You may have had your fill of Nokia analysis and features, but I’d like to draw your attention to one more – one that’s very special. The Finnish daily Helsingin Sanomat has published a report based on 15 interviews with senior staff. It reads like the transcript to an Oscar-winning documentary where the narrative thread is held together entirely by the talking heads.

The report is very long on detail and short on opinionising – and for those of you fascinated by technology and bureaucracy, something quite interesting emerges. What we learn is that the company’s current predicament was fated in 2003, when a re-organisation split Nokia’s all-conquering mobile phones division into three units. The architect was Jorma Ollila, Nokia’s most successful ever CEO, and a popular figure – who steered the company from crisis in 1992 to market leadership in mobile phones – and who as chairman oversaw the ousting of Olli-Pekka Kallasvuo this year.

In Ollila’s reshuffle, Nokia made a transition from an agile, highly reactive product-focused company to one that managed a matrix, or portfolio. The phone division was split into three: Multimedia, Enterprise and Phones, and the divisions were encouraged to compete for staff and resources. The first Nokia made very few products to a very high standard. But after the reshuffle, which took effect on 1 January 2004, the in-fighting became entrenched, and the company being increasingly bureaucratic. The results were pure Dilbert material.

For example, have a look at the section which starts here, with “A novel application or feature has been dreamed up that should end up installed in a phone a year from now. This is the beginning of a long day’s journey to nowhere.”

Innovations produced by the R&D department and designers could no longer be implemented quickly – one example should have taken just a couple of weeks, but instead took months to be incorporated into phones.

Executive managers interviewed note how the result was a large number of indifferent products.

Another consequence was also predictable. It’s what political writers call the most morally corrupting effect of bureaucracies: nobody takes responsibility. With the three divisions covering their own backsides, nobody wanted to make the long-term strategic investments necessary to keep platform software up-to-date. This resulted in the Symbian user interface being neglected. Nokia had developed a touch screen UI called Hildon, which became Series 90, starting in 2001 – and that should have been the basis for Nokia’s iPhone competitors today. But it was canned in 2005.

“We produced a quite enormous number of rather average products. It would have been smarter to make fewer – and better,” says one interviewee.

The masterplan was ripped up by Ollila’s successor, Olli-Pekka Kallasvuo, in 2007, but by then the units had become enormously wealthy fiefdoms, and many of the problems remained. Lots of people could veto a decision, but the leadership required to drive one through was absent. Nokia’s product pipeline all but dried up in 2009.

There’s plenty here that will ring true to Nokia loyalists over the past five years. As the journalist Mikko-Pekka Heikkinen notes, Nokians fought each other harder than they fought the competition. One example we commented on at the time was the battle between N and E series, each the output of competing MultiMedia and Enterprise fiefdoms.

Until OPK finally called time on the scrap, the enterprise E series phones were denied the best imaging features of the consumer multimedia range. The N series users were denied MailForExchange, and SIP functionality. Yet many N series customers also used their phones for business, at enterprises with Microsoft Exchange corporate email, and they made use of VoIP.

Nokia’s core best-selling line S40 was neglected. Several Nokians have pointed this out to us – in internal commuications, the company lauded its high-end Symbian multimedia devices but barely acknowledged the success of its feature phones, which brought home the revenue.

One wrote to us recently:

“About four years ago one of the S40 ‘phones achieved a major feature milestone and got one lacklustre paragraph in the internal newsletter; by comparison an S60 offering had been reduced from a ridiculously high Field Failure Rate to something just risibly high. But from the pages of congratulatory wanking you’d have thought that the damn thing had achieved sentience.”

It’s telling how many products Nokia released during 2006 and 2008 which were almost great, but which had correctable flaws – and how these died of neglect once on the market. Many of these devices had one feature in particular that could have brought wider success with just a small revision. A product-focused company would do this, but a matrix-focused one wouldn’t – it was an extra cost.

One example is the Symbian-based 6220 Classic phone. This was a small, fast, functional and competitively priced phone, and also had a Xenon flash, giving much greater depth and quality in dark conditions – a rare feature that imaging customers cried out for. But it also had a hard-to-use and unreliable keypad, which broke frequently. A tweak to the keyboard would have helped – and would certainly have been introduced after a few weeks in the old Nokia organisation, based around product teams who took a real pride in their work.

The portfolio culture has also resulted in some inexplicable design decisions that ripple across today’s handsets. Between the end of 2007 and autumn 2008, two of Nokia’s most successful and popular enterprise phones – the E51 and E71 – were released. The design was a large part of their success. But for an encore, in 2009 Nokia released successors with a severe design defect, the E52 and E72.

Both phones feature a “Backspace” key perched precariously over the right softkey on one side, and the “Terminate Call” key on the other. It looks elegant. But the Terminate Call key forces the phone to Terminate the application in use. All but the nimblest fingers would hit the key by accident. If you were writing a text, then, and made a tiny slip, you were catapulted back to the home screen, without warning, with the text or email message several clicks away in the Drafts folder. I use an E52 – and it’s almost the perfect candybar business phone.

But because the flawed key design, with the floating backspace, is part of Nokia’s 2010 “design language” for 2010, the flaw is replicated across several devices – including, now, the C3 and E5.

There are exceptions to the matrix. Nokia’s N95-8GB is the best example of what Nokia can do when the gears mesh, and the organsation focuses on product quality – although it followed a painful time with its predecessor the N95, which took over six months to stabilise. The 8GB was brought to market quickly while it was still ahead of the competition, and saw improvements in almost every department; the phone’s robust design gives users terrific service even today.

Maemo and the Nokia Internet Tablet devices were subversive projects that also managed to survive the infighting – and might possibly save the day. (And they must – as I wrote last week, there is no Plan C.)

The article also notes goodwill towards Nokia’s new CEO, Stephen Elop, to restore Nokia’s competitiveness. As he doubtless knows, a savage axe will accompany the restructuring. But as the Con-Lib Coalition is discovering, bureaucracies are much harder to dismantle than anyone realises, and you need a positive vision to go with the bloodshed.

Related Link

Helsingin Sanomat [in English]