Managing Innovation at Nokia Corporation - Case Study Example

Managing innovation I suppose you must have an idea of what a firm is? In this case, we will be concentrating on Nokia. Nokia Corporation as it might have occurred to you is ideally a multinational communications corporation headquartered in Espoo, a city that neighbors Finland's capital Helsinki (Andy 2006). Just for you to know, Nokia engages in the manufacture of mobile devices and in services of converging Internet and industries of communications, with over 123,000 employees practically in 120 countries, with sales in more than 150 countries worldwide and global annual revenue estimated at EUR 41 billion and operates profit of €1.2 billion as of year 2009. I know you might be shocked by these figures and wondering why many corporations have not made it this far but get in detail to this paper because you will be answered all your queries in due time. It is the largest mobile telephones manufacturer globally with its global device market share rating at about 33% in Q2 year 2010, down from earlier 35% in Q2 year 2009. Generally, Nokia has been producing mobile devices for every market segment globally and protocol, including W-CDMA (UMTS), GSM, and CDMA (Siegmund, Matthias & Weber 1998, p.78). Nokia also offers Internet services for instance music, maps, applications, games, media and messaging via its Ovi platform (Andy 2006). As a global company, Nokia has been in the frontline of innovations. GSM (Global Mobile Communications System) has been the most popular standard innovation for mobile telephony systems globally (Fried helm 2002, p.67). By now, GSM is used by an estimated 4.3 billion people in over 212 countries and territories (Siegmund, Matthias and Weber 1998, p.78). Nokia came up with this innovation to capitalize on its ubiquity enabling international roaming arrangements among mobile phone operators, and giving subscribers a chance to use of their mobile phones in all parts of the world (Siegmund, Matthias and Weber 1998, p.78). The Nokia’s GSM innovation differs from the predeceasing technologies in that both speech and signaling channels are digital, and therefore, GSM is a second generation (2G) system for mobile phones (Fried helm 2002, p.67). This is also facilitating the wide-spread achievement of data communication applications into the mobile system. But what could have been the driving factor for Nokia in coming up with this innovation? This is a question to think about because the company must have strategized for long before embarking on the system and later investing in the same wholly without looking back. Who would have said that this innovation would bring the company this far? And who would have predicted that GSM would finally be among the top systems in mobile communication systems? It’s all about strategy and this is what Nokia embarked on and utilized to the maximum (Andy 2006). Having known that the customer is the determining factor of business success and for the development of any company, it was on Nokia’s shoulders to think about satisfying the customer. As the theory, of consumer behavior goes “the customer is always right and he goes for what brings in satisfaction (Bearden, Richard, & Teel 1989).” If asked why? Nokia’s department of marketing would simply say their innovation was customer oriented because they knew that it was the right way forward in the new era of development in the world of communication. It is simple that the ubiquity of GSM standard implementation has been an advantage to the consumers, benefiting from the ability to switch and roam carriers without any replacement of phones, and also to easily network operators, who can perfectly choose equipment from numerous GSM equipment vendors (Fried helm 2002, p.67). It is out rightly evident that nobody would value switching phones or operators in their mobility. You cannot deny the fact that the world is becoming global and that people are moving across regions with ease of which definitely, they need communication and not just communication but efficient and effective modes of communication (Siegmund, Matthias and Weber 1998, p.78). Would I be lying is then I argued that GSM was a life saver for the world’s population? This is for you to think about as we progress with the discussion in this paper. GSM innovation by Nokia also pioneered low-cost short message service (SMS) implementation (Andy 2006). As you might be aware, this is also known as the text messaging that has since been supported even on all mobile phone standards. The text messaging feature has been of use mainly because it is cheap and people prefer the same because it’s quick especially in communicating a particular message. However, we cannot dispute the fact that the messaging as offered by many mobile service providers has been costly and the rating has been as per the distance of subjects (sender and receiver). What about you have a low cost and standard costing of text messaging? Wouldn’t that be perfect and something to celebrate? I guess your answer is yes, and this is what GSM from Nokia came to offer (Fried helm 2002, p.67). In fact, to be precise, the standard is an inclusion of a worldwide feature of the emergency telephone number (112). I guess you are still convinced that Nokia was taking the Role of Affect and Cognition in the Customer Satisfaction Formation seriously. What about we dig deeper into the newer versions of the standard backward-compatible with the originally released GSM system? For instance, Release '97 of the Nokia’s standard added packet data features through General Packet Radio Service (GPRS). On the other hand, Release '99 was responsible for the introduction of higher speed data transmission with the use of Enhanced Data Rates ideally for GSM Evolution (EDGE). GSM cell phone as an innovation from the latest releases by Nokia comes with lost of advantages both for the customer as well as the company itself (Siegmund, Matthias and Weber 1998, p.78). It ha eminent usefulness and therefore, ranks amongst the most brilliant innovations ever occurred globally (Fried helm 2002, p.67). What about a phone that offers greater sound quality. I was with a friend last week, and she couldn’t hide her happiness after trying out this phone. She was overexcited and asking her what was so remarkable about the phone compared to others, she burst out with all features of the GSM technological innovation by Nokia claiming that it has excellent background sounds, no disturbances, and static reduced vastly and crossed-line conversations facilitated. In fact, all she could she could say was that GSM phone from Nokia had sound quality more like one of a fixed telephone. In summary, she couldn’t hide the joy to that fact that now she had a chance to get a mobile phone easy in International Roaming ability, small cheaper handsets, exceptional sound quality, and ability to handle enormous volumes of users. And additional to this, she felt that, unlike analogue phones, the conversations using a GSM Nokia cell phone in the digital network was safe and secure (Siegmund, Matthias and Weber 1998, p.78). Guess what Nokia had also a lot in mind when they introduced this technology and their innovation brought to superior battery life, an issue that has been troubling many mobile users and digital technology helping them get twice as much in terms of talk time from the onset of the battery charge. What probably could have led Nokia to the innovation? This is a question to ponder and probably evaluate the negative and positive side of the innovation. Nokia as described above is one of the most prominent companies that deal with fast communication systems implementation and for sure it would be the first company on the limelight if things went wrong in its operations. Therefore, the company would appreciate leading as the service provider for the best communication systems. This simply does not come from mere talks. It is broader and requires a diverse thing and planning. So many providers are out there coming up with own innovation and to beat them, it calls for something unique (Roy 2006). Nokia might have gambled in introducing GSM as their ideal innovation strategy, but it paid fruits because it has been on the frontline of advancement (Siegmund, Matthias and Weber 1998, p.78). Recently, Finns consistently ranked Nokia as a leading and the best Finnish brands. In year 2008, it was the 27th company as most respected Finns brand, down from been ranked sixth place in 2007. And what do you think Nokia owes for this type of progress? With Nokia’s brand, valuing at $34.9 billion this is part of GSM has seen it through especially by increasing its innovations in the same field and customer preference increasing by day for the brand (Siegmund, Matthias and Weber 1998, p.78). Current as we speak, Nokia is the number one brand of phones in Asia and Europe and guess what, it is the 41st most admirable company globally in Fortune's World's rankings of the Most Admired Companies list of year 2010. If you haven’t noticed, Nokia has been growing by day and thanks for the GSM technological innovation (Siegmund, Matthias and Weber 1998, p.78). Nobody would have this kind of upshot in the mobile market especially where the competition is on a high unless you had the greatest innovations of all times, and this is what GSM has brought in place for Nokia. The GSM innovation is also perfectly suited to explain the concept of status consumption from the consumers (Siegmund, Matthias and Weber 1998, p.78). Status consumption is described as the behavior of consumers to seek to purchase goods of all brands for the status they ideally agree to, regardless of income of the individual consumer or social class (Bearden, Richard, & Teel 1989). On the other hand, status consumption in the past normally involved high-end luxurious and expensive products and services. Schiff man et al (2008) describes goods and services described as acquired through status consumption as not taken by many persons regularly but just at the individual events of relevance. Many brand consumers particularly use such brands in satisfying material needs as well as the social needs ascribed to status (Diller & Rhea 2006). Ronald (2005) argue that, in simple words, status consumption as used by many consumers is generally, meant to impress the others who may be among the consumer’s superiors, a future spouse or social connections. Ronald (2005) argues that status consumption increases the brand value of a given consumer as well as the product. And how does this apply to Nokia’s innovation? It simply explains that GSM has featured as a favorite for consumers and nothing would beat the technology bearing in mind that it is the only solution for the communication efficiency across the globe (Siegmund, Matthias and Weber 1998, p.78). While the importance of Status Consumption is practically famous in history world-over (Bearden, Richard, & Teel 1989), researches earlier on to the consumer status-consumption domain have looked at a nation context regarding to consumer status consumption. For instance, researches in the past looked at consumer status consumption ideally from the brand (Diller & Rhea 2006) example of Australia clothing context, US cosmetics for women, automobiles in the US. Same case here, Nokia can apply relatively well in explaining this concept. However, it is essential to note that consumer status consumption does not ideally have such boundaries in the national level but generally found to be prevailing globally (Homburg, Nicole and Wayne 2006, p.21-31). It is this reason why advertisers considering status consumption should detail a structure of an advert to reach global points (Homburg, Nicole and Wayne 2006, p.21-31), and this is what Nokia has done by introducing GSM as a service of use across the globe. In Nokia’s case of innovation, I would seek to look into the aspect of phone locking as has been the case with many phone providers. Many are times when mobile phone operators strategically restrict handsets, which they sell for use ideally with their network. This is termed as locking and is under implementation by a software phone feature. It has not been a favorite for the customers which bring us to the fact that the GSM innovation for Nokia came with lost of surprises (Siegmund, Matthias and Weber 1998, p.78). Many providers locked the phones because the purchase price of the phones to the consumer is characteristically subsidized with some revenue from subscriptions and the respective operators must recoup the investment before an individual subscriber terminates service (Wayne and Nicole 2005, p.36-49). This has been so selfish for companies that subscribers feel imprisoned to a particular provider even with poor services offered by the same. They dictate that a subscriber may contact the provider usually to remove the lock for a fee, or relatively utilize private services in removing the lock at their own risk. However, for Nokia, things are different, they have free software that would help the customer unlock the handset themselves and what would unquestionably entice people apart from such favors. If I may ask, what does a company like Nokia have to do to prosper and expand internationally? The outright answer would probably be innovation. And this is what Nokia features when applying the GSM technology in its operations (Siegmund, Matthias and Weber 1998, p.78). Obviously there are factors, which would determine the expansion of a company globally and relating to innovation. This will detail Nokia’s progress in applying the GSM technology and its application in global expansion. Many company managers have catchy slogans in their organizational operations, and many have been equipped to believe in them (Homburg, Nicole and Wayne 2006, p.21-31). Companies across the globe especially those, which promote technology and communication like the case of Nokia, are better prepared in handling the ever-changing operations of the organizational environment (Dobbins 2003). When a company’s leadership plans to expand internationally, it must ideally account for all the principal and key business environmental factors for the organization to succeed (Pearce & Robinson 2002). The aptitude to expand the business will be influenced by how well the organization leaders have learned noting the respective factors of the business environment, to demonstrate the organizational significance, as well as approximate the magnitude of each of the business environmental factor’s influence on the strategy of organizational expansion. Looking back at Nokia’s GSM innovation, it was a strategy to out do the competitors and be the best in mobile phone communication (Siegmund, Matthias and Weber 1998, p.78). Competitors are one significant environmental factor when considering any business expansion. Every company has external peers acting on similar functions within their sole business and professional discipline. These fellow peers are generally the main rivals, and they compete in the services production of the organization. The rivals in the business contribute highly to the overall organization by their ability in bringing out the same services or products especially of lofty caliber and at exceedingly cutthroat prices (Dobbins 2003; Pearce & Robinson 2002). Competition among the rivals is extraordinarily healthy from organizational market perspective because it gives choices to customers as well as provides the organizations an exciting opportunity of create a market niche. This is what Nokia thought in investing and implementing the GSM innovation (Siegmund, Matthias and Weber 1998, p.78). The company was on the verge of facing the wrath of depending on old technology, but with this new technology, something happened and in due time, it was a top class brand and a leading mobile communication provider outdoing many competitors in the market in terms of products, services and the prices (Wayne and Nicole 2005, p.36-49). In expanding internationally, any company needs to look into this environmental factor bearing in mind that it will have to have an overview before rolling the operations to avoid future losses for the company (Pearce & Robinson 2002). In citing the competitors, this helps the company adopt strategies of how to become the best and attract many customers beating the other companies and taking hold of the niche. Obviously, Nokia was bright in handling this and has seen its mission through by becoming a leading company. In Ellis’ works (2002), he cites six main approaches to apply in strategies’ formulation. Number four of the strategies is to understand competition’s weakness for other companies and then developing it. He notes Blockbusters on his works of the late fee drill majorly as a case in point of the way a new business competitor, Netflix, influenced consumers in trying their brands over those of their counterpart Blockbuster. The rival Netflix, had their business operations with no late fees, and it was possible for one to keep a movie for as long he or she likes. This shows ideally that competitors are a key environmental factor to consider before moving on with the expansion strategy. For Nokia, they left no leaf unturned when they came up with such and innovation and introduced GSM knowing clearly that they had to act in due time and come out with the best. Customers are extremely essential in every department of any company, without the consumers there would be in an ideal world no purpose for the organization (Homburg, Nicole and Wayne 2006, p.21-31). This is because it would not operate. Regardless of the service or product of the company, a company must have the ability to leverage their own marketing or even the organization production, ensuring that they gratify customer demand (Dobbins 2003). What happened in the case of GSM as the innovation for Nokia is that it was a lifesaver for its sales in the mobile phone market (Siegmund, Matthias and Weber 1998, p.78). Therefore, even with the great plans of expanding the company internationally, not a single company can give a blind eye to the operations of other countries in terms of the customer availability (Homburg, Nicole and Wayne 2006, p.21-31). For it to succeed in expansion, it will have to generate an enormous niche of customers to help in developing a fast movement of goods and services it provides (Homburg, Nicole and Wayne 2005, p.84-96). Winning the trust of these customers is the most notable aspect above all in this environmental factor (Homburg, Nicole and Wayne 2006, p.21-31). How did Nokia win the customers? It simply gave the customers an upper hand by providing GSM that was to solve all its problems especially those of global communication. What can you call a service that offers the Subscriber Identity Module? It’s an absolute brilliant company. This is commonly referred to as a SIM card (Siegmund, Matthias and Weber 1998, p.78). The SIM is a removable smart card that contains the user's subscription information, as well as his or her phone book (Juhani 2007). This is what allows the user and makes sure he or she retains his or her information even after he or she switches the handsets off (Matthias and Weber 1995, p.28). Nokia was just on line knowing that this is something that has been a problem for most consumers of the mobile service. Alternatively, the innovation enabled users to change operators while they retained the handset simply through a change of the SIM (Siegmund, Matthias and Weber 1998, p.78). Some operators have been blocking this by allowing the phone to be using only a single SIM, or relatively only a SIM from them, but Nokia knew the right taste for the customer and brought in the right innovation precisely at the right time. Hammonds (2002) cites in his works in the article “People who are the customers, have ideally shifted in thought more than even the commercial businesses. An immense probability is found in that in an ideal world, abyss separates companies and individual consumers (Pearce & Robinson 2002). Therefore, Companies learning to change with their respective customers will develop immense benefits from the expansion of the consumer confidence and enjoy the increased buying (Pearce & Robinson 2002). In making it clear, pork and Bacon Company will need to cross check areas where the product is less to gain customers for instance in Islamic countries owing to their faith and make other international expansion arrangements precisely, a similar case with Nokia as a mobile service provider. It is like a full package I can tell you, and this is evident to the many confessions from users (Matthias and Weber 1995, p.28). Operators have hailed this innovation saying that it doubled the GSM network capacity available within existing spectrum, and therefore, serving GSM operators across the world more network that they could offer, as well as greater quality (Siegmund, Matthias and Weber 1998, p.78). Nokia achieved this upgrade to capacity through its Dynamic Frequency as well as Channel Allocation (DFCA) feature that supports additional network growth and at the same time not impacting upon the quality of service provided or even controls costs (Matthias and Weber 1995, p.28). And thanks to all these relating to the innovation, recently, revelations were clear that emerging markets are seeing millions of additional subscribers to the GSM system every month meaning that this was not a crude idea at all and needs further progress and evaluations (Siegmund, Matthias and Weber 1998, p.78). What would you say regarding this innovation and what would Nokia have to add or replace if they are to survive in the market with this innovation? It is with no doubt that many companies in the same field are moving forward and have come up with even stronger innovations (Frank 1985). But why try out other innovations if the one in place is working wonders for now? Nokia needs to stick to the GSM and make sure that this features holds strong and become even more efficient (Virki 2007). Technology is growing fast (Homburg, Nicole and Wayne 2005, p.84-96), and this is the only worry that Nokia should have rather than looking back and comparing themselves to other companies (Matthias and Weber 1995, p.28). It is the appropriate time for Nokia to make GSM more efficient probably lowering the costs more to keep the competitive advantage alive, but this should at least be without compromising its profits (Nokia Corporation 1997). It id up to Nokia to thing of how the common man will benefit from affordable rates preferably in the Mobile phone communication that has fast moved to a mass service for the common man (Wayne and Nicole 2005, p.36-49). The company ought to fuel the falling tariffs and increase its coverage with the GSM innovation. Expeditious and Early introduction of GSM services across many economies across the globe is what will hold the key to mobile success for Nokia, and its future dominance especially in mobile telephony will be ascertained (Fried helm 2002, p.67). It is time that Nokia concentrates more on strategic planning and taking the consumer in mind all the time for a healthy growth and development in mobile telephony. What then can we assess and learn from the GSM innovation by Nokia? We can simply say that the innovation was timely and the firm new exactly what they wanted and would push for in the future operations of the organization. There may be many other innovations from the company, but this beats the rest. With Nokia employing professionals in the field of mobile services in telephony, undoubtedly we would expect that they will deliver more and advance this innovation making it a pleasant one of all times. We might have varying views on this, but I guess by all means, the innovation has shown that it can work wonders. Critics are everywhere talking ill of innovation and giving the strategy a wrong perception with all the blackmail on earth but what is happening? Nokia is still growing, and GSM is featuring to a great innovation for them meaning that they have what they wanted in their hands, what remains is how to maintain the same and hold the competitive advantage over all the other companies upcoming and introducing sweeping innovations related to the mobile service field and holding as a favorite for the majority of the customers. 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