Last week, I taught a case study on the decline of Nokia to my MBA students. I asked them, "Why did Nokia fall from industry leadership to also-ran status in the space of less than five years?" Their answers were predictable:
• "They lost touch with their customers." True, but almost tautological -- and interesting to note that this is the same Nokia that in the early 2000s was lauded for its customer-centric marketing and design capabilities.
• "They failed to develop the necessary technologies." Not really true -- Nokia (NOK) had a prototype touchscreen before the iPhone was launched, and its smartphones were technologically superior to anything Apple (AAPL), Samsung, or Google (GOOG) had to offer during the late 1990s.
• "They didn't recognize that the basis of competition was shifting from the hardware to the ecosystem." Again, not really true -- the "ecosystem" battle began in the early 2000s, with Nokia joining forces with Ericsson (ERIC), Motorola, and Psion to create Symbian as a platform technology that would keep Microsoft (MSFT) at bay.
Through this period, the people at Nokia were aware of the changes going on around them, and they were never short of leading-edge technology or clever marketers. Where they struggled was in converting awareness into action. The company lacked the capacity to change in a decisive and committed way.
The failure of big companies to adapt to changing circumstances is one of the fundamental puzzles in the world of business. Occasionally, a genuinely "disruptive" technology, such as digital imaging, comes along and wipes out an entire industry. But usually the sources of failure are more prosaic and avoidable -- a failure to implement technologies that have already been developed, an arrogant disregard for changing customer demands, a complacent attitude towards new competitors.
In such cases, the ultimate responsibility for failure rests with the CEO. But if such failures are to be avoided, it is clear that the CEO cannot do it on his or her own. People across the firm must keep their eyes open to changes in their business, and to take responsibility to push their new ideas and challenge existing ways of working. Obviously, this isn't easy to do, but if there is a better understanding of the problem then there is a chance for improvement.
So what are the enemies of agility you should be looking out for in your organization? Here are my "big five":
Ossified management processes. Things get done in big firms through management processes -- budgeting and planning, performance management, succession planning. These processes create simplicity and order, but they also become entrenched and self-reinforcing. One example: I was asked to put on a webinar for a big publishing company a couple of years ago, and they asked me to sign a 20-page contract for the right to talk about my research for an hour. The reason wasn't hard to fathom -- their antediluvian book-publishing process was running on autopilot, and doing its best to suck the life out of any new Web-based initiatives. What's the solution here? First, identify and kill off the processes that no longer add any value. Second, pilot all new initiatives outside the existing processes.