Nokia's CEO on the Challenges & Promise of the New Mobile Industry

Nokia Chairman, CEO and President Olli-Pekka Kallasvuo has the second-toughest job in the mobile industry — that of turning the decades-old, set-in-its-ways, $58-billion-a-year mobile handset maker into a services-driven, Internet-oriented monster that not only catches up to but surpasses new upstart rivals Apple and Google. The good news is that unlike Palm CEO Jon Rubenstein (who has the toughest mobile gig), he doesn’t have to worry about running out of money anytime soon.

“You can’t really call it a mobile industry. Things are quite blurry. The Internet and mobile are converging and the PC and cell phone are merging,” said Kallasvuo when I met him for a brief conversation earlier this week. If sales of the iPhone and Google’s Android-based smartphones are any indication, the mobile industry is indeed overhauling itself for the future — one that revolves around the Internet, and the content and services that come with persistent connectivity to it.

“Today consumers expect more from the device than just hardware. They want hardware along with services such as music and navigation built into the price of the device,” Kallasvuo said. So while in the past Nokia competed with other handset makers on hardware features, now it’s competing on new ways of doing business. “The industry competition now is about ecosystem and business models.”

The Rise of the Mobile Internet

The tragic part, of course, is that Nokia was the first one to see this change coming — long before Apple started working on the iPhone. I’ve followed the Espoo, Finland-based company for a long time, nearly a decade and a half. My first cell phone, in 1995, was from Nokia; it was the device that exposed me to the potential of wireless. It was the phone I used to call my parents in India, so for me, Nokia represented a way to connect with the people I love. What excited me even more back then was Nokia’s vision of phones as a “multimedia computers” that put the Internet in your pocket. The company was talking about disrupting not only the industry it already dominated, but itself.

And then Nokia blew it. Rather than disrupting anything, the company started going down the path of incremental evolution. It sacrificed its boldness at the altar of scale and commoditization. It became the Dell of the handset business. And then, in 2007, the iPhone was launched, and cell phones stopped being just about hardware and instead became all about services, content and developers. The stock prices of the two companies tell the whole story.

When I outlined this — not in as many words, of course — Kallasvuo listened to me patiently and then responded by pointing out that over the past two years, Nokia has been trying to move in this direction, mostly by acquiring companies and by launching new mapping and music-related services. “We have made investments in adding these capabilities,” he said. “Others,” he said, “have not made it clear in their value.” By others he means Nokia’s hardware-focused handset rivals.

“We have been transforming the company from a hardware company to a more value-added services company,” he said. “We have brought in new people with new processes and are doing things in a new way. This change has been extremely complex and time-consuming.”

To that end, Kallasvuo candidly admitted that while the “direction is very clear” for Nokia, the key will be executing on that vision. He’s confident Nokia can do it, pointing, by way of example, to its Ovi services, which it’s been localizing for countries around the world. “From 2008 to 2010 we have made a lot of progress and in 2010 you are going to see the results of that,” he said.

Symbian…Why Why Why?

When I asked him why Nokia still hadn’t introduced a great touchscreen phone, he would only say that the company was working on new products, refusing to get into details. I’ve been pretty tough on Nokia when it comes to this point, as most of its touchphones have been extremely disappointing (at least to me). However, Kallasvuo was willing to talk about Nokia’s reliance on Symbian , a mobile operating system that’s long in the tooth.

“Symbian has a lot of positive telecom-centric legacy which allows it to scale really well,” Kallasvuo said. The new version of the OS, he added, has improvements — said to include better graphics, multitouch, support of multiple home pages and a better music store, amongst other things — that will speak for themselves. I’m not holding my breath, however, mostly because I think the guys at Apple and Android are innovating at Internet speed. Plus the new Symbian isn’t likely to make it to the market until late June.

Kallasvuo also pointed out that Nokia sells an enormous number of feature phones (reasonably priced devices that aren’t as powerful as smartphones), and can bring the Internet to those devices. Hence the company’s recent purchase of Novarra. I think this could end up being Nokia’s big opportunity. With Apple and Google succeeding at the top end of the market, Nokia would do well to shore up its bread-and-butter business and even try and take market share from rivals such as the beleaguered Sony Ericsson.

Location Gives the Internet Relevance

One of the things that gets Kallasvuo excited is location — or more specifically, location-based services. “Location is not an app, instead it adds a whole new dimension (and value) to the Internet,” he said, explaining why his company has made huge investments in location, including its $8 billion purchase of mapping company Navteq. Nokia earlier this year released a new Ovi Maps application that allows it to compete in markets such as India, Brazil and Russia, places where Google and Apple haven’t made inroads just yet.

“Putting location elements into different type of services is a big opportunity which makes the Internet more exciting,” Kallasvuo said. (I’ve written about Nokia’s location-oriented strategy in the past.) Location, along with different types of sensors and augmented reality, will open the mobile world up to different possibilities, he said.

If there was one point Nokia’s big boss wanted to make before we ended our conversation, it was that the Nokia in 2010 is going to be a lot different from the Nokia of the past. The company has its work cut out for it. The good news, if you can call it that, is that its CEO knows what to do. Acceptance is the first step toward recovery. And for me that’s a good start. I look forward to falling in love with Nokia all over again.

Photo courtesy of NokiaConnectZA.

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