We’ve all been so consumed about What It Means For The Future Of Mobile that Microsoft bought Nokia’s mobile unit, and so consumed to note the staggering scale of the collapse of Nokia’s mobile business, that we’ve barely noted that there is still an independent company called Nokia that will continue to operate. But what’s the New Nokia? What’s in it? What’s going to happen to it? What should it do next?
I’m going to argue that, if it plays its cards right, New Nokia actually has a bright future ahead of it. It should be noted that this isn’t the first time Nokia has had to reinvent itself: as best as I can tell, it’s the only company that’s over 100 years old that’s not in the same business as it was when it was founded.
Siemens still makes communications equipment. General Electric still makes light bulbs. But Nokia doesn’t make paper and rubber anymore. Nokia’s history is reinvention, and it should draw from that history to write a great new chapter.
So what is the New Nokia? Well, Microsoft bought Nokia’s mobile phone business, which was its biggest division, but there are still other businesses and product lines left. New Nokia basically has four components:
NSN (Nokia Solutions and Networks), Nokia’s unit that is in the business of telecommunications equipment: the switches and routers and software and services that allow networks such as mobile phone networks and the internet to run
Here, Nokia’s mapping unit. At first blush it looks like an equivalent of Google Maps, and there’s certainly some duplication, but it is also a comprehensive database and service of geodata. For example, Here powers the built-in GPSs of many cars
A great brand. The Nokia brand is still famous worldwide
The $7 billion that Microsoft will pay to Nokia for its mobile phone business and patent licenses
Those last two bits are actually the most important, but let’s not get ahead of ourselves.
What should Nokia do with NSN? NSN actually isn’t doing too badly as a business. After losing money for many years, it recently became profitable again. Networking is still a promising business as mobile phone networks get built up around the world and upgrade to faster systems. But NSN will need to jump ahead of the competition. NSN currently barely ekes out a profit, eaten as it is by competition and monopsony.
Luckily, the networking industry is currently on the verge of being transformed by a set of technologies known as “software-defined networking”. As the name suggests, software-defined networking creates a layer of abstraction whereby most of the network operations are run via software, allowing network builders to build networks out of commodity hardware.
You can guess the consequences: those who build networking hardware will be reduced to commodity providers; those who build the software and services that enable software-defined networking will earn fat profits. Nokia doesn’t have a lot of time, and can’t afford to be caught on the wrong side of a technology revolution twice. It needs to snap up two or three of the best software-defined networking start-ups right away, and build its business around it.
What should Nokia do with Here? With geodata, Nokia has an amazing opportunity, for a number of reasons. First, geographic data is an enormous market, as almost every device either is or will have to be geo-aware. Second, this is a market with huge economies of scale and barriers to entry (few people can afford to build a comprehensive street-level map of planet Earth).
And third, Here’s obvious competitor – Google Maps – is plagued by a lack of focus and conflicts of interest. For instance, most car manufacturers will not trust Google Maps as their service of choice, since Google has made plain its plans to compete with them.
Nokia should take this business one step further and build the “Amazon Cloud of Geo Data”: allow anyone to tap into its data, buy it by the sip, and do computations and apps with it in the cloud. In fact, it could do so in partnership with Amazon, allowing Amazon’s cloud customers to use Nokia’s geodata directly within Amazon’s cloud.
So with the right strategic moves, Nokia’s two existing businesses can have a bright future. What about the rest?
As I said, Nokia’s best assets are its brand and its cash. The value of the cash is obvious: it allows for strategic acquisitions, and lots of experimentation. The value of a brand is also straightforward, but there is a subtle reason why it’s particularly important for Nokia, and that’s its location.
Nokia is sitting on a gold mine of talent that most of its competitors won’t even think to tap.
As we know, Nokia is in Finland. And as we know, Finland is a relatively small country that has long seen Nokia as its national champion, and even sometimes as a source of national pride. The reason why that matters is easy to see. Finland has an education system that’s second to none (one might also add a history of solid Protestant work ethic, and early evenings).
In other words, its universities churn out extremely talented people, who for the most part aren’t lured to work on trading floors in New York, because Goldman Sachs doesn’t recruit in Finland.
This is tremendously lucky. Today, more than ever, a technology company is not so much in one particular business, as it is in the business of attracting the best and brightest people it can find and giving them room to invent and experiment. And Nokia is sitting on a gold mine of talent that most of its competitors won’t even think to tap.
The analogy here would be Skype. The usual story of any start-up that gets acquired by a big company is that it suddenly becomes utterly mismanaged as its best people leave and it stops innovating. This is what happened when eBay bought PayPal – and yet it didn’t happen when eBay bought Skype.
The reason is that Skype is based in Estonia, and if you’re a great programmer in Estonia, Skype is pretty much the only interesting place you can work. And so, despite eBay’s mismanagement, Skype continued to thrive.
Similarly, Nokia’s brand should tap deeply into Finland’s well of outstanding human resources and become Finland’s national champion again.
It should straightforwardly explain that it’s going to spend its $7 billion in inventing new businesses. The model here would be Google X, Google’s “Moonshot Projects” unit. No idea should be too crazy. Some of the ideas will bomb, but even that will be a good thing, as it will serve to reestablish Nokia’s identity as a bold innovator.
For the rest, there are plenty of emerging sectors where Nokia can build ambitious ideas: robotics, AI, 3D printing, healthcare, biotech, global development, energy and so on. In other words, if it plays its cards right, Nokia’s brightest days are still very much ahead.