Has DA IICT started its downfall
Former Nokia boss: "You think it's the end, but after the tenth time you just don't believe it anymore"
Risto Siilasmaa witnessed the decline of Nokia first hand. First as Chairman of the Board of Directors, then also as CEO. In an interview, he talks about that time and talks about Finland's future as a startup nation.
Mr. Siilasmaa, Nokia was Europe's most admired tech company: world market leader in cell phones, pioneer in smartphones. Nonetheless, Nokia failed miserably, has the success made management arrogant?
In part, yes. For example, collapsible cell phones were all the rage for a while. Nokia was not surprised by this trend. The company even foresaw it. But management felt that it was a short-lived fad. And if Nokia, as such a powerful company, doesn't jump on the bandwagon, the trend will subside more quickly. That is arrogance and arrogance.
gvm. The 52-year-old Risto Siilasmaa joined Nokia as the founder of the successful IT security company F-Secure, when Finland's dominant technology group was still in the midst of a boom. Since 2012, Siilasmaa has accompanied the decline and rise of Nokia as Chairman of the Board of Directors, and as CEO on an interim basis from autumn 2013 to spring 2014. The entrepreneur, showered with awards, not only sits on numerous boards of directors, but also invests in start-up companies. The engineer, known for his calm demeanor, is also involved in Finnish economic committees.
So the old Nokia management had lost touch with reality.
To a certain extent, yes. I have processed the experiences of that time in a book that will appear soon. I wrote this primarily for our Nokia employees today to remind them of our mistakes.
Does that help? The same mistakes can still be made again. . .
. . . and we will do it again! The question, however, is how long it takes before we perceive it and how open we are to admitting it. Many managers come to me with the question of why an extremely successful company can fail. The very fact that they ask me this tells me that they are less likely to repeat our mistakes - companies that are less concerned about them would have more to worry about.
When did you realize that Nokia was going downhill? When you joined the company in 2008 as a member of the Board of Directors, it was still extremely successful.
Yes, but only financially. I had known Nokia as a supplier for a long time: My company F-Secure had been working on Symbian, the operating system for Nokia mobile phones, since 2001. I knew how bad Symbian was, it was a nightmare.
So did you know from the start that something was wrong?
Nokia was many times the size of my own company. It took me a long time to believe in myself. I realized something was wrong, but I didn't trust my feelings. Nokia was run by the world's best people, after all. So I had to be wrong. It took me a year and a half to two years to realize I was right.
How long have you been fooling yourself?
It wasn't until I became Chairman of the Board of Directors in 2012 that I realized the huge problems we were facing. Before that, as a member of the Board of Directors, my main concern was that we had not taken any action to find out what was going wrong. Neither the board of directors nor the management looked for the causes. Often there was talk of the share price, the analysts and the stock market, or what the media write about the company and what the auditors think. But these are all corporate governance things that have nothing to do with how we can be successful in the future.
What would such leading indicators be?
For example what customers say about us. Or how our software developers judge us and our competition. But we didn't listen to such things. Instead, Nokia even banned its software developers from using iPhones. It's crazy, how can they find out what the competition is up to? We should have forced them to write apps for iPhone! All of this combined made it very difficult for me to realize that we were facing existential problems. I didn't get the correct information. The culture of talking about problems did not prevail on the Nokia board of directors.
Does that have anything to do with the Finnish soul?
No, Finns tend to be brutally honest. Courtesy is not our strong point. That should actually have helped. So it was a corporate culture problem that occurs in many successful companies: You are prevented from talking about problems if you don't already have a ready-made solution.
After the crisis, radical steps were called for. What does today's Nokia have in common with the one ten years ago?
As of the 1990s, Nokia had two divisions: the network business and the cell phone business. In 2007 we outsourced the network business and merged it with Siemens. The new Nokia Siemens Networks, the NSN, was a “merger of equals” - that actually never works. We and Siemens pumped billions into the joint venture because NSN was constantly making losses. Now Nokia is back in the business we started with. But only 1% of our workforce from 2012 was still there in 2016. In that sense, today's Nokia is a completely different company.
Has the corporate culture survived?
The corporate culture during the crisis was much better than at the zenith of success. The new Nokia was a combination of the network divisions of Nokia, Siemens, Alcatel, Nortel and Lucent, a kaleidoscope of puzzle pieces. With the new company, we went back to the culture that Nokia had in the early 1990s - we went back to our roots. Problems should be voiced again and the hierarchies should become flatter. It is a long process that has not yet been completed.
Was it clear from the start that you would concentrate on the network business again?
No, not at all. While on the board of directors, the primary plan has always been to ditch the networking business. In our scenario planning from back then, we had worked out five options for how we would proceed with NSN. All scenarios boiled down to selling it. We haven't seen a way in which we would keep the networking division.
And then keep it anyway.
In the end we believed that this was the best of the natural alternatives. When I say “natural alternatives” I mean those that fit the company's history. We could also have said, for example, that we are going to be a health care company after screwing up the cell phone business. I believe that here, however, the shareholders would have shown us the finger and accused us that we are now wasting the funds resolved with the Microsoft deal in the health sector. So certain realignments just weren't natural. Of those who fit Nokia, the networking business was the best.
Was the company's long history an obstacle when it came to reinventing Nokia?
No, on the contrary. It's a lot easier because you can use your story as a symbol. We are all emotional creatures. We like to remember the good old days. You have to convey the feeling: This is a company that has survived 150 years and will therefore survive the next crisis. You're only there for a short period of time, but you're proud to be part of it. I can't prove it, and it might sound crazy, but I'm convinced that Nokia's soul survived the transformation.
How is the culture of your own company, F-Secure, different from that of Nokia?
In a company run by an entrepreneur, you follow the entrepreneur and this is how the corporate culture is formed. It is different in a company run by paid managers who are replaced every few years. F-Secure has grown 100% year on year for the first ten years. That was exciting, everything moved steadily. But when saturation sets in, the price war begins and every drop of efficiency has to be squeezed out of the organization, it's a different matter. We don't treat Nokia like a startup, but we try to bring in the entrepreneurial spirit that everyone feels like their own.
Did you succeed?
26,000 employees, mostly engineers, work in the field of mobile networks for development. There are only four hierarchical levels in this area - the head of a segment has more than thirty direct subordinates. We're experimenting with an extremely low hierarchy; that in itself is entrepreneurial. The other sectors of Nokia function more normally.
How did you learn to lead yourself?
Whenever I've heard something about leadership that seemed right and important to me, I wrote it down. And whenever I face a new challenge, I read through my notes. I add, adjust, or delete things through my own experiences. Even when I became Nokia boss, I read through the notes a few times. I realized that how much we trust each other depends a lot on how we treat each other. That's why I wrote down the rules for the Nokia board of directors.
How did you get the Board of Directors to adapt the rules?
It was easy because the boards felt guilty for the earlier failure. We realized what we had been doing wasn't working. As the new, inexperienced head of a large corporation in the crisis, I had to prove myself, but I had no opposition. They gave me a chance and were open to new ideas.
What was the biggest change?
In the past we never discussed alternatives, only the management's plan. We never talked about why the plan might fail. Thinking like that was not allowed - although the plans failed every time. My answer as a manager is "paranoid optimism". I always think about what goes wrong and what could be a better alternative. Because we know what can go wrong, we are more optimistic about the future.
So it helps to see the glass half empty.
And half full. It is both. When you're paranoid, you have every reason to be optimistic.
Thousands of people lost their jobs during the transformation. How did you keep the employees motivated?
In 2008 we had around 60,000 employees in the mobile phone division. When we sold the business to Microsoft, there were still 32,000: Of these, 7,000 stayed with Nokia, 25,000 switched to Microsoft, of which half were made redundant shortly afterwards. Back then it was really hard for everyone. There was one wave of layoffs after another. But we decided early on that we had to show respect for the dismissed employees. That is why we have invested a lot of money and resources to make it easier for those who have been released to reorient.
Did you get any support from the state?
Yes, we did. But our first principle was: We take responsibility. That means we do not hold the markets, the competition or the state responsible for the case of Nokia. That is why we did not wait for dismissed employees to come to us, but rather we took the initiative.
How did you proceed?
We have selected the best executives from among those laid off. And then one of the top management asked these cadres if they would be willing to take responsibility for a group. We told them to show us the best possible solutions and employ laid-off workers to carry out projects. We paid for the cost. During this time, for example, we made € 50,000 available in start-up capital for anyone who wanted to set up a start-up company. 1000 companies were founded by people who lost their jobs at Nokia. Many of these companies still exist today.
So the collapse of Nokia was a kind of “startup initiative”.
Exactly. The city of Oulu, for example, suffered enormously from the upheaval. But today it is already difficult to recruit people with ICT skills there because everyone has found jobs. There are tons of new companies. So in the end it was a good thing for Oulu. Instead of a giant, the city now has a robust ecosystem of many small companies.
How did you convince shareholders to raise money for laid-off employees?
That wasn't a problem. There was not a single day of strike, the sacked workers did not go to the media to talk badly about Nokia, and there were no lawsuits. People were loyal to the company, they even spoke out positively for Nokia. We had a study carried out and 85% of those laid off said they had been treated well or very well by Nokia. As a result, management was able to concentrate on business and not have to deal with strikes and the like. In the end, Nokia benefited in many ways from this program, which is why it made sense for shareholders too.
How did you personally experience that time? At times you were both Chairman of the Board of Directors and Managing Director - a huge burden.
I had the advantage of being the managing director of my own company for over eighteen years. There have been countless crises in those years. If you have survived this crisis situation several times and the world has kept turning, then you start to grow with it. You think it's the end, but after the tenth time you just don't believe it anymore. That's how it always goes. There is a crisis, you do the best you can and you are successful again. You start to believe in success even when there is no reason to believe. And if you, as a managing director, really believe in success and don't pretend to be, then that's contagious.
Did you never have any doubts?
When I was interviewed for the position on the board of directors at Nokia, I said that I had never experienced a situation that I had not mastered. The other person started laughing and I blushed. It sounded arrogant, showing off is frowned upon in Finland. But I didn't mean it that way. As an engineer, I believe in breaking down big problems into small ones. Then you dissolve particle by particle until the whole thing is dissolved. I am convinced that problems can be solved this way. That helps in a crisis.
How did the crisis affect you personally?
Of course it was tough back then. On the eve of the cell phone sale, I had a family reunion with my wife and three children. I told them that the next day they would hear very bad things about their father, for example at school. Fortunately, that didn't happen in the end. Everything turned out very well for the children, even if there were many negative reports back then.
You founded your company F-Secure in 1988. What was the environment like for startups in Finland back then?
It was a completely different country. Finland actually just produced big machines and sold them to the Soviet Union. We didn't have an international tech or software company in the country. In mid-2000, I and various business people came to the conclusion that the Finnish university system was completely out of date. It had to be revolutionized.
The universities were budget items of the Ministry of Education and were subsequently run like an office. This approach is completely wrong for a college. That's why we campaigned for a new law that would allow private universities, which, like the top universities in the US, are funded by foundations. As a result, the University of Aalto was founded, a merger of three existing universities. Aalto combined the fields of design, business administration and technology. Every student has to take courses from all three areas. At this new university, students started initiatives on the subject of entrepreneurship.
Are there any concrete examples?
Yes, the startup and tech conference Slush. Certain practical rules that the pioneers established back then were very helpful in building a startup ecosystem. For example, one rule is that someone can only work in a leading position at Slush for two years. The idea behind it is that you learn so much in the two years that you can actually set up your own startup afterwards.
And that made so much difference?
In 2006 a friend of mine gave a presentation to 600 students. When he asked who could imagine setting up a company one day, only three students raised their hands - two of them were foreigners, only one was Finnish. In 2014 I gave a presentation at Aalto University and asked the same question. Now three quarters of the students volunteered. The new university is central: More than half of the companies newly founded by the university in Finland today come from there. Other universities then naturally began to copy the concept. All of this has changed the way people think about startups.
So when Nokia collapsed, there was already a startup ecosystem in place.
Yes, without these developments around universities, Nokia's transformation would have been much worse for the economy.
The interview was conducted on the sidelines of the SMG Forum 2018 of the Swiss Management Society in Zurich.
You can follow business editor Jürg Müller on Twitter, LinkedIn and Xing as well as Facebook.
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