NOKIA, 10 YEARS
AFTER THE STRATEGIC MOVE
«A Consistent Record of Strong
AN INTERVIEW WITH JORMA
By Jorge Nascimento Rodrigues,
in Espoo, Finland
Book at Amazon.com - Nokia, The Inside Story
Jorma Ollila became CEO of the Nokia Group in January
1992, following is success at the Mobile Phones Division
and also in the financial side as vice-president. He
was de facto elected in December and presented a memo
with strategic ideas for Nokia's future development
to Board Members of the group. In the memo he pointed
the new core business areas - telecommunications and
mobile phones. And talked of divesting from historical
areas of the conglomerate (paper, tires, cables, consumer
electronics like TVs). His strategy was to focus and
"dismantle" the conglomerate logic followed
since the formation of the group in the twenties.
Ollila was 41 at the time and have only 6 years of
Nokia. He moved over to Nokia in 1985 coming from Citibank
that opened offices in Helsinki where Ollila was placed
as part of the team. The young Ollila received a scholarship
to study at Atlantic College in Wales (UK) at the age
of 17. Then he studied political sciences and economics
in Helsinki and take some master degrees, including
one from the London School of Economics. He began his
professional career at Citibank in the City of London.
After 10 years of leadership of Nokia group he appeared
in the cover of Business Week, Wired and Fortune, for
instance. Nokia is now the 5th most valuable brand in
the world. It's the only one outside of US in the 10
world's most valuable brands ranking. Sales are 25%
of Finland GNP and its market value is 100% Finland
GDP. Its market value is more than the double of Ericsson
from Sweden that tried to buy Nokia in 1991. Since 1998,
Nokia is the world leader in mobile phones, a market
for more than 420 million a year, 4 times the PC production
and 8 times the auto output.
Nokia oldest original company was established in 1865
in the forest business near a river called Nokia in
the city of Tampere, and later moved to the small city
of Nokia also in the river of the same name. Nokia name
comes from a dark, furry rodent, member of the weasel
family! The official merger of the three original companies
was only in 1967.
Why Nokia decided to focus on a new area in the
90's, out of its historical Finnish roots?
There are several factors behind the new strategy.
Nokia had a background in telecommunications since early
1960's - so we were not totally new in this business
area. Also, deregulation of operators opened competition
in the field of telecommunications equipment, previously
controlled by national telecom monopolies. Thirdly,
analogue communications technology gradually gave way
to digital tech, enabling operators to offer a host
of new services and creating steadily expanding market.
Finally, pan-European GSM networks first introduced
in 1991 grew rapidly both in geographical scope and
in functions offered.
Why the group decided to go for a global strategy,
out of Finland?
Finland is such a small marketplace that Nokia as well
as other Finnish companies had to seek growth beyond
their home borders. It was important that also, in the
1980's, the deregulatory political winds out of the
US and the United Kingdom introduced competition to
the telecom operator sector that previously had been
controlled by national monopolies. New operators quickly
adopted the latest tech, forcing established operators
to react by upgrading their networks and systems. Combined
with the introduction of GSM, this provided equipment
manufacturers with a growing market.
Our secret? The strong value base,
straightforward thinking, fast decision-making and open
company culture, which allow for both long-term vision
and high flexibility, even in turbulent conditions.
Despite born in the "wrong" place - as
said by professor Yves Doz of INSEAD in his study about
metanational companies -, Nokia outperformed the incumbent
manufacturers in US, Europe (Germany and Sweden for
instance) and Asia in the last decade. What was the
There is never just ONE reason behind the "secret",
but I want to highlight the following: the strong value
base, straightforward thinking, fast decision-making
and open company culture, which allow for both long-term
vision and high flexibility, even in turbulent conditions.
And what were the basic principles followed in Nokia
The constant and vigorous investment in research and
development - around 10% of group sales -, as well as
design and changing the product portfolio by simplifying
the technology and allowing economies of scale in production.
Also, Nokia has a consistent record of strong business
May be the American readers will be interested to
know that the Nokia Design Center was established in
1995 in Los Angeles and was lead by Frank Nuovo, a designer
from Monterrey... But, in the present situation, with
a storm menacing telecom industry (bear stock markets,
collapse of some big companies, huge indebtment of operators)
and the apparent advantage of Japanese standard DoCoMo,
how Nokia see the next future?
The competition has always been tough, it is tough
today and it will be tough tomorrow. But, we have always
been very careful to keep a tight lid on costs, and
while the current market environment has had inevitable
impact on our top line growth, we have continued to
translate our core strengths of strong brand, excellence
in execution and winning products into profitable results
and a strong cash flow position.
You expect a lot from the new growth phase in the
The mobile industry has been in a transition during
the past 18 months as voice growth has slowed down and
the new data driven products or services have not yet
reached mass-market maturity. However, this autumn of
2002 we start to see the mass-market emergence of the
new mobile paradigm, which will accelerate from 2003
onwards. These new devices and services are being rolled
out as we speak, and we have strong confidence in their
potential and attractiveness. We see ourselves as very
competitively positioned to lead the industry into the
next mobile communications growth phase.
NOKIA BY ITS HISTORIAN
«The Secret? Flexibility, Flexibility,
Say author Martti Haikio
Nokia-The Inside Story was just published in
London by Pearson Education by arrangement with Nokia
and the Finnish Edita Publishing. The book is authored
by Professor Martti Haikio, professional historian and
senior lecturer at Helsinki University, who studied
the company in the last five years, since the Board
of Directors decided in January 1997 to commission a
corporate history that would tell the full story from
the beginning till today.
The complete history was published in Finnish at the
end of 2001 by Edita as Nokia Oyj:n historia, comprising
three volumes: The Merger, covering the evolution from
the three original companies since the first one was
founded in 1865 to the development of a conglomerate,
until 1982; Sturn und Drang, covering the global conglomerate
strategy and the internal turbulence from 1983 to 1991;
Globalization, the story of Nokia's emergence as a global
focused telecom company from 1992 to 2001. Haikio was
given free access to Nokia personnel and documents for
his research and reveals some confidential memos that
give some light about the strategic moves and debates
inside the group.
Martti is 52 and have published more than tem history
books, lately about telecom revolution, innovation and
"This book was been written for two purposes.
First: Nokia is the market leader on mobile phones and
this is the first real history book based on company
archives, interviews and academic critical judgement.
Second: to understand the ongoing third industrial revolution
we must understand one of the key industries, telecom
sector, and the transformation of old Finnish paper
producing company of the XIX century to become the global
leader in that new field.
The true secret I found was the flexibility to adapt
to the radical changes in environment in the past 137
years - world and civil wars, regulation and deregulation,
new innovations, birth of EU and globalisation, etc.
Of course the main reason is that there has been NO
BANKRUPCY - any company must be profitable to survive
in the long run.
The most critical period was 1991. The consumer electronics
division (TV production) was making huge losses, the
profitable Soviet market collapsed, there began a deep
recession in Finland and a milder one in Western Markets,
the corporate governance structure of the company was
in deep crisis, the owners were contemplating to sell
Finland became the lead market in mobilewear because
for historical reasons we had two independent telecom
camps - one state and the other private - to start competition
in the mobile phones operating when deregulation reached
Brand of Nokia is world wide, very positive and modern.
It has strengthened the international image of Finland
as a modern high-tech industrial society".
Professor Haikio can be contacted by
email at email@example.com
SEVEN LESSONS FROM NOKIA
A Testimony by Professor Erkko Autio,
a Finnish specialist in "born global" companies
«In Nokia, humbleness is almost
a religion. By being humble you can stay nimble and
avoid becoming arrogant. This may turn out to be the
most difficult lesson of all to follow in the long-term,
as you start becoming more successful»
Erkko Autio is a Professor at Technology University
of Helsinki and a specialist in born global companies
and the new internationalisation strategy theory.
"Unlike often believed, the strategy change in
Nokia from a toilet paper, industrial rubber, and rubber
foot manufacturer actually started early on. The first
strategy meetings to discuss Nokia's long-term future
were held in early 1960's.
My predecessor, professor Martti M. Kaila remembers
receiving invitation from Nokia's then CEO to discuss
Nokia's future options. He and many others were taken
to a large room with a bright green carpet. There were
no chairs. Their instructions were: "you cannot
come out from this room before you have a proposition
for a long-term strategy for Nokia".
So these wise men out their heads together and decided
that Nokia's future would be in electronics. This decision
led the company to start its phone modem division in
the 1970's, thereby paving the way for Nokia's future
transformation that was carried through at ever more
hectic pace starting from 1980's.
This transformation did not happen without mistakes,
even major ones. Early on, Nokia thought that it should
compete in consumer electronics business. Hence their
acquisitions of TV manufacturing plants in Germany,
for example, in mid-1980's. These moves were disastrous
and almost destroyed the company. By the end of 1980's
Nokia was in deep crisis.
Industrial clusters and cluster policies were not widely
recognised and understood at that time. But the fact
was that Finland's had been one of the worlds's most
sophisticated and deregulated telephone operator markets
for well over a century! The per capita telephone density
in Finland has always been among the very highest in
the world. Already in the 1910's there were some 300
independent regional phone operators, so the conditions
for sophisticated demand and local competition were
Yet, Nokia more or less stumbled, almost accidentally,
on mobile phones. In this it was greatly helped by the
introduction of the world's then most sophisticated
common standard for mobile phones, shared by the Scandinavian
countries, the NMP (Nordic Mobile Phone standard). This
was a crucial thing, since it created early critical
mass for Nokia to develop and market its mobile phones
to. The rest is history.
So, what can we learn?
1. You must have a clear will and lots of ambition.
Nokia possessed both of these, lots of each.
2. Particularly if you are established player
with a long history, you must be prepared to change,
to carry out even painful restructure and cuts when
necessary. Nokia's technological transformation stands
without parallel in European industrial history, but
it was not an easy one. You must have lots of determination
and will to implement your long-term strategy
3. You must have a long-term view indeed. Unlike
often thought, Nokia's strategy considerations were
initiated already in early 60's.
4. You must be prepared to pay for your mistakes
and learn the hard lessons. Nokia's attempt to become
a dominant TV manufacturer almost destroyed the company.
To that date, Nokia committed some of the largest mistakes
in the Finnish industrial history.
5. You must have a charismatic leader that can
see the changes through. Nokia possessed one, Kari Kairamo.
But the transformation was not easy: exhausted by the
vast undertaking and depressed by his mistakes in the
TV industry, Kairamo committed suicide in late 80's.
6. You must have your share of good luck and
be in the right place at a right time. Nokia was lucky
to enjoy the proximity of a sophisticated market for
telephony, and the NMP standard gave it early lead in
the mobile phone market. A later stroke of luck was
GSM, in which Nokia was also able to steal early crucial
7. You must be humble. In Nokia, humbleness is
almost a religion. By being humble you can stay nimble
and avoid becoming arrogant. This may turn out to be
the most difficult lesson of all to follow in the long-term,
as you start becoming more successful.
Professor Autio can be contacted by email
© Janelanaweb.com, Jorge Nascimento
Rodrigues, August 2002