MANAGEMENT:What was the most successful European company of the 1990s? Easy. The Finnish mobile phone manufacturer Nokia. And what was the most disappointing one of the 2000s? Easy again. Nokia.

A company once held up as an example of how Europe could still compete in technology and create new industrial giants, Nokia has been in steep decline – a point emphasised this month by its decision to hire its first non-Finn as chief executive officer, Stephen Elop, who is charged with turning the business around.

And just as the company’s rise held lessons about how Europe could succeed, its fall from the top tells us much about why the region so often fails.

Nokia rested too comfortably on its laurels. It was never willing to reinvent its business, even if it meant completely changing its products. It was never located at the heart of the information technology industry, among competitors who might force it to keep innovating. Other European companies should study Nokia’s fate to make sure they don’t repeat it.

A decade ago, Nokia was the most successful business Europe had produced in a generation. It captured the emerging market for mobile phones and built the industry’s most powerful brand.

Politicians lined up to praise the company as an example of how Europe could still prosper in the 21st century. No less a figure than Romano Prodi, former president of the European Commission, drew attention to the success of Nokia and its rival, Sweden’s Ericsson, in a speech in 2002.

“Their achievement in mobile telephones helped to create two vibrant clusters, around Oulu in Finland and Stockholm in Sweden, which have attracted a large number of start-ups as well as investment from foreign companies,” said Prodi. “These examples demonstrate that European regions are capable of developing new, high-tech clusters.”

It doesn’t look so good now. In the last three years, the news out of Nokia has only been bad.

Since Apple introduced its iPhone in January 2007, Nokia shares have fallen by 47 per cent. The company’s brand, which was once one of the coolest in the world, is battered. In a ranking of global brands by Millward Brown Optimor this year, Nokia ranked 43rd – dropping 30 places in 12 months. Its profit margins have been shrinking, along with the average price of its phones and its market share.

True, it still has more than a third of global mobile phone sales, a pretty mammoth share for one firm, but it looks stranded in the middle of the market.

Nokia has recognised the scale of its challenges by hiring Elop, the former head of Microsoft’s business unit, to turn the company around. But can he succeed?

The cruel truth is that for all its residual market share, Nokia looks like a has-been. It misread the way the mobile phone industry was merging with computing and social networking and it is probably too late to turn that around.

There are uncomfortable lessons here for European industry. First, never rest on your laurels. Nokia got to the top of its industry quickly. But once there, it became complacent in an industry where laziness is fatal. It worried too much about hanging onto its market share, rather than creating new products to excite customers.

Second, Nokia was unwilling to challenge itself. The company clung to the model that mobile phones were mainly about calling people. It failed to notice that they were just as much about checking e-mails, finding a good restaurant nearby and tweeting.

Finally, it wasn’t located near a cluster of similar companies. Building a technology giant in Finland was a great achievement. But Nokia wasn’t surrounded by web companies or consumer-electronics manufacturers. That meant it wasn’t in the mix of innovative ideas, which would have forced it to question its assumptions every day.

Politicians and business experts spent a lot of time praising Nokia and trying to learn from its rise. They should devote as much time studying the lessons of its slide. If they don’t, much of the rest of European industry will repeat its mistakes and Europe can’t afford to lose many more world leaders.

Matthew Lynn is the author of

Bust

an upcoming book on the Greek debt crisis