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

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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 (s AAPL) and Google (s GOOG). 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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32 Comments

Al

A few things Nokia has going for them;Rock solid reputation for durable handsets,loyalty of real multi-tasking users,a bit more imaginative than US consumers,the MAPS application.
If ONLY they can bring back the flagship allrounder communicator like business device(with a gr8 camera-but churn it out non-stop like the fantastic E71 with a modern interface to consumers,they can stay ahead of the baying crowd.

Joseph

I dont really understand that Nokia “business”. They arent innovative company, they made only cell phones in different design. Yes, they have S40, S60, N900. But, Symbian – what is this? Nokia N97 is “old school” phone, OVI store is …, sorry… Some companies from SE Asia are much more innovative than Nokia is and ever will be. I think, that Nokia can not surprise with anything. They are always few steps backward. They try to be “looks like inovative”, have good marketing – but, theres so many buts …. I think, that good gold times of Nokia are past… Future is in new technologies, mobile OS…

Chris

A thoughtful piece. I too am a fan of Nokia, having worked there and used the N95 and other N Series phones all over the world. I recently started using the iPhone and the sad truth is that Nokia has no smart phone or service offering that is remotely in the same league as Apple. Nothing they have done in the smart phone or service market for the past two years has worked. Comes With Music is a colossal failure and OVI is starting to get downloads but generates no revenue for the company. They have failed at services and there seems to be no reason to see that they will turn this around. OPK always says scale is where Nokia wins but as they sell more low end handsets with extremely low margins, Apple just churns out one kind of phone with very high margins linked with great services. In end, which company will make a greater profit? Apple, no doubt. The future for Nokia lies in emerging markets, but in the end it might just prepare the way for Apple to come in when smart phone prices drop further and emerging market customers trade up to the newer iterations of the iPhone. Not a great future for Nokia. But then Avis was always a good second banana to Hertz for many years.

Marni Salup

Great article. I too am a fan of Nokia mobile devices, particularly the N Series. I am surprised the are not on the forefront and a major player in the American market. They were first to market with QIK and video streaming, that I am aware of, and as a “router” for my laptop to connect when WiFi was nowhere to be found! I am not a huge fan of OVI because I am connected to so many other social platforms. I think their product is there but the marketing needs to be turned up.

Jonathan Greene

I certainly appreciate the emerging market global scale of mobile, but Nokia needs to actually deliver change instead of just talking about it. The ground they’ve lost in mindshare is substantial and developers are not exactly beating the doors down to make apps for Symbian or Maemo/Meego. Their own services ecosystem is not exactly fully baked or integrated and it’s frustrating to hear OPK talk like scale is the thing that matters here.

Pedro Côrte-Real

I’m a bit baffled by the article and this discussion. Nokia already has a iPhone/Android level smartphone with multitasking and apps and everything:

http://www.nokiausa.com/find-products/phones/nokia-n900#/main/landing

It’s not new either. It’s the same platform as the N800 and the N810, which has been around for a long time and is fully open (full access without jailbreaking) and mostly open source. The N900 is just the first in the line that is a phone and not just a wi-fi tablet.

Chris

I tried a n900, really nice phone but the interface is garbage. Bought a Nexus One instead.

This isn’t a checkbox feature war like in the 80’s with word processors. People are going to buy the phone with the most rich apps and that is easy to use.

richradka

the article and the posts here are in denial of reality: nokia does not have the ability to turn it around… just after this article posted, apple previewed os 4.0 with multi-taksing, background location based services, contextual interactive ads, and lots lots more. nokia will cede the high-end space within 24 months and give up on the expensive investments into segments they cannot win. However, if they focus on the bottom of the pyramid, they could own this huge audience globally in latam, asia, and africa where their brand is really strong. 80% of potential users are here; i say go for it as the best way to counter apple (i have to admit i’m an apple user – and i believe nokia has not the product, services, mentality, or culture to take on apple, so they should use their global footprint to own another segment…)

Shaun

Except for the OS level advertising, Nokia already has all the features that Apple announced in OS 4.0 and more. For instance, Apple relies on Google Maps which is a very poor alternative to Ovi Maps, especially outside the USA. Apple added 7 different kinds of ‘multi-tasking’ including levels for streaming audio and VoIP – Nokia has full multitasking and a very well respected full SIP VoIP stack built in already.

Nokia’s Ovi services are also the biggest bargain going – free push mail, maps, file sharing, contacts and calendar sync. Apple asks you for more money for only some of those services in MobileMe.

Ovi Services is Nokia’s ace. Their CEO is spot on. But, they need to sort out their development environment with rich APIs (for instance there’s no API for Ovi Maps to use from an application but there is for Google Maps!) and they need to ditch Symbian Signed. That’s what killed off many of the developers a few years ago and it’s barely recovered.

Apple’s strength is the App store and development environment even with Apple’s draconian management of the store. Nokia/Symbian needs to make it easy for it’s developers to release apps.

Bazil

“just after this article posted, apple previewed os 4.0 with multi-taksing, background location based services, contextual interactive ads, and lots lots more”

LOL, Nokia and Symbian have multitasking and folders since 2001, and background location-based services since 2006. Moreover, iPhone’s “multitasking” will not be real multitasking even with the latest firmware. There are just 7 APIs (controlled exclusively by Apple of course) that applications can call. Noone can build a new background service, everyone is obliged to just use those 7 built-in services. And really, are ads an evolution? LOL

Maybe all those fanboys (who never had a smartphone before iPhone) cannot realise it, but Apple is in fact 2-3 years behind the others, in every aspect of mobile technology except from the UI (where they really innovated back in 2006, but they haven’t evolved it since). But they are way ahead of anyone else in marketing and brainwashing techniques…

correlationist

Om – incredible insights as always!!

There will be nearly 7 billion (E) mobile subcscribers by 2014, and a vast majority will not be smartphones. Hence, the acquisition of Novarra can only serve Nokia’s short-term “hang on to market-share” strategy – and is is not a good one (IMO).

I am wondering if they have hardware related strengths that may help deliver a better (AR + Location) experience down the line – maybe that could be their ticket.

Thoughts?

Prince

Brian S Hall

This was very informative. Thanks!
While I discount, say, Microsoft from the future — they are PC and packaged software company trying to thrive in a smartphone/cloud world — I think Nokia can right itself.

Soon the world will shift from mobile phones to smartphones. Nokia has a truly global presence and distribution network to match. They understand infrastructure and bandwidth and the unique needs of developing countries.

I have no plans to give up my iPhone, however.

Om Malik

Brian

Your distinction between Microsoft and Nokia is pretty astute. I hope you are right and in many ways if they make you give up your iPhone, then they have totally come a full circle.

Cheers

Sanjay Maharaj

He certainly has a tough road ahead and an uphill climb. What Nokia needs is a home run, they need to go where Apple has with the iphone in terms of introducing a mobile product which is a game changer [iphone]. Nokia need’s their own version of an iphone which will be a game changer to the mobile/internet market. What could that be?
They would do well to introduce a low level smartphone which is priced right to penetrate and capture where their market dominance is such as in India. The iphone in India is too expensive for the ordinary working class but if Nokia can replicate a lower version of a smartphone in marketes like India, they will then remain a solid player and capture market share in a different target market segment

Rahul

Om, I’m a devout Nokia user (it was also my very first mobile phone), and I’m rooting for Nokia to come out in better shape this year.

They need more native Symbian apps for services such as Facebook and Twitter — devs don’t seem to want to write software for this platform, choosing to favour iPhone, Android and BlackBerry devices instead. Nokia clearly has the market share outside the US, and if they can get the right developers on their side, perhaps assist in marketing their apps like how Apple showcases the best of the best iPhone apps, then they may have a chance to “redeem” themselves. Great post!

Om Malik

Rahul

Clearly a lot of people in rest of the world believe in Nokia and its brand. But the company has much less wiggle room than it thinks because unless they get agressive, they are going to find themselves on the losing end of the equation forever.

That said — looking forward to whatever they need to throw at me. ;-)

christexaport

You make sense, but you underestimate the effect these upstarts will have upon themselves. There is no one that can reach Nokia’s marketshare numbers. EVER.

Thiago Bocato dos Santos

Om,

some points. I’m Brazilian and here Apple is expressive regarding smartphone presence, among wealtiest people faces RIM and Nokia head to head. But regarding Nokia and Symbian, they are a major force even on Europe, not a monopoly, but according to comScore that different from AdMob made it’s reports according to active lines, Symbian owns 60% of share on EU5 (Germany, UK, Italia, France, Spain) where smartphone penetration is even grater that USA.

http://www.allaboutsymbian.com/news/item/11342_comScore_data_shows_smartphone.php

Nice post giving the deserved space to Nokia, that unfortunately americans are skeptical to acknowledge. I really love GigaOm for the space and freedom given to editors and posts like these.

Best Regards!

Om Malik

Thanks. Well being an old time Nokia user, I am hoping for them to make a comeback. But that doesn’t mean I won’t be critical of them :-)

christexaport

I totally respect your opinion, Om, but I think you’re like alot of Americans. You consider UI advancements and apps as innovations, but they are small elements that can be rehashed in short time. Nokia has taken its time to insure it does it right, and has taken the extra time to add more advanced cross platform technology, make development easier, and making Symbian and MeeGo engines for Qt and portals to service data.

The new Symbian UI and MeeGo Handheld UX will show you that you assumed Nokia wasn’t innovating, but they’re just innovating in another space lately. They reverted focus to infrastructure for two years, but has returned to emphasize on hardware. Nokia can recreate UIs, but Apple and Android have alot of work to add support for more advanced frameworks and infrastructure inside the OS.

tom

nokia is a great hardware company and should symbian and meamo and instead make the absolute best android handsets. anything else is just too likely to end up being ‘too little too late.’ android is going to rule the cellular world along with apple, but motorola and HTC need a really strong competitor of nokia wold be perfect. at the very least they should release android handset in addition to symbian and meamo ones.

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