AMSTERDAM, The Netherlands-Nokia Corp.’s strategy hasn’t wavered much in the past few years and the message for 2008 is essentially more of the same. While at one end of the spectrum, the Finnish company is eyeing more feature-rich devices and applications that connect peoples’ “digital lives,” it is also committed to widening its global reach by re-doubling its efforts in emerging markets such as India, China, Ukraine and the African continent, top executive told an audience of 3,000 at the opening of Nokia World.
Despite the significant push Nokia has made in the realm of converged services and multimedia, “the device itself remains the core of our business,” President and CEO Olli-Pekka Kallasvuo said in his opening keynote. “We continue to be a device company. On top of that we are going to take the services opportunity.”
Nokia enjoys the largest market share in the industry because of the breadth of its portfolio, Kallasvuo said. “Our industry is pushing the boundaries of creativity, technology and innovations. Consumers increasingly expect Internet access to be as natural as talking or texting on their phones.”
Nokia recognizes that desire and plans to continue developing devices and applications that quench that thirst for an all-in-one world in pocket-sized form, Kallasvuo added.
“We know that things need to be improved,” Executive VP and GM of Multimedia Anssi Vanjoki told the audience.
Reshaping communications
Nokia has its sights set on an all-out revision of communications, entertainment and how we connect with the world beyond our daily lives, he said. Vanjoki aired a video clip aimed at defining what Nokia envisions for the future. As the clip went through the motions of more than 100 years of history, it highlighted the various introductions of screens along the way and the changes each has brought to the cultural landscape of humanity. Eventually, “everything came to us in a device that could fit in our pocket,” the narrator said. “We shared what inspired us with everyone that we cared about . our sense of purpose kept growing,” he continued. “It was the beginning of everything. Welcome to the fourth screen.”
U.S. strategy
The device to connect people, of course, is the mobile phone. To that end, Nokia’s head of mobile phones, Kai Oistamo, sees music, navigation and gaming as the three most important areas for the company. In each area, Nokia has to collaborate with the best minds and find ways to add value to the consumer to make any dent in overall adoption, Oistamo said.
Moreover, he says the company is committed to regaining market share in the United States. Calling its business in the United States “very important,” Oistamo recognizes that “you cannot overlook the market structure.”
While Nokia has opened flagship stores in New York City and Chicago and plans to open more where it will offer devices free of carrier control and unlocked for use on any compatible network (albeit at a much higher, unsubsidized price), Oistamo said that is not Nokia’s end game for the market here.
“You have to earn your mark in a marketplace everyday,” he said.
He says Nokia recognizes the importance of working with carriers in the U.S. market and says “that’s exactly what we are doing.” The company changed its strategy for the United States mid-2006 and has put considerable focus on CDMA devices for Verizon Wireless and is refocusing on its relationship with AT&T Mobility, Oistamo said. He added, however, that it typically takes 18 to 24 months to develop and bring new products to the marketplace.
More generally, Oistamo admitted that the rapid success of Apple Inc.’s iPhone was a “wake-up call for the whole industry,” particularly with regard to its innovative use of a touchscreen and intuitive user interface. While touchscreens have been around for years, a new entrant came to the market and beat everyone at their own game when it came to the user friendly interface that Apple developed for the iPhone. He added that it was partly a failure on the part of the whole industry to not effectively market the true power of next-generation Internet browsers available pre-iPhone days, but he admitted that more needs to be done on that front.
Oistamo also talked about Nokia’s plans in the navigation sector; especially with its pending $8.1 billion purchase of digital mapping company Navteq appearing set to close. Oistamo said he expects the deal to close in the next few months, but regardless sees navigation as a “unique opportunity” for the mobile juggernaut.
Navigation can deliver completely new types of user experiences on mobile devices by combining navigation features with cellular connectivity, he said, adding that the experience is so much worse without that tie-in. “I think there’s lots of innovation that one can do in this area,” he said. “Why would anyone want a standalone navigation device?”
Emerging markets
Overall, Nokia wants to push its high-end N-Series devices and lower-end handsets equally, Oistamo said. The company determines its focus in each market dependant on the overall needs of the people living there, he added.
Soren Petersen, who heads up Nokia’s mobile phones division aimed at delivering devices well below $100, understands this equation all too well. He’s constantly studying how to better meet the consumers’ needs in emerging markets.
The way Nokia brings prices down in these areas is through sheer scale and a determined decision to bring the cost down at retail. Petersen has a “maverick role within the company,” where he’s often found himself arguing with multiple divisions for sweeping changes that all drive costs to the consumer down in the end, he said.
“Rather to do it ourselves than let someone else do it to us,” he explained. Petersen has convinced many within the company that Nokia can make as much money as its competitors without charging more than $72 per device. He argues with colleagues a lot less these days, he told RCR Wireless News.
Many of his ideas have come from personal journeys to places far off the map. On a visit to Kenya, Petersen stopped in an “excessively rural storefront” and noticed all of the products were displayed in plastic bags. When he asked the merchant where the boxes and manuals had gone, the man replied “make good fire.”
It was then that Petersen realized Nokia needed to change its approach to packaging. “Make it barely last the journey,” Petersen explained. By cutting back on the box size and constructing them from reusable materials, Nokia is saving about $147 million each year. “The numbers there alone lit up a whole new drive within the business for these kind of things,” he said.
And what about the user guides? Nokia did away with color printing on the front and back covers and is saving $16 million a year, Petersen said. “It’s scale where one cent is a million dollars.”
Petersen says the company still has one to two years to go on these types of cost-cutting measures. “It’s been a fun process,” he said.
Nokia has introduced new features that have made devices more useful for the people in these markets. For example, Petersen recognized that not only do many of his customers spend a significant portion of their salary on one device, but many of them will never know how to read or write. So what good is a text-based address book to them? It seems simple and rather mundane, but the introduction of icons in the address book has helped countless customers identify loved ones and friends with simple pictures like a soccer ball or flower, he said. Additionally, Nokia added several phonebooks to their devices, recognizing the fact that many people share their phone with a half-dozen others.
The entry-level business comprises half of the company’s overall business now; 150 million units were shipped to emerging markets last year, Petersen said. Two years ago, one out of every 10 Nokia devices sold were entry level. Today, that number is closer to one in five.
