Nokia is no longer a phone company. Of course, we’ve known this since the firm reportedly banned the word ‘phone’ from its Multimedia division, where its flagship ‘media computers’ are made. Now it is going a step further, with an ambitious program to become a ‘mobile internet company’, a strategy that got under way under previous CEO Jorma Olilla, but has been articulated more strongly since new chief Olli-Pekka Kallasvuo took the helm. Nokia executives point out that the company has always flourished on dramatic refocusing. Olilla himself initially made his considerable reputation from axing Nokia’s diverse product line, ranging from bedroom slippers to rubber products, and turning it into a firm that just did cellphones. Now Kallasvuo is presiding over the new recreation of the company, to seek a dominant role not just in handsets but the key services and experiences that will run on them in the future.
This requires, as Olilla well knew during his own transformation, a new internal structure and a new supply chain and ecosystem, not just appealing products. One of the elements in its shift towards internet and multimedia software is the creation of highly autonomous ’emerging business units’ within Nokia, which come out of the venture arm and, even when they have a commercial product, continue to operate entrepreneurially rather than being merged immediately into one of the four main business units (Mobile Phones, Multimedia, Enterprise and the Nokia Siemens infrastructure joint venture). The first high profile example of this approach is the unit behind one of the most important products in Nokia’s bid to be a mobile internet leader, Widsets. On the shoulders of this product and others coming along behind it, such as a mobile advertising platform, is the responsibility of keeping control of the mobile internet in the hands of the existing mobile community, and Nokia specifically, and keeping the internet giants – Google, Microsoft, Yahoo and so on – on the sidelines.
Interfaces based around widgets, rather than traditional browser tools or downloadable applets, are seen as one of the best hopes for creating a usable mobile internet experience at last. They provide one-click access to services and information feeds, and cross-platform applications can be created even by total novices using simple building block techniques, within the browser. Apple, Google, Yahoo, Qualcomm and many others are working on this approach, and the hype surrounding the iPhone has helped put the Ajax widget-oriented programming tools in the spotlight (though widgets can also be created using Java, as Nokia and Opera do, and other languages). The widget approach starts to address some key mobile internet challenges – difficulties in usability and discovery, and the need for increasing personalization. IDC reckons that the market for mobile widgets will reach $500m in value by 2010 in the US alone, and account for 15% of mobile marketing spend.
Nokia entered the market with WidSets last October and is building a hugely ambitious mobile internet program around this first foundation stone. Much rides on the product. It is the first time Nokia has offered a full mobile service, rather than just software and tools. Of course, it has improved its Java support and developer ecosystem, and has incorporated widgets, dynamic user interfaces, new content sharing techniques and so on into its most critical non-handset product, the would-be user interface standard, Series 60 – a platform that is already licensed to other phonemakers, and we would assume is likely to be moved to Linux as well as the more closed SymbianOS in future. But with WidSets, Nokia is taking on a new business model, in which it provides an online, internet service to the mass market, which is independent of the make of phone in use, and which can generate revenue in various ways – through paid-for content, advertising, and partnerships with other vendors.
WidSets also serves to take Nokia into the world of Web 2.0, encouraging the formation of a wide community of developers – many of them with no programming skills – who can create widgets and contribute them to the central pool in the collaborative manner typical of the new wave of the internet. Nokia was probably the first mobile specialist really to recognize and talk up the potential of Web 2,0 on the phone, and it is determined to pre-empt the PC-based leaders of the movement in creating a major base in the mobile world, thus clinging on to its position of strength in setting the pace for this industry.
With WidSets, users can download widgets – short cuts to favorite information and media services, for instance – to their phones, either directly over the air or via a web site. Within the browser, they can design their own user interface using collections of widgets, and synchronize this between the PC, phone and other devices. They can use simple tools and wizards – or full scale Java, if so skilled – to create their own mini-applications and can put these online for uptake by others. Some particularly popular widgets will be pre-loaded on some Nokia ‘multimedia computers’, thus encouraging usage of the mobile internet among those who do not wish to go to the trouble of downloading or designing their own. Even with this feature not yet available, Nokia still claims that 1m users have downloaded WidSets since its launch.
The WidSets concept is far closer to the Google world than traditional Nokia software activities, which have focused clearly on the Finnish giant’s own platforms – notably Series 60 – and stimulating a developer and user community around those. WidSets will become still more Google-like as Nokia shifts into areas like mobile advertising – where it says it is testing up to 10 different models – going head-to-head with more experienced players in this world such as its chief bugbear Microsoft. Where Nokia would argue it has an edge over the greater experience of the internet giants is in optimizing for the mobile platform – not just at the user interface end, but on the server that manages the widgets and ensures they are tailored to work optimally on each user’s device. The widgets server is important, since it incorporates strong security and personalization, and has more power to provide these features – and so improve the business model – than solutions like Apple’s where most of the hard work is done at the client end.
There is another political angle to this that is perhaps less obvious than the impending clash with Google, but which is clear in other Nokia moves towards the open internet model, such as its non-cellular Internet Tablet device. Like mobile services, these are steps that can bypass the cellular carrier. The WidSets widgets, and the tools for users to create and personalize them, can be made available within a cellco’s portal and Nokia has been working on some of these partnerships. But they can equally easily be accessed with no recourse to the cellco – except paying for the data bandwidth involved. The WidSets can also be accessed via their own web site, or those of content providers, information services and other partners. And they will soon come pre-installed on certain phones – Nokia models at first, of course, and perhaps third party devices in future. Nokia cannot live without the support of the cellcos, of course, as they will remain its largest customer base for many years to come. But it can put more of its eggs in other baskets, in order to reduce its dependence on one market that, despite its size, is under enormous pressure.
The mobile internet will be a phenomenon that, unlike the PC internet or cellular voice, will not be predominantly based on one type of platform. Instead, it will spread across cellphones, ultra-mobile PCs, music players, digital video recorders, health screening monitors and so on. Nokia knows this, and that it will profit more from influencing the software that unifies all this than trying to make too wide a range of low margin devices. This is a logical and brave plan, and one where Nokia has obvious strengths and will gain more through acquisition and its own internal ventures. However, it also carries huge risk. The challengers for the crown may be well behind on creating a really optimized mobile experience, but they have massive weight in internet business models, and will have, in many cases, easier access to some of the new channels and devices that will support those models in future. When Jorma Olilla axed bedroom slippers and rubber from the Nokia portfolio to focus on cellphones alone, the company was already clearly expert and in a position of power in his chosen sector. In becoming a mobile internet company, Nokia has expertise but has not yet attained the position of power, and it will have to fight hard for it. Key weapons will be its own cellphone designs and brand, and its cellco relationships, however fraught. These should not be defocused too hastily in the quest to reinvent this most audacious of consumer devices makers.