ANALYSIS: Using 750 words, write a brief analysis, in your own words of how the article relates to the selected chapters. An analysis is not rehashing what was already stated in the article, but the opportunity for you to add value by sharing your experiences, thoughts and opinions. This is the most important part of the assignment.REFERENCES: All references must be listed at the bottom of the submission–in APA format. Be sure to use the headers in your submission to ensure that all aspects of the assignment are completed as required.Any form of plagiarism, including cutting and pasting, will result in zero points for the entire assignment.Journal of Small Business Management 2012 50(2), pp. 181–190
Introduction: Small Business and Networked
Innovation: Organizational and
Managerial Challenges
jsbm_349 181..190
by Massimo G. Colombo, Keld Laursen, Mats Magnusson, and
Cristina Rossi-Lamastra
The aim of this article is to provide an introduction to the special issue. We briefly
consider the organizational and managerial challenges that small and mediumsized enterprises encounter in networked innovation, thereby building a background
to the articles included in the special issue. We then present the main findings of these
articles and highlight their novel contributions.
The aim of this special issue is to
examine the organizational and managerial challenges that small and mediumsized enterprises (SMEs) encounter in
networked innovation and to highlight
how these challenges can be overcome.
From a theoretical perspective, this
special issue extends our understanding
of how SMEs can design their networks
for innovation. In so doing, it offers valuable practical insights to SMEs’ managers.
SMEs encounter severe obstacles
in their path toward innovation
(Kleinknecht 1989). First, these firms
are usually financially constrained
Massimo G. Colombo is professor of Economics of Technical Change at the Department of
Management, Economics, and Industrial Engineering, Politecnico di Milano.
Keld Laursen is professor of Economics and Management of Innovation at the Department
of Innovation and Organizational Economics, Copenhagen Business School.
Mats Magnusson is professor of Product Innovation Engineering at the School of Industrial
Engineering and Management, KTH Royal Institute of Technology.
Cristina Rossi-Lamastra is assistant professor at the Department of Management, Economics,
and Industrial Engineering, Politecnico di Milano.
Address correspondence to: Massimo Colombo, Department of Management, economics and
industrial engineering, Politecnico di Milano, Leonardo 32, 20133 Milan, Italy. E-mail:
thus performing limited research and
(Himmelberg and Petersen 1994). Likewise, they are not particularly attractive
for prospective external investors, especially in the very early stages of their
lifecycle when they lack a track record
that can signal their quality (Connelly
et al. 2011). Second, SMEs normally do
not possess the complementary assets
(Gans and Stern 2003; Teece 1986)
needed to commercialize the innovative
technologies they develop. As a result,
SMEs may show poor innovation performance (Rosenbusch, Brinckmann, and
Bausch 2011).
Scholars have observed that to overcome these limitations, SMEs can establish alliances with third parties (e.g.,
Baum, Calabrese, and Silverman 2000;
Eisenhardt and Schoonhoven 1996;
Flatten, Greve, and Brettel 2011; Miles,
Preece, and Baetz 1999; Nieto and
Santamaría 2010). Indeed, SMEs often set
up collaborative innovation projects with
large suppliers and lead customers (e.g.,
Smith, Dickson, and Smith 1991), create
linkages with other SMEs in districts or
geographical clusters (e.g., MolinaMorales and Martínez-Fernández 2010),
and collaborate with universities and
research centers (e.g., Motohashi 2005;
Piergiovanni, Santarelli, and Vivarelli
1997). By networking outside their
boundaries, SMEs can complement their
limited internal R&D with knowledge
generated by external actors and obtain
access to external complementary assets.
Such networking activities help overcome
SMEs’ liability of smallness (Freeman,
Carroll, and Hannan 1983) and let them
gain access to national and international
sources of new knowledge (Colombo
et al. 2009). Indeed, networks allow SMEs
to reach critical mass and constitute
bridges toward new markets and innovation sources (Hite and Hesterly 2001).
poses key organizational and managerial
challenges to firms (Colombo, Rabbiosi,
and Reichstein 2011). These challenges
are especially severe for SMEs. Networking may divert resources and management time from the company’s core
business, may generate unintended
knowledge leakages to network partners, may require (too) heavy investments in absorptive capacity, or may
increase personnel turnover. In spite of
the attention that small business literature has devoted to the link between
networking and innovation, the issue of
how SMEs should organize in order to
limit the negative effects generated by
networking and increase its benefits is
still poorly investigated. Accordingly,
this special issue describes, analyzes, and
improves our understanding of the organizational and managerial challenges
posed to SMEs by networked innovation.
Identifying these challenges is a prerequisite for suggesting suitable organizational
practices for the interaction of SMEs with
third parties, aimed to facilitate the
development and commercial exploitation of technological knowledge.
Presentation of the
Articles Included in the
Special Issue
The articles included in this special
issue advance our comprehension on
how SMEs design their external networking activities and how managerial and
organizational decisions in this domain
impact on SMEs’ innovation performance.
Interestingly enough, the articles do not
revolve around a single theoretical
approach or empirical methodology, but
propose a wide variety of theoretical perspectives and research designs. Accordingly, the special issue exposes the reader
to diverse ideas and methods, thus having
the potential to stimulate creative conversations on this topic. Theoretical
approaches range from coordination
theories (Gardet and Fraiha 2012),
resource-based view (Piva, Rentocchini,
and Rossi-Lamastra 2012), social network
analysis (Lowik et al. 2012), open innovation (Lasagni 2012; Parida, Westerberg,
and Frishammar 2012), and literature on
social capital (Sarel, Verreynne, and Kastelle 2012) and on family firms (Classen
2012). The proposed methodologies span
from case studies (e.g., Gardet and Fraiha
2012) to quantitative analyses conducted
on large databases (e.g., Sarel, Verreynne,
and Kastelle 2012).
Moreover, the articles differ in the
locus of their investigation. The first
three articles in order of presentation in
the special issue devote attention mainly
to the organization of networks. Specifically, they analyze how SMEs design
crucial dimensions of their networks
depending on their own characteristics
and the characteristics of the networks
they join. In the subsequent four articles,
the locus of investigation moves to firm
performance. Through rigorous quantitative analyses based on large data sets,
these articles examine the impact of
SMEs’ external networks on their innovation performance, a topic that has a
long tradition in small business research
(see e.g., Shan, Walker, and Kogut 1994).
They extend extant literature in that they
highlight that this link depends on the
peculiar type of networking activities
that firms carry out and the type of partners they interact with. Difficulties in
measuring innovation performance in
SMEs are solved by resorting to multiple
innovation indicators (Lasagni 2012;
Piva, Rentocchini, and Rossi-Lamastra
2012; Sarel, Verreynne, and Kastelle
2012) and by the application of widely
accepted scales (Parida, Westerberg, and
Frishammar 2012). Likewise, the wellknown problems of firm performance
analyses (e.g., reverse causality or endogeneity concerns) are minimized by
resorting to advanced econometric techniques (e.g., Piva, Rentocchini, and
Rossi-Lamastra 2012) or complex
research designs (e.g., Sarel, Verreynne,
and Kastelle 2012).
The article by Classen opens the
special issue. It examines an important
dimension of SMEs’ external networking
activities: search breadth as measured by
the number of different external sources
or partner types that firms rely upon to
acquire resources for their innovative
activities (Laursen and Salter 2006). The
in-depth analysis that the author conducts of this dimension is an original
addition to the debate on how SMEs
should organize their networks to maximize their innovation performance.
Search breadth indeed raises a challenging trade-off. On the one side, a wide
search breadth is conducive to better
innovation performance. Interactions
with diverse network partners can bring
novel ideas and/or generate new combinations of existing ideas (Amabile 1996).
On the other side, managing a wide
search breadth is problematic as partners’ diversity must be harmonized also
seen in the light of the peculiar characteristics of the firm that participates in
the network. As to this latter aspect,
SMEs are an intriguing object of analysis
for an article focusing on search breadth.
These firms do not possess the resources
and well-established routines that allow
large incumbents to manage wide and
diverse networks of partners. This holds
specifically true for family SMEs where
the liability of newness and smallness is
coupled with the peculiar characteristics
engendered by family ownership and
control (see, e.g., Chrisman et al. 2012
for a recent contribution). Conventional
wisdom suggests that family firms are
less prone to network with a wide array
of external third parties as they perceive
that this may threaten the family’s equilibria and socio-emotional wealth
(Gómez-Mejía et al. 2007). Accordingly,
Classen finds that family SMEs network
with a less diversified set of partners
than nonfamily SMEs. Even more interestingly, the study finds variance within
the group of family SMEs in that family
SMEs with a better educated CEO and a
higher percentage of nonfamily managers have a wider search breadth in comparison with the other family SMEs.
Moreover, there is a positive interaction
between nonfamily involvement and
educational background diversity within
the top management team in determining search breadth.
Gardet and Fraiha’s article studies
another important dimension of SMEs’
networking activities. In particular, the
article focuses on coordination modes—
that is, specific combinations of different
coordination tools—which SMEs can use
to manage their network of alliances. This
construct is an interesting addition to the
literature interested in the organization
and management of network relations.
The authors use an in-depth longitudinal
case study of a project bearer SME in a
network—the network “hub”—to document that coordination modes can change
even if the network does not change. The
authors analyze data from interviews,
direct observation, and other sources to
address the following research questions:
(1) what are the coordination tools used
by a hub SME for the purpose of developing an innovative project; (2) how do
coordination tools change during the lifecycle of the project; and (3) what are the
drivers of these changes? Results show
that the skills necessary to the hub SME
change according to the different phases
of the innovative project. These changes,
in turn, influence the choice of the coordination mode. Moreover, the firm’s
choice of a particular coordination mode
is affected by the degree of its dependency on the network partners. These
findings have important practical and
theoretical implications for SMEs interested in initiating an innovative project.
Notably, they provide new insights
regarding how to design and coordinate
an effective network of collaborative relations contingent on the evolution of the
innovative project.
The article by Lowik et al. focuses on
the strength of network ties, a topic that
has received extensive coverage since
the inception of scholarly research on
networks (Granovetter 1973). In particular, the article offers a new perspective
on the role of strong ties with partners,
allowing SMEs to acquire external
knowledge relevant to new product
development. Previous studies have
highlighted that firms can fruitfully configure their alliance network by combining strong and weak ties and by
leveraging the specific advantages of
each type of tie (e.g., McFadyen and
Cannella 2004). However, this configuration is problematic for SMEs as these
firms are generally short of internal
managerial resources and thus find it difficult to manage a broad and heterogeneous portfolio of ties with other firms.
Lowik et al. resort to four case studies of
high-tech SMEs based on interviews with
firms’ CEOs, operating managers, and
employees exposed to interactions with
external knowledge sources, to examine
how SMEs can use strong ties to get the
external knowledge they need. The
extant literature assumes an inverted
U-shaped relationship between tie
strength and new knowledge acquisition
(Uzzi 1996). Indeed, embeddedness in
the collaborative relation over time leads
to diminished knowledge acquisition
benefits. Conversely, Lowik et al.’s study
suggests that the relationship between
tie strength and knowledge acquisition,
if it is properly managed by an SME, can
remain positive. In fact, firms can use
mitigate the negative effects of overembeddedness in strong ties on new
knowledge acquisition. These capabilities serve the purpose of (1) extending
existing relations with customers and/or
suppliers to new individuals, new knowledge domains, or new organizational
levels within the partner; and (2) using
the strong tie as a bridge to get access to
the partner’s network. In so doing, they
transform a strong tie into a “multiplex”
relation. Lowik et al.’s study contributes
to the network and alliance capability
literature while offering new insights
pertaining to the interplay between the
organization of SMEs’ networks and the
managerial challenges raised by such
arrangements. This study also has important managerial implications for network
design. SMEs that have a very high
opportunity cost of management time
and attention, may profitably concentrate
on building strong ties with a limited
number of partners with the purpose of
acquiring external knowledge for innovation. However, in order for this
network organization to be beneficial,
firms have to invest in developing relational capabilities that can turn these
strong ties into multiplex collaborative
Moving the focus from the investigation of network dimensions (i.e., search
strength of network ties) to the relation
between networking activities and performance, the article by Gronum et al.
(2012) accounts for the complexity of
such a relation. The authors investigate
the interplay between networks, innovation, and SME performance. Based on
longitudinal data from 1,435 SMEs, they
show that the positive connections
between networking activities and economic performance (as measured by
sales growth, range of product or service
growth, profitability, and productivity
growth) are more complex than previously thought. Specifically, the authors
first consider network heterogeneity, as
measured by number of network ties
engaged by an SME with different actors,
and the strength of these network ties, as
proxied by the interaction frequency
between the focal firm and these actors,
as two important dimensions of an SME’s
social capital. Results show that both
dimensions of social capital matter for
innovation breadth, as measured by the
ability to introduce product-, process-,
and organizational innovations. Second,
the authors analyze the impact of inno-
vation breadth on firm performance and,
subsequently, the impact of network heterogeneity and strength of network ties
on firm performance. Results confirm
that both innovation breadth and networking activities have a positive impact
on SMEs’ performance. Finally, the
authors find support for the mediating
role of innovation breadth in the relationship between networking activities
and firm performance. The article makes
an original contribution to extant
network literature and offers intriguing
normative indications to SMEs’ managers. Scholars have often presented participation in networks as a solution to the
lack of resources plaguing SMEs, thus
leading to better performance. However,
the manner in which network participation translates into better performance
remains contentious (Lee, Lee, and Pennings 2001). Accounting for the multiform
activities and performance has interesting practical implications. First, as maintaining network relations is time- and
resource consuming, SMEs’ managers
should use their limited resources in
diverse) network links. Moreover, such
network links should primarily be
breadth, a mechanism that unlocks the
performance value of networks.
The subsequent two articles by
Lasagni, and Parida, Westerberg, and
Frishammar are explicitly grounded in
the open innovation literature, thus
heeding the call for more research
devoted to study the effects of open
innovation in SMEs (van de Vrande et al.
2009). Conventional wisdom suggests
that SMEs can reap greater benefits from
open innovation than their larger counterparts as external collaborations can
compensate for the scarcity of internal
resources and competences (Lichtenthaler 2008).
Lasagni considers how the nature of
SMEs’ network partners influences their
innovation performance. Specifically, the
article empirically investigates the role
played by two types of external relationships for innovation in SMEs: vertical
relationships with customers and suppliers and collaborations with universities
and R&D laboratories. Using a slightly
modified version of the framework proposed by Street and Cameron (2007), the
article examines the link between the
aforementioned two types of SMEs’
external relationships and two different
measures of innovation performance,
that is, changes in the product range and
turnover from new products.
The empirical analysis based on data
from 490 SMEs located in six European
countries shows that SMEs that are proactive in strengthening their relationships with suppliers and customers
have higher innovation performance
than other SMEs. Moreover, SMEs having
good relationships with universities and
R&D laboratories show higher innovation performance than SMEs lacking such
The study by Parida, Westerberg, and
Frishammar adds to extant literature in
several respects. First, the authors
acknowledge that the implementation of
an open innovation strategy by an SME
comprises several activities (technology scouting, vertical technology
collaborations, horizontal technology
collaborations, and technology sourcing)
that may have differential effects on firmlevel innovation performance. In so
doing, they depart from previous studies
that have mainly focused on one peculiar
type of open innovation activities (see,
e.g., Bianchi et al. 2010 for a recent contribution). Second, the authors couple
the wide scope of their analysis with the
adoption of a rigorous quantitative
research design. Previous contributions
that have explored the effects of open
innovation on SMEs have mainly
resorted to qualitative methods. The few
studies that have encompassed a broader
set of open innovation activities and
have adopted a quantitative approach to
study their effects on firm performance
(Lichtenthaler 2008; van de Vrande et al.
2009) have not been explicitly designed
to target SMEs and their peculiarities.
Third, the article by Parida, Westerberg,
and Frishammar proposes a fine-grained
analysis of innovation output. In line
with Laursen and Salter (2006), the
authors distinguish between radical and
incremental innovation and find that
inbound open innovation activities have
different influences on these two aspects
of innovation performance. Notably,
scouting tends to be more important for
incremental innovation, whereas sourcing is more important for radical innovation. The article puts forth interesting
managerial implications. Moving from
the premise that open innovation can be
highly beneficial for SMEs, the authors
suggests a road map for implementing
diverse open innovation activities by
taking into account the limited resources
and competence of SMEs and their objectives in terms of innovation (i.e., incremental versus radical innovation).
Accordingly, the authors’ hint is to start
with technology scouting, which is fairly
easy to implement, engenders limited
costs, and has strong positive effects on
innovation performance. Then, SMEs
aiming for incremental innovation
should consider horizontal technology
collaborations with other firms so as to
share development costs and information. Conversely, if SME managers target
radical innovation, then it will be advisable to team up with strong customer
firms in the value chain and become a
specialized supplier for them in the area
where the focal firm has its competence
base. An alternative is to set up and
organize interactions with customers that
can provide insights about future market
needs. Technology sourcing is also a
viable alternative to achieve radical innovation. Acquiring licenses or other forms
of technology, or tapping into university
knowledge that can help the company to
commercialize new to the world products, services, or processes, can provide
a relatively safe shortcut to radical
innovation. In short, the article by
Parida, Westerberg, and Frishammar
encourages SMEs’ managers to open up
their innovation process to several external third parties that may constitute
importance sources of new knowledge
and ideas.
The article by Piva, Rentocchini, and
Rossi-Lamastra complements the study as
it focuses on a potential source of knowledge that, despite of its growing importance, has been neglected, namely
communities of users and developers.
More specifically, Piva, Rentocchini, and
Rossi-Lamastra investigate whether and
why software SMEs that collaborate with
the community producing Open Source
software (OSS) are more innovative than
other software SMEs. Piva, Rentocchini,
and Rossi-Lamastra highlight three potential innovation advantages that SMEs can
derive from collaborating with the OSS
community. First, they point to the financial constraints of software SMEs and to
the advantage residing in the use of the
additional development resources offered
at low cost by the OSS community.
Second, the authors highlight the importance of accessing external competences,
which SMEs cannot get through other
channels (e.g., by recruiting software
developers). Finally, they argue that the
OSS community offers SMEs access to
valuable complementary assets (e.g.,
complementary software applications,
distribution channels, user manuals).
Piva, Rentocchini, and Rossi-Lamastra
consider 199 Italian software SMEs
located in the Emilia-Romagna region, out
of which 60 were collaborating with the
OSS community, and find that the collaborating SMEs indeed have higher
innovation performance. Sophisticated
techniques for minimizing reverse causality and endogeneity problems are
applied. This study extends existing
knowledge on open innovation and also
brings new nuances to earlier studies
showing that firms’ collaborations with
OSS community may result in better
innovation performance (see, e.g., Stam
Concluding Remarks
By combining and contrasting the
results of the different articles in this
special issue, a first conclusion that can
be reached is that SMEs’ use of networks to improve innovation performance is a multi-faceted and complex
issue. Given this complexity, it appears
to be fundamental not to search for allencompassing, generic solutions, but
rather to acknowledge different dimensions of both networks and innovation
performance. The different articles constitute a step forward in this direction
by addressing different types of external
relationships and their different effects
on innovation performance. It is important to underline not only the need for
more fine-grained analyses of network
characteristics, taking into account different structural characteristics and
managerial practices of networks, as
well as network dynamics, but also the
necessity to attend more carefully
to different dimensions of innovation
performance. As shown by Parida,
Westerberg, and Frishammar’s study,
which contrasts incremental and radical
innovation, different networks are
conducive to different types of
A contribution of this special issue to
the network literature is to hint that
SMEs and larger firms have different networking patterns and that this prevents
us from simply extending findings from
studies of larger firms to the SME
domain. Arguably, SMEs do not in-source
external knowledge the way certain multinational companies do. Moreover,
SMEs’ resources for building and utilizing relationships to external parties are
normally more limited than what is the
case for larger firms. As a consequence,
as it is shown by the studies of Lowik
et al. and Sarel, Verreynne, and Kastelle,
SMEs must leverage the strength of
strong ties, turning these ties into multiplex relations. Vertical relationships with
lead customers or large suppliers are
especially important in this respect, as
Network breadth could also be useful for
SMEs, but it is a difficult strategy to
pursue (see the study of Classen on
family SMEs). However, SMEs may have
more freedom than their larger counterparts to search for new external knowledge and information in an active and
flexible manner. We can here note the
interesting paradoxical effect of resource
availability for innovative and entrepreneurial activities. As proposed by Bhidé
(2000) there may be value in not having
too strong capabilities in a specific field,
as this leads to higher levels of flexibility
and space for maneuvering, thereby
facilitating more radical innovation
activities. This can be seen as a specific
case of the idea of core rigidities, also
referred to as core incompetencies by
Dougherty (1995), an issue that stands
out as a problem predominantly for
large, mature firms (Dougherty and
Hardy 1996). In this light, Piva, Rentocchini, and Rossi-Lamastra have shown
that SMEs are ideally positioned to take
advantage from collaborating with new
and relevant sources of distributed
knowledge, like communities of users
and developers. SMEs may also be flexible enough to adjust their coordination
mode along the lifecycle of an innovative
project, as suggested by Gardet and
Fraiha’s study.
Altogether, the studies included in
this special issue advance our knowledge
of SMEs’ networking activities and, at the
same time, raise new issues for future
research. Moreover, they offer SMEs’
managers interesting new insights on
how to design effective networks for
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Academy ol Management Learning and Education. 2003, Vol. 2, No. 1, 68-72.
Nokia Leads Change Through
Continuous Learning
Jnferview with Nokia’s Sonja Weckstrom-Nousiainen by LEENA MASALIN
Helsinki School of Economics
Organizations need to increase their rate of learning to survive in these times of
unprecedented change. Learning is change. As Karl Weick and Francis Westley have
expressed it, “Learning is to disorganize and increase variety.” According to Weick and
Westley, ideally, learning occurs for both individuals and organizations in circumstances
where order and disorder are juxtaposed, when exploration and exploitation are
combined in an optimal way. Nokia Corporation has successfully managed to balance
order and disorder and has learned to learn from change. It constantly explores new
ways of learning while simultaneously exploiting traditional learning methods. Its
corporate values provide the foundation for tackling change. An important element in
Nokia’s culture emphasizes the necessity of continuous learning.
In the 1990s, Nokia Corporation underwent several major changes. It was transformed
to a focused telecommunications company from a multibranch firm of electronics,
information systems, paper, rubber, mobile phones, and telecommunications. It grew from
a national to a global company with current net sales of $30 billion and over 50,000
employees. It turned losses into rising profits. Today it is again facing a challenging
transformation: The telecommunications industry is moving from voice to the still
untapped and even unforeseen opportunities of pictures.
Nokia Corporation is the leading mobile phone supplier and a leading supplier of
mobile, fixed, and IP networks, including related services. The corporation comprises two
business groups: Nokia Networks and Nokia Mobile Phones. In addition, Nokia includes
the separate Nokia Ventures Organization and the corporate research unit, Nokia
Research Centre. In creating the future of communications Nokia strives to play a
leading, brand-recognized role by combining mobility and the Internet and by
stimulating the creation of new services.
In its distinctive management approach, Nokia relies on a strong corporate culture and
the company values: customer satisfaction, respect for the individual, achievement, and
continuous learning. Their management approach—the “Nokia way”—comprises the
Nokia values, its organizational competencies, and its mode of operation and processes
used to maintain operational efficiency. This approach is the foundation on which Nokia
builds its current and future strength. A flat, networked organization combined with
speed and flexibility in decision making are characteristic of the Nokia way. Nokia’s
managers emphasize the importance of understanding the market and turning foresight
into correct action at the right time. A combination of winning foresight and effective
execution is a key dimension in Nokia’s management approach.
Value-based leadership is an integral element of the Nokia way. Nokia wants its
leaders to have personal qualities such as speed, openness, integrity, humbleness,
accountability, and responsibility. The Nokia way embraces teamwork and
empowerment. Nokia believes that efficient processes produce business results. By
operational mode Nokia’s managers mean process thinking and core business processes.
To make learning as efficient as possible, the same process management principles and
terminology are used throughout the company.
Nokia’s upper management believes that each individual in the corporation possesses
specific skills that enable him or her to succeed. By defining these skills and the
competencies required in various ;obs, Nokia assists its people in determining the type of
competencies they need to develop for their current and future tasks. The focus used to be
on developing technological competencies, but technological superiority is not enough. In
a global corporation such as Nokia, mastering managerial and leadership issues in
multicultural settings is equally important. Proactive competence development has
priority. The organization emphasizes developing new ways to be constantly proactive in
response to rapid change.
I asked Ms. Sonja Weckstrom-Nousiainen how the Nokia value of continuous learning is
put into action today. Sonja has been with the corporation 11 years and is now a vice
president, responsible for global human recourses development at Nokia Mobile Phones.
Top management’s role in initiating change is
important, and without their support any
development effort can fail. You started our
discussion by talking of the positive attitude of
Nokia’s top management toward HRD. Would you
like to elaborate on that?
Our top management’s attitude is the foundation
on which the work at HRD is built. I have really
experienced this during my years at Nokia. Continuous learning is a true value at Nokia, and this
is the result of top management’s genuine commitment to it. Without that belief and a strong commitment at the top, nothing we did at HRD would
make such a big difference. With their help, we
have managed to acculturate the attitude that continuous learning is non-negotiable, something that
you need to invest in to ensure competitiveness at
Nokia. This is reflected in our performance management, in which an integral part is called “investing in people” or the IIP process. Investing in
people focuses strongly on continuous learning
and emphasizes developing people, not only as an
organizational asset but also as human beings.
Developing people as human beings and not
only as a company asset sounds like respect for
the individual, which is one of your core values.
Could you explain more specifically what the
investing in people process at Nokia is and how
it is linked to continuous development and
If continuous learning is a true value, it should be
apparent in IIP discussions between managers
and subordinates. IIP is something that we have
really emphasized in recent years, not only implementation throughout the company but also improvement of the quality of the process itself. IIP is
the responsibility of each and every manager. I
would say that the idea has been adopted successfully throughout most of the organization.
Please address comments and correspondence concerning
this interview to Leena Masalin, c/o masalin@hkkk.ii,.
The IIP process consists of four parts: objective
setting, coaching and achievement review, competence analysis and personal development plan,
and finally, performance evaluation. Our operations are based on continuous planning, and to
ensure quick action in our rapidly moving business, we have IIP discussions every 6 months.
Since we need to react immediately to any business changes, personal targets and incentives
have to be changed accordingly. Nevertheless, the
performance evaluation part of IIP is carried out
just once a year.
The IIP discussion starts with a review of the
previous 6 months. People are rewarded according
to an incentive plan that has been agreed upon
when setting objectives. Nokia is a very resultoriented organization, and our managers are absolutely committed to targets. After setting objectives for the next 6 months, the manager and
subordinate perform a coaching and achievement
review. The review focuses on success in achieving all targets and development plans. We use a
lot of feedback gathered from external customers
and internal partners. The expression coaching
characterizes the nature of the manager’s role in
leading the IIP discussion. In their role as coaches,
managers should facilitate professional learning
and development of their subordinates. We believe
that business achievements depend on success in
learning and development. The review also monitors the effectiveness of learning and development, and new methods are added when necessary.
The IIP process ends with an evaluation of individual competences and by drafting of the relevant
personal development plan. We have profiles in
electronic form for most jobs in the organization,
and the entire IIP process is also supported electronically. You can pick up your profile from our
intranet, evaluate yourself, create a personal development plan, and then see what learning solutions are available at our Learning Centres. Our
Learning Centres around the world offer a variety
of learning solutions to meet development needs at
Academy oi Management Learning and Education
Before we move on and talk more about the
Learning Centres, I’d like to ask whether you
monitor the implementation of the IIP process?
We trust people, and I would certainly not like to
use the word[s] check or control in this context. We
trust that people play the game according to
the rules that we have mutually agreed on. As I
said, we believe that achievement of your targets
usually depends on how well you reach your learning objectives. In other words, learning sparks
achievements. So if you live up to the Nokia values,
you want to learn, and you are a high performer.
The best kind of follow-up is the IIP discussion
itself, in which the manager and subordinate evaluate together how well the development plan was
carried out. One of the best ways to monitor the
implementation of IIP is our annual “Listening to
You” survey, in which we ask our employees
whether they have clear targets and whether they
have had their IIP discussion within the past 6
months. This survey covers all Nokia people.
Setting ambitious targets is characteristic of our
culture, and we really believe in learning, in
achieving, and in personal growth. We believe that
people often have more potential than they realize.
We tend to give people more responsibility than
they could ever dream of. But we also try to ensure
the necessary support. Again, the IIP process
serves this end. In our experience this is the way to
unleash a lot of potential in the organization; ambitious goals provoke extraordinary results.
Let’s now talk about the Learning Centres that
you mentioned earlier. What do they do, and how
do they work?
Before going into the specifics of the Learning Centres, I would like to mention one central dimension
in our HRD: We are strategy driven. Nokia’s overall
strategy determines the nature of our competence
and resource strategies. The learning and development solutions in the Learning Centres are
driven both by these strategies and by information
on learning needs. Learning Centres have been
created over the past several years.
The idea is that the Learning Centres form one
joint learning platform for the entire corporation.
The Centres were originally created for Nokia Networks, but today all business groups utilize their
services. Through the Learning Centres, we have
integrated the learning activities of all business
groups. By mixing participants from across different business groups, we can enhance corporate
knowledge creation, since traditions and experiences can now be shared widely.
Learning Centres very much serve our volume
needs. They offer programs for more junior level
managers in leadership and management development and especially for professional competence development, which is a continuous challenge for us. Just now, when our industry is moving
from voice to multimedia, there are a lot of new
challenges to competence development that need
to be continuously addressed.
Learning Centres are a networked, internal service provider for learning and development programs. They use both internal and external assistance in design and delivery of these professional
or managerial and leadership programs. This network structure enables fast transformation and
alignment of programs as the strategic direction
and needs change. Shopping around both internally and externally further increases the flexibility to create and recreate new programs. The programs offered are very much blended solutions;
they include e-learning elements, face-to-face
learning facilitation and self-managed learning,
and also small action-learning projects. However,
Learning Centres are obviously not the only arena
of development. I would like to stress that much
learning at Nokia takes place on the job level,
where managers coach their people in professional development. We implement a lot of job
rotation at Nokia. New assignments teach a great
deal; learning from challenging new job assignments is often extremely effective. At Nokia we say
that “a day without a lesson learned is a day wasted.” Learning on a day-to-day basis is very much
part of the mindset of our culture.
One would think that as a large corporation,
Nokia needs a lot of help from external providers
of learning and development services. What kind
of outside input do you use in your learning
Outside input is important for keeping a broad
mind and for inspiring out-of-the-box thinking. We
work with a variety of leading business schools
and universities of technology around the world
and with numerous professional consultants. We
invite professionals from many different fields of
life to speak about their experiences and to inspire
our thinking: For example, we can invite an orchestra conductor to share his leadership views with
our managers. But our HRD keeps a tight rein on all
outside input to ensure tlfat it is in line with the
requirements and objectives of the learning solutions. While the programs for more junior managers are offered through the Learning Centres, the
programs for more senior participants typically
have a much stronger in-house flavor. These programs can be built around themes like “renewal”
or “continuous learning.” They are to a great extent
facilitated internally, and they are closely aligned
with the company strategy, but of course we also
include a fair proportion of external input, like
visiting speakers from business schools and from
other businesses or industries.
We tend to think that organizations are
reflections of their top management. You have
mentioned that the culture at Nokia avoids
glorifying the individuals at the top. 1 have
interpreted this to mean that achievements
should not be associated with the top people,
since it is collective effort that generates results.
Since Nokia has had the same top team for quite
a while, their contribution to the collective effort
is substantial. Could you give some examples on
how the top management participates in internal
learning processes?
The top management team’s commitment to continuous learning is strong and I can give you some
practical examples of it. The business group presidents are the leading “owners” of all global management and leadership programs for senior managers. They bring their personal input to all these
programs but they also appoint “godfathers” from
their management teams. These godfathers are the
content owners of the various topics selected as
the focal themes of the programs. Not only do they
participate actively throughout the program, but
they are also designers of the content. Together
with HRD staff, the godfathers facilitate the learning processes in the programs. In most cases, we
build in a strong action-learning element, which is
implemented through strategic projects carried out
in conjunction with the program. The top people
invest time in project reviews and authorize action
based on the project work recommendations as
well as monitor their implementation.
There are constant changes that need to be
pushed through the organization, and we need to
ensure senior management’s commitment to facilitating this change. We also need their brainpower
to make sure that the project work topics are
aligned with the strategic direction of the company. The business group presidents together with
their top management teams are personally involved in the generation of project themes.
In programs for less senior managers, the regional organization’s input and the involvement of
regional senior managers is strong. For professional competence development we have appointed line managers as competence area own-
ers. They hold the driver’s seat in these programs
and are ultimately responsible for identification of
future key competencies. Together with the HRD
professionals, they contribute to the design and
participate in the implementation of professional
and other development programs.
An issue of interest in both companies and
academia is how to measure the impact of
learning and development interventions in
organizations. How do you evaluate learning
at Nokia?
This is an interesting question indeed. Although at
the HRD we appreciate a fact-based approach and
measurement of results in general, we do not see
evaluation of learning as a science. It is important,
however. Consequently, we use different methods
to monitor results and the trend is the key; we need
to improve all the time. We always ask the participants’ immediate response when they have completed a learning program. We use 360 feedback, in
other words evaluation of leadership behavior development by peers, superiors, colleagues, and
team members. Evaluation of the business projects
linked to the development programs is based on
how much they contribute to the business. We emphasize that learning should result in improved
operations and generate better business results.
An additional indicator of achievement that we
look for is goal attainment of competence and resource strategy in all parts of the organization.
When we have discussed the issue of measuring
learning with our top managers, they always emphasize networking as an important aspect of internal development programs; crossing organizational boundaries means that more knowledge is
changed and created. Networking increases social
capital and organizational cohesion and facilitates continuous reinforcement of corporate culture
and values.
Part of leadership capabilities, coping with
continuous change and the accelerating demands
of the industry, is managing yourself. In recent
years the problem of burnout has hit many
companies. Nokia operates in a highly turbulent
and demanding industry. How does your
organization prevent burnout?
Again our IIP process is an effective [tool] for ensuring that people have the right kind of responsibility, enough challenges, and clear goals. We also
try to emphasize that it is the managers’ responsibility to act as role models in maintaining a good
balance between work and private life. During the
Academy of Management Learning and Education
last couple of years, we have put a lot of effort to
promoting both the Nokia way of fact-based management and value-based leadership, and a third
dimension, a balance between work and personal
growth. Value-based leadership characterizes how
to make things happen, and fact-based management is v^hat should be taken into consideration
when inspiring and helping people to achieve
business results. Our industry is becoming increasingly complex and thriving will require not
only more intellectual capability but also more
emotional strength. Leadership should provide the
appropriate support and guidance.
Nokia has announced that it intends to maintain
its position as the leading player in the industry.
To achieve this, what challenges will HRD at
Nokia lace?
There are obviously many of them! We need to
ensure a quick development of competencies for
future needs, we need to create foresight about
where the business is heading and to identify future competencies today. Unlearning is necessary
to make room for new learning. Creating future
leadership capabilities is a constant challenge.
Our values—customer satisfaction, respect for the
individual, achievement, and continuous learning—are very important; leveraging and strengthening our culture on the basis of these values is
critical in the business phase that we are undergoing now. Since personnel growth has been extremely rapid we had to create quite a comprehensive induction process. I would say that we have
managed the induction of all these new people
surprisingly well. Now the focus is more on retention of our key people and on ensuring that we
have a good value proposition for our personnel.
Therefore the Nokia culture needs to be constantly
You have talked a lot about values and corporate
culture. I got the impression during our
discussion that Nokia values are actually
practiced, not only preached in the organization.
The culture and values must have greatly
contributed to the success of Nokia in recent
years. What do you see as the secret behind
Nokia’s success?
I believe that people work for an organization because of its values. Values promote strong commitment. The stronger the values resonate in one, the
stronger the commitment to the organization and to
its goals. You can easily sense the values in a
company by talking to people even if the values
are not publicly articulated. Values can provide
cohesion, ensuring personal meaningfulness and
organizational efficiency. As my very personal
opinion about Nokia, I would like to say that on the
one hand success is driven by the passion to make
a difference and on the other hand by humility and
a commitment to work hard and give your best
every single day. Nokia has been able to transform
and change when that has been the only way to
ensure future success.
This interview with Nokia gives us an interesting
narrative on how a contemporary corporation embraces learning and development in its current
operations. Compared to its rivals, Nokia has been
successful in the downturn of the telecommunications industry. It has maintained its relative market share and it has remained profitable even with
dropping sales. This is rare and an indication of
strong corporate capabilities, which cannot be
sustained without an investment in learning and
education. As Sonja Weckstrom-Nousiainen explained here, continuous learning is a central issue at Nokia, and the corporate culture and practices strongly support it.
Leena Masalin is managing director of FINTRA, The Finnish Institute for International Trade.
She is currently working on her doctoral thesis at the Helsinki School of Economics. Her
research interest is strategic leadership and organizational learning.

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