-competing in the third vawe: business insights

1. -competing in the third vawe: business insights Outi Sutinen, Senior lecturer University of Applied Sciences, Department of Business and Information management

2. Visiting lecturer • Name: Outi Sutinen • Education: • MBA, Vaasa University, Finland International Business • Professional Career: • Senior lecturer at Oulu University of Applied Sciences, department of International Business • Marketing director, Baltic States, L’Orèal • Marketing director and Exports Area Manager, sales person in various food stuff organizations in Finland and France • Head of Oulu Export association

3. Presentation structure • Introduction • Case Nokia: company presentation • Market dynamics and Research & development • The Nokia approach • Future challenges

4. Introduction • Where do I come from?

5. Oulu – a Nokia town

6. How Nokia and Oulu are connected? • Why Nokia came just from Finland? • teleoperator market was not concentrated to only 1 national company like in many other European countries > more competition> more innovation • Oulu University department of engineering played a central role in the developement of Nokia technology

7. The founding of Oulu University in 1958 is regarded as the preparation for the Oulu high tech industrial cluster’s formation, and the establishment of university’s Department of Electronical Engineers in 1965 as the starting point (1975 orientated in electronics, mobile telecommunications and IT – personal interests of former professors Juhani Oksman and Matti Otala)

8. 1973 Nokia radio producing company started in Oulu • 1974 VTT – National Technical Research Centre of Finland comes to Oulu • Foundation of an electric laboratory • innovation environment further improved Today Oulu is important production and R&D center for Nokia and Nokia as a anchor company has attracted a variety of other companies which together make an important IT cluster in a global level (Oulu Technology Village)

9. Oulu-the Finnish ”Phenomena” • A finnish center of high tech • NOKIA • TECHNOPOLIS SCIENCE PARK • MULTIPOLIS-METROPOLIS NETWORK PROJECT • STRONG NETWORKING BETWEEN COMPANIES, UNIVERSITY, POLYTECHNIC & VTT

11. What do you know Nokia? • Origins of Nokia? • Procduct range • Where the products of Nokia are made?

12. Nokia in Brief • How old is Nokia?Nokia's roots go back to 1865, when the Nokia wood-pulp mill was founded. In 1967, upon the merger of three separate companies. • Some important dates: • 1981 Nordic Nordic Telephone (NMT), the first international mobile phone network, is built • 1991 GSM- a new mobile standard opens up Nokia equipment is used to make the world’s first GSM call

13. Nokia in Brief • Mobile revolution 1992-1999 • 1992 Jorma Ollila becomes CEO of Nokia • (access to international finance markets) • 1994: World’s first satellite call made using a Nokia GSM handset • 1998 Nokia becomes the leader in mobile phones

14. Nokia in brief • Nokia 2000-today • 2002: First 3G phone, 6650 • 2003: Nokia launches N-Gage – mobile multiplayer game • 2005: The billionth Nokia phone-a Nokia 1100-is sold in Nigeria • Today: market leader (40% market share 4/4 quarter 2007 –Nokia’s market share exceeded the combined shares of its next three biggest competitors: Samsung, Motorola and Sony Ericsson. • (http://www.nytimes.com/2008/01/25/technology/25nokia.html) • Is today worlds 5th most valued brand

15. Nokia Mobile phones production FINLAND GB GERMANY HUNGARY CHINA ROMANIA SOUTH-COREA INDIA MEXIQUE BREZIL

16. Nokia in Brief • World largest manufacturer of mobile devices • Head office in Finland • Appr. 60 000 employees in 128 nationalities • R & D centers in 11 countries (31% of staff work in R&D) • Production facilities in 9 countries

17. Nokia Today

18. Market dynamics • Which are the market trends in mobile markets? • What are the critical succes factors in winning the business?

19. Market trends • 1. consumer taste divergence/fashion business • From high tech to fashion business – customer is the key • Consumers look for experience - not just technology • Fragmenting market segments> more and more models

20. Fashion and phones

21. Market trends • 2. Shortening life cycles • Customers tastes wary quicky > shorter product life cycles

22. Shortening life cycles of mobile phones

23. Product Life Cycles: mobilephones Typical life cycle 1-2 years Development 1-2 years

24. Product & Process R&D in the Innovation Life cycle (based on M.L. Patterson, 93) • Cash flow Product is Released to production (Mostly Product R&D) Positive Cash flow Net Profit period Opportunity occurs Negative Cash flow Break Even time Project Becomes extinct Time Product Definition and Plans freeze Project Activity begins (mostly process R&D) Opportunity Is perceived First customers are satisfied

25. 3. Globalisation • Geographical and consumer diversity –differences in consumer behaviour and taste • Role of Asia growing, namely China and India, • BRIC countries (Brasil, Russia, China and India getting stronger) • Globalisation affects business • ”China Phenomena” > companies go to cheap labour countries • ”India Phenomena” > companies are no more just addressing costs but try to get best partners globally and see opportunities in networking • ! 20% of worlds software outsoursed to India

26. Companies go where the market is • New division: China contributed more than 25% to global growth in 2007 (India 9%)* • For example: Exports and production • Nokia sold in 2007 77.8 million cellphones in Asia, the Middle East and Africa in the quarter, nearly double the 42.3 million sold in Europe and North America. In China, Nokia’s fastest-growing high-volume market, it sold 20.2 million phones, an increase of 38.4 percent over a year earlier.

27. 4. Technolgy war- new technologies and constant improvements • Examples: • internet convergence • Non - cellular wireless • Usability-customer friendliness aspect in technology growing • Compatibility of technologies • New added performaces – just the imagination as a limit (Nokia & Free music, free navigation…Nokia acquired a USA based Navteq, an American maker of digital maps, and has joint-venture with Siemens in wireless networks • competition today = setting standards first (like, Microsoft , Intel….)

28. Challenges that Nokia has to meet – and the Nokia Response • Understand consumer needs and variety • Response: decentralized R&D in 11 countries • Be first in the market and set standards • Response: Nokia has a strong history in being innovator-firsting the markets • For example: 13.11.2006 world’s first commercial WCDMA*900 data call on 900 MHz band- advantages: 2-4 times larger coverage area *Wideband Code Division Multiple Access

29. Product innovation N95 • Response: new launches, New technologies Customer friendly • N95 • Now attacking Us markets

30. Nokia – fostering Innovation- how? • The vision of Nokia of ”Inclusive environment” • emphasis on cultural/individual differences • diversity was seen as a key to success > increased creativity, mirrored market place, improved attraction and retention of human resources • 1997 : Nokia Code of conduct was introduced to support inclusive environment • commitment to equal opportunity & openess • The Nokia Way • efforts to promote teamwork & individual responsability

31. Secrets of Nokia’s success BOLD STRATEGIC INTENT - seizing the opportunities INNOVATION THROUGHVALUE CHAIN FLAT ORGANIZATION ENTREPRENEURIAL SPIRIT collective leadership global R & D networks competition & cooperation CUSTOMER SATISFACTION

32. Nokia New Values 2007 – Worked Down to Top worldwide in Nokia Way Cafés • Achieving together • Trust, cooperation, sharing, openness, networking • Engaging you • Listening, client, employee, partner, consumer, development • Passion for Innovation • Dream, passion, courage, future • Very Human • Close to humanity, respect, customer friendliness

33. Nokia secret: flat team organisations- working with cross-functional teams • Cross-functional Team Defined • Cross-functional team is a group of employees from various functional areas of the organization – research, engineering, marketing, finance. human resources, and operations, for example – who are all focused on a specific objective and are responsible to work as a team to improve coordination and innovation across divisions and resolve mutual problems.

34. Example from Nokia India – Great place to work • Nokia HR department closely tracks every employee's progress. Every September, Nokia employees across mobile phones, networks and two R&D divisions set up teams comprising 6-8 employees. Each of these cross-functional teams has employees from marketing, sales and logistics, who would already have submitted a performance rating of themselves, the company, the division and so on, on various parameters. The teams are told to formulate an action plan and improve on the parameters with the lowest scores. The HR department coordinates this exercise and reviews progress every quarter.**

35. Nokia working with cross-functional teams • new product development projects are run by a cross-functional teams to ensure that all viewpoints are heard and given proper weight throughout the life of the project. • The team is composed of people that represent the various functional areas important to the success of the product • Nokia has strong networks with suppliers and research institutes, very often teams are multinational and operate mainly virtually

36. Nokia Spirit supporting cross-functional teams ”The Nokia culture is the same world over. Sanjay Bhasin, director (India strategy) who has spent two years in Finland and a year in London observes: "Nokia is a melting pot of people, based on the egalitarian society that exists in Finland." Nokia also offers a lot of opportunity for its employees to work globally. ** Comment: Finnish culture is about taking responsability, low control, having low power distance, high trust and ”growing in work” – large responsabilities- and equality-team leaders normally rotate in Nokia

37. New Focus deeper in Internet where • New business models • Roles of actors are mixed • Work societies and ways to work change • (Nokia follows very closely people at work> innovations) • Need for agility, knowhow and speed grow

38. Globalisation: China phenomena > you have to focus on costs – sometimes difficult decisions • Nokia response: production in 9 countries –latest factory was opened in Chennai, India, move from Bochum (Germany) to Romania Jucu

39. Nokia manufacturing strategy – cost leader • Plants in Brazil, China, Finland, India, Germany, Hungary, Mexico, the Republic of Korea and UK, new plant to be opened in Romania • Flexible global manufacturing network • Quick response logistics • No inventories (moved to suppliers) • Highly automatized production • Focus on ITC systems and production platform flexibility • Stong supplier relationships (eg. Perlos (phone cover manufacturer deliveres just on 4 hour notice) – high trust

40. Future Challenges • Which kind of future challenches can you imagine Nokia will face? • Which do you think are the worst competitors for Nokia along different criteria? • Design • Price • Service offering • Other, which • What do you think will be happening in this market in the close future- which kind of new launches do you predict? And in Spain?

41. Summary • Nokia is working in a very dynamic market • Attention to speed to the market >R&D • Attention to customer needs and design • Nokia excells both in low cost models as well as high end • Attention to new technologies > to set the standards> deeper to Internet and wireless innovations • New partners (Siemens, …) • Attention to logistics optimation > production costs and flexible manufacturing • Attention to Asia and BRIC countries • CLIENT is the key (Nokia has learned it’s lessons) • In Nokia the inspiration and spirit of organization makes the difference – achieving together! • Muchas gracias!

42. Sources and Recommended addresses • http://www.nytimes.com/2008/01/25/technology/25nokia.html) (market share) • http://www.businessweek.com/magazine/content/07_32/b4045401.htm (brand value) • www.virtualfinland.fi • www.tekes.fi • www.vtt.fi • www.oulu.fi • *www.arvopaperi.fi/extra/esitykset/rahapaiva07/konnos_raoul.pdf • **http://www.growtalent.com/gptw/no8.htm