Nokia has never been a company to shy away from radical new directions ‘ the decision to pull out of bedroom slippers, televisions and forestry in the early 1990s, to focus only on mobile systems, was seen as high risk at the time. In its own way, the more recent decision to reinvent itself as a mobile web services giant, integrating hardware, software and content, is just as brave, and is leading Nokia to experiment with some unfamiliar new business models. While the Finnish giant’s bet on web services is likely to reap the strongest dividends in emerging economies, in the short term, there are two highly evolved markets where it needs to use creative tactics to improve on its poor performance. These are Japan and the US, and the past week has seen Nokia reaching out to the MVNO model in the former, and to Hollywood in the latter.
Japan is often the country to watch in terms of new mobile trends, that will later spread to other territories. So reports that, in Japan, Nokia plans to set up its own MVNO – treading even more heavily on the operators’ toes than it already has with its web services strategy ‘ should be seen as a test that could be emulated in Europe and the US, and later in emerging economies. It could also be keenly watched by some of Japan’s consumer electronics giants, which might run successful MVNOs themselves, leveraging their strong brands and expertise in Japanese consumer habits. And as a welcome by-product, Nokia might boost its lamentable market share of just not much over 1% in the country.
Nokia’s aggressive move into mobile web services with its Ovi portal has caused tension with many of its cellco partners in developed markets, which want to keep control of the new mobile internet value chain by putting their own brand on services such as content download and social networking. Now Nokia is proposing actually launching its own network, putting its brand across the whole mobile spectrum from carrier to device to services.
Reportedly, Nokia plans to partner with NTT DoCoMo to launch an MVNO that will be heavily geared to its Ovi services and targeted at the affluent end of the market, also pushing its Vertu line of luxury smartphones, the latest of which is co-branded with Ferrari. According to Kyodo News, this would position Nokia in a sector where DoCoMo is not very strong under its own brand.
As in the US, Nokia has had problems working within the Japanese cellcos’ model, because they demand such high levels of input and control over device design. They also have highly controlled and differentiated mobile internet environments, notably DoCoMo’s i-Mode, which would not be supported by the Nokia MVNO. In other words, Nokia is unlikely to gain significant market share against the majors, but it will take an early step into Japan’s nascent open access trend, with a more open alternative to i-Mode, and it will gain invaluable market understanding of delivering a mobile internet service, in the world’s most advanced market. This could then be applied to emerging markets where Nokia could gain far greater presence.
And it does not have much to lose in Japan in terms of cellco relationships. DoCoMo and Softbank do carry some of its phones, but they are heavily focused on their homegrown partners such as Sharp and Fujitsu, which in effect create phones to order for the operators, and heavily geared to the specific expectations of Japanese consumers. Apple has found this culture also to be a barrier to uptake of the iPhone via its Softbank deal.
So while this is a model that would be high risk for Nokia in its traditional markets, where the cellcos will remain its primary channel for many years, despite the rise of open access. But it could be promising in emerging territories, the key focus of Nokia’s web services strategy, where carriers have less sensitivity about their own, largely undeveloped brands, and could welcome a global brand like Nokia to boost usage of their new networks.
The US is slightly more successful for Nokia than Japan, but not much ‘ the Finn typically has 6-8% share, and has been less successful than Samsung in taking advantage of the decline of former US market leader Motorola. In the past week, Nokia has lit a new fire under its efforts to conquer the US, and has talked up increasingly close collaborations with the carriers. But the company believes its chance to make a major impact on the US consumer market lies in its mobile web and multimedia efforts, and so its newest development facility in the region is based in Hollywood.
Nokia hopes to raise the profile of its advanced multimedia and web services activities in the US, positioning itself to build a direct-to-consumer channel and to take advantage of the nascent shift towards open access and new devices, rather than carrier controlled handsets. As it builds on its early moves into multimedia in 2009 ‘ video/film and gaming versions of its Comes With Music unlimited download offering are planned ‘ relationships with content owners are becoming as critical as those with carriers.
So the Finnish giant has supplemented its San Diego handset R&D lab, which is geared specifically to closer collaboration with operators, with a new facility in Hollywood. The Nokia Research Center (NRC) Hollywood will focus on many technologies surrounding the media industry, including movies, music, games, web and TV, said the phone giant, and will have a strong emphasis on enhancing consumer entertainment with techniques like mixed reality, new content creation tools and advanced user interfaces, among others.
“Hollywood has an enormous variety of academic institutions, innovative media businesses and unique creative talent. It offers exactly the right ingredients for research into topics that will be vital for Nokia’s business in the future. The link with the movie industry is naturally strong, however the entertainment concepts we will be working on at the NRC Hollywood laboratory are even more diverse,’ said Rebecca Allen, director of the new laboratory. She added: Our research work will focus on mixed reality experiences, with a strong community flavor. We will develop new user interfaces that fully explore the role of the human body and human motion for more natural forms of interaction.’
Nokia Research Center is a worldwide initiative with existing laboratories in the US, Finland, the UK, Switzerland and China. These work with academic institutions and content industries, hiring researchers and developers from beyond the handset sector. Among its university partners are MIT and Stanford in the US, the UK’s University of Cambridge, and Tsinghua University, China.