Nokia Oyj: Why would a market leader follow?

Originally published on October 29th 2008, i had taken this blog off because of some professional reasons. I am happy to be able to re publish it yet again.)

Nokia Corporation is the 5th most valuable brand in the world with a brand value of $ 36 billion (sales of $50 billion and more) and has been consistent in the ratings for over 6 years now in the Interbarnd survey. In fact it is one of the very few European Brands in a list that reads excessive US Brands. Yet everything is far from Hunky Dory with this Telecom giant which sits at 40% of the world market pie. Its stock price hasnot been buzzing for some time now and as with all market leaders it is the favourite passtime of analysts over the world to point out to whats-not-right sort of thing with Nokia. It is trading with a P/E ratio close to 1 in the stock markets which is very average compared to Google, Apple, RIM. It is much better than Motorola though.It had over an year back made certain allusions about a fundamental move in its thinking towards services and internet with its fledgeling brand, Ovi. This was a forward looking step towards a world of convergence! There was a organizational restructuring that happened soon after. The stock markets applauded the efforts as being forward looking. There also have been pro active steps with acquisition of Navteq and Symbian, which indicate that the company is securing its end to end business structure. This is again positive.Yet there are seeds of doubt... RIM is gaining ground in the eMail space as is Apple with its breakthrough I Phone. Google is muscling its way into the Mobile space with its Android. Then there are other more competitors like Samsung and HTC which have been more innovative. Bottomline: Nokia seems to have lost a bit on its innovation leadership position to its nimbler competitors.I am not debating whether Nokia has lost of any of that bit or not... it definitely has. It has not created a wow in the market for some time. There was N 95 and there was E 71 and thats about it for almost 2 full years. To me, E 71 and 5800 Tube are just improvements over a market standard. Hence these are not what i would call innovations. There has been some buzz with the Ovi, but it has not been significant.

The strength @ Nokia is its diversified portfolio. However, straddling over so many segments with such a large portfolio can also be a fatal flaw. While Nokia is a world leader in Mobiles, especially in Asian and African markets, it has hedged itself on Music, e-mail, gaming, Navigation, Internet space, other market services and more. This adds a huge layer of complexity to the structure which is good in terms of all round consumer facedness and bad in terms of diffusedness of the focus. Lately, there is a thought running thru the leadership of the corporation, where in they are selling off functions not immediately relevant to its future. Case in point is, Nokia letting go development of its business mobility solutions which it can primarily source from the market. Another aspect, where Nokia and Google have been playing similar strategies is the development of Open Source architecture (something that Microsoft and Apple do not have). Thus the point i am trying to make in here is that, Nokia has a large offering base within different portals, which makes it less dynamic. However, there is a move within the organization to integrate critical business structures (NAVTEQ and SYMBIAN) while offloading non critical structures (development of Business Mobility solutions).

Before i proceed further, there are two charts that i would like to revisit. One being the age old SWOT analysis (Exhibit 1) and the second one being the Competitive context (Exhibit 2:havent used Porter here).Each of the Portals is a investment game where you need to develop the market and create the demand. Most of these portals have gestation periods and the early birds with deep pockets would survive gestations. Given that Nokia chiefly works on its ability to massify platforms, it makes sense that it waits for the any other organization (innovator, ex. Apple for Touch phones) to first create the market and then moves in quickly to massify the platform ( Tube 5800). The ability to massify comes from its end to end business models, supply chain integration, direct presence in markets, economies of scale which lead to cost leadership. So while Apple could skim the market with its $700 I Phone, its Nokia 5800 Tube which takes the Touch technology deeper into the masses with attractive price points like $395.It may well be that markets such as America and Japan which are technically advanced have a different view of this approach, but Finns are known to place safe bets and raise the moolah.

That probably makes them lag at the early game, but with their might and bulk they are able to cpitaulate on opportunities mid game onwards. Only Recently i heard Olli Pekka, Nokia CEO admit that Nokia has been late to wake up to the "Touch Trend". However, from looks of it, Nokia will play catch up and massifywith its 5800 codenamed the Tube and then mid next year, you can expect that N 97, which could redefine tech leadership in the mobile phone space!

Nokia Oyj: Why would a market leader follow?

Originally published in early November, i am re releasing this post , which serves as an addendum to the first part on Nokia Oyj.

I shared my thoughts on the SWOT analysis of Nokia, which has been featured in my earlier blog with a friend of mine. His additions to the list of weaknesses are as follows:1. Understanding of business models is a threat -- Nokia thinks of monetizing first, Google builds scale first and then monetizes . Web 2.0 is all about mostly free services2. Being device lead is a threat in itself3. There is no culture of innovation - and there is no localization. Google creates nimble products for each market4. Current implementation of EMS is not a strength.I would agree wholly to Points 2,3 and 4. There are weaknesses in the system that do not enable Nokia to be a swift and nimble entity. Instead there are organizational layers. What ever and how ever one sees it, points 2,3,4 are somewhat beyond question in terms of weaknesses.As far as the business models (point 1) is concerned, i think it is debatable.

Corporate Website 1.0 is dead. Long Live Corporate Website 2.0: Consumer Co Creation

http://windchimesindia.wordpress.com/2008/11/22/corporatewebsite/#comment-322
Social media is an interesting and yet very lucid context that exalts the power of networking forums to promote ideas , communicate and debate. Happened to browse through Nimesh Shah's blog on Corporate Website 2.0 as a interactive social medium to promote the brand, company and products. Original link as given in the beginniing. This is my extension of the Corporate website 2.0 concept into something that i call consumer co creation.


Hi
As promised Nimesh, i would like to add onto Corporate Website 2.0 idea. I would call this “Co Creating with the Consumer”.
Technology is evolving fast and (if not for the Recessionary mood), PE and other moneys are available for ideas that deliver better solutions at a lower cost to consumers. This has a far reaching effect in terms of Technology ROI. For any organization to milk revenues out of a technology investment, it takes time. However with the redundancy rates of technology it becomes difficult to forecast when a disrutive technology would make an existing one a thing of the past. Thus Organizations need to build stickiness around their products/services. This would also help them beat the fragmentation economics in the market and get a premium over others.This is where a Corporate website 2.0 idea can be extended to something that is called the “consumer co creation”. Every product / service has a base element and a Value added part to it. Normally product/business managers work out the best fit product/solution which they think works best in the market. However the corporate website can be engineered that they provide the “base” and allow the consumer to choose his “value added” services. For the value adds their would be a premium charge. At the end of the day the consumer is satisfied because the product is order made according to his needs. The example in question is Dell which makes computers that have been oredered by the consumers. I am privy to many companies that make a product with a long luandry lists of “firsts” and “bests” and yet the consumer buying them only uses 10% of the “full monty”. The conusmer thus pays money for stuff he doesnot want and may or may not get the stuff he wants in the product hes paid a fortune for.Increasingly companies identify this but there is not enough that has been done to make this idea see the light of the day…

What is the biggest challenge Telcos currently face?

This was amswered as a part of a discussion in LinkedIn. http://www.linkedin.com/answers?viewQuestion=&questionID=373970&askerID=20831362&browseIdx=10&sik=1227942408141&goback=%2Easr_2_1227942408141&report%2Esuccess=vfLh7ZiQxNtkwQoO3efsNN1zAgQ8WXmCT24lKBBmlHq_pfcN7JydQUoVP_zdv4b8

The Biggest challenges faced by Telcos primarily are two in nature:

Faster technology cycles impacting corresponding business ROIs adversely
Creating stickiness thru personalization of products

New technologies enable users to do more at lesser price commoditizing the older technology. Earlier it was voice, text and some data that one was primarily dealing with. With the advent of 3G, 3.5G, Web 2.0 technologies voice and text have seen rapid commoditization. Not only are we talking of more advanced technology within the vertical, but we also have competing medium, most notably internet which is democratizing a lot of services.

In this kind of rapid technology cycle, Telcos face stand offs on the kind of technology that they would invest in and how much returns in future terms would they be expecting out of the those investments. Such calculations tend to go haywire when ever another disruptive technology takes over. Telcos may fail to make the returns they expected from a particular technology / product. In that kind of a scenario you would often find a large Telco suddenly becoming irrelevant because the business models are based on revenues and profits not technology cycles. Smaller and nimbler competitors bring in the new technology, create the market and gain dominance. Sometimes these new players get acquired by the market leader which provides them a suitable platform into the new technology.
Thus Technological obsolescence may impact RoIs adversely.

Content, Context and Services are the next big stories. Cumulatively we could call them personalization. Telcos that master these would be able to make business out of web 2.0, 3.0 and the others. However, that is easier said than done. It is difficult to ascertain consumer price elasticity for these services. It is difficult to understand the nature of revenue flows and the market potential and then there always is consumer inertia to move into these services. However with the eminent fragmentation of the market and commoditization of businesses, this is the essential piece of the jigsaw which will create the stickiness in consumption. Google, RIM Blackberry and Apple have made the first splash in this aspect and competition in here is set to amplify with Nokia and other following suit.

Can the internet and social media change a B2C company’s group structure?

http://www.linkedin.com/groupAnswers?viewQuestionAndAnswers=&gid=102576&discussionID=445139&commentID=592971&goback=%2Ehom%2Eanh_102576#commentID_592971 .. in response to a question posted in Linked In

I think it already is.
The supply chain will be radically altered by Internet which is already bringing products and experiences directly to the end consumer. This eliminates a lot of the agents in the chain between the source and the consumer. Not only does it bring direct access, it also has direct bearings over the costs of channel management and the staffing. Hence a lot of companies today are paying more heed to their online presence. Presently these would only be a supporting tool, but in days to come it will become a delivery channel. What ever little remains in terms of physical deliveries is being outsourced.
This is just scratching the surface as many technology companies are already thinking of co opting and inventing with the consumer. Case in point is Dell. From the configuration of the product/services (as Dell does) to Payments (directly thru the internet) to after sales service, intenet is altering the nature of transactions
As far social media is concerned, C2C referrals are in. A consumer tends to believe another consumer more than the source. Social networking communities are gathering more clout as more and more consumer affiliate to them. Hence the developers and the businesses are seriously looking at engaging these communities. It is a much more focussed advertising media than anything else, where you are speaking directly to your target audience. Hence as you see, internet is chopping out the physical channels and social networking is redefining the role of marketing.
The direct advantage of this goes to the small and nimbler companies who find this focussed and cost effective medium to be more effective than blowing millions of dollars on channel, people and marketing as such. Currently the trend is catching in. So it is a supporting tool. However the next 4/5 years could see these mediums to beecome very relevant and substituting mainstream channels. (This substitution is also a function of the nature of your business). B2B also evolves more or less in the same manner.

Is Facebook the Future of Search?

http://www.time.com/time/business/article/0,8599,1710493,00.html?iid=sphere-inline-bottom --> Original Article

This article caught my eye for its provocative headline! For almost 9 years now, Google's pristine white search page has exemplied "search" for me. During my MBA days, i remember assignments and project reports that were dug out and googled. Back then and even now, Google is my saviour in terms of information i need. There was encarta and there was Brittanica encyclopaedia, but Google over ruled them all. Alongside came Wiki and the search for information found it panacea. No wonder Google is a lingo out there is the west, a connotation for information search.

So then, when i saw this headline, i was taken aback. Facebook to me is social networking. It is like a real ife experience on screen on internet. You meet freinds, you send messages, you declare your state of mind, you play, you share birthdays, you meet more people, you share photos, you share information. Prima facie, the impact of the statement never hit me. However a deeper thought on the issue made me look at it otherwise. Free world, free trade, free information, sharing are wholistically a democratization of knowledge sharing. No one screens it, we make it, we share it, it is for us. Web 2.0 and 3.0 are all about free availability of the information from consumers to consumers. As a consumer, i would much more believe a C2C source than a B2C source. In their lies the insight and genius. When you co discover with other people like you, you feel more affirmative, more reassured. I had trust a friend telling me to watch a movie because it is nice than trust all the trailers and promos of the movie. Facebook is delivering on this insight! Thus it is bridging the gap between social networking and information search. So much elementary!

This is an interesting insight and in the times to come i see a lot more of this happening and businesses come all over supporting this structure. Giving the consumer his right to referral and information is possibly going to be the next big thing. Watch this!

PS: Wiki does some bit of this thru open source content development but then it is more informative and academic than business/transactional...

Customer Loyalty program for telecom service providers

LinkedIn discussion on the topic of Customer Loyalty programmes by Telecom Service Providers (TSPs).
Increased competition and introduction of number portability will make it imperative for mobile service providers to introduce good customer loyalty programs.
http://www.linkedin.com/groupAnswers?viewQuestionAndAnswers=&gid=23013&discussionID=434160&commentID=550356&trk=discq_mor&goback=%2Esrp_1_1226460130686_in%2Eanh_23013#commentID_550356

Hi Ritu

I think Telecom Service Providers (TSPs) need to take a leaf out of your books (Credit Cards) on the Customer Loyalty Programmes.

However a few stumbling blocks to be kept in mind (these act as restriants currently):
1. Number Portability and Churn are devils that may and probably will ruin the ROI sheets of a lot of these TSPs.
2. Opening up of the licences can see a lot of investment in India by other TSPs (e.g. Etilasat, Telenor)
3. Hence the market will see further fragmentation
4. Given this, there is a reluctance from operators in investing in higher quantums in 2009
5. While operators reduce the capital expenditures by sharing infrastructure, uncertain economic conditions cast a doubt on returns over existing infrastructures.
6. 80% revenues of the TSPs comes from less than 20% of consumers in very small pockets. (Metros and major 10 towns)
7. Hence there is excess demand in cities and rural networks have huge white spaces.
8. Spectrum Limitations by the government donot allow operators to value sell higher services to the premium customers (the 80% revenue ones)
9. Higher Spectrum (3G) has very high entry cost which presently doesnot guarantee a break even in a medium term horizon.
10. Then there are other disruptive technologies such as VoIP which loom as a threat in the horizon.
11. The internal competition threatens to commoditize the voice and sms based revenues and most operators will need to value sell to maintain profitability.
12. However most operators are holding up their investments presently in face of toughening market and general conditions.

In all, the only gainer is the exchequer who holds the spectrum, the new technology licences and service taxes. The markets will gain in competition and users will benefit out of that but most of this will be discount deals or customer loyalty programme led. There wont be any major value lifting propositions.

Bottomline for you: While TSPs will take Credit Card Route to retain consumers, that wont really guarantee innovations and newer technology and services to consumers. Do let me know if i confused you with the discourse. Thanks Regards Manas