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| Doors and windows |
| Sunil Jain / New Delhi May 27, 2010, 00:55 IST |
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Think of a truly globalised company and the names that first come to mind are Google, Microsoft, Yahoo, Apple, Cisco, LG, Samsung and Nokia. And with good reason: all are big, successful brands with a substantial part of their sales coming from international markets. Yet, there is a big difference. In the case of Apple, 57 per cent of sales come from North America, it’s 59 per cent in the case of Microsoft, 57 per cent for Google and 68 per cent for Yahoo; home markets account for 22 and 46 per cent in the case of Korean Samsung and LG, respectively. In the case of Nokia, the home market (Finland) accounts for less than 1 per cent of net sales. Not surprising then that, unlike most other globalised companies, Nokia doesn’t have an international division. And this, one must add, in a market that has grown from just 17 million in 1990 to over 4 billion in 2008, and is projected to hit 5.9 billion by 2013.
Nokia’s history, from a timber company when it was founded in 1865 to an electronics company (think Salora TV) and finally to a grand bet in the 1990s on GSM phones/equipment (consulting firm McKinsey was hired to see if the focus was too narrow in 1995), is pretty well known. What Dan Steinbock, the research director of international business in the India, China and America (ICA) Institute does, however, is to explain just what makes Nokia ring.
As a truly international company in a rapidly changing technological space, it’s not surprising that Nokia spends upwards of 10 per cent of its top line on R&D (it’s 15 per cent in the network company, Nokia Siemens Networks) and that nearly a third of its employees are employed in this function. What is unique, though, is that the core of this research, the Nokia Research Centre (NRC), is really a misnomer in the sense there is no single NRC centre. The NRC, for historical reasons, has the largest laboratory in Helsinki, but it is across Silicon Valley, in China, in India, in Africa… it is a global network of research centres and laboratories (it has 10 locations worldwide) — around 85 per cent of R&D was done in Finland in 2004, but by 2009, around half was done outside Finland (in Germany primarily since this is where Siemens is located, but the spread to Asia has been quite rapid).
Nokia, of course, has been written off from time to time and condemned to confine itself to the middle market — the cheaper players (think HTC) would grab the lower end of the market while the Microsofts and the Apples would get the top end of the converged market given their expertise in computing solutions. Well, that hasn’t quite happened. In China, the share of local firms rose from less than 10 per cent in 2001 to a huge 55 per cent by 2003, but Nokia managed to come back and the share of Chinese firms dropped to less than 38 per cent just a year later. As for Apple, Steinbock points out, while it sold 12 million iPhones in 2008, this compared with a total mobile business of 1.2 billion units globally — of this, Nokia shipped 468 million devices, of which 61 million were “converged” devices, that is mobile computers and smartphones. Of course, if you look at the average price of an iPhone and the average price of a Nokia device, the comparison will look a lot different, but the point is that Nokia has generally managed to hang on.
Like all global and/or large organisations, Nokia too has a matrix structure, with people in the same team having both local and global reporting/ responsibilities. This, as Jack Welch has pointed out, is tricky: “Matrixes sound great in theory but are hell to put in practice… for all the good they can do in terms of productivity and knowledge-sharing in multi-product line companies, they can really fuzz up reporting relationships.” Nokia’s success is that it has evolved a matrix structure that has managed to work — if you can understand what this means, Steinbock says “the simple rule of thumb is that during periods of rapid global growth, rising trade, and investment, business reigns over geography; whereas, during periods of stagnating global growth and protectionism, geography reigns over business” ...there’s a diagram to show how this works.
The key to making it all work, and this is why an American-style top-down CEO doesn’t work, is the strong emphasis on teamwork — when she began work, Nokia’s corporate development officer was told by the CEO “just because I approve something doesn’t necessarily mean it’s approved… you need to have a broad buy-in in order to get anything done… you’re going to have to work across the organisation and across the network”.
Since “solutions” or “apps” (think of the Apple Store) are now the key, as opposed to dumb “boxes”, the new Nokia’s matrix now involves interdisciplinary work between devices and services teams. The Ovi, Finnish for door, is the result of this — Nokia’s answer to Windows, it literally means opening one door to enter another space. It is under this that Nokia has clubbed its key service areas — games, maps, media, messaging and music. Whether Nokia will continue to retain its market share or whether the HTCs and the Apples will kill it remains to be seen (though Nokia’s key message, its one-time chief says, is “you can come back”), but this book throws light on a lot of key managerial issues like matrixes, teams versus stars, hiring, and so on.
WINNING ACROSS GLOBAL MARKETS
How Nokia Creates Strategic Advantage
Dan Steinbock
Jossey-Bass
291 pages; $27.95
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