“Between 1998 and 2007, Nokia was responsible for nearly 4 per cent of Finland’s annual GDP, while also being responsible for 30 per cent of the nordic country’s research and development spend and some 20 per cent of its annual exports.”
Original source: Finland government buys a slice of Nokia
This led middle managers to over promise and under deliver. One middle manager told us that “you can get resources by promising something earlier, or promising a lot. It’s sales work.” This was made worse by the lack of technical competence among top managers, which influenced how they could assess technological limitations during goal setting.
As one middle manager pointed out to us, at Apple the top managers are engineers. “We make everything into a business case and use figures to prove what’s good, whereas Apple is engineer-driven.” Top managers acknowledged to us that “there was no real software competence in the top management team”.
Who knows if that notion about Apple is true or if it causes their success. The broader point of needing to understand the unpredictable nature of software is still important. As more organizations start using and making custom written software (if only to make mobile “store fronts” to their business), knowledge of the chaotic nature of software development needs to spread more beyond IT. Even IT people get it dreadfully wrong often.
So far the best tactic we have is to redefine what “success is”: it’s not delivering everything you promised on time, but being predictable about delivering something on regular intervals. That’s a vague way of saying delivering smaller batches of code into production more often. We sort of predict/hope that this results in more useful, better software overall. We’ll see.
Now, of course, part of this process is being honest about reality. The analysis of Nokia’s failures because “management” would not accept “real talk” from their employees will kill any innovation-driven business. As the company (and RIM and countless others) shows: tech companies are never so secure that they can afford to be confident in their market position.
Seems like the Nokia acquisition was a bad idea? “As a result of the cuts, Microsoft said it will record an impairment charge of approximately $7.6 billion related to assets associated with the acquisition of the Nokia business in addition to a restructuring charge of approximately $750 million to $850 million.”
Microsoft Targets Hardware Business With 7,800 Job Cuts
Good stuff as always, esp. the brainstorming on Nokia strategy at the end.
Catharsis or Anticlimax? – @asymco on Microsoft+Nokia
My new analyst house, 451, has a good take on Microsoft buying Nokia’s handset division, available for free, written by Chris Hazelton and Brenon Daly. Be sure to check out the walk to the conclusion (esp. the chunks on the difficulty of being in third place, ChangeWave’s survey data on sentiment for buying Windows Phone & Nokia, and the analysis of how MSFT gets return on the deal)…but here’s the dessert first:
This is a defensive move to secure a range of mobile devices for Microsoft’s Windows Phone OS. The risk of losing Nokia to Android or market failure is greater than the cost of using a little less than 10% of Microsoft’s international cash holdings. The deal falls in line with Microsoft’s strategy to become a devices and services player, but we see this as primarily a step to put off the inevitable move from OS vendor to primarily services provider.
The traditional computing model is under significant threat, and buying a failing smartphone vendor will not turn things around. In the two and a half years since the Microsoft and Nokia partnership was established, the two have been unable to significantly gain market share. As the market becomes even further entrenched in iOS and Android, it is hard to see how this deal can provide anything other than time for Microsoft, to allow it to figure out its mobile future.
451 on Microsoft Buying Nokia – Microsoft Just Bought Itself Time
Under the terms of the agreement, Microsoft will pay EUR 3.79 billion to purchase substantially all of Nokia’s Devices & Services business, and EUR 1.65 billion to license Nokia’s patents, for a total transaction price of EUR 5.44 billion in cash. Microsoft will draw upon its overseas cash resources to fund the transaction. The transaction is expected to close in the first quarter of 2014, subject to approval by Nokia’s shareholders, regulatory approvals and other closing conditions.
That’s pretty intense. We’ll see how fast they can move. I’m eager to see/hear have what Horace says.
Also, see a lengthy, detailed press release here.
Microsoft to buy the device part of Nokia for €5.4B