Transnational Research Associates
NOKIA’S STRATEGIC INITIATIVES AND
DYNAMIC ENTREPRENEURIAL POSTURE
Art Madsen, M.Ed.
Table of Contents
II. Nokia Company Profile and Underlying Corporate Culture
III. Nokia and the Drucker Paradigm of Innovative Thinking
IV. Bold New Horizons for Nokia in the Telecommunications Industry
V. Sustaining Innovation Over Time
VI. Future Prospects and Concluding Observations
This study describes several entrepreneurial mechanisms and strategies that enabled Nokia Group to surge to its undisputed leadership position in the cellular and telecommunications industry leaving previously dominant firms, like Motorola, Ericsson, and AT&T, in significantly weakened market positions.
Several paradigms and approaches for ensuring intra-corporate innovative creativity are examined. Internal Nokia policies and priorities are also clarified within this context. Lastly, methods of sustaining excellence and innovation, conceivably transferable to other technologically advanced firms, are offered along with optimistic remarks pertaining to the future of Nokia within its ever-progressing sector.
II. NOKIA COMPANY PROFILE AND UNDERLYING CORPORATE CULTURE
Given the phenomenal growth and expansion of NOKIA GROUP, in all sectors of the telecommunications industry, it is of special significance to explore the underlying reasons for the consistency of their ever-expansive success. Not only will it prove enlightening to examine the conventional wisdom and strategic decisions of NOKIA's Group President, Pekka Ala-Pietila, but to place these innovative decisions into the matrix of Drucker's Ten-Point Model. Beyond this approach, comparative insights will be offered, demonstrating that failure can often result from neglecting to seize opportunities in the telecommunications industry as soon as they arise whether within the technical realm of expertise or in terms of potential new markets.
Nokia Group's current profile should first be presented, followed
by an analysis of strategic entrepreneurial decisions that have catapulted
this firm into the forefront of its industry. Nokia sells mobile phones
in over 130 of the world's nations. They employ more than 60,000 persons,
one third of whom are working in research and development. Beyond their
mobile phone division, they have sold to 87 clients in almost 40 nations
high tech GSM communication systems which outperform any equipment offered
by competitors. Nokia is also pioneering in advanced microwave radio communication
innovations and in wireless base station subsystems.
Nokia long ago outgrew the boundaries of its homeland, Finland,
where they currently sell only 4% of their equipment, although some 50%
of their employees are Finns (Burt, 1999). Many of the CEO's vital concepts
seem to mirror the priorities of TQM, Total Quality Management, but there
is a definite overlay of ingenious innovation occurring within Nokia that
distinguishes this rapidly expanding firm from competitive rivals many
of which have been using TQM.
What qualities should the observer attempt to isolate which have
made Nokia the undisputed industry leader in telecommunications? The generation
of ideas at an unbelievably fast pace seems typical of Nokia whose engineering
personnel, for the most part, are in their thirties. Not only is hard work
necessary, it would seem, but bright ideas and putting them into practice
is what makes this firm tick. There is a sense of inexhaustible energy
and dynamism, as Nokia pushes on a daily basis whether from a technical
standpoint or in terms of marketing initiatives. Within Nokia there is
evidence of free-flowing ideas, of trust and interaction at all levels
of the hierarchy (Burt,1999; Carnegy, 1995). Titles are not important within
Nokia and subordinates can react to concepts offered by their superiors.
These are elements that are not always prominent in other firms. For example,
some indications pointed, in years past, to rivalries and secretiveness
within Motorola Corporation, causing design, production and sales disturbances
Inside Nokia's technical nucleus, commitment is at an all time
high and, within divisions, there is a sense of unified thrust. The only
problems that can be held against Nokia are those related to their workforce
being fairly low in seniority. More than half of the employees have been
working there less than three years. This is a factor possibly contributing
to a corporate culture that is in a constant state of flux. New employees
are definitely a visible feature of Nokia and this can lead, in a positive
sense, to the creative process, as new personnel forge dynamically into
the forefront of operations. There has, in fact, been evidence in the recent
history of Nokia Board decisions that priorities and objectives are being
clearly and forcefully pursued with vigor and determination not commonly
found in the industry.
The firm is continuously working on developing various solutions
with which its retail personnel can meet consumer demand easily, flexibly
and as cost-effectively as possible. One solution for operators of Nokia
systems to increase capacity without adding cost, is to implement a dual
band network, for instance. This solution was developed in May of 2000,
and reflects on-going thinking and brain-storming within technical divisions
on this problem and on many others. To satisfy market need, Nokia has introduced
a new, unique product, the Nokia GSM 900/1800 Dual Band Base Station, among
dozens of similar products (Nokia, 2000).
The corporate profile and culture of Nokia have been clarified to a reasonable degree. Now, it is appropriate to turn to the Drucker Model of Innovation and review to what extent the Nokia profile, and inner dynamics associated with it, fall within its parameters.
III. NOKIA AND THE DRUCKER PARADIGM OF INNOVATIVE THINKING
What might Drucker say that Nokia has that competitive firms Microsoft, Ericsson, Motorola and Telefon might not possess? Could it be an elusive element worthy of discussion? From a strategic viewpoint, the founders of Nokia embrace a common vision and have formulated a mission statement, incorporating, at the same time, corporate and departmental goals. The current vision of Nokia is summed up by its new Group President Ala-Pietila who stated, "This company is not about producing basic consumer products. We are looking for software solutions in wireless communication." (Burt, 1999).
There is certainly a push for change within Nokia, in light of the new realms into which the company is venturing around the world with its massive brainpower. The types of decisions being made at the top levels of each of Nokia's major divisions are referred to as policies developed by "cross-functional teams." This key posture fits right in with Drucker's change master stipulation. Teams, made up of change masters, are moving this firm decisively ahead in a rapidly growing and constantly transformed industry.
The Nokia emphasis on customer service is placing Nokia ahead
of its competitors. Not only is the firm far more forward-leaning than
its rivals, but it bends over backwards to assist customers who have specific
problems. Often custom-tailored systems are devised to fulfill the diverse
needs of the cellular mobile market. With other product lines, Nokia is
equally concerned about satisfaction with consumer products it has developed.
A real effort is put forward to attract and retain market share through
enhancing the entrepreneurial spirit, a vital part of which is customer
relations, being close and remaining attentive to details of interest to
It took Nokia ten years to develop what Drucker refers to as
a systematic approach to conducting business. Prior to entering the telecommunications
field, Nokia owned and operated paper mills, and then moved into rubber
and cables. There were major managerial problems, resulting even in the
suicide of the chief executive and critical new decisions and strategies
had to be worked out to ensure survival of the firm (Carnegy, 1995). It
was at this point that systematic thinking began to permeate the firm.
Necessity dictated that matters be taken into hand. Systematic approaches
were used to take calculated risks, and these risks have paid off. Some
of the risks taken resulted in unexpected successes, and Nokia moved ahead
of its competitors. This, too, might have been unexpected, but the creative
thinking of Nokia engineers and Finnish technical expertise resulted in
a dynamite combination when coupled with the Drucker call for systematization.
What resulted from this chain of events was a firm quite responsive
to the market, to fluctuating conditions and to the needs of its growing
customer base. Occasionally, as in the case of the Omnitel/Nokia joint
operation agreement (New Media Investor, 2000), Nokia decided that
a strategic alliance was in the best interest of its own position and responded
dynamically to the realities of the moment.
Lastly, in the Drucker paradigm, are the people, the employees
of Nokia, who are the company's most valuable commodity. The only people
who have problems within Nokia are the one's having to take instructions
from moment to moment, and there are few of those! In fact, Nokia personnel
are trained in four worldwide centers, each serving 50 countries. They
soon become aware of the corporate culture and the demands that the firm
will place upon them. Yet, Nokia treats them well. The best minds are identified
and rewarded; failure is not overly criticized since a valiant attempt
is what is ultimately most valuable to the firm.
The cross-functional team approach is the heart of Nokia's success, and this approach has not been featured at Motorola and AT&T as dynamically. On balance, the Drucker approach reflects quite accurately what is occurring within Nokia. The only shortcoming it seems to harbor is the lack of a cross-checking mechanism, perhaps within the systematic approach segment, for ensuring that Nokia -- or any other firm -- does not risk too much time and money on R&D, without adequately gauging the market for products and approaches to be developed.
Nokia has played the game quite well, outpacing its nearest competitors in many comparable market niches. Their lead engineers have developed new concepts in telecommunications many of which have been promoted and sold on a scale not previously imagined. Nokia in 1998 became the world's largest producer of mobile phones and produced more than 40 million of them. Their sales increased by 30% in 1999 and seem to be repeating this trend this year. These factors are well known and documented in The Financial Times (3/24/99), in The Wall Street Journal (11/7/00) and in a number of more pedestrian publications as well. Nokia's innovative spirit has led it to pursue, and achieve, new heights in the telecommunications industry, with an emphasis on hand-held global communications technology.
Toshiba and Siemans would have liked to do even a fraction of the mobile phone business that Nokia enjoys in this market, but were compelled to join forces in order to attempt to compete viably (General Readings, WSJ, 2000).
What has led to Nokia's primacy in the telecommunications sector, compared to other firms? Another paradigm is in order, this time a five-step process, attributable, in part, to Porter. This is known as the 'forced relationship' model, leading to problem solving and creative innovation, replete with the required sense of urgency and compulsion so desirable. It may not seem typical of Nokia’s external image, but, beneath the surface, there is a persistence and a drive unparalleled in the telecommunications industry, both of which have made Nokia – among other factors – an industry dynamo.
Source: Paraphrased from Professor Benson’s Notes, Aramco, 2000.
Perhaps not so coincidentally, the ability to identify patterns, in psychometric terms, is also an indicator of intelligence. Nokia is surely known for its problem-solving capabilities and their technical staff has designed worldwide programs to reinforce, to unlock and fully utilize the skills inherent within their employees. This entrepreneurial strategy, while nestled within the heart of the company, is one of the driving forces behind Nokia's success.
Where will these strategies and techniques take Nokia in the foreseeable future? A day hardly goes by without mention in the world's most prestigious economic periodicals of this Finnish multinational. In conjunction with Ericsson and Alcatel, Nokia has recently received a 10 Billion Euro contract, approximately US$8 billion, to supply infrastructural communications equipment for UMTS' worldwide telecommunications networks (Echos, Oct 28, 2000).
Also last month, Nokia-Finland purchased the remaining half of NG Industrial from its Brazilian parent firm for a sum of $415 million. This enables Nokia to manufacture virtually all of the mobile phones sold in Brazil (RCR Wireless News, Oct 23, 2000).
If we speak of Nokia in France and in Brazil, it would be negligent not to mention Mainland China. Nokia has expanded into Jinan and Nanjing with major Internet coverage systems. The Chinese preferred the broadband access system to other modalities since it uses a digital subscriber line (DSL) system and is flexible enough to accommodate their Internet and Telecommunications needs. The Ministry of Information approved of the system, which is quite the feather in Nokia’s cap. (Newsbytes News Network, October 25, 2000).
How did Nokia achieve this international stature? First, by adhering to some of the principles of Porter and Drucker, i.e. actually analyzing sales patterns, demand, market forces and estimating risk factors. Once their internally controlled administrative and technical systems were in place, and they were sure of their target clientele, they forged ahead, applying all of the tactics and strategies discussed above, and, it goes without saying, many more.
V. SUSTAINING INNOVATION OVER TIME
Moving laterally and then vertically through several industries and finally settling for the booming mobile phone market, Nokia, in ten years, has come a long way. Ideally, it would be highly desirable to keep moving in the same direction, upward. There is no indication that Nokia is stalling in this effort; the firm’s ascent is continuous and uninterrupted in almost all of the sectors in which it competes. What strategies for sustaining excellence and innovation is Nokia deploying to remain an industry leader? Nokia’s Finnish engineers, and all other nationalities working for Nokia, must keep ahead of the Ex-Apple group, operating under the name PIXO, which is focusing on exactly the same products and technical expertise as Nokia (Carlton, June 19, 2000). If we are to believe their new Group President, Nokia seems to thrive on several intellectually and commercially valid concepts, among which are:
Source: Adapted from Prof Benson Lecture Notes and Burt,T. Financial Times, March 24, 1999.
These concepts leap before one’s eyes in the literature now readily available on this mega-firm, cleverly, ethically, and profitably pursuing its goals on a worldwide scale.
VI. FUTURE PROSPECTS AND CONCLUDING OBSERVATIONS
The challenges that Nokia faces today are no longer those of yesterday in the paper, rubber and forestry industries. Nokia is clearly a firm on the move, going form a sector it already dominates (cellular phones) to a somewhat more amorphous, yet demanding field: software for use in wireless transmission and communication. It has the know-how, the strategic insight, the innovative drive and the assets to create waves for even the largest of firms.
Having established firm bridge-heads on four continents and sales outlets in virtually every city in the world, Nokia will doubtless continue to conquer new competitors, all the while catering to technical clientele and people of distinction who crave the hand held gadgetry that Nokia has helped pioneer and make so popular on a massive scale.
"Alcatel, Ericsson and Nokia will be Suppliers…", Echos, Oct 28, 2000.
Benson, A. "Porter’s Structural Analysis (Five Forces Analysis - ARAMCO 2000), Hull University, UK, October 2000.
Burt, T. "Hello World, Helsinki Calling", Financial Times, March 24, 1999.
Cargney, "Nokia has been Transformed: Scared of Growing Fat and Lazy", Financial Times, July 10, 1995.
Carlton, J. "Ex-Apple Engineers Try New Way to Wireless Web", Wall Street Journal, June 19, 2000.
"Dual Band Articles", Nokia Main Site, http://www.nokia.com
"IP Security Solutions", Nokia Corporation, 2000. http://www.iprg.nokia.com
"Nokia Corp., Omnitel – Pronto Italia Mannesmann AG, New Media Investor, No. 76, Sept 9, 2000.
"Nokia Scores DSL Broadband Access Contract", Newsbytes News Network, October 25, 2000.
"Nokia Acquires Brazilian Venture; Nokia Buys Remaining 49% of NG Industrial", RCR Wireless News, Oct 23, 2000.
Price, C. "Satellite phone industry suffers a fresh setback", Financial Times, Aug 13, 1999.