nokia technology strategy

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A Paper on the Diffusion of Nokia’s Competitive Advantage:
Strategic Management of Innovation and Technology
Executive Summary
The paper describes with reference to Nokia through a globalised perspective in the
21st Century. It will address the management with a lens to its innovation and
technology as well as the strategies employed in gaining its competitive advantage
through the management of innovation and technology. The framework employed will
combine emergent and radical research approaches and using the Twiss Egg model
of innovation by Twiss to illustrate Nokia’s degree of business innovation with
non-conventional management strategies, which will address their competitive edge
in this globalised epoch. The model will be outlined to allow a better comprehension
of structure and text which so adheres to Nokia’s approaches, i.e. Nokia’s radical and
emergent research and development applied to innovation and technology. This must
be taken into context together with management and organizational strategies to
realise Nokia’s competitive edge in the current everchanging global landscape.
Nokia’s core business is about delivering communications to all segments of the
markets with products geared towards various business and consumer needs. It has
been researched and proven that innovation and technology underpins and drives all
Nokia’s business strategies, ultimately enabling and sustaining the company’s growth.
Nokia’s use of innovative technology is a key success factor to the company’s overall
business goals, which the right mix of innovative technology provides revenue
through broad and focus differentiation and cost reduction strategies. In this paper,
we will see the various managerial and strategical approaches toward managing its
technological portfolios globally. This will be underpinned by the framework of Palmer
& Kaplan (2007) stressing on the notions of strategic alignment, consumer insights,
core technologies and competencies and organizational readiness. This is a period of
uncertainty and struggles for many companies to succeed across their industries
through research and development, and Nokia is of no exception to this trend.
Abstract: Twist Egg, Innovation, Technology, Strategic Alignment, Strategic Fit,
Mergers and Acquisitions, Competitive Advantages
Introduction to the company
Nokia Corporation is a Finnish multi-national corporation (MNC) in communications
that is headquartered in Keilaniemi, a city neighbouring Finland's capital Helsinki.
Nokia is engaged in the manufacturing of mobile devices and in converging Internet
and communications industries, with over 123,000 employees in 120 countries, sales
in more than 150 countries and global annual revenue of EUR 41 billion and
operating profit of €1.2 billion as of 2009 (Nokia, 2009a). It is the world's largest
manufacturer of mobile telephones: its global device market share was about 33% in
Q2 2010, down from 35% in Q2 2009 and unchanged from Q1 2010 (beginning in
2010 Nokia revised its definition of the industry mobile device market that it use to
estimate industry volumes) Nokia's converged device market share was about 41%
in Q2, unchanged from Q1 2010 (Nokia, 2008a).
More importantly where innovation and technolgy areas are concerned, Nokia has
sites for research and development, manufacture and sales in many countries
throughout the world. As of December 2009, Nokia had R&D presence in 16
countries and employed 37,020 people in research and development, representing
approximately 30% of the group's total workforce. (Nokia, 2009a). The Nokia
Research Center, one of Nokia’s core research unit, is Nokia's industrial research unit
consisting of about 500 researchers, engineers and scientists. It has sites in seven
countries: Finland, China, India, Kenya, Switzerland, the United Kingdom and the
United States. Besides its research centers, in 2001 Nokia founded the Nokia
Institute of Technology in Brazil and operates a total of 15 manufacturing facilities. It
can thus be induced that most of the innovative technologies that are created by
Nokia come under the juridsiction of the amount of effective applied research and
development put into those areas results in substantial value generation to the right
customers. As such, Nokia has not just found and embraced this innovation adoption
trend just because it is a trend, but rather, it feels that seeking breakthroughs may
sometimes be a costly mistake and that a slow but steady growth would be a better
choice. Such is the strategic vision, leadership and management of the company that
they see breakthroughs not to be justified as just leading or expanding any packets of
innovation, but ushering a deadly move of strategies and tactics that will protect the
innovation and technologies that might be abused later on.
Managing innovation and technology
Firstly, it would be critical to understand the concept of innovation and technology.
According to Barras (1984), Innovation is a change in the thought process for doing
something, or the useful application of new inventions or discoveries. It may refer to
an incremental emergent or radical and revolutionary changes in thinking, products,
processes, or organizations. Thus it is nothing like the abovementioned of
breakthroughs. In hindsight, an innovation is akin to an improvement towards
products, services or processes that are already in place. However what is certain is
this; the key to increasing profitability and growth is through innovation. Innovation
can take place in many forms and approaches. Research and development forms the
core of Nokia’s strategic aligment to its goals. Based on a report by Nokia-asia (2007),
it has seen Companies considered successful innovators are seeing close to 45% of
their profits coming from products launched within the past five years. Such
companies include Google, Dell and Air Asia. And some of these companies are not
even anywhere near to Nokia in terms of brand strength or sales generated. Thus,
imagine Nokia with its breakthrough ideas, technologies and new products which get
into the mainstream global markets.
Just as it is difficult to pinpoint innovation of its exact meaning, it would just be as
tedious defining technology. According to CincinnatiUSA (nd), industries have a great
dependence on science and technology innovation that leads to new or improved
products and services. They generally have a substantial economic impact, fueled
both by large research and development spending, and a higher than industry
average sales growth. New product development and capital investment often go
hand in hand, making high technology companies an attractive addition to local tax
bases. In addition to this technology, innovation plays a hand by demanding from the
corporation a trained and talented workforce. Thus, Nokia can grow up around the
high tech enterprises and supply raw materials, components, specialized technical
expertise in design, marketing, and knowledge management, skilled subcontractors,
specialty packaging, distribution, and transportation.
Developments that build capabilities, new platforms, new technology and
fundamental research lay the seeds for a family of winning new products, or a
much-improved manufacturing process. These are you your ‘tomorrow projects’ and
potential game-changers that give your business sustainable competitive advantage.
Innovation calls for good leadership throughout the organisation. A strategic intent is
your company’s vision of what it wants to achieve in the long term. Leaders of
successful, high-growth companies understand that innovation is what drives growth,
and innovation is achieved by awesome people with a shared relentless growth
attitude and shared passion for problem solving and for turning ideas into realities.
Companies that continuously innovate will create and re-invent new markets,
products, services, and business models – which leads to more growth. Innovation is
founded on your enterprise's ability to recognize market opportunities, your internal
capabilities to respond innovatively, and your knowledge base.
The framework-specific of innovation and technology
Based on the framework model of Twiss (1992), his egg model of innovation in
figure.A can be ascertained as an appropriate guide toward understanding how
innovation and technology can be harnessed and managed within a large MNC such
as Nokia. This model is based on having the external and internal environments
co-exist vis-a-vis in order for innovation to succeed. According to Howells (2005),
“A definite pre-analysis and pre-evalution stage, definitive
feedback loops, both internally within the firm and externally with the
environment; the industry and life stage of the organization within the
industry; a recoginition or the environmental variables - not only the
marketing and technological, but the socio-cultural and political
environmental variables and the internal environment (culture) of the
firm; and the important dimensions of time and cost/resource
commitment.”
Fig.A
Source: Twiss Egg model of innovation (1992).
When this model has to be applied to any of Nokia’s innovative and technological
products, services or processes, it implies that creativity or idea is the spark that
renders this notion possible. For without the brillance of an idea, there can be no gem
born. Project champions are usually though as born leaders, or players that
assuming certain roles and responsiblities within their own functions. They can be
individuals who have the means and authority to use resources within or outside an
organization for completion of a given project, such as handling a specific branding
exercise. They must also be responsible for the project from the start to the end, from
the initiation to the execution. They are more than just managers, and in reality, they
do oversee and direct a senior functional manager since project champions are
authorised to lead the project. Their management of a project which frequently
touches and uses technology and innovation, assures that a strategic imperative is
required. Such imperative needs would include high-level dicussion and consensus
from the top management and board of directors. It has been researched by Khan
(2009) that in some of Nokia oversea branches, these discussions and consensus
are usually related to the following:

Helps in eliminating any hindrances and obstacles which hamper a project’s
success by conducting a risk assessment of a project.

Delivering a timely proposal to its board of directors or nearest regional top
representative for approval.

Sets evaluative benchmarks associated with a project and periodically reviews
a project’s success in meeting strategic considerations.

Modifies the scope of a project to suit its value chain activities that include
research and development, design capabilities, production and marketing and
sales.

Grants or dismisses additional resources based on the modification of the
scope.

Monitors the changes in the project and acts as a guide to drive the execution
of a project successfully.

Ensures best practices are deployed by the team while executing a project.
Take for instance by applying one of Nokia’s recently produced N-series smart phone
product, it shows how technology management builds value. In the report from
Nokia-asia (2007), “a major focus of Nokia’s technology management strategy is to
give her customers choice and simplicity – keys to delivering the best user
experiences.” It is not what is fanciful that works for Nokia, but indeed, it is what
consumers perceive that is key to a fruitful and fast fast adoption of new technologies.
This is known as the market knowledge required for technology to diffuse effectively.
Managing this perception sometimes is outside the scope of Nokia’s innovative’s
realm since this is the job of a marketer. But Nokia’s guiding marketing principle is
whether people will use the N-series technology in their everyday lives to connect
and share with others. Naturally, this will increase the adoption of Nokia’s products,
and the project champion is one that should understand ground conditions, allow
customers to co-participate in the production of such emergent innovations. It can be
referred from the model and evidences whereof Nokia makes decisions on prioritizing
its individual project through phases so as to eliminate any wastes or redundancies
while executing a project. Such instances of process innovation also means using the
best practices which focus on obtaining continuous improvement while executing a
project. The effects of monitoring such a continuous improvement cannot be
underestimated, if not to arrest any impending production problems than to create a
pool of future knowledge for Nokia. According to Smith (2002), the rate of change of
technology guarantees that knowledge and expertise gained several years ago will
no longer be completely valid. If a company is planning to modify its production
process or add new products, it must understand how the latest technologies can
contribute to those plans. These changes indicate that the project champions
themselves feel that one of their most important responsibilities is to monitor,
evaluate, and select technologies that can be applied to future products and services
(Thurlings and Debackere, 1996). One such example can be illustrated whereby
mobility within Nokia will very much drive the next wave of the Internet. This will bring
new interactivity, location-context specific information (g-trend type), such as to offer
integrated location information to personal needs on a smart intelligent device.
Finally, the project champion reports and provides feeback through formal or informal
communication loops to the top management about the status of the project. Such
communication must be acted upon rather than allow the information to passively
flow within the company without much forethoughts. Managing public information will
also become more sensitised, the project champion is also a valuable tool in
addressing the increasingly well-informed media about the products, services, and
the future plans of the company. They can speak as peers to other technologists and
can play a role in convincing the media and the public that the company’s decisions
are sound and will add value for the company’s stakeholders (Smith, 2002). Much of
Nokia’s success in technology and innovation will depend on the forefront of
managing technologies that comes with managing social expectations.
Strategic fit of innovation and technology management
Nokia needs to continously added value to its activities to enhance and sharpen its
competitive advantages. They can do this by employed strategies which will manage
well their innovative technologies. The Twiss Egg model of innovation will again
provide the framework albeit to a lesser extent. More emphasis will be targeted at
strategies and tactics that add value to Nokia’s environment. A way to summarise
strategic managmeent of innovation as implied by Derrick Palmer & Soren Kaplan
(2007) is, “Strategic innovation is the creation of growth strategies, new product
categories, services or business models that change the game and generate
significant new value for consumers, customers and the corporation. It is a holistic,
multidisciplinary framework that enables organizations to take a strategic approach to
innovation.” Organizational participation including consumers co-creative approaches
are necessary to imbue strategic thoughts put into action. Obviously, it would be a
path less taken by the mainstream, and this challenges any conventional
organization to look beyond its established business boundaries and mental models
and to participate in an open-minded, creative exploration of the realm of possibilities.
Such radical strategies, however, are not without their costs since operational profits
and satisfying shareholders are the key requirements to acehiving short-term yields,
which is the goal for most companies in this globalised epoch. The key question then
is, “how can organizations grow within such a difficult and trying environment where
short-term benefits are the norm and premium?”. What are the strategies employed
that can keep Nokia in the running to manage its technology and innovation to
generate more value perpetually if possible?” Certainly, there are no easy answers.
But for an organization that already leads the mobile device market with a 33%
market share and a production volume of devices and services at 111.1 million units,
representing an increase of 8% year-on-year must mean that certain strategies are
proving correct (Nokia, 2010). What then are these strategies that gets Nokia moving
in the right direction?
To manage technology and innovation at increasing efficiency and effectiveness in
order to compete and maintain competitive edge, many organizations would have to
manage their strategies through a few perspectives suggested by Palmer & Kaplan
(2007) ranging from:

Strategic external and internal alignment

Consumer insights

Core technologies and competencies

Organizational readiness - Mergers and acquisitions
They suggest that any innovative process is designed and managed to create
strategic alignment, which is the enthusiastic external and internal support among
key stakeholders required to galvanize an organization around shared visions, goals
and actions. In some cases it may be important to build external alignment with – and
to gather insights and ideas from partner organizations by formally making them part
of the co-creation process. This would call for building a core or extended team that
includes representatives from the organization’s supplier, channel, manufacturing or
packaging partners or advertising or branding agency.
In a white paper reported by IBM (2006), which gave an instance where Nokia started
their supply chain management transformation in 1995 with the strategy of replacing
inventory with information and creating a pull-driven supply chain with end-to-end
integration linking suppliers, factories, telecom operators, channel partners, contract
manufacturers, banks, sales, iHubs, and logistics service provider to the consumer.
Such an approach was meant to create the most efficient supplier network to offer the
best solutions to meet customer expectations. Much of the decision and goal making
were not always derived from Nokia corporation itself. The main fundamentals for
Nokia’s success included creating a value-based partnership with suppliers and
channel partners.”
On the internal side of the corporation, as according to Palmer & Kaplan (2007), it is
important to select a cross-functional core team of visionary, energetic change
agents and future leaders. Next, it is critical to choose a mix of seniority levels
typically from executive to middle management to lower level employees that are
often closer to the consumer/customer. A successful core team should consist of
subject matter experts, decision makers, implementers and maverick free-thinkers
whose role is to challenge the team’s incoming beliefs and assumptions.
One instance was the creation of the Corporate Development Office (CDO), which is
one of Nokia’s four inter-dependent corporate units within Nokia established on
January 1, 2008. As Nokia (2008b) puts it, “CDO optimizes Nokia's strategic
capabilities and growth potential for long term success and also provides operational
support for integration across all Nokia units: Devices, services & software, markets
and CDO. CDO drives Nokia’s evolution into the Internet and services space and
helps expand beyond the core businesses. This means identifying new opportunities
and innovations in mobility, helping transform them from ideas on the drawing board
into exciting solutions in the hands of Nokia customers.” It continues to state that
more than 2,800 Nokia people make up the seven teams within CDO, but they all
share the same challenge, collectively driving projects that impact Nokia's current
and future business. All seems fine to some extent, but being a company that nokia is,
one wonders if such a large conglomerate can really align and integrate its vision and
goals within an innovative mindframe in instances where development of innovation
and technology may be stalled in certain cultures? Would the same issue arise if
these innovative solutions were forced into an exchange with a certain regime for
market access? Regardless, external and internal alignment is a core element that
drives Nokia’s vision, orchestrating it under the banner of one Nokia-wide strategy.
Although much focus has been given to strategic alignment as the core element
addressing Nokia’s vision, this alignment must include the element of money
spinners – customers – that provide a “bottom-up” perspective. A deep
understanding of both the articulated and unarticulated needs of existing and
potential consumers/customers is desired. For instance, early adopter customers are
driving the demand for multiple networks to converge telecom, media and IT
industries to produce combinations of fixed, mobile, cable, TV and content services
that are bundled together. Possibly even the design of such hardware may derive
from customers themselves through the delivery of a competition. Thus from the
example quoted, strategic management of innovation and technology is concerned
with the combinations of the what, who and how of customers as shown in the model
in figure.B (Markides, 1999). The overall strategical issues addressed involve what
the need of the customer is including the value proposition offered to them, and
exactly to who these customers are and how the value proposition is to be delivered?
Such issues would also be of a concern to the CDOs as mentioned earlier.
Source: Markides (1999): Sources and Fields of Strategic Innovation
In such a deepseating scenario, Nokia-Siemens have tapped into their core
technologies and competencies that include organizational skills, resources and
assets that could potentially be leveraged to deliver value-adding propositions to
satisfy customers and to constrain competitors. Such core competencies are then
facilitated by Nokia’s executives depending on a company’s organizational readiness
that may drive or inhibit its ability to act upon and implement new ideas and strategies.
One of the resulting strategies employed by Nokia-Siemens involve utilizing their core
competences to outsource relevant aspects of their communications technology to
selected partners or operators, upon which Nokia-Siemens can focus their resources
on the service provision instead. This drives value and reduces long-term production
costs, decrease the reliance of building more hardware factories and other frills within
those factories, and to improve on their service levels by concentrating on the
research and marketing functions.
If adopting such a strategic notion, it would seem that Nokia would satisfy them
through applied means rather than a talk-the-talk approach. Hence, organizational
readiness is required for an innovation to be successful. Organizational readiness
would simply mean change to the layman. Support is needed at every level of the
organization, from top leadership to front-line workers in assessing the need for
change in an innovative culture. Nokia’s staff members’ openness to change may be
assessed by answering questions that will have an impact on the staff and
stakeholders. Increasingly there are many tools for assessing readiness for change
including staff surveys, comment cards, and focus groups (Moeller, Stolla & Doujak,
2008). These tools can be used to gather information about staff attitudes about the
status quo, about change in general, and about a particular innovation.
The common type of strategic innovative change begins with companies that go
through mergers and acquisitions (M&As). According to an article posted by Wharton
(2006), the total value of M&As reached approximately $900 billion, up 44% from the
same period last year. Companies have always used this strategy to grow and
consolidate, and to eliminate competitors. Innovation of technology did not always
feature as a raison d’etre for companies to merge. With M&As, achieving the potential
for innovation involves a thorough understanding of how the integration process
affects innovation as well as the role played by the similarities with respect to
technologies and markets. The article goes on to imply that when two companies
focus on the same technological areas, it should lead to a rationalization of the
research and development process after the merger process. Companies can also
use M&As to win market share, hurt competitors and to create economies of scale in
production and distribution. Such changes would lead to profound innovative
processes shared by both companies. In one of the boldest Nokia’s M&A move, it
reached an agreement to acquire Symbian in 2008, its supplier of smart phone
operating system software. Both companies are in related industries which would
serve the intentions to create economies of scale in production and distribution. In
fact, Nokia also announced its intention to distribute Symbian’s software and its
upgrades for free. Symbian currently supplies 56 percent of the operating system
software for smart phones and Nokia hopes to establish an industry standard based
on the Symbian software, using it as a platform for providing online services to smart
phone users. According to Elsevier Inc (2010), such services could include online
music and photo sharing on a smart device. This would put Microsoft, Google and
other software competitors in danger of being ousted. In addition, Nokia’s M&As
should be concerned with the extent of their applications towards other non-related
areas such as the automotive industry as well. Nokia’s products can and should be
replicated or extended to all digital-related industries which would embrace the
usefulness of smart technology and innovation.
On hindsight, more than 80% of the M&As do not deliver the promised results in
terms of growth, synergies and creation of client and shareholder value as
researched by Moeller and Heitger (2005). They state that organic growth on the
other hand, is easier to achieve when markets grow. It is of course easier to grow the
existing business when there is a big enough and increasing demand for the products
and services in a specific industry. If so, why is there a need for mergers? Or would it
simply be more innovative being acquired than to acquire? It looked to be as Nokia
later sold its Symbian professional services unit to Accenture. Kharif (2009) reports
that the division provides engineering consulting and product development services
to mobile phone manufacturers, chip makers and wireless service providers that
develop products based on Symbian software for smartphones, and which is the
most widely used platform today, but has been losing ground to rivals such as
Android.
It is thus perceived that mergers are only as effective if they stay permanent. If they
do uncouple for the key reason of being a “surplus beyond requirement”, then the
mergers would have been deemed a fly-by-night operation. That is to say, Symbian
would afterall be made redundant in the face of new gadgets and tablets and unable
to compete against other new competitors such as Android or Chrome (belonging to
Google) that are cheaper, faster and better. The key question is, why are there still so
many M&As taking place especially so in the information technology and automotive
industries if they are failing? Perhaps it is the perception of mergers that are so often
the package of rescue and ridicule. Maybe, M&As are simply just trends that hang on
during bad economic periods. Certainly, the truth cannot be too far away and the
answer could just lie in the name of competitive advantage. Companies that
continuously innovate will no sooner recognize marketing opportunities and
strengthen their competitive advantages. And with Nokia’s internal capabilities to
manage and respond innovatively to new technological outcomes, their survival
assured and competitive status sustained.
Conclusion
In summary, this paper understands that managing technology and innovation refers
to managing incremental emergent or radical and revolutionary changes in thinking,
products, processes, or organizations. Research and development is inherent to
such innovation for many due reasons. Competitive advantage and value adding are
the core reasons for adopting innovation and technologies throughout Nokia. The
framework of Twiss Egg model provides a useful reference as to how management is
applied to cultivate and adopt an innovative product or process. Analyses and
explanations have been made and consenses were geared towards the handling of
obstacles, delivering of timely proposals and setting of evaluative benchmarks with
strategic considerations in mind. Modification and contingency planning were taken
into account. Strategic management of innovation and technology considerations
involve higher level decision making that include strategical alignment with external
and internal stakeholders and customers. Corporate development office was quoted
as a method to align and establish a common vision and goal. Consumer insights,
core technologies, competencies and organizational readiness involving M&As are
key strategic areas to be addressed for innovation to be successful and competitive
for Nokia.
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