Thomas White Global Investing
Global Players

Global Players

July 2010

Jorma Ollila, Chairman, Royal Dutch Shell


Jorma Ollila

Image Credit: Soppakanuuna on Wikimedia Commons under a Creative Commons license

“At Shell, we keep a close eye on managing …short-term impacts, but we keep the focus on our long-term strategy.”

— Jorma Ollila, 2009


Telecommunications and oil are two vastly different fields. Yet, over the past four years, they have shared a common thread. Jorma Ollila is the Chairman not only of Royal Dutch Shell but also cellphone mainstay Nokia. The Finnish cell phone maker has flourished under his aegis, now Ollila aims to do the same for the oil goliath, even as he promotes the usage of clean fuel.

The Finnish born Ollila is one of the most active supporters of legislation that curbs greenhouse gas emissions. At the United Nations Climate Change Conference in Copenhagen last year, Ollila firmly reiterated the need to draw a map for a low-carbon economy. “If there is a common acceptance that we need a price on carbon, that would take us a long way,” he said in a speech prior to the Conference. Since he came onboard Shell in 2006, Ollila has worked towards positioning the company as a strong backer of cap-and-trade legislation, which is a system that legally limits carbon emissions and regulates carbon trading. Ollila’s stand comes as an intrepid approach, considering that most oil and gas companies today are either against such legislation or provide little support.

Yet, Ollila has always preferred to take the path least taken. More famous, even today, as the man who changed Nokia, Ollila’s unassuming demeanor and low-key style belies his highly lauded track record.

A London School of Economics graduate who holds two other degrees in political science and engineering, Ollila joined Nokia in 1985. He was appointed CEO of the company seven years later, a turning point for both the company as well as its newly minted chief executive. At the time, Nokia was not only a down and out firm with a string of financial crises; the company also lacked focus, manufacturing everything from bicycle tires to personal computers.

Ollila began by retooling the company’s entire strategy. His first crucial step was to sharpen Nokia’s focus on telecommunications while divesting the rubber, cable and consumer electronics divisions during the 1990s. With this, Nokia’s sales, which until then were concentrated in Finland, now reached a global market from the Americas to Asia. By 1998, due to Ollila’s prudent and early concentration on GSM technologies, Nokia had increased its turnover ten-fold, making the company the biggest mobile phone manufacturer even surpassing Motorola. By 2000, Nokia had become well-known for manufacturing feature loaded phones at affordable prices, the result of Ollila’s unwavering attention on research and development.

Fifteen years into Nokia’s management, Ollila stepped down as CEO and instead became the Chairman of Nokia and Shell in the same year. “After being CEO for 15 years you are a drag on the company. Chairman is more of a governing role. You have to be very careful not to manage,” he explains in his characteristic wry manner to The Financial Times.

Coined ‘the wireless wonder’ by Time Magazine for his numerous contributions in advancing the marketplace, Jorma has made an indelible mark in the history of wireless communication.

— Steve Largent, President and CEO of CTIA – The Wireless Association.

Jumping from telecommunications to oil is a formidable task. But Ollila seems to have taken it in his stride. “The adjustment isn’t automatic. But I have found it fine,” he shrugs. For the sharply analytical Ollila, who is used to bold decisions, the transition might have been less daunting than most. Since joining Shell, Ollila spent one year traveling to site locations from Nigerian oil fields to the company’s oil and gas project at Sakhalin in Russia. He has tried to realign company priorities too, putting safety and security issues at the top of the list after an explosion in a Shell refinery killed 15 people.

Clearly, Ollila’s presence is felt at Shell, with his stronger focus “on all things ‘green,'” such as renewables and combating climate change,” observes Neil McMahon, an analyst at research firm Sanford Bernstein. In 2009, Shell decided to stop all investments in solar, wind and hydrogen energy because they were not economically feasible or investor friendly. Already the world’s largest buyer and blender of crop-based biofuels, Shell now channels its money towards the development of new types of biofuels that are non-crop based and are least injurious to the environment, a decision that Ollila says is “more about pragmatism.”

Ollila might be right. Admittedly, oil companies do face the threat of oil falling out of favor. But if Ollila’s strategy is followed, Shell will not be one of them.

 

 

 

 

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