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Nokia: Forget handsets, services are the way forward
The world's largest handset vendor has revealed it plans to transform itself into a services company, and has set the 
target of multiplying the users of its services nearly six-fold, to 300 million by 2012, up from its current 54 million.
This latest announcement from Nokia--which brings with it that slight smell of ‘do something, quick'--would appear to herald a significant switch after 22 years as a vendor of handsets. The new focus will see the company promoting its email and instant messaging, games, maps and music services ahead of handsets.
Many of these services will be rebranded with the Ovi label, with its Ovi Store consolidating a number of its existing app and media-sharing platforms into one consumer-facing app store. However, Ovi Store continues to attract criticism for its poor performance and antiquated style when compared with similar platforms from Apple and RIM.
Nokia's CEO, Olli-Pekka Kallasvuo, has confirmed the planned changes will mean a ‘profound' cultural readjustment within the company, but would not require any major restructuring--"a case of fine-tuning" was how Kallasvuo tried to position this huge shift in company strategy.
While the company has been losing market share within many of its core business sectors, has suffered from calamitous product launches (such as its comes-with-music phone) and unveiled devices that seem one-generation behind the competition (see its first netbook product), Nokia has the technical resources to rebuild itself. But many observers are increasingly doubting whether there is the available time for such a large company to make such a momentous transition.
For more on this story:
Mobile Today and ReThink Wireless
Related stories:
Rumour mill: Is Nokia about to launch a mobile money service?
Nokia boosts mobile advertising presence with new partners
Nokia looks to services for future revenues
Nokia acquiring cellity
Facebook in mobile social networking talks with Nokia
Comments
Posted by Anonymous | August 27, 2009 - 12:28pm
This will be quite a feat if they can pull it off. Nokia has transformed itself before, but this would be, far and away, the biggest change since they became the world's largest supplier or handsets.
Here are ten reasons that one should be skeptical of Nokia's ability to pull this off:
(1) Few companies, in any industry, have made as a big a change as the one suggested here. And, as indicated below, they are fighting battles on many fronts.
(2) Despite changes over the last few years, Nokia's organization and culture remain focused on building handsets.
(3) Nokia ceded leadership in device innovation years ago, relying instead on sourcing, manufacturing, and distribution of mid-level and below handsets to carry them forward.
(4) For the last 15 or 20 years every major initiative Nokia launched outside of handsets has been abandoned, many within two or three years.
(5) They have nearly eliminated their presence in Silicon Valley, arguably the global hub of mobile application and service innovation.
(6) They have been unable to demonstrate even modest success to-date with services.
(7) Despite repeated efforts and the investment of hundreds of millions of euros, they have not made major strides in the enterprise or in CDMA.
(8) They have just announced a move into small notebooks (inelegantly, "booklets"), a business that has smaller margins and more intense competition than handsets.
(9) OPK believes that this momentous change can be made with merely "fine-tuning."
(10) Their board, while much-improved over the last few years, does not include anyone from the world of services, with the exception of the head of Pearson and the former head of a security/anti-virus provider, or consumer electronics (outside of Nokia).
Jorma remains Nokia's Chairman, and he led the revival of Nokia once before. However, he also oversaw Nokia's rise to world handset leadership while at the same time overseeing numerous high-profile services failures, including Club Nokia and N-Gage.
His experience as a global banker makes him much better suited for the other chairmanship he holds, that of Chairman of the Board of Royal Dutch Shell.
Transforming Nokia, if it has a chance at succeeding, will be a full-time job.
More likely, Nokia shrinks to become a smaller, albet still major, supplier of handsets. They eventually sell or spin-off any service offerings that aren't tightly tied to Nokia--NAVTEQ is the best example of an entity that will be worth more as a stand-alone company--and scale back their ambitions.
This allows Nokia the opportunity to declare something of victory while forgoing the huge disruptions that are required for it to make the change OPK claims here.
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