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Petri Rouvinen, ETLA Aalto University Course 21C00600 Nokia House, Espoo, 9 April 2013
IN THE ICT UNIVERSE *
* My prelude to CEO Stephen Elop’s talk on Nokia’s corporate strategy. A part of BRIE-ETLA collaborative research (www.brie-etla.org).
It’s all about coded info… … and ways to
monetize it
A narrow US-centricview: Amazon, Apple,Google & Facebookfight the main battle
Nokia & Microsoftare falling back …
Source: The Economist (1 Dec. 2012). Technology Giants at War (Briefing): Another Game of Thrones. Vol. 405, No. 8813, Pp. 23-26.
… but any map is hopelessly 2D… real competition is at least 4D
How did we get here?Dynamics of competition in ICT?
Nokia’s path and its implications for Finland?
History: How Did We Get Here?
“In the northern skunk works called Finland, the 21st century is in beta...”
Steve Silberman, Wired Issue 7.09, September 1999http://www.wired.com/wired/archive/7.09/nokia_pr.html
The Foundations Were Laid Over 100 Years Ago• Telephony Decree of the Finnish Senate in 1886
– Numerous private operators– Competitive operator & equipment markets
• Industry’s / hobbyists’ interest in radio technology since 1920s– Salora, Finnish Cable Works, Radio Laboratory (Ministry of Defense)
• Word War II & subsequent war reparations– Advanced Soviet demand (DX200)
• Keen interest in digital technologies particularly in banking– Advances in computing & data transmission
• Two rounds of standardization: NMT & GSM (shift to digital)– Nordic authorities: analog cellular NMT standard in 1981 (roaming, caller pays):
The Nordics became the biggest & most advanced market worldwide (Mobira)– European authorities & industry: digital cellular GSM standard:
rolled out in the early 1990s (the first GSM network/call: Radiolinja)
• Worldwide deregulation & liberalization since the 1990s– Keen competition & crazy market expansion: Nokia outperforms
(bets on winning standards; focus on consumers & developing mkts; excels in logistics/manuf.)
19911992
19931994
19951996
19971998
19992000
20012002
20032004
20052006
20072008
20092010
20112012
42 64 82 65 60 56 56 64 47 2 18 37 24 7 35 7 32 11
19911992
19931994
19951996
19971998
19992000
20012002
20032004
20052006
20072008
20092010
20112012
6.2
405
1141
1775
Global Handset Sales Millions of phones p.a. Data: Gartner
Year-to-Year Growth, %
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
20
24
29
3234
38 38
32 33
4138 38
36
28
23
19
Nokia’s Global Handset Market Share, % Data: Gartner
Towards Industry/Technology Convergence
Source: Hernesniemi, Lammi, Ylä-Anttila & Rouvinen (ed.) 1996.Advantage Finland: The Future of Finnish Industries.
Taloustieto (ETLA B 113, Sitra 149).
Phases of Competition in the Mobile Handset Industry
1990s
Separate sectors
Official standards, symbiosis of operators & equip. providers
Industry leaders: Nokia, Ericsson, Motorola, Siemens
2000s
Weakening boundaries
Industry consortia, innovation at the edges of sectors
Industry leaders: Nokia, Motorola, Samsung
2010s
Convergence, Ecosystems
Apps, content, platforms, services Industry leaders: Apple, Google, Samsung, MS, Nokia
I’ve seen the God…
… or is it the Devil?
January 2007Photo: v.gd/D1ZYvo
2008 2009 2010 2011 20120%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Market Shares of Smartphone OSs
Data: Gartner
Android(Google)
iOS (Apple)
Symbian(Nokia)
RIM (Blackberry)
Other
Windows
Smartphones All mobile phones
Sources: Business Insider, Strategic Analytics, International Telecommunications Union.
Note: Most Phones in Use Remain ”Dumb”
1 billion
6 billions
Dumb
2007 2008 2009 2010 2011 2012
-10
0
10
20
30
40
50
60
70
80
Operating Profit Margins, %
Sources: Business Insider, Canaccord Genuity estimates, Company releases.
2009/1
2009/2
2009/3
2009/4
2010/1
2010/2
2010/3
2010/4
2011/1
2011/2
2011/3
2011/4
2012/1
2012/2
2012/3
2012/4
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
PC, Smartphone & Tablet OSs Together
Source: Business Insider, Gartner, IDC, Strategic Analytics, company filings
Android
Apple
RIMOther
Microsoft Windows
Finland& Nokia
“The importance of Nokia to Finland looks like a one-off [in global comparison]”
Economist. (25 August 2012). One-firm economies: The Nokia effect. Page 57.
0.5 0.3 0.5 0.7 0.8 1.1 1.2 1.8 2.5 3.1 4.0 3.3 3.6 3.8 3.0 2.9 3.1 3.2 2.6 1.2 1.2 0.5-0.1
Nokia’s Share of Finnish GDP, % Source: Ali-Yrkkö, ETLA
GDP = Value added = + Operating profit (shown in Finland)
+ Depreciation + Labor costs + Rent
Nokia contributed 1/4 of Finnish economic growth in 1998–2007 (4.0% p.a.)
4.0 0.5
2.5-1.4
21 9
14 0
1.0 0.7
43 43
70 12
Nokia’s share of Finnish …Source: Ali-Yrkkö, ETLA GDP
Contribution to GDP growth
Total exports
Corporate tax revenues
Total employment
Corporate R&D
Helsinki Stock Exchange’s market cap.
2000 2011
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
20120
10,000
20,000
30,000
40,000
50,000
60,000
70,000
ICT Sector Employment in Finland
Data: Statistics Finland.
Equipment manufacturing
Software, IT services
Telecommunications
Wholesale
Conclusions
Digi + Converge: Opening of a huge unconquered domain
Titans clash over dominance of ”Internet of Everything”
Early positions established – Uncertain future ahead
Photo: v.gd/1zLk63
Telecom operators &manufacturers withend-to-end control
Platform competitionRe-shuffling of value stacksHardware commoditization Dumb-pipe operators
Photo: v.gd/gPtce3
In early 2000s Nokia grew lazy …
… in the new landscape it was caught in a difficult situation & had to choose: Android, MS or ???
Windows 8 provides the power of unified industry-strength ecosystem
Microsoft (Back-end IT, PC domain, Office etc. ) & Nokia (“owns” mobiles; IP; manuf./logistics)
retain many assets & strengths …
… but are they able to capitalize on them?
