Nokia crisis highlights internal struggle By Bobbie Johnson

Technology reporter, BBC News Published duration 10 February 2011

image caption Sauna meetings are a way of life for top executives at Nokia, say insiders

When Nokia chief executive Stephen Elop laid out the problems facing the company this week, he did not mince his words.

His - which was posted for all of the Finnish firm's employees to read - outlined the serious challenges that the business faces.

They include mistakes that have left it "years behind" rivals such as Apple and Google, while facing stiff competition from Chinese rivals at the same time.

But insiders have told BBC News that Mr Elop's biggest challenge is something different: the battle to open up Nokia's fiercely insular culture.

The business, which is headquartered just outside Helsinki, has been run almost exclusively by Finnish executives since it started as a paper-milling company in 1865.

Many of these senior managers have been with the company for their entire career, and despite its global presence and large international workforce, some deliberately keep foreign counterparts at arms' length.

In private conversations, staff regularly talk about Nokia's overtly masculine culture, and describe a world where important deals are usually brokered during visits to the sauna.

While the sauna is a way of life for Finnish people, it has almost become a religion for Nokia's high-ranking managers.

Indeed it is seen as so integral to the company's operation that many of its offices around the world, which span from Afghanistan to Zambia, have had saunas specially fitted in order to accommodate their addiction.

'Mere blip'

That culture is part of what Mr Elop, an American who was brought in last September as the company's first non-Finnish chief executive, is hoping shake up.

image caption Mr Elop said the firm faced competition from Google and Apple

He is also trying to speed up Nokia's approach to developing new products, an area where it has been accused of being unresponsive - despite pumping $3.9bn (£2.5bn) into research projects last year alone.

"Our employer is in the biggest trouble now, and we have not succeeded in bringing out new ideas," one member of staff told BBC News.

Many insiders admit that these structural problems were apparent several years ago, but that the cracks were papered over by the explosive and seemingly unstoppable growth of the mobile phone industry in general.

However, Mr Elop has suggested that the company's shortcomings were brutally exposed when Apple launched the iPhone in 2007 and ushered in an era of touchscreen technology.

"The first iPhone shipped in 2007, and we still don't have a product that is close to their experience," he said in the memo.

"Android came on the scene just over two years ago, and this week they took our leadership position in smartphone volumes."

But while outsiders agree that Nokia needs to broaden its view of the world, many Finns reject the idea that Nokia is in trouble.

To them, it is an indestructible company that has become vitally important to the nation. It dominates the country's finances and is responsible - directly and indirectly - for a huge number of jobs in a country with a population of just 5 million people.

For those who cannot imagine life without Nokia, the issues it faces today - characterised in Mr Elop's memo as "unbelievable" - are merely a blip.

Tomi Ahonen, a former Nokia executive who is now a consultant and author, says that critics ignore the fact that the company has a greater share of the worldwide phone business than anyone else.

"If you lead the market and are twice as big as your nearest rival, that is something any market leader would desperately wish for," he says. "Ask Toyota or Coca-Cola or Airbus."

Though he admits that Nokia has been slow to make progress in some areas, he is a bullish supporter of the company, and believes that the competition from American technology brands will be short-lived.

Why? Because US businesses - driven by the voracious nature of the stock market - are often focused on short-term domination and quick results.

"The culture is radically different, and this may explain why Nokia is seen to be struggling so much more than it actually is struggling," he says.

Whether you believe that Nokia's problems are severe or merely a passing phase, they are certainly not unique.

'Sound business'

Other major technology companies have faced similar problems in adapting to sudden changes, most notably Japanese electronics giant Sony.

image caption Mr Elop's memo likened Nokia's position to like being on a burning platform

It also grew massively and led its industry for years, before hitting a series of stumbling blocks.

Faced with an inability to keep up with smaller, faster rivals and a business culture that was based heavily around its Tokyo roots, the company eventually decided in 2005 that it needed to go outside Japan for its next boss.

It ended up appointing Sir Howard Stringer, a respected executive who grew up in Wales and made his name at American TV network CBS.

Since taking over the leadership of the company in 2005, Sir Howard has worked to carefully merge two very different styles of business.

"In a sense," he has said, "It's easier for me as an outsider to execute, provided I find a way to enlist the support of the employees."

Five years after Sony made the decision to break with its tradition, Mr Elop finds himself in a similar position - a Canadian who spent most of his career in senior roles at American software companies, now running a business where he doesn't even speak the language of its home country.

The desire to shake things up may be why he is said to be considering moving the company's "centre of gravity" to the US. But one former Nokia manager said that the same idea has been put forward before - only to be met with disdain.

It remains to be seen whether Mr Elop's stewardship can convince them to change their minds and stem the company's long-term slide, but Mr Ahonen believes that long-term crisis is avoidable.

"For all who doubt Nokia, be warned," he says.

"It is facing enormous changes, yes, but it is navigating those changes far better than most of its rivals.