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Is your board stuck in yesterday’s successes?

Have you heard of Nokia?

Had I asked that in 2010 it would have been an impertinent question. At the time Nokia was the dominant global mobile phone company. In my seminars of those days, perhaps nine in 10 of those present would be sporting a Nokia device.

Today, asking if you know Nokia is a pertinent question. In this past decade a generation of phone users has come of age never having heard of the company. This is because in the years immediately after the arrival of Apple’s iPhone and Google’s Android-powered phones, Nokia lost 90% of its value and teetered on the  verge of bankruptcy.

How did this happen? Risto Siilasmaa, who took the chair in 2012 to try and rescue the 150-year-old organization, is in no doubt about the reason. Nokia, he says, was the victim of its own success. Leaders had become smug, complacent and resistant to change. The organization’s ability to innovate or take bold risks had all but died.

Make no mistake: in its heyday, Nokia was a remarkable company. It was the pride of Finland, producing nearly a fifth of its exports and making as much money as all other Finnish companies combined. At one point, Nokia had greater global brand recognition than Disney or Toyota. I had a Nokia phone back then, and if you’re of a certain age, so, most likely, did you.

How did it stumble so badly? In his book, Transforming Nokia, Siilasmaa calls it “the toxicity of success.” Nokia’s board was not blind – it could see the assault the new generation of smartphones was making on its core markets. But there was no sense of urgency. The board was informed by management in every meeting that nothing was amiss; that measures were being taken; that all would be well. Board meetings at the time, he tells us, would be hours of brain-numbing presentations, flitting over many topics but studiously avoiding the growing elephant in the room – Nokia’s failing long-term competitiveness in smartphones.

There was no lack of talent at the top. The chair at the time was a near-mythical figure in Finland, widely admired. The board contained icons from other global companies and renowned professors (one went on to win a Nobel prize). 

But this board, in Silaasmaa’s telling, was stiffly formal; it was run like a gentleman’s club, genteel and superficial. Oh, and the dazzle!

In 2008 the board went to China. Directors stayed in suites with their spouses at the Ritz-Carlton in Beijing. A fleet of limousines was lined up for the directors, and they moved around in a police-escorted motorcade, like royalty. They flew back to Finland in the chairman’s private jet. Silaasmaa, then a junior director, was definitely dazzled. 

But the ship was sinking, and no one was paying attention.

Bad news was getting watered down or ignored altogether; the board was spending its time glorying in its storied past rather than focusing on its future; and it was enjoying its perks without questioning its purpose.

Does this sound familiar? I know I have seen it many times. Boards who just show up to tick boxes; well-fed directors who don’t ask tough questions; a collegiate atmosphere that feeds complacency; a sense of importance amplified by swooning aides and acolytes. This style has brought many a dominant organisation to its knees.

Nokia did make it, incidentally. Siilaasmaa helped it survive a failed marriage with Microsoft, and guided his restructured board and management team to work together to focus Nokia on its one remaining area of competitive strength: global telecommunications infrastructure. It came back from the edge of extinction, not so much as a handset brand (which was eventually licensed to others and today runs as a peripheral Android player, albeit with some panache) but as one of the world’s two or three biggest providers of network infrastructure. A good chunk of what you consume on the internet passes through Nokia’s hands today.

If you’re on the board of a successful organization, look around you. Do you see energy and enthusiasm in every board meeting, or just superficial box-ticking? Do you get lively repartee and intelligent probing going on, or just dazed expressions? Do you see self-satisfied directors, enjoying yesterday’s successes without building tomorrow’s? Very little time spent on strategy, innovation and futuristic thinking? Big perks and retainers that inhibit any rocking of the boat? Do you see a board that’s heavy on formality but light on substance?

Then I’m afraid trouble is brewing. It’s not enough to have a great past in business; the future is never assured, and must be built afresh.

(Sunday Nation, 8 November 2020)

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