This report is about an essential topic of “Why Innovation Fails and What are its main reasons?” This topic is fundamentally related to failure of innovation in business organizations. In majority of large business organizations, use of innovative ideas is the part of their strategic plans. These business organizations commonly claim that they know what innovation is and how it is implemented to achieve their goals. Now the question here is, why issue of innovation failure occurs in these organizations? More importantly, what companies can do in this situation? According to survey of PwC consulting firm, only 27% innovation leaders felt that they had mastered in elements that are required for innovation success in organization and it is very unfortunate.
Now, the purpose of this report is to focus on three top causes of innovation failures in categories of technologies, strategies and people. Besides this, we will explain consequences of these causes of innovation failures on our selected case study of downfall of Nokia organization. Nokia is a multinational communication and information technology company. It was founded in 1865 and headquarter of Nokia is in Espoo, Finland. Nokia is very well known among people for its mobile phones. Before rising of smart phones, Nokia’s mobile phones were high preferred to use among people. The legendary hand sets of Nokia are not forgettable by its users. With its innovation, advanced technologies and strategic plans, Nokia was considered best in development of mobile. But after this great success, there was a time when Nokia faced downfall and its mobile replaced by smart phones. Why innovation fails in Nokia, it is an important question for this organization and all its users.
Nokia Downfall Case Study:
According to research of case study, the downfall of Nokia is not a big secret for people. This company is crushed by Apple and Android (Ovide, 2017). Historically, Nokia had been an adaptive company and it has contributed in different business field such as electricity, paper and rubber galoshes. But in nineteen nineties, it raised in different ways with cell phones. In 1996, a prototype of touch screen and internet enables phone was developed by Nokia and at that time, company has also spent enormous amount on research and development (Syoen, 2017). But one thing Nokia was unable to do at that time i.e. research and development into products that actually wanted by people (Adhikari, 2017). Besides this, entry of iPhone into competitive market has changed the world and put influence over Nokia mobile phones. The fall in Nokia was swift.
According to figures of market analysts it is found that market share of Nokia’s smartphones in 2007 was 49.4% and subsequent years it was 43.7%, 41.1% and 34.2%. At that time, it was considered that company missed the importance of its operating system and it also underestimated the value of transition to smartphones in future. Essentially, Nokia Company had future in smartphones but company did not do efforts to achieve this goal. Almost seven years before the iPhone, it was Nokia’s innovation that it made prototype of touch screen and internet-based phone which was first innovative step of Nokia towards advancement of mobile phones. But unfortunately this innovative idea was not implemented. By Nuovo, it claimed that Nokia was ready to develop a tablet computer by completing its all requirements a decade before of iPad. Besides this, in 2007, after release of iPhone, Nokia also introduced its smartphone like Nokia 95 with operating system Symbian. But due to big hit of iPhone in market, Nokia 95 was affected so much. After this, Nokia did various essential efforts to raise its smartphone devices by developing more and more user-friendly apps. But unfortunately, Nokia’s market shares were falling down in subsequent years.
If Nokia had this kind of innovative ideas and prototypes of future mobile phones, then why these devices not found their ways into hands of customers and why innovation of Nokia failed. According to researchers, various reasons are identified regarding innovation failures in business organizations like Nokia. In next segment of report, we will emphasize on three top reasons of innovation failures and their consequences on case study of Nokia and how these reasons affected organization’s innovation (GSMArena.com, 2017).
Key Reasons for Innovation Failure
It is not easier to identify key reasons about why innovation fails, but with the research and experience of some researches, some reasons are found. Generally, in business organizations it is noticed that in case of any big failure, finger is pointed out to the top management. But it is not always right (Staff, 2017). One reason of innovation failure is that some business organizations have knowledge gap that what actually innovation is and how successfully it can be implemented. Therefore, this knowledge gap is required to remove by business organizations that are planning to implement innovative ideas. According to an article, following three reasons are specified for innovation failure that can be commonly encountered by business organizations (Ft.com, 2017).
- Unrealistic Expectations from Top Management
- Lack of Resources and Strategic Approach
- Too much focus on products and technology
Unrealistic Expectations from Top Management
This is considered the most important reasons for failure of innovation in any business organization (BBC News, 2017). This reason of failure comes under the category of people means where senior members of organization are considered responsible for failure. This may be possible because management may not have real clue of complexity of innovation and its required resources (Lomas, 2017). They just wanted to be cozy within their existing market products and familiar technologies. By doing this, they increase their knowledge gap and awareness about latest innovative technologies that have entered or entering into competitive market. This unwillingness to push innovation and extend capabilities lead to continuous failures. All types of innovation without exploration does not make sense of a complete business.
This actually shows lack of real involvement, engagement, understanding and comprehension. This problem of top management can be occurred in every business organization and may lead to innovation failure. In case of Nokia, we have also found this reason of innovation failure that belong to category of people (Platt, Lizza. 2017).
According to analysis, various CEOs of Nokia have given their significant contribution to company. In 2010, it was announced that Elop would take position of CEO in Nokia by replacing previous CEO Olli-Pekka Kallasvuo. After this, on 11 March, 2011, it was announced that Nokia had paid $6 million signing bonus. After taking over his position in Nokia, Elop has sent an internal memo to his employees and that got leaked to the press. That memo was dubbed as Burning Platform and was considered as one of the silliest corporate memo. Following points were added into memo by Elop as CEO of Nokia (Monaghan, 2017):
By his memo, Elop tried to rephrase strategies of Nokia. The company joined forces with Microsoft Company to enhance its strength in market of smartphones. It was noticed that Nokia dump Symbian operating system and adapt Windows Phone operating system. By doing this Nokia has established an alternative ecosystem to its rivals such as iOS and Android. Under the leadership of Elop, it was also decided that Nokia will only continue with Windows operating system and company has launched Windows Phones series as Nokia Lumia. After this launch, Nokia was ready with its other smartphone products such as Lumia 920 and Lumia 1020, but something wrong was encountered in leadership of Elope after rephrasing strategies of company and it can be seen in following graph (Insead Knowledge, 2017).
As we can see effect of Elop’s strategy on Nokia Company and it was happened due to wrong decision taken by Elop as CEO. As we know that entire smartphone operating system industry was evolving at that time and most of the manufacturers were moved on operating systems like Android, Windows, Meego and Bada. But Nokia decided only to stick with Windows OS. That is why Nokia’s Windows phones was not successful to attract attention of others. Besides this, new technologies were developed by Nokia, but those were not promising enough. In this way, CEO of Nokia was responsible in failure of innovation of company.
Lack of Resources and Strategic Approach
The lack of resources is also an essential reason for failure of innovation. The proper management of availability of resources in business organization is a part of strategic plan of company. While developing a project, if sufficient resources will not be available then issues of project failure can occur (Failure and Hobcraft, 2017). So this reason can be categorized under strategy. Lack of resources occurs when company does not have clarity about actual requirements of project and frequent changes are implemented in project requirements (Fast Company, 2017). These changes can be related to use of basic product development platform, service providers and suppliers etc. These changes put bad influence over project activities and performance of developers (Harvard Business Review, 2017). In case of Nokia Company, improper implementation of strategy was also the reason of innovation failure. Not only issues of lack resources and technologies occur but other strategic issues also occurred (Lindegaard, 2017). As we know that Symbian Ltd. developed Symbian OS which was joint venture between Psion and phone manufacturers like Nokia, Motorola and Ericsson. Symbian was considered most popular operating system (BBC News, 2017). In 2008, Nokia attained Symbian Ltd. under a decision for making Symbian operating system open-source platform. So that it can be used by more developers for developing their mobile apps. In 2010, Symbian operating system was made available as open source code officially (South China Morning Post, 2017). But it was too late because till than Android was already become an open-source and freely available. At that time, iPhone was also attracting market towards itself and replacing Symbian OS, with iPhone’s platforms and other essential support applications on smartphones. In Feb, 2011 Nokia announced its partnership with Microsoft and also carried its operating system i.e. Windows OS for its smartphones (Dediu, 2017). But in study of June, 2011 it is showed that 39% of the mobile developers used Symbian and they had planned to license the platform of Android or iOS. Then by June 2011, Nokia had made deal with Accenture for development of software solution that must be based on Symbian OS. In this way, various frequent changes came in strategic approach of Nokia and company could not made decision regarding appropriate operating system for its smartphones. Therefore, improper strategy of Nokia became reason of innovation failure in this company.
Too much focus on products and technology
The use of technology plays important role in every business project. Lack of technology may lead to deficiencies in project and proper use of technology may provide various benefits. But it is not right to give too much focus on technology or products. This is because, too much focus on products and technology enhances ignorance of other available options within innovation such as services, platform collaborations and business model etc. The focus on only one option is not good to successful implement innovation in organization, various essential factors must be considered. This reason of innovation failure is commonly found by researchers in various business organizations. In case study of Nokia, this problem of too much focus on technology was third reason of innovation failure (Gartner.com, 2017). As we know that Nokia was a discoverer in cellphones and mobiles industry (Nokia.com, 2017). To reach this state, Nokia came a long way. But only with aging staff and technology, a company could not stand in competitive market for long time (Regalado, 2017). Major improvements in business activities, strategic plans and implementation of innovative ideas are required. According to analysis, we got to know that Nokia had the Mobira series from 1982-1990 and this series was so popular in its time. In period of 1990-1999, original series of phones were sold by Nokia and it had inclusion of newly developed GSM technology (Nokia.com, 2017). After this, Nokia moved towards production of color screens phones, music capable and digital camera featured phones. Besides this, Nokia also added gaming features in its phone. Next technology change that implemented Nokia in its phone was of business series phones with push emails and other corporate benefiting features.
Later on, Nokia focused on usage of Symbian operating system and company was top of the world with its new smart featured phones. But at this time, Nokia was also reached at the top of its research and development cycles (Altitude, 2017). The main thing that Nokia wanted to do at that time was to become leader in an innovative new technology to dominate its competitive market. But to achieve this, Nokia had to compete with new breed of engineers of Android and iPhone that had already become competitors of Nokia in competitive market. It was still believed by Nokia that Symbian operating system is powerful enough to compete with Android and iPhone and there decision to adapt Symbian was right. But over a period of time, Nokia realized that its decision was not worth the fight in competitive market with iOS and Android operating systems. This was the time when Nokia decided to find out a new partner in market for its amazing hardware devices and Nokia did partnership with Microsoft for its Mobile Platform Operating system that is Windows 7.5 Mango and launched Nokia Lumia series with its featured innovative hardware advancements. But till that time Nokia had almost gone its glory in market of smartphones. As we can see, Nokia focused too much on its technology and ignored some other essential factors such as market trend analysis, strategy to compete with most popular operating systems such as Android and iOS and demands and attractions of customers towards OS. If Nokia would have been focused on these points of innovation appropriately then it could successfully manage selling of its innovative products in market.
The above discussed are three major causes ort reasons that contribute in failure of innovation in Nokia organization. The strategic approach, technology and support of organizational people such as staff members, technical experts and to management are essential to encourage innovation in business organizations and to make it successful. From above discussion, we got to know that there are various important aspects that ignored by Nokia. But those aspects were required for implementing innovative ideas and prototype of future mobile by Nokia. This Company did not concentrate on what is actually required by customers, what and how other companies are providing mobile users to satisfy their needs. Besides this, top level decision for rephrasing strategies of company was also not successful and it had great influence on company’s performance.
The result of Nokia’s innovation failure was that, during three years Nokia revenues fell 40%, profit fell 95% and market shares of Nokia collapsed in smartphones from 34% to 3.4%. Besides this, the credit rating of Nokia went from AAA to junk and share price of Nokia dropped by 60% in value. If we talk about Nokia’s market capitalization, then it lost in value minimum $13 billion. It was calculated by Financial Times that the shareholders of Nokia ended up paying Elop CEO of Nokia a bonus of 1 million Euros because it was considered that due to Elop’s wrong decision Nokia was destroyed. In this way, every failure among three main failures has critically affected organization to innovate.
On the behalf of above discussion, it is understood that for an organization it is very important to consider each and every aspect that is required for successful innovation. The role of strategy, technology and people are different from each other, but they all contribute to achieve one single goal. The roles of these factors can be beneficial for organization, but sometimes may lead to failure. The role of Stephen Elop (CEO of Nokia) has contributed in failure of Nokia. According to conspiracy theory, Elop came from Microsoft to Nokia and his decisions were continuously in favor of Microsoft. But it is against ethical business rules of professionalism. This argument can be considered true on the behalf of available graph of Nokia’s position in market after joining of Elop as CEO and we have already briefly discussed that graph in this report.
The strategy of Elop to stick Nokia only with Microsoft and abandon that all other operating systems such as iOS and Android are not good for performance of company in business. Besides this, Elop’s decision not to move towards Android after Symbian OS that was already done by other companies at that time led Nokia towards losing maximum market shares. Besides role of Elop and his strategy for Nokia’s smartphone development and ignorance of another advanced technological options increased chances of innovation failure of Nokia. Due to these wrong decisions, Nokia lost its splendor in market of mobile and cell phones. The new entrants were also restricted to show their interest in Nokia’s business due to its bad market position. The company was failed to bring new entrants into its business and also not able to respond to new innovations produced by market competitors. At last we can say that Nokia administrated market of mobile and cell phone for long time but it was not able sustain its administrated after entrance of new competitors in this industry with advanced featured smartphones. Nokia did not provide appropriate support to its innovative ideas and lack of knowledge and awareness about market trends, Nokia downfall occurred. Therefore, for every large and small business organizations, it is necessary to focus on its overall performance in every field and according to outcomes decisions should be taken by management of company.
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