Managing Change Semester I 2016: Case Study for Assignment 2 Nokia: A Slimmer Management Model In February 2011, Nokia's Chief Executive Stephen Elop warned employees \"Nokia was standing on a burning platform\". A few days later, he announced the leap: a controversial alliance with Microsoft in smartphones to build a 'third ecosystem' to rival Apple and Google's Android, and an accelerated pursuit of the \"next billion\" consumers in the emerging markets. At that time, there were still a few inside Nokia who doubted the situation was that dire. The company was, after all, the biggest handset manufacturer in the world. It was still infected with what one senior executive called \"the arrogance of Nokia\". However, those who could not smell the smoke, quickly felt the flames as Nokia implemented a deep restructuring. Since then, Mr Elop has sort to tackle a trio of internal challenges: to become more open, more accountable and more agile. The most important question Mr Elop had to answer was 'will consumers buy Nokia's phones in sufficient quantities to guarantee its future'? Mr Elop is often asked if he has a \"Plan B\" if the Windows plan falters, but there were, and are, few other options short of a break-up of the whole company. The choice of Android as a smartphone platform would have led Nokia into a fragmented, commoditised, overcrowded market. The Microsoft deal was the only strategy that was available to Nokia. Nokia had adapted its structure and cost base to this reality. The company, which employed about 65,000 in 2011, now has 45,000 staff. It has closed or consolidated 200 out of 500 sites worldwide. Nokia used to launch 50 products a year. It now introduces less than 25. Some analysts interpreted it as a sign of the depth of Nokia's plight, but corporate controller Kristian Pullola says the decision signalled \"nothing is sacred when it comes to driving the focus on cash\". Later that year, Mr Elop announced a further 10,000 job cuts. The share prices fell 83 percent, and Samsung snatched the mantle of the world's biggest handset makers. In January 2013, Nokia cancelled its dividend for the first time in its 148-year history. Executives say what looked from outside like a deepening crisis reinforced Nokia's determination to reform its overcomplicated management systems. Mr Elop claims to have increased the \"intensity of execution\" of the strategy. 'Focus' is the word the Nokia executives kept repeating. For instance, Jo Harlow, who leads the smart devices division, has mapped Nokia's management structure against that of its US partner, to improve efficiency. Nokia created the roles of Programme Manager, Head of Quality and Head of Engineering to match similar roles at Microsoft. Under the old Nokia system, the company would have to choose between an innovative product, brought to market late, or a punctual product with less innovation. One reason was that decisions that should have been taken locally got stuck at a committee level at headquarters. But in the \"controlled mania\" of producing a first Windows phone by 2011, Ms Harlow says Nokia learnt to 'give the teams the authority to run faster'. At the same time, the company, guilty in the past of overcomplicating new products, has made choices not to do something just because they could, in refining the Windows platform. Juha Akras, Nokia's head of human resources, says one side effect of becoming smaller is greater cooperation. To his surprise, internal measures of staff satisfaction have continued to improve, even during the gloomy first half of 2012. But Nokia has also faced setbacks, notably in its attempt to strengthen the second pillar of its strategy: to sell more mobile phones in fast-growing markets such as China and India. The company admits it was slow to bring its more innovative full-touch feature phones into these markets in the first half of 2012, allowing Samsung and HTC to steal market share. In June, Mr Elop put Juha Putkiranta, in charge of factories, supplies and logistics, and Chris Weber, new Head of Sales and Marketing, into the senior leadership team. Board would now report directly to the Chief Executive. \"We really ratcheted up the degree to which the senior leadership and layers below were involved in what was going on, " Mr Elop says. A "change task force", put in place in 2011 became a turnaround leadership group last year as it became clear. Mr Pullola says, that Nokia needed to become even more disciplined and focused on cash control. Outsiders still worry that supply chain shortages - such as the group's inability to get enough Lumia phones into shops in China for the New Year holiday - indicate deeper problems. Nokia replies that demand exceeds expectations. Technology companies also have a long history of crimping Supply as a marketing ploy, but analyst Mr Windsor says it is clear that at the very high end, they aren't the customer of choice for suppliers. Will customers buy it? More worrying is that new Nokia Smart phones are not yet the device of choice for customers. Marketing remains their weakest link in terms of being able to read again that 'wow' factor, says Gartner's Carolina Milanesi. While Nokia's share of the market for more affordable mobile phones slipped just over four percentage points between 2011 and 2012 to 19.1%, its smart phone share dropped from 17.9% to 5.8%. Better fourth-quarter results than expected, published last month, did show the first positive underlying profit margin in the core mobile phone business for a year - as well as an improvement in its net cash position. Following last year's collection of course in full touch feature phones, these more affordable devices - sold under the sub-brand Asha (meaning hope) - are selling better, and a revived Nokia Siemens networks provided unexpectedly strong support to the group. The sales of Windows phones were in line with expectations. Given the amount Microsoft is spending to market its wider operating system, Ms Harlow believes the customer is just starting to appreciate the advantages of Windows 8 when used on computer, phone and tablet. \"The amount of effort going into Windows 8, the amount of advertising - that is going to help,\" adds Mr Elop, who on Monday announced new affordable Windows models and also said that Nokia was winning more corporate business. But, Pekka Yla-Anttila, research director at ETLA, a Helsinki economic think-tank, says the 'alliance with Microsoft isn't yet flying... No one can say whether it will succeed or not - even six years ago we didn't know anything about iPhones.\" In an effort to differentiate Nokia's products, Mr Elop has pushed the company to emphasise how the new phones will improve customers' lives. He suggests to sales staff, for instance, that, rather than detailing the technical attributes of the Lumia phone's cameras, they should say \"it takes better pictures at night": " If you go into these store and look at these devices, it's hard to tell most of them apart. You can look at a piece of paper next to them and see its got a Snapdragon quad-core blah blah blah...[Instead], we asked 'What are the improved customer experiences that really make a difference?' Pankaj Ghemawat, global strategy professor at IESE business School, compares Nokia's broader challenge with that which faced Nintendo in the early 2000s when it was trying to get ahead in the videogame market. Incremental changes was not sufficient to outstrip feuding rivals Microsoft Xbox and Sony PlayStation, so the Japanese company came up with the revolutionary Wii. Nokia \"has to build a city and the bridge to get to it at the same time\Managing\tChange Semester\t1,\t2015 Strategy as\tChange Today's\tFOCI Approaches\tto\tStrategy Views\ton\tSTRATEGY\tand Strategic MANAGEMENT PRESCRIPTIVE &\tANALYTICAL Strategic APPROACH PLANNED &\tEMERGENT\tStrategy Key\tConcepts:\tStrategy and\tStrategic Management STRATEGY... exemplifies\tthe Rational-Purposive approach\tto\tchange Strategy \"The\tpattern\tor\tplan\tthat\tintegrates\tan\torganization's\tmajor\tgoals,\tpolicies,\tand action\tsequences\tinto\ta\tcohesive\twhole\" Mintzberg, H. 1994. The Rise and Fall of Strategic Planning, New York: Free Press \"The\tdecisions\tand\tactions\tthat\tdetermine\tthe\tlong-run\tperformance\tof\tan organisation\" Robbins et al. 2008. Management, Frenchs Forest: Pearson Strategic\tManagement \"The\tprocess\tof\tformulating\tand\timplementing\tstrategies\tto\taccomplish\tlong term\tgoals,\tand attaining\tand\tsustaining\tcompetitive\tadvantage\" Strategic\tBusiness\tUnits\t(SBUs) A\tdivision\tof\tthe\torganisation\twith\ta\tunique\tbusiness\tmission,\tproduct\tline\tand competitors. Three\tBASIC\tVIEWS of\tstrategy - Johnson\t(1987): The RATIONALISTIC view: - views strategy as the outcome of a series of pre-planned actions designed to achieve the stated goals of an organisation in an optimal planning fashion. The ADAPTIVE or INCREMENTAL view - which sees strategy evolving through an accumulation of relatively small changes over time. adaptation The INTERPRETATIVE view - which sees strategy as the product of individual and collective attempts to make Sense-making sense of, i.e. interpret, past events. Johnson (1987) Strategy - Mintzberg et\tal\t(1989) Five definitions: Strategy as... Plan - Intended\tactions Ploy - Manoeuvre Pattern - Consistent\ttrend\tof\tbehaviour Position - Avoiding\tcompetition Perspective - Common\tview. STRATEGY (Johnson\tand\tScholes,\t1993) Concerns\tthe\tfull\tscope\tof\tthe\torganisation's activities. Is\tthe\tprocess\tof\tmatching the\torganisation's activities to its\tenvironment. Is\tthe\tprocess\tof\tmatching\tits\tactivities\tto its\tresource capability. Has\tmajor\tresource\timplications. Affects operational\tdecisions. Is\taffected\tby\tthe\tvalues\tand\tbeliefs\tof\tthose\twho\thave power in\tthe\torganisation. Affects the\tlong-term\tdirection\tof\tthe\torganisation. Strategic\tManagement Strategic\tmanagement\tis\tconcerned\twith\tcomplexity\tarising\tout\tof ambiguous\tand\tnon-routine\tsituations\twith\torganisation-wide\trather than\toperations-specific\timplications.\t...\tNor\tis\tstrategic\tmanagement concerned\tonly\twith\ttaking\tdecisions\tabout\tmajor\tissues\tfacing\tthe organisation.\tIt\tis\talso\tconcerned\twith\tensuring\tthat\tthe\tstrategy\tis put\tinto\teffect.\tIt\tcan\tbe\tthought\tof\tas\thaving\tthree\telements\twithin\tit ...\tunderstanding\tthe\tstrategic\tposition\tof\tan\torganisation\t(analysis), strategic\tchoices\tfor the\tfuture\t(choice\tand\tplanning)\tand\tturning strategy\tinto\taction\t(implementation). (Johnson and Scholes, 2002: 15-16) Strategic Management Strategic ANALYSIS Strategic CHOICE Strategic ACTION Continuous\tIterations Strategic\tPosition /\tAnalysis STRATEGY development\tcan commence\tat\tany stage\t- not\tonly\twith analysis (though\tit\tis preferable) Strategic\tChoices Strategic\tinto\tAction Implementation Johnson, Scholes\tand Whittington (JSW) (Prescriptive\t&\tAnalytical;\tPlanned\t&\tEmergent) The\tPRESCRIPTIVE view ...a\tcontrolled,\tintentional\tprescriptive\tPROCESS Strategy... Analysis\ttools: SWOT ProductMarket\tmix BCG GrowthShare\tmatrix Is\tan\teconomic-rational process Matches\tproducts\tto\tmarkets Uses\tmathematical\tmodels\tof\ttrends Is\ttop-down Consists\tof\tdetailed\tplans Drives\tchange. Comprised\tof\t3\tschools... Planning (Igor\tAnsoff) Design\t(Kenneth\tAndrews) Positioning (Michael\tPorter) The\tANALYTICAL view ...the\tOUTCOME of social\tand\tpolitical\tprocesses Strategy... Is\tthe\toutcome\tof\tpolitical\tand\ta\tsocial\tprocesses Emerges from\tthe\tcontinual\tstream\tof\tchoices organisations make\ton\ta\tday-to-day\tbasis\t(is\tabout\tintent - 'strategic intent') Is\tbottom-up\tand\ttop-down Choice is\tconstrained by\tstructure,\tresources,\tculture\tand vision Emerges\tfrom\tchange. Analysis\ttools: Vision\tbuilding Scenario planning Approaches\tto\tSTRATEGY In\tsummary... PRESCRIPTIVE Planned,\trational, quantitative Strategy DEVELOPMENT (analysis\t&\tchoice) Strategy IMPLEMENTATION Rational\tanalysis\tof\tdata: external\tmarket\ttrends,\tto\ta lesser\textent\tinternal\tresources and\tcapability ANALYTICAL Intuitive\t(less\tplanned), interpretive\t/\tsense-making Affected\tby\tvalues,\tbeliefs, vision,\tbeyond\trational\tdata analysis Tools focus\ton\tbuilding\tstretch visions\t&\tdevelopment\tof plausible\tscenarios\t(creative leaps\tfrom\tthe\tpresent\tinto\tthe future) Cannot\tbe\tfully\tplanned; allows\tfor\tunpredictability, complexity, responsive\tand\tadaptive\tto unanticipated\tevents\t(Emergent) Tools focus\ton\tanalysis\tof objective\tdata\t(future is extrapolated from\tthe\tpresent) Deliberate,\tpre-planned\taction (Rational\tplanning) (Prescriptive\t&\tAnalytical;\tPlanned\t&\tEmergent) Planned and\tEmergent strategies Deliberate strategy focuses on control - making sure that managerial intentions are realized in action - while emergent strategy emphasizes learning - coming to understand through the taking of actions what those intentions should be in the first place. ... The concept of emergent strategy ... opens the door to strategic learning, because it acknowledges the organization's capacity to experiment. A single action can be taken, feedback can be received, and the process can continue until the organization converges on the pattern that becomes its strategy. (Mintzberg et\tal, 1998a:\t189-190) 'Umbrella strategies' [Some\torganisations\tpursue]\t...\tumbrella\tstrategies: the\tbroad\toutlines\tare\tdeliberate\twhile\tthe\tdetails are\tallowed\tto\temerge within\tthem.\tThus\temergent strategies\tare\tnot\tbad\tand\tdeliberate\tones\tgood; effective\tstrategies\tmix\tthese\tcharacteristics\tin\tways that\treflect\tthe\tconditions\tat\thand,\tnotably\tthe\tability to\tpredict\tas\twell\tas\tthe\tneed\tto\treact\tto\tunexpected events. (Mintzberg,\t1994:\t25) Strategy: Choices\t&\tConstraints Figure 6.4 Constraints on managerial choice In\tSTRATEGY Managers\thave\tchoice... ...but choice is constrained by National\tobjectives,\tpractices\tand\tcultures: Industry\tand sector\tnorms: INSTITUTIONAL perspective\ton change That's\tit\tfor\ttoday! Lecture\t7 Management vs. Leadership Transactional and Transformational 'leadership' during change Managerial\troles\t(Mintzberg 1975) 1. The\tInterpersonal role Figurehead Leader Liaison. The\tInformational role Monitor Disseminate Spokesperson. The\tDecision-making role Disturbance Handler Resource Allocator Negotiator and\tEntrepreneur. Typical\tmanagerial\troles\twith key\troles\thighlighted 2. These\troles\tremain\tin\tplace when\tthe\tmanager\tengages\tin change\tinitiatives Managers\tdeal\twith... Rational/technical\tissues Operation\tof\tsystems Vision,\tmotivation\tand\tconflict\tresolution. Managers\tuse\tboth\tart\tand\tscience Management\tcombines\tsoft\tand\thard\ttechniques Managers\tneed\tto\tbe\table\tto\tswitch\tbetween\tand\tcombine these\tas\tnecessary. Although\tmanagement and\tleadership are\ttwo\tdifferent\troles they\tare\toften\tperformed\tby\tthe\tsame\tperson\tincumbent\tbut with\tdifferent\temphases\t- depending\ton\tmany\tfactors\tbut\tin particular\tthe\tlevel\tof\tfunctioning\tin\tthe\tcorporate\thierarchy Definitions:\tLeadership &\trelated Definition:\tLeading 'Leading\tis\tthe\tprocess\tof\tarousing\tenthusiasm and directing effort\ttowards\torganisational goals.' (Campling et\tal.\t2008,\tp.356) Definition:\tleadership 'Influencing,\tmotivating and enabling others\tto\tcontribute toward\tthe\teffectiveness\tand\tsuccess\tof\tthe\torganisations of which\tthey\tare\tmembers.'\t(McShane\tet\tal.\t2010,\tp.456) Definition:\tPower: '...the\tcapacity\tto\tinfluence\tother'\t(McShane\tet\tal. 2010,\tp.402) Definition:\tInfluence:\t'...any\tbehaviour that\tattempts\tto\talter someone's\tattitudes\tor\tbehaviour.'\t(McShane\tet\tal.\t2010,\tp.402) Comparing\tmanagement and\tleadership\troles TRANSACTIONAL\tmanagers vs.\tTRANSFORMATIONAL\tleaders TRANSACTIONAL\tmanagers vs.\tTRANSFORMATIONAL\tleaders\t(Continued) Two\t'managerial'\tor 'leadership'\tstyles Transactional: Optimise performance Incremental\tchange Maintain\tthe\tstatus\tquo. Transformational: Challenge\tthe\testablished\torder Change\tfollowers'\tbehaviour and\tbeliefs Create\ta\tnew\tvision. Virgin Galactic CONTRASTING:\tTransformational & Transactional TRANSACTIONAL\tmanagers vs.\tTRANSFORMATIONAL\tleaders Two\t(2)\tOrganisational 'states'\tthat\trequire\tdifferent forms\tof\tchange\tand\tleadership\tto\tvarying\tdegrees Convergent Stable\tconditions Established\tand\taccepted\tgoals Divergent Increasingly\tchaotic\tenvironment Established\tgoals\tchallenged Mostly\ta\tTRANSACTIONAL emphasis &\tless\t(but\tstill\tmeaningful) of\ta transformational\tchange\tagenda Mostly\ta\tTRANSFORMATIONAL emphasis\t&\tsignificant\ttransactional change\tagenda\tto\taccompany Transaction without Transformation Tends\tto\tbe\ttoo\tshort-term\tfocused,\tfail\tto\tbring\tabout\tmeaningful\tCHANGE, too\trigid,\tuncommitted\tworkforce...etc. Transformational without Transaction Essentially\ttheoretical\t(rhetoric);\tNot\tpractically\texecutable ROLE\t&\tCONTRIBUTION\tin\tPERFORMANCE PERFORMANCE is\tthe\tcentral\tfocus\tof\tthe organisation.\tPerformance\timprovement\t= CHANGE Transactional leadership effects\tchange\tat\ta\tmore operational\tand\tconcrete task\tand\tprocess\tlevel Transformational leadership effects\tchange at\ta\tmore\tstrategic\t,conceptual\tand\tabstract level\t(concerned\twith\torganisation adaptation\tand\tpositioning) Effective\tChange Leaders Challenge\tthe\tstatus\tquo\tand\tcreate\ta\treadiness\tfor\tchange Inspire\ta\tshared\tvision\tand\tpersonally\tcommunicate\tthe\tfuture direction Enable\tothers\tto\tact Create\tadditional\tsponsors\tat\tdifferent\tlevels\tof\tthe organisation Employ\tsymbolic\tand\tsubstantive\tactions Model\tthe\tway Communicate\tthe\tmessage\trepeatedly Management\tvs. Leadership Leadership High Low (visionary;\tinnovative;\tinitiates\tchange) The\tcharacter\tof management\ttasks change\twith\tprogression up\tthe\tcorporate\tladder More\t'leadership'\tor transformational activities\tand\tless managerial\tor transactional\tactivities are\tobserved\tin\thigher positions\tcompared\twith lower\tpositions Senior Manager Middle Manager Line Manager Low Management (rational;\tproblem-solving;\tstructured) High Which\tform\tof\tleadership\tis preferable? Neither! Organisations\tneed\tboth Transactional managers\tand Transformational leaders\tto\tperform,\tadapt and\tsurvive in\tthe\tlong\trun. That's\tit\tfor\ttoday