Nokia is a Finnish multinational company specializing in consumer electronics, information technology, and telecommunications. While most associate Nokia with the development of the earliest cell phones, the company was founded as a paper mill in 1865 by Fredrik Idestam, Leo Mechelin, and Eduard Polón.
Nokia was founded as a single paper mill operation by Idestam in Tampere, a city located in the southwest region of Finland.
The operation was successful and soon expanded to the nearby town of Nokia which would inspire the company name in 1871.
Idestam then retired in 1896, which paved the way for Mechelin to expand the company into electricity generation in 1902.
Two years later and also in the town of Nokia, Polón founded the Finnish Rubber Works factory that manufactured items such as car tires and rubber shoes.
A third company, Finnish Cable Works, was established in 1912 to profit from advances in electric cable, telephone, and telegraph communication.
Both were then incorporated into the Nokia Corporation in 1967, which sold a diverse range of products including paper and rubber products, military communication, computers, televisions, nuclear power plant infrastructure, and even toilet paper.
The shift to telecommunications
In 1975, new CEO Kari Kairamo was appointed. Kairamo oversaw the expansion of Nokia into other parts of Europe while ensuring the company earned a reputation for quality manufacturing at the same time.
Four years later, Nokia released the Mobira Oy telephone and launched the Nordic Mobile Telephone (NMT) service in a joint venture with television producer Salora.
The NMT was the first international cell network in the world. Shortly after, Nokia released the Mobira Senator car phone and the DXT 200, a fault-tolerant and scalable digital switching system.
Nokia also released the Mobira Cityman in 1986, the world’s first proper handheld mobile phone weighing in at a hefty 1.7 pounds
Nokia also began manufacturing personal computers at this time, but sales were lackluster.
However, it did succeed in digital television and satellite products, with the company producing items for Ericsson in Sweden, IBM in Britain, and Hitachi in France, among many other partnerships.
In the 1990s, Nokia executives decided to focus on communications and sell off the company’s remaining business units.
Nokia cell phones are launched
With a sole focus on telecommunications, Nokia enjoyed a period of sustained success over the next few years.
In 1992, it released the first handheld GSM phone called the Nokia 1011. In 1994, the Nokia 2100 was launched with the now infamous Nokia ringtone.
Head of Nokia Mobile Phones Pekka Ala-Pietilä predicted that mobile phone adoption could reach ”around 25% of the population in the most advanced economies by 2000.”
This statement was ridiculed by many in the industry, but in any case, Nokia gained a competitive advantage over the likes of Motorola and Ericsson.
The company provided end-to-end mobile phone solutions and understood the consumer market for these products better than anyone else.
The company then debuted on the New York Stock Exchange, which allowed it to develop and release the 5110, 6110, and 7110.
These phones were revolutionary at the time and were miles ahead of competitor products from Sony, Apple, and Motorola.
In fact, in 1998, Nokia overtook Motorola to become the largest phone manufacturer in the world. The company was a pioneer of innovation and had identified that cell phones were the future. The world, as it seemed, was at Nokia’s feet.
Demise
At the turn of the millennium, Nokia made a series of fateful missteps both internally and externally. Management was slow to make crucial decisions and moved away from the company’s innovative culture in favor of mass production.
The company also refused to accept that a new product could ever jeopardize its success. Nokia had a 49.4% market share shortly before the iPhone was released in 2007.
This had reduced to 34.2% in 2010 and sits at just 3% today.
Ultimately, the failure to withstand the release of Apple’s product was down to Nokia ignoring the importance of software in smartphone design.
Once its mobile phone division was sold off, Nokia returned to data networking and telecommunications equipment in a partnership with Siemens and the acquisition of telco equipment company Alcatel-Lucent.
Finnish company HMD Global then purchased Nokia’s mobile phone business from Microsoft, launching the Nokia 8.3 – the world’s first 5G smartphone.
Key takeaways:
Nokia is a Finnish multinational company specializing in consumer electronics, information technology, and telecommunications. The company was founded as a paper mill in 1865 by Fredrik Idestam, Leo Mechelin, and Eduard Polón.
In the 1990s, Nokia executives decided to focus on communications and sell off the company’s diverse business units. The company enjoyed a period of success in the 1990s as an innovative visionary in the consumer cell phone market.
Nokia became complacent in the early 2000s. With almost 50% market share, it underestimated the rise of smartphones such as the iPhone which had more of a software focus. The company went back to its roots after Microsoft purchased its failed cell phone division in 2013.
Key Highlights
Founding and Diversification: Nokia was founded as a paper mill by Fredrik Idestam in Tampere, Finland in 1865. It expanded into electricity generation, rubber manufacturing, and cable works, which were later incorporated into Nokia Corporation in 1967, offering a diverse range of products.
Shift to Telecommunications: In the 1970s and 1980s, Nokia shifted its focus to telecommunications. It released the Mobira Oy telephone and launched the Nordic Mobile Telephone (NMT) service, the world’s first international cell network. Nokia’s innovative mobile phones gained popularity, and it also entered the digital television and satellite product markets.
Focus on Communications: In the 1990s, Nokia decided to concentrate solely on communications and divested other business units. The company introduced successful mobile phone models like the Nokia 1011 and Nokia 2100 with the iconic Nokia ringtone, gaining a competitive edge over rivals.
Market Dominance and Innovation: Nokia became the largest phone manufacturer globally in 1998, overtaking Motorola. It pioneered mobile phone innovation, with products like the 5110, 6110, and 7110. Nokia’s market share increased dramatically, and it was at the forefront of cell phone design.
Decline and Failure to Adapt: At the turn of the millennium, Nokia’s management made strategic errors, moving away from innovation towards mass production. The company underestimated the importance of software in smartphones. The release of the iPhone in 2007 led to a significant decline in Nokia’s market share.
Acquisition and Transformation: Microsoft acquired Nokia’s mobile phone division in 2013, attempting to compete with the rise of smartphones. After the sale, Nokia refocused on data networking and telecommunications equipment, partnering with Siemens and acquiring Alcatel-Lucent.
Return to Mobile Phones: Nokia’s mobile phone business was purchased by HMD Global, a Finnish company, from Microsoft. The Nokia 8.3, the world’s first 5G smartphone, was launched as part of Nokia’s return to the mobile phone market.
Business modelinnovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.
The innovation loop is a methodology/framework derived from the Bell Labs, which produced innovation at scale throughout the 20th century. They learned how to leverage a hybrid innovation management model based on science, invention, engineering, and manufacturing at scale. By leveraging individual genius, creativity, and small/large groups.
According to how well defined is the problem and how well defined the domain, we have four main types of innovations: basic research (problem and domain or not well defined); breakthrough innovation (domain is not well defined, the problem is well defined); sustaining innovation (both problem and domain are well defined); and disruptive innovation (domain is well defined, the problem is not well defined).
That is a process that requires a continuous feedback loop to develop a valuable product and build a viable businessmodel. Continuous innovation is a mindset where products and services are designed and delivered to tune them around the customers’ problem and not the technical solution of its founders.
Disruptive innovation as a term was first described by Clayton M. Christensen, an American academic and business consultant whom The Economist called “the most influential management thinker of his time.” Disruptive innovation describes the process by which a product or service takes hold at the bottom of a market and eventually displaces established competitors, products, firms, or alliances.
In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.
Sociologist E.M Rogers developed the Diffusion of Innovation Theory in 1962 with the premise that with enough time, tech products are adopted by wider society as a whole. People adopting those technologies are divided according to their psychologic profiles in five groups: innovators, early adopters, early majority, late majority, and laggards.
In the TED talk entitled “creative problem-solving in the face of extreme limits” Navi Radjou defined frugal innovation as “the ability to create more economic and social value using fewer resources. Frugal innovation is not about making do; it’s about making things better.” Indian people call it Jugaad, a Hindi word that means finding inexpensive solutions based on existing scarce resources to solve problems smartly.
A consumer brand company like Procter & Gamble (P&G) defines “Constructive Disruption” as: a willingness to change, adapt, and create new trends and technologies that will shape our industry for the future. According to P&G, it moves around four pillars: lean innovation, brand building, supply chain, and digitalization & data analytics.
In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).
An innovation funnel is a tool or process ensuring only the best ideas are executed. In a metaphorical sense, the funnel screens innovative ideas for viability so that only the best products, processes, or business models are launched to the market. An innovation funnel provides a framework for the screening and testing of innovative ideas for viability.
Tim Brown, Executive Chair of IDEO, defined design thinking as “a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.” Therefore, desirability, feasibility, and viability are balanced to solve critical problems.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
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