Business Improvement and Creativity: Nokia - Essay Example

? Business Improvement and Creativity: Nokia Introduction Started in Finland in 1865 by an engineer d Fredrik Idestam, Nokia Corporation is one of the largest mobile phone manufactures in the world at present. Nokia started its business activities in paper and rubber industries. They were the prominent exporters of paper to many of the European countries in the nineteenth century. After watching Nokia’s huge success in paper manufacturing, Nokia diversified their business activities to other areas such as cable manufacturing and mobile phone manufacturing. They tasted huge success in mobile phone industry. In fact they dictated mobile phone business until recent times. However, the arrival of Apple Inc and Samsung with smartphones such as iPhone and Galaxy S2, S3 have caused huge problems to Nokia. At present they are far behind Apple and Samsung in terms of market share in mobile phone industry. Different scholars proposed different theories to learn more about the problems facing by modern organizations like Nokia. Kotter’s eight step change model theory and DeBono’s six thinking hats theory are two of such theories which help organizations to realize the problems in their business strategies and make necessary corrections. Create Urgency, Form a Powerful Coalition, Create a Vision for Change, Communicate the Vision, Remove Obstacles, Create Short-term Wins, Build on the Change and Anchor the Changes in Corporate Culture are the eight steps in Kotter’s change model theory. (See Appendix 1 for more details). On the other hand, DeBono’s six hat theory stresses the importance of six thinking caps with respect to process control (blue hat) creativity (green hat), positive thinking (yellow hat), identifying wrong decisions (black hat), solving problems (red hat) and information processing (white hat). (See appendix 2 for more details). This paper analyses the challenges facing by Nokia at present with the help of Kotter’s eight step change model theory and DeBono’s six thinking hats theory. Identification of Nokia’s problems with the help of Kotter’s eight step change model theory Establishing a sense of urgency is the first step in Kotter’s change model theory. Market is changing day by day because of the huge changes taking place in science and technology and the subsequent changes in the living standards of people. “In a time of rapidly changing technologies and ever shorter product life cycles, product developments often proceed at a glacial pace” (Hammer, 1990, p.104). Only the smarter companies keep in pace with the changing technologies. For example, yesterday’s ordinary mobile phones are outdated today. Today, people look for smartphones instead of ordinary mobile phones. Nokia was slow in identifying this changing consumer buying habit and they paid the price. On the other hand, Apple Inc and Samsung have evaluated the changing trends in the market and they introduced smartphones such as iPhone and Galaxy S2 and S3, well before the introduction of Nokia’s Lumia. In other words, Nokia was slow in responding to the changing needs of the consumers. They thought that nobody can challenge them in the mobile phone industry at least for another decade. However, Apple and Samsung proved Nokia wrong. Forming a powerful guiding coalition is the second step in Kotter’s change model. Team work is encouraged in most of the organizations at present. Team work helps organizations to reduce employees stress and derive the maximum productivity out of the employees. Nokia was not much keen in encouraging teamwork earlier. They preferred individual work over team work. As a result of that, Nokia faced shortage of creative ideas in its workplace. That is why they failed to identify the opportunities and potentials of smartphone market before others enter in that segment. Creating a vision is the third step in Kotter’s theory. Kotter argued that organizations should set a vision and make strategies suitable to achieve that vision, to stay competitive in the current organizational world. Business process reengineering or BPR is often implemented in organizations to achieve the vision and objectives of the organizations. “At the heart of reengineering is the notion of discontinuous thinking of recognising and breaking away from the outdated rules and fundamental assumptions that underlie operations” (Hammer,1990, p.107). Nokia tried to stick with its old models of mobile phones even though the market was changing. They did nothing to implement BPR in its workplace. As stated earlier, they failed to realize the threats arising from competitors. “It is ironical that while much is being discussed about business process reengineering (BPR), most companies are still searching for methods to better manage radical change”(Grover &Malhotra, 1997, p.193). Nokia was one among such companies. However, Apple and Samsung were not so. They think differently and introduced the principles of BPR successfully in their workplaces. It should be noted that a series of innovative products such as iPhone, iPad, iPode etc, have changed the history of Apple Company. In fact Apple Inc was on the verge of destruction once. However, they successfully implemented BPR and became the most valuable technology company in the world at present. Nokia on the other hand, was reluctant in implementing BPR and paid the penalty. “BPR theorists insisted that if a company focussed only on new product development, it might not improve the overall processes” (Harmon, 2007, p.9). Nokia is currently trying to regain its lost market share with the help of some new products such as Lumia, which is operating based on windows operating system. Even though Windows is the leader in computer OS market, it is not so in mobile phone OS market. In mobile phone OS market, Android or Google is the leader. Moreover, Nokia has not done enough home work while implementing BPR. Communicating the vision of the company from top to bottom (vertical integration) is another important step in Kotter’s model. Communication is the blood which gives life to the body of the organization. Many companies failed to implement change management principles because of the failure of communication from top to bottom. The vision and mission of the organization should be conveyed properly to the employees. Total quality management, Six Sigma, Lean principles etc are introduced in many companies at present as part of change management. “The purpose of TQM, as with any change method, is to improve organizational performance” (Na?slund, 2008, p.272). TQM helps companies to service the customers efficiently so that customer loyalty towards the brand increases further. Lean thinking was developed by Toyota to reduce manufacturing waste and increase value added activities. Lean is an integrated system of principles, practices, tools, and techniques focused on reducing waste, synchronizing work flows, and managing variability in production flows” (Koning et al., 2006, p.5). Six Sigma is another strategy developed by Motorola to reduce manufacturing waste as much as possible. Use of a common, realistic metric for quality assessment and improvement; Clear assignment of roles and responsibilities in performance improvement efforts; Logical alignment of statistical tools; Recognition of the time effects on processes; Unprecedented synergy with modern information technology and Capabilities to grow for larger roles for business competitiveness are some of the advantages of Six Sigma principle (Goh, 2010, p.300-304). Nokia never bothered much to implement Six Sigma, lean thinking or TQM in its workplace. They stuck with old principles and processes of business management. Empowerment of employees is the fifth step in Kotter’s model. Employees may not accept change management principles easily. The management should convince the employees with respect to the needs of such management principles. Employees often believe that changes are implemented not for the betterment of employees but for the betterment of the organization. Such beliefs can be eliminated with the help of employee empowerment programs. Peter Checkland’s soft system methodologies or SSM can be used to eliminate the concerns of employees towards change management principles. SSM helps employees to realize the real world situations properly. It says that “Rational intervention in human affairs, if it is to constitute not only action but also research, so that future interventions may be made more effective, needs a well-defined methodological framework” (Checkland, 1985, p.821). In other words, SSM teaches employees that today’s pain would be tomorrow’s gain. Nokia’s expenditure for training and development of employees is considerably lesser that in other companies. Instead of participatory management style, Nokia seems to have belief in authoritarian management style. Planning for and creating short term win is the sixth step in Kotter’s theory. This step seems to be little bit illogical when one would analyses modern business strategies. Modern business organizations give more attention to long term goals rather than short term goals. It is difficult for an organization to stay competitive always while working on short term goals. Nokia seems to have belief in this step. While competitors give more emphasize to long term goals, Nokia is trying to compete with them with the help of short term strategies. For example, as part of cutting manufacturing costs, most of the organizations are trying to offshore their business to cheap labor oriented countries. Nokia on the other hand does not like to relocate their manufacturing divisions. “A goal-based view provides new insight into the conduct and evaluation of brainstorming research that improves its relevance to management”(Litchfield, 2008, p.649). Nokia never bothered too much about brainstorming researches. The seventh and eighth steps; consolidation of improvements and the institutionalizing of new approaches are not much important in Nokia’s case. Identification of Nokia’s problems with the help of DeBono’s six hats theory In DeBono’s six hat theory, green hat represents creativity. “Creativity is not just brainstorming and being free to suggest outlandish ideas”(Bono, 1995, p.12). Amabile (1998) pointed out that the creative ideas should be appropriate, useful and actionable. Moreover it must influence the way business gets done, by improving a product or opening up a new way of approaching a process (Amabile,1998, p.78). Nokia seems to be far behind in terms of creative ideas. It should be noted that Apple was successful in implementing a series of innovative products at the beginning of twenty-first century. Same way, Samsung also introduced many advanced products in the market recently. As per the latest statistics, Samsung is beating Apple in smartphone industry. Nokia on the other hand is placed far behind Apple and Samsung. They failed to develop an operating system of their own like Apple. Positive thinking represents yellow hat in DeBono’s six hat theory. Even though Nokia has diversified its business activities in the nineteenth century, they are much confident in doing so at present. They are still little bit hesitant in diversifying its business. Still they are concentrating mainly on mobile phone market. It should be noted that Samsung and Apple like competitors are diversifying their business activities periodically. Nokia does not have the courage to penetrate deep into the market of others. In other words, they are reluctant in wearing yellow hat. Problem solving abilities represent red hat. Even though Nokia is trying a lot to remove the red hat, it still stuck on their head. In 1990’s Nokia was successful in removing red hat. However, heavy competition at the beginning of 2000 forced Nokia to wear the red cap again. Identifying wrong decisions is the black hat in DeBono’s six hat theory. Nokia wore black hat very late. They recognized their mistakes only when competitors started to introduce new products. Process control represents the blue hat. Information processing is the white hat in DeBono’s six hat theory. Nokia has poor abilities in information processing. That is why they failed to introduce the Lumia smartphone much earlier than the introduction of iPhone or galaxy. Nokia though that the success they tasted with ordinary mobile phone would stay back long. “Experiencing success does not depend on the absolute level of performance that is attained” (Latham & Locke,2006, p.333). Success depends on many other factors. Nokia failed to recognize those factors at the right time. According to the latest statistics, Nokia’s revenue growth rate for the last five years is -11.31 whereas its market capitalization is 13219.7 million US dollars. Its asset turnover is .9%, return on assets is -10.4% and return on capital investment is -23.6% (Nokia visual financials, 2013). The following graph illustrates Nokia’s current assets and liabilities. (Nokia visual financials, 2013) From the above figures, it is evident that Nokia’s financial performances for the last few years are not so good. Its returns on investment are extremely poor compared to some other mobile manufacturers in the world. In other words, Nokia’s current investments are not bringing the expected returns. Conclusion and Recommendations Nokia should forecast market pulses and trends well and they should implement new strategies and products to cater the changing needs of the consumers. Team work should be encouraged further in Nokia’s workplace so that workers develop more creativity and innovative ideas to support the growth of the company. Nokia is still interested in keeping the existing business processes, even though they are developing new products. New product development should be complemented with other business processes so that BPR can be implemented successfully. Six Sigma, lean thinking and TQM like modern change management principles should be implemented in the workplace of Nokia to improve quality, reliability and performance of Nokia products. Nokia should try to offshore its manufacturing activities to cheap labour oriented countries to cut down the manufacturing costs and to stay competitive in the market. References Amabile, T. M. (1998). How to kill creativity. Harvard Business Review, 76(5), 76-87 Bono, E. (1995). Serious creativity. Journal For Quality & Participation, 18(5), 12. Checkland P. (1985) Achieving 'Desirable and Feasible' Change: An Application of Soft Systems Methodology, The Journal of the Operational Research, 36(9), 821-831 Grover V, Malhotra M J (1997) Business process reengineering: A tutorial on the concept, evolution, method, technology and application. Journal of Operations Management, 15(3)3, 193-213 Goh, T. N. (2010). Six Triumphs and Six Tragedies of Six Sigma. Quality Engineering, 22(4), 299-305 Harmon P. 2007. Business Process Change, Second Edition: A Guide for Business Managers and BPM and Six Sigma Professionals, 2nd Edition, Morgan Kaufmann Hammer, M. (1990) Reengineering Work: Don't Automate, Obliterate. Harvard Business Review, 68(4):104-112 Kotter, J. P. (2007). Leading Change. Harvard Business Review, 85(1), 96-103 Koning, H. Verver, JPS, Heuvel, J , Bisgaard, S, Ronald J. M. M. D. 2006. Lean Six Sigma in Healthcare. Journal for Healthcare Quality. Vol. 28 No. 2 March/April 2006 Latham GP & Locke, EA. 2006. Enhancing the Bene?ts and Overcoming the Pitfalls of Goal Setting. Organizational Dynamics, Vol. 35, No. 4, pp. 332–340, 2006 Litchfield, R. C. (2008). Brainstorming reconsidered: A goal-based view. Academy Of Management Review, 33(3), 649-668 Na?slund, D. 2008. Lean, six sigma and lean sigma: fads or real process improvement methods? Business Process Management Journal Vol. 14 No. 3, 2008. pp. 269-287 Nokia visual financials, 2013. [Online] available at: http://in.advfn.com/p.php?pid=financials&symbol=NYSE%3ANOK [Accessed 25 February 2013] Paul, 2008. Six Thinking Hats Mind Map. [Online] available at: http://www.mindmapinspiration.com/six-thinking-hats-mind-map-paul-foreman/[Accessed 25 February 2013] Appendix 1. (Kotter, 2007, p.97) Appendix 2 (Paul, 2008) Read More