Nokia Shuffle Intensifies Focus on Mobile and Services, but Managerial Changes Are Ill Timed

John Byrne
John Byrne – Service Director, Service Provider Infrastructure

Summary Bullets:

  • Nokia will divide up its Mobile Networks and Chief Innovation and Operating Officer units to align with the company’s ‘Rebalancing for Growth’ strategy unveiled in November 2016.
  • The moves create greater visibility for Nokia’s services unit, and should lead to improved operating efficiency and strategic investment, but significant management changes give the impression of disarray.

On March 17, Nokia announced changes in its organization and leadership team, to better execute the strategy unveiled by CEO Rajeev Suri at the company’s Capital Markets Day in November 2016:

  • Mobile Networks will be divided into two distinct organizations: Products & Solutions and Global Services. Marc Rouanne will assume control of the Products & Solutions unit, while current Mobile Networks President Samih Elhage will step down. Igor Leprince will continue to head up Global Services and will be added to Nokia’s Group Leadership Team (GLT), an indication of the growing importance of services.
  • Despite being placed within Mobile Networks, Global Services will house all managed network services and company-wide global service delivery. The Global Services unit will also be responsible for developing a common approach for processes and tools, managing a Services Committee to coordinate services development across different groups, with a common Customer Delivery Manager responsible for managing all services for a single customer.
  • Global Services will also continue to drive emerging strategic service areas such telco cloud, ‘x as a service’ (XaaS), prime integration and transformation consulting.
  • The former Chief Innovation and Operating Officer (CIOO) organization will be split into three: A traditional ‘operating’ unit will focus on internal operations, while responsibility for ‘innovation’ will revert to CTO Marcus Weldon and Chief Strategy Officer Kathrin Buvac. Monika Maurer, currently COO of the fixed business, will became company COO; both Maurer and Weldon will join the GLT. (Buvac is already a member.)

So, those are the facts, and on paper, it all adds up. However, the announcement raises specific concerns and questions:

  • Granted, network equipment vendors have struggled with where to put services for years. (Note: Ericsson now houses a specific services unit in both its Networks and IT & Cloud units, while Huawei’s Global Technical Services continues to house all things services.) The reality is that there is no right answer. However, it’s hard to see the logic behind having Global Services within a product group given the ever-expanding role of services. Network, operational, business and process transformation can no longer be attuned to a single bucket of professional services. In addition, given that Nokia is all about ‘end-to-end’ coverage of fixed, mobile, IP and IT pain points, not having Global Services as a standalone unit runs counter to the way Nokia has been positioning its services business.
  • It could be argued Nokia missed an opportunity to provide a stronger services link to non-traditional customers. Given the importance Nokia has placed on the enterprise as a vehicle for growth, the decision not to call this out specifically within the revised group structure could be seen as a missed opportunity. Nokia could have signaled its commitment to services even more clearly by putting it in one of the ‘innovation’ units.
  • Dismantling the CIOO makes clear sense, especially the decision to revert to a traditional COO role. Given the often spare margins in various hypercompetitive telco segments, the ability to operate in a continuous stealth mode internally is a vital factor in the ability to price competitively and still make a profit.
  • That said, the somewhat amorphous position that Nokia’s ‘innovation’ unit now falls in raises serious questions and also gives the perception of internal power struggles which should be addressed soon. The best way to address these concerns is to follow this announcement up with a more formal plan as to who will be responsible for what under the new structure. Forming two specific innovation ‘hubs’ or focus areas for the two units would be an effective way to convey to the market that ‘two (innovation) heads are better than one.’
  • Overall, the significant management shifts, notably the departure of Mobile Networks head Samih Elhage, do raise eyebrows and give the perception of an ongoing internal ‘power grab.’ To be sure, Marc Rouanne is a solid replacement, having headed up Nokia Siemens’s mobile broadband unit prior to the Alcatel-Lucent acquisition and having previously headed up Alcatel’s wireless division. Moreover, Igor Leprince’s appointment to the GLT is clearly overdue given the importance of services to Nokia’s future. But, operators are likely surprised at the significant number of movements in important executive roles.

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