Transforming Nokia

The Power of Paranoid Optimism to Lead Through Colossal Change

About the Author

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Chairman, founder and former CEO of F-Secure Corporation, Risto Siilasmaa has been Nokia's board chairman since 2012. His co-author is Catherine Fredman.

Summary

Nokia

Nokia, a venerable Finnish firm and a global powerhouse “Finland’s flagship company” lost most of its market value, laid off thousands of workers, burned through nearly all of its operating capital and teetered on the edge of bankruptcy. But the company came back stronger than ever through bold new leadership, reinvention and transformation. Today, Nokia is one of the two most dominant “global digital communications infrastructure” firms in the world.

Author Risto Siilasmaa has served as Nokia’s board chairman since 2012 and was also interim CEO from 2013 to 2014. Siilasmaa recounts how, as Nokia’s chairman, he became the company’s lead strategist and negotiator in the effort to turn it around and make it into something new.

“Under the leadership of Jorma Ollila, the company’s legendary CEO, Nokia had stronger global brand recognition than Toyota, Walt Disney or McDonald’s.”

Mobile Phones

Nokia invented the smartphone and by 2008 was the dominant operator in the mobile phone industry. Customers loved Nokia’s sleek, cutting-edge, feature-packed and nearly indestructible phones. Nokia sold so many mobile and smartphones that by 2000 it accounted for 4% of Finland’s GDP and nearly 20% of the nation’s exports. Along with the sauna, Nokia’s phones had become Finland’s signature export.
Things got worse after 2005. Competition encroached on Nokia around the world. In 2007, Apple introduced the iPhone, a “touchscreen smartphone,” a revolutionary new device Nokia couldn’t match. However, in 2008, more than 50% of smartphones in use across the globe still came from Nokia. Then, BlackBerry began to capture significant market share. And Google brought out its Android operating system for touchscreen phones. Between them, Apple and Android took Nokia’s share of the cellphone market.

“Today, we are an almost entirely new Nokia. Out of some 100,000 employees, fewer than 1% held a Nokia badge in 2012.”

Jorma Ollila

Nokia was largely unprepared for tough, new competition. When things started to go bad, Jorma Ollila was Nokia’s “revered and feared” chairman of the board. A near “mythic leader,” Ollila was popular in Finland. But, despite his legendary reputation, he was inflexible, secretive and close-minded. Ollila had become largely oblivious to what was going on at Nokia, and he was rarely interested in hearing negative information. He wanted the people around him to validate his point of view. What counted for Ollila was what he believed about how the company was doing, its commercial issues and related topics, not what others might think, regardless of their experience or expertise.

“You can’t fix disappointing numbers by focusing only on the numbers; you can only fix them by figuring out the reasons for the slump.”

After Risto Siilasmaa joined Nokia’s board, Ollila would regularly snap at him when the younger man volunteered any new ideas. Ollila would say, “Risto, you just don’t understand how a global company the size of Nokia works.” Ollila shortsightedly focused on the “what,” never on the “why.” This did not auger well for Nokia’s continued success.

Ollila sought to keep other Nokia board members in the dark and “blissfully ignorant” about how the company was doing. He tried to keep board members focused on relatively unimportant issues, not on Nokia’s “long-term competitiveness.” Under no circumstances did Ollila want his board members to investigate either Nokia missed launch dates or its deteriorating product excellence. At Nokia, events that should never have happened at all became the norm. The company was in big trouble. Nokia’s corporate culture had become as inflexible and suspicious of new ideas, approaches and methodologies as Ollila. For the longest time, Nokia had been locked into the highly vaunted and sacrosanct “Nokia Way.” Executives and employees did their best to hide bad news and avoid accountability. No one stepped up to make changes or accept responsibility. Meanwhile, competitors like Apple and Google were thriving by being transparent, adaptable, and flexible.

“To all those people who assumed that Nokia would follow Motorola, BlackBerry, and other former shining tech stars into oblivion: You were wrong.”

The “Bottom 25th Percentile”

In 2009, Nokia hired McKinsey & Company to evaluate the firm’s “organizational efficiency.” McKinsey ranked Nokia in the bottom 25th percentile of firms on its Organizational Health Index (OHI). According to McKinsey’s “historical data,” the chances were better than 50% that firms with such low rankings would be out of business within two years. By 2012, Nokia had lost more than 90% of its “market value.” The company was getting rid of workers by the thousands. Many observers believed Nokia would soon go bankrupt.

“Over the course of a year, we each have 365 daily opportunities to boost the possibility of a positive scenario.”

F-Secure, Then Nokia

As a young man, Siilasmaa, who always had a natural affinity for technology, partnered up to start F-Secure, which became a successful cybersecurity company. After a few months, his partner went to work at an established company. Siilasmaa ran F-Secure by himself in the early 1990s. In 2000, Nokia contracted with F-Secure to develop an antivirus app. Impressed with the F-Secure entrepreneur, Nokia asked Siilasmaa to join its board. In 2008, Siilasmaa became Nokia’s most junior board member at age 42. Behind Siilasmaa’s back, Ollila had “campaigned against” the young man taking over as chairman. Regardless, on May 3, 2012, Siilasmaa replaced Ollila as chairman of the board at the annual general meeting.

“Thinking as a paranoid optimist almost forces you to do scenario planning. You can’t stop your imagination from coming up with different scenarios…or ways to influence the outcomes.”

Bold Leadership and Bolder Ideas

From 2012 to 2016, under Siilasmaa’s leadership, Nokia’s value climbed more than 2,000%, outpacing numerous brilliant start-ups in the process. Stephen Elop, Nokia’s first non-Finnish CEO,contributed new perspectives and a welcome “outsider’s” approach from 2010 to 2103.
Siilasmaa understood that the only way to turn Nokia around was to promote bold ideas that were bigger than its problems. He wanted to create a new vision for Nokia, but that required developing a novel strategy. Implementing the new strategy called for complete reorganization of Nokia’s structure.In 2013, with Siilasmaa as chief strategist and chief negotiator, Nokia sold its Devices & Services unit – previously the heart of the firm’s business – to Microsoft. This was a difficult decision for Nokia, but it was necessary for the firm’s survival and transformation.

“If you’re not an optimist, you can’t energize people. But if you don’t also help them preempt downside scenarios, the company will not build true resilience.”

Other major commercial ventures conceptualized, planned and successfully implemented under Siilasmaa’s leadership included the “complete purchase” of Nokia Siemens Networks (NSN) and acquiring Alcatel-Lucent. Like the sale to Microsoft, these were blockbuster deals. In 2013, Siemens, a multinational conglomerate, decided to sell its share of NSN, originally created by an earlier merger of Nokia Networks and Siemens’s networks business. In this joint venture, Nokia worked with Siemens on telecommunication equipment, mobile broadband and related services.” Ever the big-picture strategist, Siilasmaa believed that NSN – known for mobile broadband and related services – could “become the core of a new Nokia.”
Combining NSN with Alcatel-Lucent (ALu), which – as the “fourth-largest” company in “wireless-infrastructure” – offered sophisticated network technology, gave the “new Nokia” a complete and complex network far surpassing the original NSN. Siilasmaa conceived the new NSN as a central hub of connection. As he urges all corporate leaders to do, Siilasmaa found the courage to think and act big. His actions took Nokia from the brink of bankruptcy to a corporation that had “the technology to connect the world.”

“People often say that business is business. But…business is never just business: It’s always about the people.”

10 Principles of “Entrepreneurial Leadership”

During his nearly two decades at F-Secure, Siilasmaa developed the concept of entrepreneurial leadership. F-Secure was a high-profile start-up, but Siilasmaa’s principles are useful for all leaders, whether of start-ups or international megacorporations. They are:

1. “Hold yourself accountable” – Take ownership of your situation in your company. Your position in your firm must mean more than your paycheck. If something in your area of responsibility is broken, no matter what it may be, quickly take steps to fix it.

2. “Face facts” – You can’t understand the problems you are up against, so you can’t be effective, unless you have a firm grasp of the facts. That is why, “No news is bad news. Bad news is good news. And good news is no news.”

3. “Be persistent” – Regardless of the difficulties, never give up. A solution exists for every problem. It’s your job to figure out that solution and determine the best way to implement it.

4. “Manage risks” – If you adopt an entrepreneurial mind-set, you must be comfortable with risk. Don’t blindly accept risk; deal with it intelligently and always with your eyes open wide.

5. “Be a learning addict” – You can learn from everything that happens to you – every up and every down, every success and every failure. Keep your mind open to new knowledge. You’re never too old to learn.

6. “Maintain an unwavering focus” – Whatever your company or industry, keep your focus on your products and services. They matter most.

7. “Look to the horizon” – Every entrepreneur, and every executive regardless of his or her                     company and its stature or size, must be able to put out fires. No matter what is going on with              your day-to-day work, keep looking to the horizon so you remain prepared for any long-term             problems and can take advantage of any opportunities.

8. “Build a team of people you like and respect” – Entrepreneurs know their success or failure depends on their teams. Surround yourself with quality people.

9. “Ask why”– Everybody always asks, “What?” Few people ask, “Why?” “What?” is an easy question to answer. “Why?” is difficult, but it’s the most important question. For example, asking what features to offer customers matters less than asking why you should offer them.

10.“Never stop dreaming” – Drawing from a George Bernard Shaw quote, Robert F. Kennedy once said, “Some men see things as they are, and ask why. I dream of things that never were, and ask why not.” Develop this practical dreamer’s entrepreneurial mind-set.

“The higher you ascend…the more removed you are from…the front lines, [and] the more filters the information will go through before it reaches you.”

“When you have an entrepreneurial mind-set, everything is your responsibility. You truly care, and your actions communicate that loud and clear.” 

“The way to create a culture is by being a role model. Oftentimes, you don’t need to ‘lead.’ You just do, and people will do what you do.”

“The Power of Paranoid Optimism”

Commercial success today depends on paranoid optimism. This means that as a leader you must always prepare mentally for the most negative outcomes. This allows you to be enthusiastic about the most positive outcomes. Paranoid optimists are vigilant. They are rightfully fearful about factors they should realistically fear. These leaders’ optimism derives directly from their paranoia. To alleviate paranoia, they go out of their way to envision “all the worst-case outcomes” and plan how to deal with them. Thus, paranoia becomes a positive trait, as is optimism. Leaders who are not optimists can’t motivate employees. Realistic leaders’ optimism derives from their real-world circumstances.These optimistic leaders feel confident they can handle any problem or situation.

“For paranoid optimism to be effective…give everyone as much time as possible to think through all the different scenarios, face their fears and articulate their hopes.”

This has always been Siilasmaa’s position. When Nokia’s vice-chairman Marjorie Scardino asked Siilasmaa how he would feel about becoming chairman of the board, he responded by saying he’d never found any task he couldn’t take on. Scardino found Siilasmaa’s bold response amusing. Siilasmaa clarified by saying that his programming background had taught him that with persistence, he could solve even intractable problems. Siilasmaa understood how to identify each “component” of a problem and “solve those one by one.”

Sisu is the ultimate Finnish attribute. It exemplifies “endurance, resilience, tenacity, determination and perseverance.” Sisu means that no matter what, you never quit or give up. Sisu expresses Siilasmaa’s attitude about life and business.

“The only way for any organization, large or small, to adapt successfully to today’s complex and dynamic world is by adopting an entrepreneurial mind-
set.”

Leadership Lessons

Siilasmaa places the highest premium on trust; he says that nothing in the world is more important. Then, he advises, work overtime to build as much luck for yourself as you can. Yes, you can make your own luck. When Jack Nicklaus scored his 18th hole-in-one, a fan complimented him on his good luck. After thanking the fan, Nicklaus said, “The more I practice, the luckier I get.” Make your own good luck by engaging in the right actions in the right way. That leverages the “probability curve” so it will work best for you and your firm in the years to come. Conduct “scenario-based” mapping to consider a variety of possible outcomes. Then plan accordingly. And, Siilasmaa advises, look for the positive aspect of every difficulty.