At times you can feel sorry for Nokia. The company is damned when it dares to plan for the future, and it’s damned if it doesn’t.
But that illustrates the depth of its dilemma. Today, Nokia is phenomenally successful in one business – handsets – which generates £27bn ($54bn) a year, with a margin of between 15 to 20 per cent.
However, Nokia relies on a small number of powerful customers as its route to market. This isn’t a problem for every business. If you sell fighter aircraft, you know who your handful of customers are, and can schmooze them directly. If you sell bangles from a market stall, you can choose which market you sell from. Nokia doesn’t have the luxury of either: its channel is its market.
And “getting from here to there” is the problem.
At great expense last week, Nokia began to imagine itself as a very different kind of company: a vertically integrated services business. Mobile users would flock to the company’s new portal, Ovi, for games, music, information and “social” interaction. You might call this a “post-operator” world, but it’s also a “post-Nokia” world, as it presumes that both data and devices are commoditised. It’s a Plan B.
However, the strategy takes today’s complex mobile data eco-system and promises to torch it. Today, there’s room for a Real Networks selling games or ringtones, for example, or an AQA providing an answers service. Nokia’s Ovi portal effectively declares war on all these smaller service providers. That can be considered bad manners (or a business necessity) – but it isn’t fatal to Nokia’s plans. It’s the biggest, would-be service companies who are the most threatened.
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