chairman of the Board of Directors of Nokia Corporation since 2012 and was interim CEO in 2013 and 2014. As Chairman he led Nokia through its transformation from an ailing devices company to a successful network infrastructure player through the divestiture of the Nokia device business to Microsoft and the acquisition of Nokia Siemens Networks and the acquisition of Alcatel-Lucent. He is also the author of TRANSFORMING NOKIA: The Power of Paranoid Optimism to Lead Through Colossal Change as well as the founder and chairman of F-Secure Corporation, a Finnish cybersecurity company.