The key problem was that the decision to reallocate important leadership roles and reorganise the company into a matrix structure was poorly implemented.
Working collaboratively?
Within organisations with a matrix structure, tensions between different groups are very common. The reason for that is simple: people in different roles have different priorities as well as performance criteria.
This new setting was a challenge for the middle management in Nokia because they had no experience with subtle integrative negotiations which is necessary in a matrix structure. This was a fundamental skill in the new setting and no training was provided.
Process trumps structure in reorganisations, according to Yves Doz of INSEAD in his book (see below for details). So for a reorganisation to be successful, it is vital to adjust resource allocation processes, product policy and product management.
Managers in charge of allocating scarce resources at Nokia were struggling. They couldn’t deal with the conflicting demands of various product development programmes.
There was no proper software architecture development and no project management skills in the area of software. Decision-making slowed down. Furthermore, cost reduction pressures made it impossible for the company to differentiate itself from the competition by means of the quality of segmented products.
Declining company
Nokia was also trapped by its own operating system Symbian. This was a device-centric system at a time when the world was quickly becoming platform- and application-centric.
By 2009, Nokia was using 57 different and incompatible versions of its operating system since the system had to be developed for every phone separately.
Finally, after 2010 senior management had to refocus Nokia on network infrastructure equipment and completely abandon the field of mobile phones.
-jk-
Book: Doz, Y.: Ringtone: Exploring the Rise and Fall of Nokia in Mobile Phones (OUP Oxford 2017, 208 pages)