Table of Contents
New Corporate Strategies
A Comparative Social Cybernetics Analysis of Nokia and
British Telecom
Stig Rée
Department of Management, Politics and Philosophy
Copenhagen Business School
Blaagaardsgade 23B, DK-2200 Copenhagen N
4544440926
e-mail: reemanag@ inet.uni2.dk
ABSTRACT
In the theoretical discussions on various new global strategies, cultural, networked and
innovative ones are complementing or substituting the traditional strategies often
focusing on best practice, differentiation, core businesses, economics of scale ...
In the traditional methodologies for doing strategic analysis the head problem was to
make a constructive alignment between resources, businesses and organization, thereby
gaining competitive advantage, control and coordination for the corporation in
question.
By analyzing and comparing the character of management processes used by two
different well known global players within the teleindustry, British Telecom and Nokia,
the article tries to find out, if other methodological points of departure could be more
convenient and constructive.
In conclusion, social cybernetics analysis, with its focus on causes for entropy, self-
sustaining and reinforcing mental models in use, and systems dynamics ... nowadays is
often a better guide in the global oriented strategic work than more traditional
structural oriented analyses.
Key words: Corporate Strategy, Social Cybernetics Analysis, Teleindustry
Introduction
The traditional methodology for making strategic analysis is outlined below after Cynthia
Montgomery, Montgomery (1998), see figure 1.
The Triangle of Corporate Strategy
Competive Advantage
Resources Businesses
Organization
Coordination Control
Figure 1. The triangle of corporate strategy after Montgomery (1998).
The main idea is that it is not enough to discuss which businesses you are in, or which
resources you possess, or just trying to coordinate your activities when you are making a
strategic analysis. Naturally, you have to have all three different kinds of dimensions in
mind. However, you can not accomplish a comprehensive analysis only by trying to look
after competitive advantages, or by trying to maintain control, or by trying to coordinate
the activities in your organization.
You have to realign all three different kinds of steering instruments to each other for
gaining a strong and lasting competitive position. So, if you start looking after the
competitive advantages of your businesses, and you hereby naturally focus on market
segmentations, you should soon also take into consideration available resources and
what your organization is geared to handle. This is just what Nokia has done in the last
decade with its strong brands on the market for mobile phones, see the Economist article
on Nokia.
After the same line of reasoning, if you start focusing on your resources at hand, and
which kind of coordination and competitive advantage they immediately allow you to
obtain, you should also have in mind the importance of the control function. Here we
have the history of British Telecom management processes with its focus in recent years
on how to make a cash cow out of the fixed-line business, see the Economist article on
British Telecom and V odafone.
Finally, if you start with your organizational capabilities and drivers alignment with
existing businesses, thereby focusing on control, you should also have coordination and
competitive advantages in mind... .Vodafone with its growth by acquisition..
In strategic analysis the main thing is not only for example to promote a structural-
conduct-performance analysis a la Michael Porter, Porter (1991), or a resource based
analysis after Barney's Resource Based models, see Barney (1986), but to make the right
realignment of resources, businesses and the organization. A process which must go on
all the time, in a way continuously. This has been the case for all three examples: BT,
Nokia and Vodafone.
However, in practice you often only change your strategy when you see new profitable
trends are on the horizon, new competitors are penetrating into your market space, when
you have new resources at hand ....In such a more stable business context the
realignment model functions well, getting you to focus at the systems structural nature of
your corporation.
In the 1970" many multinational corporations gained competitive ability by
diversification,
in the1980" by differentiation and focusing, in the 1990 by getting back to their core
businesses. Every decade have its most popular way of doing things, now diversification
and differentiation are again becoming hot labels, see A grawal et.al. (2001).
One way to handle the more and more vibrant and turbulent intemational and global
economy, often creating a growing need for faster and larger realignment of the
corporations businesses, resources and organization, is to propose a still more all
encompassing structural oriented model. This has been done by Dave Ulrich, Jack
Zenger and Norm Smallwood, see Ulrich et.al. (1999), Results Based Leadership. The
main idea here is to realign all different kinds of attributes existing in a corporation so
that they give rise to desired results, which are characterized by being balanced, strategic,
lasting and selfless p.32.
This is the good governance way of doing things, taking care of all different groups of
interest in a balanced, and at the same time market oriented way. See also Batten and
Waller (2001) for a more European oriented view. It has been immensely popular,
especially in Anglo-Saxon countries because it explicitly tries to balance between
investors, customers and employees, in a way a combination of the traditional strategic
schools of thought, Porter, Bamey, mentioned above, ... and the human resource
management theories: Argyris (1990), Schein (1995), Senge (1994)...
Let’s now run through and compare the cases of Nokia and British Telecom, hereafter
BT, more in detail on a social cybernetic methodology form, looking after missing
dynamic links in the structural good governance concept. In a way, we are looking after,
how different kinds of catalysts, often human agents, can bring sustainability to the
system, see David Lane in Lane (2002).
Social Cybernetics Analysis, Characteristics
Social cybemetic methodology can be described by figure 2 below, where interaction
among contexts and dynamics give rise or fall to competitive ability:
Cybernetic Development
Context
Dynamics
Competitive ability
Figure 2. Cybernetic development after Rée (2000).
For BT the important context could be different product areas and groupings: fixed line
business, wireless products, corporate data and broadband product and services. For
Nokia the main product groupings are mobile phones and handsets, and components and
services for the mobile infrastructure.
The history of Nokia and BT are totally different. In the beginning of the 1990ties BT
were the largest European telephone company and telesystem operator. In a way,
everything has since gone wrong for BT. It was too late for wireless telephony, and too
late also for internet services and broadband activities when those product areas took off
in the late nineties. BT had the chance, it was privatized as one of the first British public
sector companies in the early nineties, but anyway it kept on to the traditional
coppersystem services delivered from an existing fixed-line infrastructure. - Another
British telephone operator, Vodafone, in the late eighties a very small company, in the
meantime has risen to be the largest teleoperator in Europe, and has now a market value
by and large ten times BT's.
Nokia is also a newcomer, but in comparison with Vodafone, which has largely grown by
acquisition, Nokia has almost created its own market for mobile phones as a mass market
brand. Nokia has a long Finnish history. It started out as a diversified business, selling a
lot of different products from pulp paper to television sets when it in the early eighties
got into the telephone materials producing business. In the nineties, Nokia has become
decisively the largest Finnish business with a significant contribution to Finnish GNP, and
totally dominating the HEX index, even after the techbubbl began to fall down.
Comparing the two cases, business dynamics has been with Nokia and against BT. There
is a tendency in the press, see The Economist (2000 October), to say that the
topmanagement team, and especially the CEO in Nokia, has been “very smart and
effective”, whereas in British Telecom they have been “dinosaur like” in their leadership
style, and anyway all too slow in handling the BT crisis.
Looking deeper into business dynamics on figure 1 from a social cybernetics point of
view, we can distinguish between three different generic processes of management,
human agents mental models, containing and catching turbulences around and inside a
corporation, see figure 3 below
Processes of Management
Strategic
ZN
Innovative Political
Figure 3. Processes of management after Rée (2000).
Generic strategic processes is about benchmarking and making results, generic political
processes is about being a credible business, and generic innovative processes is about
doing things right in a new and better way. See Rée (2000). In a way the different types
of business dynamics processes can be seen as system dynamics when they play into the
different specific kinds of contexts: markets, industries,countries... Results (profits),
credibility, innovative possibilities for example are all flow variables, whereas context
descriptions often take place in stock variables: Inventory levels, levels of goodwill,
stocks of new patents ...
Especially, Nokia has a strong focus on strategic, marketing and political processes,
making a credible smart brand in the mobile phone market, taking the lead in mass
commoditization developments. At the same time, they are getting ready for 3G and
GPRS technological developments. - BT always tries to be up to date and a little ahead
with technological developments. They have used a lot of money financing 3G licences
and capital expenditures on the Internet Protocol and broadband developments, at the
same time working hard for maintaining and sustaining their monopoly in fixed line
businesses with squeezed declining margins.
Retuming to figure 2, the result has been different compositions of competitive ability
for the two global players: Nokia tries to hold on to its differentiation strategy by a kind
of reversed commoditization, using dual band devices and backward compatibility as
differentiation strongholds. BT wants to get out of its infrastructure monopoly lock in
by adding a lot of new wireless, broadband and intemet services to its products line.
However, compared to Nokia there is no real differentiation and focus, only spin-inns of
new, but always on the market already existing, services and products, and spin-offs of
old ones.
In traditional global strategic balancing terms: for a realignment of resources, businesses
and organization, Nokia has to diversify, and BT has to focus.
The strategic catalysts and possibilities, human agents social actions, for Nokia could
be: Lower its single brand vulnerability by a strategic alliance with an American
company, operator as well as producer, or by a merger with a, for the time being, cheap
Japanese multinational. In Japan, they have built, and put on an operational basis, a
European compatible 3G network. - Or Nokia can retreat to its old multibrand
diversification strategy, becoming a cash cow as BT.
And for BT: Focus while reorganizing. They have already done so, by letting the fixed-
line business split into retail (discounted packages) and wholesale (sale of netcapacity to
competitors), by establishing BT-wireless and Ignite, BT broadband IP businesses and
BTopenworld, all their intemet services. - Or, they can really try to focus on either the
wires alone, or only on customers, getting rid of the fixed-lines, serving customers with
different kinds of new packages and hot services. BT is then retreating to its old
differentiation focus strategy for becoming a brand new global player. - In a way, the old
Nokia mass marketing branding strategy.
Corporate Good Governance, the contribution
As mentioned above one of the most comprehensive and well praised good governance
approaches is “Result Based Leadership” ( org.cit. p.3 ). Desired results reaches high on
four dimensions:
First they are balanced:
Both Nokia and BT have tried to live up to this intention. Nokia having a very fine
balance between investor markets need for equity growth and employees need for
development possibilities. Nokia has a typical very non-hierarchical type of
organizational structuring, for a long time their stocks where on an exponential rate of
growth, and in the downturn Nokia is still not hit so much as other telephone equipment
producers, as Scandinavian competitor, Eriksson, for example.
In their own way BT’s results are also balanced: In the Anglo-Saxon tradition investors
and financial markets evaluations have been very much in focus, BT continuously
pushing new consumer services oriented products into both corporate and
private markets.
Second they are strategic:
having clear strategic intents. Nokia wants to keep on with their massmarket mobile
telephone well-known brands by establishing new kinds of barriers around them. For
example, they developed another product area, infrastructure components, for launching
a whole supply line of services products.
BT has also a clear strategic intent. As Nokia, it is also getting into new consumer
services in wireless, broadband and Internet communications, and at the same time ride
on the copper infrastructure cash cow, as long as possible.
Third they are lasting:
As seen from the just past history, they are maybe too lasting. BT still press margins for
other operators using the fixed-line infrastructure, and they are still trying to realize not
real spin-offs for their service product groupings.
Nokia are going on trying to brand their mobile phones after new customer trends and
tendencies. It looks as if they will succeed, even if there are significant risks in that kind
of strategy.
Finally they are also selfless, in the sense that the consumer services focusing of both
companies are seen as giving rise to constructive synergy between the consumer product
groupings and other products and markets in the respective companies.
To sum up. Both Nokia and BT have for a long time been making desired results after
the good governance concepts. However, it is also clear that they both easily could run
into serious problems in volatile, especially private teleconsumer markets, Another well-
known old British and American teleoperator, Cable and Wireless, have learned the
lesson from spreading out too many private consumer products and services, and are
now having a very strong focus on IPservices for industrialized, especially European,
corporate markets.
Social Cybernetic Analysis, the contribution.
Pushing forward the social cybernetic analysis, we can look into specifics of the generic
strategic management process from figure 3 as illustrated on figure 4, see Rée (2000).
MAIN FOCUS Results
DIMENSIONS
Results
Explainable ideas
Catch/see changing attitudes
Figure 4. Generic strategic management processes.
As mentioned above, in processes of strategy business results, in its many different
forms, benchmarking, profits, margins, are in focus. The social cybemetic point of view
is that realized strategic results, often through the other dimensions in the strategic
Management process, ideas and attitudes, have spillovers, positive or negative, to
political and innovative processes of management for the corporation seen as a whole,
see figur 3.
So, when BT is focusing on results for their cash cow, the fixed-line business, maybe
they should try to be a little more idea-generating and proactive instead of overtly
defensive. Maybe, they could be helped by innovative and political processes, gaining
credibility for being, not a follower and copying company, but a leader and first comer in
consumer service markets. The advice for BT would he first to look into this credibility
problem focusing on a certain consumer segment, then to let the innovative process
follow in the wake. Today there is all too much uncoordinated and unconnected
innovation.
Hereby, BT might find the “right” part and the “right” time for a spin-off.
For Nokia the situation is different. They have their strengths in benchmarking and
making very well-known credible brands. What they lack are really technical innovative
capability to sustain and make leverage on their new branding ideas. So, the advice for
Nokia should be first to strengthen the innovative process of management, what they
already are doing integrating a venture type of organization in the existing
organizational hierarchy. And later on, in the wake of this process, precipitate
candidates for being the new Nokia brands.
Social cybemetic generic strategic analysis take as its starting point, and make leverage
on, existing human mental models in use, playing on their often built in selfsustaining and
reinforcing dimensions thereby realizing a constructive flow and sequence of different
processes of management over time. For further examples see Rée (2000).
Conclusion
By focusing on systems dynamics of different mental models embedded in different kinds
of head management processes, and especially on their interplay, the social cybemetic
methodology can have an advantage compared to good govemance models, often only
looking into different structural forms of behavior and organization. This is in line with
the reasoning in “Creative Destruction” by Richard Foster and Sarah Kapland, see
Foster and Kapland (2001)
In summary, a proposed social cybernetics methodology can run as follows with feed-
back loops between all phases:
Contexts: Countries, industries, products.
Dynamics: Different types of generic management processes and human agents mental
models in use with different focus: innovative, strategic, political...
Competitive ability: If possible, with the help of system dynamics models illustrate: types
of synergy, good governance concepts: balanced outcomes, desired results...
(Structuring the interaction of stocks and flows, also of social management variables. In
short, try to build a generic social system dynamics model illustrating the interplay
between contexts and dynamics for the market, industry, country... in question.)
Human agents actions, catalysts: Strategic possibilities, impossibilities...reflexive
monitoring.
Bibliography
Agrawal, Vikas et.al.(2001): E-performance: The path to rational exuberance.
McKinsey Quarterly 2001,1.
Argyris, C.(1990): Overcoming Organizational Defences. Prentice-Hall. New Y ork.
Bamey, J.B.(1986): Strategic Factor Markets: Expectations, Luck and Business
Strategy, Management Science, October.
Batten, Mark and David Waller(2001): Europe’s Models - a Business View. European
Business Forum, 1.
Economist, October (2000): A Finnish Fable.
Economist, August (2001): BT, out of the loop.
Forster, Richard N. and Sarah Kaplan (2001): Creative Destruction.
Currency/Doubleday. New Y ork.
Lane, David C. (2001): Rerum cognoscere causas: Part II - Opportunities generated by
the agency/structure debate and suggestions for clarifying the social theoretic position of
system dynamics. System Dynamics Review volume 17 number 4 winter 2001.
Porter, Michael (1991): Towards a Dynamic Theory of Strategy, Strategic Management
Journal, Winter.
Rée, Stig(2000): Economics and Sustainable Development in eds. Elohimjl, Elmar A.
Stuhler and Francisco Parra-Luna: Sustainable Development.
Schein, E(1995): On dialog, culture and organizational leaming. Organizational
Dynamics, Fall.
Senge, Peter(1994): Moving forvard, thinking strategically about building leaming
organizations in Senge et.al. eds. The Fifth Discipline Fieldbook.
Ulrich, Dave, Jack Zenger and Norm Smallwood(1999): Results Based Leadership.
Harvard Business School Press. Massachusetts.
Back to the Top
