CEO Surprises

How customers and technological advances can shake things up.

October 13 2010 by Bob Donnelly


The age old scenario of complacency overcoming innovation continues to play out and take its toll on CEOs even though we have witnessed it year-in and year-out for decades.

What is it about this common management faux pas that continues to end the reign of many CEOs?

Jim Skinner of McDonald’s captured it best with his simple statement, “we took our eyes off the fries.”

And Howard Schultz, the iconoclastic founder of Starbucks, elaborated on it with his now classic analysis: “Starbucks lost its way and became the soulless corporation I detest.” His description of becoming complacent was that “we got swept up into a phase of entitlement.” All of which resulted in the dilution of the brand and along with it the “commodity-zation” of the Starbucks experience.

Now we have Nokia, which has fallen into the complacency trap along with all the others. In Finland, the home of Nokia, the Research Institute that studies the Finnish economy reiterated what has happened to many others, “Nokia has become a victim of its own success.”

How is it that company after company becomes deluded with its own success, and when that happens the management team assumes that they know more than their customers, and starts to market by assumption? Isn’t the fundamental concept of the product/technology life cycle embedded in the education of every CEO?

It seems as if no one studies the business press, nor reads the countless stories of great companies losing their way, like Starbucks, or else they would see the predictable indicators of bureaucracy smothering innovation in their own firms. Innovation is the lifeblood of every company. The CEO has to manage the fragile balance between creativity and discipline.

Once the CEO succumbs to the “death by committee” syndrome where the complacent naysayers and bean counters snuff the life out of every new idea that comes along, the company culture can easily morph into becoming a victim of its past success as with Nokia.

Lessons from Nokia

1. Return to the pioneering spirit that started the company. Nokia had developed an internet-ready, touch screen handset with a large display screen in 2004, several years before the introduction of the iPhone. Since it was a costly device to produce, there was an element of risk to it. Accordingly, in a risk averse bureaucratic manner, management decided not to go forward with it.

2. Change the game. Likewise, in 2004 some managers at Nokia developed the idea of an online applications store. This, too, was rejected by management. Three years later we had the Apple store and the rest is history.

3. It’s all about technology. Nokia introduced its first touch-screen in 2003, which worked with a stylus. However, management allowed this technology to languish, and again Apple used this time to perfect the fingertip precision we now have with the iPhone. As a matter of fact, Nokia engineers offered about 500 proposals to improve the technology on this project, and none were approved.

4. The ROI is too small. Due to the highly risk averse corporate culture described by some ex-Nokia managers as akin to a Soviet-style bureaucracy where proposals were reviewed by interlocking management committees, proposals were rejected because their returns were seen to be “too small.”

Successful innovations typically start off small and over time become game changers.

Now we have a new CEO at Nokia, Stephen Elop, who ran Microsofts business software operations. Not only is he the first non-Finnish CEO at Nokia, he is also a Canadian. So not only does he have the daunting task of dealing with Nokia’s stifling internal management culture, he also has the cultural challenge of a Canadian dealing with Finn’s? How can Steven Elop win?

The culture at Microsoft is a far cry from the culture at Nokia!

Beyond the cultural road blocks, the new CEO has a huge technological gap to overcome to retain a position in the global smartphone market while managing the operations of what is still the largest manufacturer of mobile phones in the world.

It’s back to school on the fundamentals of the life cycle and the dangers of complacency described so well by Jim Collins in his best seller: How the Mighty Fall. His analysis on the “Hubris Born of Success” is a must read for any CEO, and Nokia fits the pattern like a glove.

Hope you can learn from this and not fall into the “complacency trap” that so many others have.

If you are concerned by some of the telltale signs of the hubris born of success in your company, let’s start a dialogue to deal with it.

E me: rmdonnelly@chiefexecutive.net

A serial entrepreneur who has previously held executive positions at IBM, Pfizer and Exxon, Bob Donnelly writes the Entrepreneurial CEO column for Chief Executive. In his years of experience as an educator, consultant and a CEO himself, he is a firm believer in getting to the future before the customer, or else “the customer will leave you behind.” His book: Guidebook to Planning – A Common Sense Approach, is available through Amazon and is now an e book. E mail Bob with questions on management issues that disturb or disrupt your business, and he will do what he can to offer help and advice.