The Story of Nokia and Nissan
Nissan, the Japanese car manufacturer, was once famous for being the most sought-after sports car manufacturer on the planet. From the 1950s to the 1970s, the company became a phenomenon with sales in the US reaching 500,000 cars per year. By the 1990s, with the introduction of boring family sedans, Nissan’s sales declined. In 1999, the company was in $20 billion debt, even on the verge of bankruptcy.
However, they were revived under the leadership of Carlos Ghosn, a Lebanese-Brazilian executive. Despite being an outsider, Carlos managed to bridge the cultural gap and gain the trust of middle and senior Japanese executives. Eventually, he was able to implement cost-cutting measures, including significant job cuts, plant closures, and streamlining operations. He even convinced skeptical employees and the Japanese government by using the massive cost savings to heavily invest in R&D, developing more than 10 new car models within 3 years.
Carlos Ghosn. Image: Internet
On the other hand, Nokia, once the world’s leading mobile phone manufacturer, revolutionized the mobile phone industry in the late 1990s. However, it was acquired by Microsoft in 2015 with a classic quote from CEO Stephen Ballmer: “We didn’t do anything wrong, but somehow, we lost.”
Nokia failed to create competitive products against the iPhone in the years 2007-2011. According to Professor Nguyen Quy Huy at INSEAD, the important lesson here is that there were too many fears within the organization.
Senior managers at Nokia were afraid of both competitors and external shareholders, and they acted out of fear. Meanwhile, middle managers were mainly afraid of their superiors and colleagues. Project managers feared sharing negative information with senior managers. This led to over-optimistic confidence in Nokia’s capabilities. As a result, they neglected long-term investments in innovation to respond to the emergence of the iPhone.
“In general, most failures are due to unsuccessful implementation. We have great, innovative ideas, but we are weak in executing them as an organization,” emphasized Professor Huy. “At INSEAD, I gave top executives stress tests on their implementation strategies. When they look deeper, they will realize that most failures are related to the culture they created: collective fear, political isolation, fraud and corruption, deception, dishonesty in feedback to senior management…”
Professor, renowned world consultant of Vietnamese origin, Nguyen Quy Huy is a strategy professor at INSEAD – the world’s leading business school – since 1998 and head of the strategy department from 2010 to 2012. Professor Huy has published over 80 works on strategic change, strategy execution, and organizational innovation. His research has won 11 international awards and has been published in major academic journals.
Professor Huy is ranked among the top 2% most cited scientists in the field of Business & Management (according to a Stanford study in 2020, taking into account the impact of each author).
Lessons for businesses in Vietnam
According to Professor Huy, recently, most researchers and businesses have made mistakes in predicting the global situation. The outbreak of Covid-19, the US-China trade war, and the post-Covid economic recession have all surprised economists as they were all “black swans” not included in the forecasts.
“The current management trend is to predict the unpredictable. Top executives worldwide are demanding the ability to react quickly to things that cannot be foreseen at any given moment,” said Professor Huy.
This is very different from a deep cost-cutting exercise, focusing on saving, not expanding production, which many Vietnamese companies have applied in the past.
Some experts believe that this is the time for leaders to focus on restructuring their businesses, strengthening management, and training employees. These are important tasks that they haven’t had time to do while in a hot development phase.
According to Professor Huy, this is crucial for the long-term growth and development of many countries, especially developing ones like Vietnam.
“From my experience, companies in these countries (including China) are not investing sufficiently in developing skilled labor (e.g., experienced multi-functional technology experts) to overcome the threshold of low-cost labor and low technology. The bigger picture is about innovation and the necessary innovation in highly skilled labor,” said Professor Huy.
“Can you find them at a market? No. These are built through both good and bad times,” emphasized the professor. “With a mindset for sustainable competitive advantage, preventing imitation of its high value, if I were a businessperson, I would conduct a systematic investigation of my company’s specific capabilities. I would ask how I could develop high-value products for the world that other companies cannot easily imitate. No field is considered attractive if we don’t have expertise, especially in producing something very useful, of high value for some global market areas. All advantages are temporary and quickly at risk of being imitated: I can become wealthy in a few years, but not for long, as I will be defeated and replaced.”
