Have you heard this one? “Nokia built a touchscreen smartphone seven years before Apple introduced the iPhone, and it had a Wi-Fi-connected tablet in the late ’90s, more than a decade ahead of the iPad’s launch.” What happened? Why isn’t Nokia the world’s greatest smartphone maker? The simple answer is execution failure. Great ideas are worthless if they never move from the idea stage to launch. Nokia failed to execute a bold new strategy, and their story serves as a potent reminder to credit unions that execution matters.
According to a Wall Street Journal article on Nokia, from which the quote above was derived, Nokia’s gadgets were “casualties of a corporate culture that lavished funds on research but squandered opportunities to bring the innovations it produced to market.” The company was undone by a lack of clear direction, warring factions, indecision, and ultimately an inability to get things done. While it hasn’t failed, it has suffered a -98% change in stock price from its high in 2000. It is a shell of its former self.
Of course, Nokia isn’t the only company to go from high-flying to life support. Hundreds of companies go through this every year, with but a handful emerging from the shadows with new focus and rebounding performance while the rest remain mired in a long, slow decline. The good news is that in the misfortune of others we find great lessons in leadership, and in particular three lessons in “smart” execution.
Lesson 1: Smart Execution Starts With Good Strategy
Often the best lessons are the ones steeped in common sense. This is one of those lessons. It doesn’t matter if you can execute well if what you are executing is based on something dumb. Consider these two circumstances surrounding Nokia’s strategy, both points from the Wall Street Journal article:
Early on, the CEO started laying the groundwork for the company’s next reinvention. Nokia executives predicted that the business of producing cellphones that do little but make calls would lose its profitability by 2000. So the company started spending billions of dollars to research mobile email, touch screens and faster wireless networks.
After Olli-Pekka Kallasvuo…took the helm…in 2006, he merged Nokia’s smartphone and basic-phone operations. The result, said several former executives, was that the more profitable basic phone business started calling the shots.”The Nokia bias went backwards,” said Jari Pasanen, a member of a group Nokia set up in 2004 to create multimedia services for smartphones and now a venture capitalist in Finland. “It went toward traditional mobile phones.”
Certainly in light of what we know now this return to a focus on basic phones was a bad idea, but lest we excuse the shift by saying “hindsight is 20/20” remember that the company itself thought a dedicated focus on basic phones was a bad idea. They simply let bad strategy overwhelm good strategy and consequently executed (perhaps too well) a dumb idea.
In a similar fashion far too many credit unions are executing, but the strategies behind the execution are not right for next year or most certainly for the next three to five years. Case in point is the strategy of some credit unions to eschew adoption of a mobile access strategy in favor of “the way we’ve always done it” branch strategy. Sure, it works today but I’m not so sure ignoring mobile will work tomorrow, which means defining a mobile strategy and an execution plan is in order today – even while branching serves as the bedrock of member relationships. Because we are a well-capitalized industry we can afford to be short-sighted for the time being, but the cost of short-sighted strategy will eventually be a big problem to bear.
Lesson 2: Smart Execution Requires Uncluttered Focus
Adding and adding new strategies without purging old stuff leads to inefficiency, a busted budget, frustrated change agents…not to mention frustrated stalwarts who feel they are on a freight train. It is critical, then, to purge old and/or ineffective strategies as new strategies are added. The best visual representation of this particular issue is of a professional plate spinner (there is such a thing: http://www.platespinning.com) trying to keep every plate spinning without them crashing to the ground. Easy to do with one plate or two, but after a while managing multiple plates requires a hefty and unsustainable amount of energy. When that energy runs out, every plate eventually stops spinning.
A friend of mine once made the statement that energy follows attention. Launching something new, ramping up, gaining momentum requires a lot of energy. If your attention is spread amongst a variety of competing strategies, then new strategies won’t have the energy they need to gain traction and succeed. Focus, or attention, diluted amongst too many old and new objectives will result in less and less success over time.
Rarely do institutions proactively determine the strategies, products, initiatives, etc. that should not go forward. Most institutions simply add new to old, waiting until it is absolutely, unequivocally clear that a strategy is dead before removing it from a team’s strategic focus. One example, however, of a credit union that did it the right way involves a telephone teller system. This credit union was looking to the future, contemplating how members would be conducting their transaction business, and subsequently began questioning the long-term need for a traditional call-in system in the face of increasing online/mobile banking adoption (mobile baking happened to be an element of new strategy). They embarked on an analysis process simply to determine the value of the call-in system, but it ended up with the quick and complete elimination of the call-in system and a redirection of saved resources into immediately improving their mobile banking solution. The easier decision would have simply been to leave the system alone. The right decision was to kill it.
Lesson 3: Smart Execution Needs a Decision-Maker Returning to the Nokia article, consider this very interesting quote:
In 2010… Nokia was hashing out some details of software that would make it easier for outside programmers to write applications that could work on any Nokia smartphone. At some companies, such decisions might be made around a conference table. In Nokia’s case, the meeting involved gathering about 100 engineers and product managers from offices as far-flung as Massachusetts and China in a hotel ballroom…
Over three days, the Nokia employees sat on folding chairs and jotted notes on an array of paper easels. Representatives of MeeGo, Symbian and other programs within Nokia all struggled to make themselves heard. “People were trying to keep their jobs,” one person there recalls. “Each group was accountable for delivering the most competitive phone.”
Decisions by committee are always hard to come by. Decisions by a committee of 100 are near impossible. Smart execution requires that someone have the authority and intelligence to assess a strategic discussion and, in the absence of any kind of consensus, make the decision on a course of action.
In a credit union context, the two parties tasked with this “the buck stops here” decision-making responsibility are the board of directors and the CEO. Boards, along with the CEO, make decisions on very broad corporate strategy, and the CEO makes decisions on more defined corporate strategy as well as execution. Should either a board or CEO fail to make strong decisions, or succumb to the improper delegation of such decision-making to a group lacking performance accountability, the institution will find self-interests driving execution decisions. As with Nokia, staff members will fight harder for themselves or their departments than for the long-term success of the credit union.
The End of Nokia? The End of Credit Unions?
Nokia is now in the midst of a turnaround. It will, more than likely, survive but it is doubtful that it will recover its King-of-the-Hill dominance of the mobile phone market any time soon – if ever. As for the credit union community, some say that small credit unions are unfit for the future. My opinion is that future success is less about the size of an institution than it is about the wise deployment of resources. Credit unions executing their strategies with a high degree of intelligence will survive because their resources will be used wisely, deployed in support of solid, focused strategy defined in the context and process of accountable decision-making. Those that continue to do dumb things will not survive. I’m guessing that after failing they will be willing to talk about their failures – but only if we can still reach them on their Nokia 6267 clamshells. Here’s hoping.