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Leaders in high margin mass market product innovation
on a journey to innovate in services to the same effect

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Profile: nokia

As its strapline suggests, Nokia is really good at ‘connecting people’. This Finnish icon is the world’s largest manufacturer of mobile devices and has around 40% of the global device market. Nokia is very, very successful and, in 2006, generated revenue that for the first time was in excess of Finland’s state budget. Nokia has always used innovation as a key driver for growth: first, by pioneering GSM and then by reinventing the concept of product personalisation. These days Nokia’s challenge is to maintain its position in a world increasingly converged and dominated by the likes of Google and Microsoft. However, while these companies have strong brands and interesting plans for the future, they don’t have control over the handset. Nokia is bundling great services with tailored, user-friendly hardware. With a billion customers and relationships with hundreds of operators around the world, Nokia may well manage to hold its place.

Core innovation strengths within Nokia include speed of action, interconnection between products and services and the strategic use of design. Over the past few years, as margins have been three times those of its nearest competitors, the company has re-emphasised the importance of design to place it literally at the heart of the organisation’s operations. This has moved Nokia from being a feature-driven to a design-driven manufacturer where, amongst others, ethnography is now a core capability linking consumer behaviour around new uses of digital media directly into the development process. Nokia’s leadership in mobile devices has given it a solid platform upon which to build a services business that expands outside the core. And here’s the rub, while Nokia has consolidated its traditional strengths of R&D and product design, the big story in 2007 was its strategic shift into the multimedia services space.

Nokia created the N Series to deliver high-end multimedia phones. In addition, its near-ubiquitous camera-phones have provided revenue opportunities from user-generated content. In support of the social networking trend, Nokia has formed alliances with partners such as Yahoo to allow users to share photos using its Flickr service. 2006 saw the first tablet device with internet, not cellular connectivity, and the success of this product has led to a next-generation of internet-only devices including webcams and higher levels of VoIP. By eliminating the SIM card and breaking the connection to the networks, Nokia is using alliances with the likes of Google and Skype to offer more freedom of choice direct to consumers. At the lower end of the market, Nokia is the leading brand in China and India and is well positioned for further growth. It continues to lead on process innovation to drive down cost and is opening its tenth factory in India with the capability to turn out 20m phones a year.

Nokia’s innovation roadmap weaves its software and services into a seamless package. Smart acquisitions have increasingly played a considerable role in this. Seeing that that location and content services provide major opportunities Nokia bought Navteq, the leading provider of digital map information for over $8bn in cash. Nokia expects that the truly mobile internet with multiple connectivity options that enable faster access to music, video, TV and mobile navigation and massive multiplayer gaming services will be a major factor in driving further growth. With overall industry handset volumes growing, Nokia is in the strongest position of any manufacturer. Add into this mix Nokia’s acquisitions and partnerships that are building new service portfolios and it is clear that this company continues to be the leading source of innovation in the telecommunications sector.

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