1. IN THE ICT UNIVERSE *
* My prelude to CEO Stephen Elop’s talk on Nokia’s corporate strategy.
A part of BRIE-ETLA collaborative research (www.brie-etla.org).
Petri Rouvinen, ETLA
Aalto University Course 21C00600
Nokia House, Espoo, 9 April 2013

2. It’s all about
coded info… … and ways to
monetize it
A narrow US-centric
view: Amazon, Apple,
Google & Facebook
fight the main battle
Nokia & Microsoft
are falling back …
Source: The Economist (1 Dec. 2012). Technology Giants at War (Briefing): Another Game of Thrones. Vol. 405, No. 8813, Pp. 23-26.

3. … but any map is hopelessly 2D
… real competition is at least 4D
How did we get here?
Dynamics of competition in ICT?
Nokia’s path and its implications for Finland?

4. History:
How Did We
Get Here?
“In the northern skunk
works called Finland,
the 21st century
is in beta...”
Steve Silberman,
Wired Issue 7.09,
September 1999
http://www.wired.com/wired/archive/7.09/nokia_pr.html

5. The Foundations Were Laid Over 100 Years Ago
• Telephony Decree of the Finnish Senate in 1886
– Numerous private operators
– Competitive operator & equipment markets
• Industry’s / hobbyists’ interest in radio technology since 1920s
– Salora, Finnish Cable Works, Radio Laboratory (Ministry of Defense)
• Word War II & subsequent war reparations
– Advanced Soviet demand (DX200)
• Keen interest in digital technologies particularly in banking
– Advances in computing & data transmission
• Two rounds of standardization: NMT & GSM (shift to digital)
– Nordic authorities: analog cellular NMT standard in 1981 (roaming, caller pays):
The Nordics became the biggest & most advanced market worldwide (Mobira)
– European authorities & industry: digital cellular GSM standard:
rolled out in the early 1990s (the first GSM network/call: Radiolinja)
• Worldwide deregulation & liberalization since the 1990s
– Keen competition & crazy market expansion: Nokia outperforms
(bets on winning standards; focus on consumers & developing mkts; excels in logistics/manuf.)

6. 1775
Global Handset Sales
Millions of phones p.a.
1141
Data: Gartner
405
6.2
1991 1994 1997 2000 2003 2006 2009 2012
Year-to-Year Growth, %
42 64 82 65 60 56 56 64 47 2 18 37 24 7 35 7 32 11
1991 1994 1997 2000 2003 2006 2009 2012

7. Nokia’s Global Handset Market Share, %
Data: Gartner
41
38 38 38 38
36
34 33
32 32
29 28
24 23
20 19
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

8. Towards Industry/Technology Convergence
Source: Hernesniemi, Lammi, Ylä-Anttila & Rouvinen (ed.) 1996.
Advantage Finland: The Future of Finnish Industries.
Taloustieto (ETLA B 113, Sitra 149).

9. Phases of Competition in the Mobile Handset Industry
1990s 2000s 2010s
Separate sectors Weakening Convergence,
boundaries Ecosystems
Official standards,
symbiosis of Industry consortia, Apps, content,
operators & innovation at the platforms,
equip. providers edges of sectors services
Industry leaders: Industry leaders: Industry leaders:
Nokia, Ericsson, Nokia, Motorola, Apple, Google,
Motorola, Samsung Samsung, MS,
Siemens Nokia

10. I’ve seen the God…
January 2007
Photo: v.gd/D1ZYvo
… or is it the Devil?

11. Market Shares of Smartphone OSs
100%
Windows
90%
Other
80%
70% RIM (Blackberry)
iOS (Apple)
60%
50%
40%
30% Symbian
(Nokia)
20% Android
(Google)
10%
0%
2008 2009 2010 2011 2012
Data: Gartner

12. Note: Most Phones in Use Remain ”Dumb”
6 billions
Dumb
1 billion
Smartphones All mobile phones
Sources: Business Insider, Strategic Analytics, International Telecommunications Union.

13. Operating Profit Margins, %
80
70
60
50
40
30
20
10
0
2007 2008 2009 2010 2011 2012
-10
Sources: Business Insider, Canaccord Genuity estimates, Company releases.

14. PC, Smartphone & Tablet OSs Together
100%
90%
Android
80%
70%
Other
60%
RIM
50%
Apple
40%
30%
20%
Microsoft Windows
10%
0%
Source: Business Insider, Gartner, IDC, Strategic Analytics, company filings

15. &

16. “The importance of Nokia
to Finland looks like a
one-off [in global
comparison]”
Economist. (25 August 2012).
One-firm economies:
The Nokia effect.
Page 57.

17. Nokia’s Share of Finnish GDP, %
Source: Ali-Yrkkö, ETLA
GDP = Value added =
+ Operating profit (shown in Finland)
+ Depreciation
+ Labor costs
+ Rent
0.5 0.3 0.5 0.7 0.8 1.1 1.2 1.8 2.5 3.1 4.0 3.3 3.6 3.8 3.0 2.9 3.1 3.2 2.6 1.2 1.2 0.5
-0.1
1990 1994 1998 2002 2006 2010
Nokia contributed 1/4 of Finnish economic growth in 1998–2007 (4.0% p.a.)

18. 2000 2011
Nokia’s share of Finnish…
Source: Ali-Yrkkö, ETLA
GDP 4.0 0.5
2.5
Contribution to GDP growth -1.4
Total exports 21 9
Corporate tax revenues 14 0
Total employment 1.0 0.7
Corporate R&D 43 43
Helsinki Stock Exchange’s market cap. 70 12

19. ICT Sector Employment in Finland
70,000
60,000
50,000 Software,
IT services
40,000
Equipment
30,000 manufacturing
Telecommunications
20,000
Wholesale
10,000
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Data: Statistics Finland.

20. Conclusions

21. Photo: v.gd/1zLk63
Digi + Converge: Opening of a huge unconquered domain
Titans clash over dominance of ”Internet of Everything”
Early positions established – Uncertain future ahead

22. Telecom operators & Platform competition
manufacturers with Re-shuffling of value stacks
end-to-end control Hardware commoditization
Dumb-pipe operators
Photo:
v.gd/gPtce3

23. In early 2000s Nokia grew lazy …
… in the new landscape it was
caught in a difficult situation &
had to choose: Android, MS or ???
Windows 8 provides the power of
unified industry-strength ecosystem
Microsoft (Back-end IT, PC domain, Office etc. ) &
Nokia (“owns” mobiles; IP; manuf./logistics)
retain many assets & strengths …
… but are they able to
capitalize on them?

24. Thank
You!
fi.linkedin.com/in/petrirouvinen/
Petri.Rouvinen@ETLA.fi
 +358–50–3673474