Monday, February 16, 2015

Nokia did it with foresight and quickness

(image credit)

March 29th 2002 notes on leadership, business and economics

Nokia has the following abilities

Coke­-like ability to sell and build its brand. In 1994, Nokia listed on the NYSE. Even though the company needed capital at the time, it invested well in advertising and sponsorship. It knew that in the US, Wall Street dominated the media and therefore the attention of people. So, the better known Nokia’s stock was, the better it would boost its sales.

Dell-like mastery of logistics. Nokia has a constant scrutiny of its supply chain. So when its key supplier of critical radio-frequency chips, Philips, suffered a fire at its semiconductor plant in Albuquerque, NM, its system alerted it to a blip in chip deliveries---even before Philips announced the fire. Its CEO, Jorma Ollila, personally persuaded the company (Board?) to dedicate other plants to supply Nokia. They acted quickly and effectively, and met their production targets… unlike Ericsson. 

Apple-like flair for combining form and function. Nokia made its phone smooth and rounded, and therefore pleasant to hold. (It also made different colors that made it cool to own and use.) It made the phones altogether user-friendly.

Ollila saw in early 2000 that the company was getting too big, too fast. Its headcount was approaching 60,000, at a hiring rate of 1000 per month. It quit hiring, stopped adding new projects, and outsourced production of network equipment and cell phones. Its sales, of course, were still hit hard, but the company was able to avoid big layoffs.

Again, what foresight and quickness.

Nokia is working to capitalize on the new “3-G” (3rd generation) technology: This will allow users to cruise the internet as easily as they can from a PC. 

As Nokia develops next generation products and enters new markets, it will face rather stiff and quite new competitors. For example, it is battling Microsoft around software standards. Big MS is working to extend its dominance in PCs to mobile phones. Nokia wants more and more people to be able to purchase its next generation products. It cannot expect a relatively small segment of consumers to purchase a next generation product, if the larger segment cannot afford it. For example, what use is it to buy a phone that can send pictures, if hardly anyone can receive it!
Apparently another success “secret” of Ollila… 

“I didn’t want to be CEO of this company 100,000 people because you can’t keep in touch with the front line… And when management stops with being interested in the front line, or can’t see it, the company gets in trouble.”

Reference: Guyon, J. (March 4th 2002). Nokia rocks its rivals. Fortune, 145(5), 115-118.

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