Nokia: A Tribute to a Giant

The recent acquisition of Nokia (devices and services unit and a license to its patents and mapping software) by Microsoft for $7.2 bn, though expected for some time, has come as a sad truth for the firm that once dominated the mobile space. It was the vision of CEO of Nokia, Kari Kairamo, that a large, diversified corporation, with strong roots in paper and pulp production until the 1980s, was turned into an important cog in the wheel of Information Society. You could still see the remnants of Nokia's pulp and paper business scattered at the Aalto University campus in Espoo, Finland-the global headquarters of Nokia.

THE SUCCESS SAGA

Ah, it's a great time to be Finnish-noted Newsweek in the summer of 1999. During the previous winter, Finland's flagship company, Nokia, captured the leadership in mobile communications, powered by sales that had grown 51% to $15.7 bn in 1998. In relative terms, Finland led the world in both internet connections and mobile phones per capita. Nokia was instrumental in Finland getting international acclaim for the first deployment of the second generation GSM network services in 1991 and later in 1999 for 3G services.

Part of Nokia's success during the 1990s were attributed to (i) a proactive Finnish government that was innovation focused (ii) active participation in 2G GSM technology standardization with all the other European countries and (iii) Finnish international ownership restrictions that protected Nokia during the early but critical stages of GSM development and (iv) the leadership traits of Jorma Ollila who took over as CEO in 1992 and led his vision that though smaller and newer to telecoms, Nokia could beat the established industry leaders. Daniel Steinbock, Professor at the Columbia Institute for Tele-Information (CITI), Columbia Business School, US in his appreciation for Nokia's strategy and success during the 1990s noted: "As important as Nokia's historical strategies may be to illustrate its dogged persistence and innovation and bold first mover strategy, they explain little of Nokia's success."

WHEN THE MARKET BECAME A CASH COW FOR NOKIA...

Furthermore, during this period Nokia realized early the importance of the corporate brand as well as attractive and user-friendly product design, which gave it a significant competitive advantage as mobile telephones became consumer products as their size and price diminished. Nokia's anthology: Developing the first communicator, a smartphone; initiating project Calypso-the first camera phone; one of the pioneers in creating an app market through Nokia Ovi; one of the first to see the emergence of open mobile platforms and hence created the Symbian Foundation in 2008 for promoting its proprietary Symbian Operating System (OS) amongst the value chain partners; was one of the first to realize the importance of mobile based navigation through the acquisition of Navteq in 2007; was one of the first to release dual SIM handsets in Europe in early 2000 to enable mobile payment; and was one of the first to bring down the price of handsets to an affordable level in emerging markets through its classic 1100 model described as the world's most popular phone ever; Nokia's embrace of the internet as the future of mobile communication way back in early 2000 when the revenue models and ecosystems were unproven at that time. Amongst its other firsts, are the creation of a development center at Vancouver, British Columbia-a multi-ethnic multi-cultural city to probe the region for its products and services; setting up of phone manufacturing plant in Sriperumpudur, near Chennai in 2006, that used to produce more than 200 mn handsets per year for its global market.

During the 2000s, it was emerging countries, especially India, became cash cow for the Finnish company. After garnering more than 70% handset marketshare in India during 2008-2010, Nokia faltered against the local branded phones and the dual-SIM handset market. However, even in 2012, India was the second largest market for the Finnish handset major after China, generating revenues to the tune of $2.227 bn.

Once pioneer in GSM with engineers rooted in the deep radio technologies, Nokia became vulnerable through this very intimacy with the technology that made it difficult for it to take some distance from it, and hence succumb to not only the other handset vendors (eg, Samsung, HTC, etc) but also to innovators coming from internet service platforms (eg, most prominently Google, but also Facebook and many others). Nokia, with its hardware units wanting differentiating embedded software and service capabilities revolving around its proprietary Symbian Operating System on one side; and the software and services unit wanting open universal availability services struggled to integrate the two. The major reorganizations of its operations in 2004 and later in 2008 did not help much. With Stephen Elop taking the reins of the company in 2010 and deciding to scrap its flagship Symbian OS, opting instead Microsoft's Windows platform, the writing was on the wall.

Is the pride of the nation lost due to the above process?