In the driver’s seat – Risto Siilasmaan haastattelu / Nordic Business Report 2023

Few people have executed such dramatic organizational changes as Risto Siilasmaa when under his chairmanship Nokia’s course was turned around from inevitable destruction to a new bloom. Speaking from experience, his advice to leaders is straightforward: whatever the future may bring, the organization must be prepared for it.

Risto Siilasmaa is a cyber security pioneer that turned into a successful business executive, and further into the Chairman of the world’s leading mobile phone manufacturer – that, again, turned into a leading wireless network company. While changes have followed each other and have been quite different in nature, certain repeating patterns are evident in making the most of each available opportunity.

One of the most important lessons from a leaders’ point of view is that the best way to manage change is to control it. The road to victory begins with getting to know the battlefield. In a constantly and often unexpectedly changing business environment, that means continuous preparations in every direction.

– There are two kinds of unexpected incidents, Siilasmaa explains. – The unknowable unknowns you simply can’t anticipate – your negligence or inactivity does not cause them. You are in no position to know anything about the specifics until they take place. The knowable unknowns, on the other hand, are surprises that you can, by following the right kind of processes and tools, find out about in time.

Siilasmaa chooses the bankruptcy of Kodak for a textbook example of a knowable unknown. It had been evident for a long time that the performance of constantly and steadily improving digital cameras would one day surpass that of film cameras, yet Kodak did not put any effort to developing their digital side. They deliberately shut their eyes from the incoming tornado and did little to protect themselves against it, protecting existing business rather than investing in longer term survival.

Russia’s invasion to Ukraine, on the other hand, was an unknowable unknown – until the final weeks before the attack. While Russia had kept becoming more aggressive and ruthless in its actions over the past years, the attack took the world by surprise. Everyone knew that something was going to happen but could not predict what or when that would be.

– The Covid pandemic, on the other hand, was the Kodak case, Siilasmaa adds. – While the event was known to happen, the timing was unknown. Scientists had said for a long time that a global pandemic was going to come during the next 20 years or so, but politicians kept maintaining that it would not happen this year. That is why we did nothing in terms of preparing for it. When the long term likelihood of an event is high, but the short term probability is low, people often choose to do nothing.

Preparation is the key

Sufficient tools and techniques are already available for organizations to prepare against both types of unknowns. In this light, Siilasmaa finds it downright inexcusable that while leaders have what it takes to see where the overall development is heading, they often do not do anything about it.

In addition to building the right kind of tool set that would enable leaders to identify the knowable unknowns and prepare accordingly, organizations must face the challenge of managing the unavoidable uncertainty of the unknowable unknowns. Both are doable.

– Uncertainty has largely been – and to a certain extent, still is – managed utilizing a traditional waterfall process, Risto Siilasmaa mentions. – The management gets together once a year to map the most potential threats and to create a top-down plan to deal with them.

While management must stay on top of things, top-down plan is often too slow to execute so that it would have sufficient time to create competitive advantages. If surprises happen on the way – which tends to be the case more often than not – a new plan must be designed. However, by the time that plan reaches the implementation level in the waterfall model, people have just barely began doing things according to the previous one.

Experimenting is a way to speed up the path from plans to implementation.

– Trying out different alternatives to discover the best way to react to change is an excellent way to manage uncertainty, Siilasmaa agrees. – The challenge in this is that if you want to create a genuine experiment culture, your management model has to be something else than the top-down version. Experiments must be initiated at every level or the organization, not just by top management.

Simulations are a great way to further boost experimenting. A digital twin of the operating environment makes simulating various scenarios a lot quicker and cost-efficient, thus creating significant efficiency effects. Thanks to simulation providing a high-quality framework, virtual experimentation can be carried out a lot more efficiently or even automated. The best virtual experiments can then be replicated in real life to verify the results. Data provided by these experiments are again fuel to the strategy which the management designs and executes through the waterfall method.

As a result of this process, a knowable unknown can be turned into a business opportunity. We do not only talk about preparing for an upcoming crisis but actually about making the most of the opportunity it creates.

To get the circle rolling, sufficient data is required.

– In simulation, data is the required fuel, Risto Siilasmaa describes. – We can’t simulate without data, so the first task is to identify the data we need to simulate appropriately.

After deciding what kind of data is most relevant for our particular purposes, we need to determine how to get that data, and if our IT architecture is capable of handling it. With knowable unknowns, it is all about clarifying our own thoughts to better understand the changes in our operating environment – including the good and bad futures we will face. Alternatives must be regularly analyzed, and consequences must be taken accordingly. That makes us better prepared for whatever outcome becomes real.

– You realize the upcoming development and decide to try if you can create business out of it, Risto Siilasmaa summarizes. – That does not take the board’s strategy meeting, it can – and must – be done at all organizational levels.

Faster reaction through scenario planning

Agility is, indeed, one of the best ways to react to the opportunities or threats an unknowable unknown may turn out to provide. Risto Siilasmaa suggests organizations adapt the idea of scenario planning so that they would be prepared to act fast soon as the opportunity opens. The benefit of scenario planning – as long as it leads to actions – is that you do not have to identify the correct scenarios, you just need to stake the space within which the events should exist.

Scenario planning takes preparations for unknown incidents to yet another level. It forces organizations to design action plans even for the most unpleasant situations.

– To be prepared as well as possible, we must create scenarios for many likely developments – and determine what we must do if that specific development materializes, Siilasmaa explains. – It all begins with us accepting the fact that something surprising will happen, and with convincing ourselves that we do not have to be afraid of it.

Human nature makes us reluctant to prepare for things we are afraid of. It is up to the management to understand this pitfall and create plans to minimize its effects. Organizations must be trained to handle these kinds of developments and provide information fast when something happens.

In addition to annual and longer-term plans and ideas about what kind of alternative developments might take place, we must be ready to challenge every one of the alternative scenarios.

– First, we need to invent the scenarios – even the very worst ones, and we need to make the management responsible for processing them, Siilasmaa describes. – We must also determine, what kind of data is required to tell us if the probability of any of the scenarios will change.

Siilasmaa does not refer solely to sales figures, but also to something that might give us indications about more fundamental developments. At Nokia, one of the most fundamental reasons for change was the old Symbian platform becoming obsolete. The data about software developers’ commitment to a certain platform served as an indicator that a shift to new platforms was becoming imminent.

The next step would be to systematically gather the kind of data that has been deemed relevant. That is often the easiest part of scenario planning as in the era of digitalization, there is plenty of data available and sophisticated tools such as AI can help us bot gather and validate it to suit our purposes the best possible way.

After we have identified and gathered the right data, we iterate it. We start to understand the changes of various scenario probabilities, which helps us allocate resources accordingly. The largest part goes to the most likely scenarios, but we must also keep the less probable ones in mind.

Risto Siilasmaa points out that while there is no doubt about the essence of scenario planning, it is the execution that eventually will separate winners from the rest. When we manage to shed even a small ray of light into the tunnel of uncertainty, we can start the change with confidence – and that is often the missing piece when it comes to organization’s perseverance to pull through a significant transition that is so often required in these times of uncertainty.

Now that we are controlling the change, it is up to us to get things in gear.