I officially became chairman of Nokia at the Annual General Meeting (AGM) on May 3, 2012. Over the course of my career, I had conducted lots of press conferences and been interviewed by the media hundreds of times. This press briefing was different. My head may have rationalized that I could handle things. My body thought otherwise. As I walked into the conference room, my head was surprised to find that my knees were shaking.
I couldn’t help flashing back to my first Nokia AGM four years earlier. That one, too, was held at the Messukeskus Helsinki, Finland’s largest convention center. Back then, board members arrived in a parade of individual chauffeured limousines. TV cameramen and photographers swarmed us, madly clicking away as if we had personally beaten the Russians in the Ice Hockey World Cup, then topped it off with a Nobel Prize. Thousands of people packed the auditorium.
Nokia in 2008 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. By 2000, Nokia accounted for an astonishing 4 percent of the Finnish GDP, and it generated nearly a fifth of Finland’s exports. Nokia made as much money as all the other companies in Finland combined.
Under the leadership of Jorma Ollila, the company’s legendary CEO, Nokia had stronger global brand recognition than Toyota, Walt Disney, or McDonald’s. One analyst said, “Nokia was to mobile as Kleenex was to tissue.” “Not since the sauna have the Finns produced anything as popular as the Nokia mobile phone,” gushed Time magazine in 2001.
Year after year, newspaper and magazine articles routinely referred to Nokia as the “tech wunderkind” powering the “Finnish miracle.” Business experts extolled “the Nokia Way.” The company seemed unstoppable. By the time of my first Nokia AGM in May 2008, Nokia owned just over half of the global smartphone market.
Even more significant was Nokia’s influence on Finland’s global identity and how Finns viewed themselves. Nokia showed the world that we were smart and hip. When I was invited to join Nokia’s board, I was thrilled to be part of this shining circle.
By 2012, though, the mood at Messukeskus had darkened.
Apple had introduced the iPhone in June 2007, and as successful as Nokia had become, it wasn’t prepared to compete against Apple’s touchscreen smartphone. It wasn’t a question of technological prowess: Nokia’s own smartphones had more features than the iPhone, and they were housed in a case sleek enough to slide into a shirt pocket and so tough that owners proudly boasted that even after accidentally backing their car over their beloved device, it still functioned just fine. Even as Apple improved its iPhones and Google launched its Android operating system in 2008 and Research in Motion (RIM) surged ahead with its Blackberry, a technological challenge was something Nokia should have been able to answer easily.
But it hadn’t. And as the months went by, one opportunity after another was missed. Nokia was still the dominant name in the industry, but it gradually became clear to me that something prevented us from reacting properly to the new competitive situation.
On the board, I was going through my own evolution. My initial starry-eyed admiration had given way to questions and confusion, then doubts. While Apple and Google were growing market share, attracting the brightest talent, and investing in the future, our market share was contracting, and we were laying off employees and reducing investments. Yet there was little concerted action in board meetings to systematically dig for the root causes of the constant failures to catch up. There was little discussion about finding new paths or leaders brave enough to take them. Concerns about our strategy were not taken seriously and alternatives not analyzed or even discussed, at least not in board meetings. My own attempts to start such discussions were brushed aside.
Was this how the board of directors of a best-in-class company worked? I didn’t want to believe this was the best we could do.
But as the crisis deepened, as our faith in management forecasts became increasingly weak and our results got even grimmer, my doubts shifted to dismay and a growing dread.
Why wasn’t Nokia able to react? Were its leaders incapable of accepting the mounting evidence that something fundamental was wrong? Were they unable to speak up or unable to listen?
As just one person — and the most junior member — on the board of directors, I felt an almost physical pain because I had neither the access nor the authority to instigate the kind of systematic, fact-finding deep dive that would have enabled me to understand what was happening and, more importantly, why it was happening. The board did not have visibility and therefore no real understanding. But it was also not doing anything to change that.
In the four years that I had been on the board, I had seen the company lose over 90 percent of its value. That spring of 2012, we issued two profit warnings over two quarters. Our operating loss was over €2 billion during the first half of 2012. Our mobile phone revenues were almost in free fall. Only a year after laying off 10,000 workers, we were planning another round of painful layoffs, the biggest in the company’s history. Our share price was an agony to watch; it was barely €3, down from about €28 when I joined the board.
Our mobile phone revenues were almost in free fall. Our investors were starting to categorize Nokia shares as non-investable. The press was speculating about the timing of the Nokia bankruptcy.
The adulation at the 2008 AGM had turned into outright antagonism by the 2012 AGM. People at all levels of the company were frustrated, anxious, and scared. Our core investors were starting to categorize Nokia shares as non-investable. The press was speculating about the timing of the Nokia bankruptcy.
As a member of the board of directors, I was seen to be at least partly culpable for Nokia’s failure. Now as the newly elected chairman of the board, I was truly accountable for whatever happened next.
The enormity of the responsibility I had assumed suddenly hit me. From that day forward, I represented the Finnish face of Nokia — to everyone but especially to my fellow Finns. If things turned out badly, I would be blamed by my country forever.
How had I gotten into this mess? And how did we get out?
My story reveals Nokia’s near death and its dramatic reinvention and revival. To all those people who assumed that Nokia would follow Motorola, Blackberry, and other former shining tech stars into oblivion: You were wrong. Today we are among the top two players in the high-value global digital communications infrastructure market. Over the four years from 2012 to 2016, the value of our business increased more than 20 times, faster than many high-flying start-ups.
Our culture, too, has been transformed. Out of some 100,000 employees today, fewer than 1 percent held a Nokia badge in 2012. We’re an almost entirely new Nokia.
I have been an entrepreneur all my life. I believe that the only way for any organization, large or small, to adapt successfully to today’s complex and dynamic world is by adopting an entrepreneurial mindset. During my 18 years as CEO of F-Secure, before I joined the Nokia board of directors, I honed my ideas about what I call “entrepreneurial leadership”: what it means to be an entrepreneurial leader and how to bring out those qualities in all people, whether they’re in charge of a company of many or a company of one.
At Nokia, the precepts of entrepreneurial leadership served as our compass through chaos, helped us respond rationally when it would have been easy to panic, and continue to guide the company today. They kept me and the management team on course as we negotiated the deal that saved the company, guided a badly beaten-down organization as we came up with a new vision for the future, constructed a strategy to implement the vision, chose the right organizational structure to drive the execution of the strategy, picked the best CEO and management team to lead the organization, and built the balance sheet we wanted to achieve.
At the same time, those precepts enabled us to stay flexible enough to adapt to constant change when the conventional way of doing things would have sunk us. Entrepreneurial leadership means assessing the resources available to you and using them in the best possible way to improve your company’s performance and competitiveness. That’s why even though I stepped in to serve as CEO for eight months during our massive reorganization — and could probably have continued in that position — I recognized that I was not the best CEO for the company we were becoming and willingly stepped away again. Our present CEO is much better than I would have been.
Entrepreneurial leadership is also about learning — about viewing every challenge, every problem, every piece of bad news as an opportunity to learn and improve. I learned a lot.
I learned to see through the sparkle of a hugely successful global corporation to spot the signs of trouble that could bring it down. I learned that being paranoid enough to always plan for the worst-case scenario actually enables you to be optimistic about opportunities. I learned that especially in complex circumstances, trust both greases the gears and is the glue that holds everything together. I learned that accountability, like trust, must be constantly reinforced. And I learned that once you have constructed a solid foundation based on these lessons of entrepreneurial leadership, you can become brave enough to dream big — maybe even bigger than you ever imagined.
I learned the pragmatic skills and tactics to implement these lessons.
I also learned about luck. We were hugely lucky and should always remember that. This was the only period in my life as a business leader where we undertook a sequence of big decisions and three massive transactions — including the sale of Nokia’s core mobile phone business to Microsoft, the purchase of complete ownership of Nokia Siemens Networks (NSN), and the acquisition of Alcatel-Lucent — and even with the benefit of hindsight, I would not change any of those decisions in any meaningful way. It is rare to be able to say that, and I’m sure I will not experience this again.
That’s why I am even more paranoid than before. The more paranoid we are, the harder we will continue to labor to shift the probability curve in our favor and the more optimistic we can afford to be.
Not every organization may face a situation as complex and life-threatening as the one that confronted Nokia, but I can guarantee that every leader will encounter plenty of challenges that are complicated and unpredictable. Whether you’re managing a team or a corporate division, leading a small firm or a multinational corporation, heading up a start-up company or steering a solo practice, and whether you’re running a business that is on the rocks or sailing along smoothly, the lessons I’ll share will help you sharpen your foresight, expand your options, reinvent — if necessary — yourself and your organization, and enable you to thrive no matter what changes tomorrow brings.
Excerpted from Transforming Nokia: The Power of Paranoid Optimism To Lead Through Colossal Change. Copyright © 2018 by Risto Siilasmaa. Published by McGraw Hill Education.