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From In-House to Joint R&D: The Way Forward for Nokia Denmark Case Solution
It is quite difficult to come up with a single solution to the predicament of Nokia Denmark. The aforementioned alternatives have both pros and cons. However, it depends upon the ground situation as well as the input of the stakeholders to come up with a solution, which is not only operationally feasible but also enable the company to overcome present problem. In order to rationally assess the alternatives, it is imperative that complete and comprehensive analysis of the alternatives is done. It will allow taking into account the tradeoffs related to the strategic alternatives. It is also essential that challenges pertaining to Nokia Denmark in its relationship with Foxconn are also assessed. And lastly, the succeeding discussion will present recommendations in case of Nokia decides to maintain its relationship with Foxconn.
Following questions are answered in this case study solution:
Consider the key challenges facing Nokia in its joint R&D with Foxconn in China. If Nokia is to continue with (perhaps even scale up) the JRD, how should it organize and manage the joint product development activities?
Organization and Management of Joint Product Development Activities
From In House to Joint R D The Way Forward for Nokia Denmark Case Analysis
1. Consider the key challenges facing Nokia in its joint R&D with Foxconn in China. If Nokia is to continue with (perhaps even scale up) the JRD, how should it organize and manage the joint product development activities?
The decision of Nokia Denmark to develop Joint Research and Development (JRD) with one of its primary suppliers in the form of Foxconn was intended to release pressure on Danish and enable it to focus on more core activities. This JRD will allow Nokia Denmark to develop technologically advanced mobiles where Foxconn will only be responsible for testing and developing some selected models. In this way, Nokia aims to concentrate on those models, which have much more commercial viability and customer attraction. Despite achieving success using this business model, Nokia is facing trouble as its sales have dropped considerably in comparison to other competitors. This has led to the pressure within Nokia for change in operational and business orientation including reassessment of the deal with its Taiwanese partner Foxconn. Otherwise, Nokia Denmark could further erode its market share as well as damage its financial standing with investors. Nevertheless, Nokia Denmark’s partnership with Foxconn is not without benefits. JRD allowed Nokia Denmark to increase its organizational ability considerably. It also made it to become more agile in decision making and also reduce product development time. These benefits can go a long way in building and sustaining competitive advantage in the market. However, Nokia Denmark has a number of options available in order to revamp and rejuvenate its operational configuration with Foxconn. Firstly, it has the option to increase its scale of operations with Foxconn, which will mean that Denmark outfit will delegate further responsibilities related to product development to its Taiwanese partners. It will allow Nokia Denmark to exclusively focus on core value addition activities, which will allow it to come up with ground breaking cellular technologies. Second option is to free Foxconn and centralize entire product development. This will force the company to divert more resources to the designing and manufacturing of standardized products but at the same time will save it controlling and coordination costs. Lastly, it has the option to maintain the status quo. This will save the organization from revamping effort but will hurt the fortunes of the organization in the long-run.
Nokia Denmark decision to outsource the development of standardized mobile models to Foxconn was taken in order to release the pressure from the Danish site. The outsourcing will also enabled it to meet the target of developing specific number of mobile phones, which is set by the corporate headquarter. The development of JRD was part of diversification strategy initiated to increase the penetration of Nokia products in the global markets. Since the inception of the JRD with Foxconn, the relationship of two organizations has been hampered by number of constraints. Resultantly, Nokia Denmark has not been able to fully benefit from the association and achieved the targets set at the offset of the initiative. The first particular challenge related with JRD was the high overhead management cost. Likewise, the operations at Taiwanese plant required too much direction from the Denmark. This was contrary to the basic purpose for which the JRD was setup in the first phase. Despite delegating the authority and responsibility to the Taiwanese firm for the development of standardized products, the developers in Denmark still have to give key details regarding the different aspects of the product design and development. Similarly, the geographical distance between the two plants also hindered the effective management of interface between electronics and mechanics. The importance of interface in cellular technology can be gauged from the fact that it is the interface, which defines different features of a mobile phone. The Danish management tried to overcome this problem by asking Foxconn to build testing facilities at their plant according to the unique requirements of the Nokia’s products. However, Foxconn adopted another alternative in the form of acquisition of electronics companies to overcome testing deficiencies. This approach saved a lot of time for both Foxconn and Nokia Denmark but in most cases, it failed to fulfill the desired requirements. Another challenge faced by Nokia Denmark in this regard was related to product development lifecycle. With the start of JRD, the times needed to develop new products decreased considerably, which affected the position of Nokia in the market positively. However, all was not well as it put questions on the in-house capability of the Danish unit. Before the initiation of JRD, Nokia Denmark was able to produce standardized products in the period of 12 to 15 months. On the other hand, under JRD, Foxconn was able to produce a similar product ranges in less than 8 months. The disparity in time of product development of both plants forced the top-management to take radical steps in order to decrease the time in Danish unit.
But, the biggest challenge related to the JRD came in the form of internal resistance from Nokia’s employees. Nokia engineers objected to the delegation of the product development processes to an external third party. They also felt uncomfortable in teaching their Taiwanese counterparts in the field of product design and development. This arose from the feeling that Nokia has delegated its core competency to an outside company. It also created apprehensions in the organization that it might hurt Nokia in the long-run. The internal resistance created massive challenges for the top management as it was the development and engineering department, which was interacting with Foxconn on a regular basis. It also led to the realization that unless and until the fears of Nokia’s employees are not removed, the partnership between the two companies cannot work efficiently.
The next challenge related to the alignment of Nokia Denmark’s processes under the new JRD. The JRD would require complete alignment of Nokia’s Denmark with Foxconn. Nokia soon realized that the outsourced project cannot work efficiently autonomously. Resultantly, it needed directives from the Danish plant to achieve its targets. More importantly, the configuration of the businesses processes of JRD required strong control and coordination from Nokia’s end. This forced Nokia to allocate a specific number of employees to manage and supervise the operations of JRD. This meant that Nokia failed to completely delegate the product development activities to the new JRD, which still required allocation of resources from the Danish plant. Similarly, another issue related to the JRD was related to the transactions of Foxconn. Foxconn was not only supplier of Nokia but it also supplied to the other cellular companies like Apple, Sony and Motorola. This created apprehension within Nokia that its technology can be leaked to the competitors with the creation of JRD. However, Foxconn assured Nokia that the leakage of the confidential information will not be a problem in the new JRD. Foxconn presented its watertight organizational structure as a guarantee, which will inhibit any chances of leakage of information from the new JRD.
In addition to this, the new JRD faced the challenge on the cultural front. The two organizations worked in completely different cultural settings, which proved to be a hindrance in the unification and harmonization of the organizational cultures in the wake of new JRD. Resultantly, the value system of the two organizations was quite different. It also created a number of communication problems for both of the organizations. Another issue pertinent to the new JRD was the high turnover rates at Taiwanese plant, which created instability for the JRD. This was a constant source of frustration for Nokia as the engineers, which were given training in the development of new products usually left the organization after six months. It not only created redundancy of effort at Nokia’s part but also increased the training costs related with the operation. The only solution to this problem was the development of Nokia PD knowledge internally at Foxconn. This would have saved training of new engineers as well as minimize the extent of control exercised by Nokia. However, this solution if implemented would have presented its share of problems.
Despite the gravity and extent of challenges faced by the new JRD, it also allowed Nokia Denmark to enjoy a number of benefits. It allowed Nokia to increase agility in the decision making, which enabled it to become more responsive to external stimulus. Likewise, it was able to delegate development of standardized products to JRD, which provided it the space to allocate resources and expertise to the core competencies in shape of creation of value-added products and features. But, the biggest advantage enjoyed by Nokia was in the form of reduction of product development time in both the Danish unit as well as the Taiwanese plant.
Organization and Management of Joint Product Development Activities
In the case, Nokia decides to continue present setup or scale up the operations of JRD, then, it will have to come with the strategy in order to address the challenges associated with the JRD. First and foremost, it should make sure that the process of concept mapping is completely streamlined between the two organizations. It will allow it to eliminate the creative redundancy from the organization’s operations. It will also enable efficient allocation and usage of resources. This can be done through intensive training and collaborative session. This will acquaint the field management at the Taiwanese plant with the requisites of the development of generic products. These sessions will also Nokia Denmark to reduce the disparity between two organizations’ culture. It was also allow inculcation in the Taiwanese employees Nokia’s values of creativity and innovation. In order to maintain the standards of quality associated with the Nokia products, it is imperative that the JRD is fully aware with the each and every technical detail of the product, which will ensure the successful replication of the in-house developments practices of Danish setup. This will also mean that the new JRD is configured in similar lines as the Danish site. Moreover, the same product lifecycle methodology is used, which was used by the Danish setup. More specifically, this required that product development manager will be given the responsibility of the entire development process. The departments related to the software, mechanics, hardware and electro-mechanics will comes under the domain of authority of the product development manager.
Similarly, in order to make JRD efficient, it is also imperative that the entire development and creation process is streamlined in the new organization. This could be done through the division of the development and creation process into three distinct phases. In the first stage, planning of product portfolio will be done, which will consists of concept mapping as mentioned before. In this stage, the different features and attributes of the products will be conceptualized in order to provide a clear picture to the development team. The second stage will consist of product development. This stage will consists of the number of phases and require coordination and communication between different departments such as software, hardware, electronics, etc. This is where the role of product development manager will become crucial. It will be the duty of product development manager to ensure integration between the different functions of product development team. This stage will entail entire spectrum of product management activities. It will also include the actual development or manufacturing in the form of productisation. Likewise, the integration of delivery capability implementation will also be done in this stage. The activities related to the marketing and advertising of the products is also included in this stage. This means that it is vital for the success of the product development that entire sales and marketing department is taken onboard during this stage. It will allow the feedback and input of the sales team into the development of the products, which will enable the company to more accurately fulfill the needs and wants of the consumers. In the last stage of product creation process, the vital activities of product maintenance will be done. Product maintenance is crucial to ensure the development of long-term customer loyalty.
Significant changes should also be brought in the controlling procedures of the JRD in order to make it more autonomous. This can only be done through decentralization. This will allow Nokia Denmark to eliminate the duplication of resources. It will also enable Danish setup to overcome the problem of high overhead costs. The decentralization initiative will instill confidence in the management of JRD. Nokia Denmark should limit itself to a supervisory role whereas the entire spectrum of development activities should be done by the Taiwanese outfit. Meanwhile, Nokia should assist JRD to achieve in-house capability needed to achieve complete autonomy. However, decentralization should not come at the cost of disintegration. Nokia should make sure that the decentralization initiative in any way bring affect the integration of organizational processes and procedure. In case of disintegration, the new JRD will not be able to produce and develop a product, which are according to the requirements of the consumers. This will further aggravate the problems for Nokia in the market.
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