Five things leaders should know about the power of emotions in watershed moments

Artificial intelligence and geopolitical storms are currently shaking up many sectors in ways that business leaders are only beginning to understand. Associate Professor Timo Vuori, together with Harvard Business School Professor Michael L. Tushman, has taken an in-depth look at Nokia's fateful years 2010–2011, when the mobile phone giant's leadership was forced to choose a replacement for the company's Symbian operating system amid historic ecosystem upheaval. Vuori says Nokia's defining moments can teach today's leaders a lot about how emotions drive decision-making when disruption hits – and how to channel their impact into a positive driver rather than a business-threatening misstep.
 

1. Big breakthroughs cause pain and anxiety that can mislead 
   
   When the boundaries or rules of an industry change, managers’ habitual behaviors and beliefs become obsolete. At the same time, much of what they have built becomes unusable. This can cause anxiety, anger, and fear. When weighing different options, there is a tendency to unconsciously favor those that maintain the illusion of past greatness and familiar operating logic.
   
   The transformation Nokia faced was the shift to digital platforms. When its own platform was no longer good enough, the mobile phone giant had to choose between Microsoft's Windows and Google's Android. Windows appealed to the emotions of Nokia's management because choosing it helped to maintain the identity of a market leader: Microsoft promised Nokia concessions and showed flattering enthusiasm in the negotiations, while Google's representatives shot down hopes of any special treatment, thus jeopardizing the preservation of its former dominant position.
    
2. When the foundational pillars of business falter, competitiveness must be understood in a broad sense
   
   During periods of upheaval, leaders often make a critical error by narrowing their focus too much, confining themselves to a limited scope or platform ecosystem without considering its competitiveness relative to others. In Nokia's case, the company's leadership was tempted by the opportunity to continue as the most significant player in its field, the biggest fish in the pond offered by Windows. Choosing Android, on the other hand, would have meant a relative loss of position in the new ecosystem. This made the leadership blind to the fact that its new ecosystem itself was not competitive—that it chose a drying pond over the ocean. As companies today contemplate ecosystem opportunities, too many still choose ‘weak’ partners to be the strongest—and thus ruin their chances of success.
    
3. In the initial phase of transformation, management needs to pause, then undergo desensitization
   
   Allow time for the change to sink in and accept the emotions it evokes. Initially, acceptance should be built by considering what the new rules of the game are and how they will affect current business. The key is to postpone planning for next steps for later.
   
   Following the initial phase, it's essential to engage in imaginative exploration: to generate a multitude of vivid scenarios envisioning the potential actions the company could take in the new landscape. This exercise aids management in emotionally expanding their cognitive horizons and alleviating the discomfort associated with change, akin to the process of desensitization therapy used to overcome phobias.
4. Next step is finding a new purpose – brutal quantitative analysis comes last
   
   After sufficiently fantasizing about future possibilities, it's time to conceptualize the company's purpose in the new context. Nokia's mistake was clinging too long to its identity as the world's leading smartphone manufacturer. Had management been more open to exploring other value the company could create through technology, networks, and software, it might have found its new path with less pain.
   
   Only after these thorough mental exercises to untangle disturbing emotional reactions should leadership proceed to brutally critical quantitative analysis to choose the best direction. Too often, management demands numbers immediately, leading them to interpret the data through a lens tinted by outdated emotions.
    
5. Nokia's lessons are particularly relevant now 
   
   Artificial intelligence is currently disrupting the operational landscape of many companies, but similar upheavals are also being caused by geopolitical tensions. The Russian market has already largely been lost, and growing tensions with China could suddenly sever supply chains and markets established over the last 20–30 years. Additionally, climate change and the resulting new regulations are dramatically altering the business environment. The best performers will be those who can swiftly adapt their thinking to the new paradigm.
    

Timo Vuori has recently published the study Strategic decision-making at platform transitions: The case of Nokia (2010–2011) in the prestigious Strategic Management Journal. In the research, Vuori, along with Harvard Business School professor Michael L. Tushman, extensively interviewed Nokia's senior leaders from 2010 to 2011 to uncover the emotional factors that led to the fateful decision to adopt Windows.