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The Stupid Manager Theory applied to Nokia

“I would say that the highest abstraction level of the problem is that there are incompetent people managing, ordering or directing things.”

via Rescuing Nokia? A former exec has a radical plan [printer-friendly] • The Register.

Risku believes in the Stupid Manager Theory of business failure. It’s still the overall most popular theory describing why large companies fail. It’s so attractive because it’s so simple.

However, I have several counters/questions to this theory:

  1. When did management become stupid, exactly? The same group was in charge when the company was successful and the corollary to the Stupid Manager Theory is the Smart Manager Theory for describing company success. So how and when did they become stupid.
  2. The conspiracy of simultaneous stupidity. How did *all* managers in a given company become stupid all at once? Did they conspire to lose competence together? Was there something in the water? Didn’t anybody escape the stupidity pathogen? A further observation to be made is that when one company in an industry fails, it’s usually not alone.  Motorola, Sony Ericsson and now LG are in dire straits.  Is the stupidity contagious across companies? Should we quarantine managers at firms like Samsung that have not yet been impacted? If the stupidity comes from reading market news, should we just keep them ignorant?
  3. If the managers were always stupid then how did HR get so good at singling out the stupid (or those susceptible to stupidity after periods of intelligence). Isn’t the remedy to simply act in perfect contradiction to their choices and hire only the people that HR rejects. After all, being perfectly wrong is a precious gift.
  • Jon T

    My experience tells me that the Smart become the Stupid when they continue doing what made them the Smart ones in the first place and won’t or can’t adjust their thinking.

    Becoming Smart, and STAYING Smart are two very different things.

    Think about in the context of Nokia, and it seems to fit.

    • http://www.asymco.com asymco

      But being inflexible in one's thinking and being unable to deal with change is not smart, at least not smart enough to be running a large company.

  • http://none JoshKo

    Clayton M. Christensen pretty much explains all this in his book "Innovator's Dilemma". In short dominant companies fail when they do not understand disruptive technologies. Disruptive in this case would be smartphones or more specifically the software layer.

    Applied to Nokia, Nokia is failing because they do not understand the smartphone customer. On the other hand they understand the dumbphone customer, perhaps too well. the problem is that the money in dumbphones is going down and increasing in smartphones.

    Eventhough Nokia might have been the first in introducing smartphones they never understood the smartphone customer.

    So Nokia has excellent management for the dumbphone market.

    • http://www.asymco.com asymco

      Bingo.

    • Lee Penick

      Couldn't you tell a similar story for Microsoft?

      (Please do, I enjoyed reading the first one.)

  • http://dawningawareness.com Michael McDaniel

    I think that asking how HR became so good at hiring stupid is neither useful nor supportive. Cultures tend to re-inforce themselves. I've never worked at a place where HR was responsible for keeping the hiring bar high. They're paper-pushers. Crappy teams hire crappy people.

    That said, I think Nokia has been very good at iterative refinement and production of other people's designs and not very good at disruptive innovation of their own. You need very different skills in managers at low-margin production houses than at high-margin innovation dens like Apple.

    • http://www.asymco.com asymco

      My article was using sarcasm. Clearly HR departments are not hiring only stupid people. By reducing the Stupid Manager Theory to absurdities, it's proven wrong.

      On the subject of Nokia, if you go back far enough you can discover that their growth was due to another disruption in telecommunications. Back in the early nineties when the mobile giant was Motorola, European nations created a standard mobile protocol for digital (GSM) to allow interoperation in their continent. The emergence of GSM as a global standard enabled mostly European companies to overtake Motorola in its core business: Ericsson, Siemens, Alcatel and Nokia all rapidly took share. Nokia was better at manufacturing and logistics and (to some degree user interfaces for SMS) thus took the overall top spot.

      So Nokia was an entrant once; taking share and profits from an incumbent who was still rolling in the dough from analog technology (AMPS).

  • Reid Simmons

    Re: #2
    Management, in most companies, exists to enforce compliance with company philosophy, vision, and goals. Managers are often not leaders; they look up for vision, etc.

    When a company's leadership does not provide vision, philosophy, and the trappings of culture, management enforces compliance with any short-sighted goal that comes down the pike. Or, in other words, they get stupid all at once.

    • Elder Norm

      Yes…. But….. Steve Jobs said it all in one small statement. When a company gets big and successful, they stop innovating…). cause they got it right so why fight success — my comment).

      The push becomes profit so instead of innovating, they try to sell what they have and the salesman end up running the company. When they lose their lead (as always happens) there is no one left to innovate, only salesmen selling old technology… (Just look and see who is running Microsoft…… the sales guy)

      Just a thought,
      en

  • http://NA VP

    JoshKo seems to have the right explanation for your #1.

    But for #2, you will have to extend the argument to include "groupthink" and "not invented here" syndrome.

    It is very hard for a firm which has struggled through early growth of technology to deliver "phones that work", and focused on usability design (e.g. absorb shock when it falls down, able to work in 120+F temperature and dusty conditions in the third world country, multi-lingual keyboards, etc.) to make the leap into completely transformed design paradigm that focused on user interface simplicity/ease of use.

    Witness their failed attempt to come up with a winning flip-phone that was all fad in the US 5 years ago. Also more 'advanced' Nokia phones (e.g. the communicator) were used by tech-savvy people, so it never looked into simplifying the interface to make it work for a really large audience.

    I am sure they have a lot of people who get the smartphone – but the radical changes needed are being blocked/sidelined by the 'old' power centers.

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  • Niilo

    This thing has popped up again. This time with Risku pointing the finger!

    http://www.mobileindustryreview.com/2010/09/risku

    (The original in the Mobile Industry Review has since redacted the names, but they are still easily located on-line, but in the spirit of civility that pervades on this blog I have not linked to them. That would just be mean!)

    • http://www.asymco.com Horace Dediu

      I want to emphasize that point of my article was that Risku is wrong. The fault does *not* lay with [stupid, lazy, uneducated, incompetent] managers.

      The problem is that the company is caught in the innovator's dilemma. There is a way out, but it requires leadership and an understanding of the harshness of response required.

      The required response is so painful that usually the only way a company undertakes it is if it's in a near-death situation. Very, very rarely will a healthy company do what it takes to destroy its core business in order to rebuild it to a new reality.

      Replacing middle management will not solve this problem. A new CEO can help but an old CEO can do it just as well. The decision to carve a new path must be supported by the board of directors. I sense that the board is not on board with the necessary change.

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