The Secret Code for Success at Nokia / Posted by Ari 12.04.2009 07:16

Ten years ago, a small Scandinavian country got so much attention from the world's leading magazines, newspapers and TV channels that someone may have thought aliens had been discovered. No, it was something real. The media was looking for stories about Finns who had fallen in love with modern technology, and especially, reporters were trying to discover the secret code for Nokia's phenomenal success.

Jorma Ollila, who was the CEO ten years ago, avoided answering the question when Fortune magazine asked him what was the secret behind Nokia's success. Nokia had overtaken Motorola as the world's largest mobile phone vendor, its share price had more than quadrupled, and the company was preparing a new technology that was supposed to bring Internet to mobile phones. Nokia's top management and the Board were aware of the secret formula but were reluctant to unveil it.

Some of the key success factors had been established in early 1990s when Nokia started to change itself into a modern corporation. The logistics crisis in 1995 forced Ollila to take a close look at the company's core competencies. The crisis nailed down the fourth key factor for Nokia's success; cost efficiency. The other three factors were timing, focus, and branding.

Nokia's timing was perfect as GSM technology proliferated in Europe and soon in Asia and America. It had invested plenty of resources in the specification work and was able to file valuable patents on GSM technology. Sari Baldauf had drafted an ambitious business plan for entering the digital network equipment business which eventually opened many new markets for the company. The timing was perfect also when Nokia decided to invest in emerging markets. It moved manufacturing to China and rapidly gained largest market share in local market. Nokia repeated the same recipe in India in 2006.

Ever since the early 1990s, Nokia has focused on telecommunications. Once the baggage from the past had been divested, it was easier to focus on a single growth industry; mobile telecommunications. When the growth peak was at its height in 2000, the temptation to invest in other businesses increased. After trying its fortunes in enterprise IT solutions, Internet security and digital TV businesses, Nokia returned to its core business – mobile phones. The focus is only getting sharper. In 2007, Nokia detached its network equipment business into a joint venture with Siemens.

Anssi Vanjoki created Nokia's brand strategy in the early 1990s. Until then, Nokia had marketed mobile phones branded as Mobira, Technophone, or Tandy, among others. Since those days Nokia has been ranked the most trusted and recognized brand in many surveys in Europe and Asia. Although Nokia isn't a sexy brand like Apple, it has far more customers than a design brand that can't attract the mass markets the same way as Nokia can.

After the logistics crisis had led to financial crisis in 1996, Nokia's top management realized they had been too slow to renew the manufacturing processes for the rapidly growing company. The logistics nightmare was quickly resolved. In the process, Nokia also discovered a new core competence – cost-efficiency. Now, Nokia is widely regarded the company that can make products at the lowest cost in the industry. It has developed a tightly controlled cluster of component suppliers that live and breathe powerful client's wishes and needs.

Even in the midst of the global financial crisis, Nokia doesn't have to look for miracle cures if its sales slow down. It can continue on the path it has chosen. As long as Jorma Ollila continues as the Chairman and Olli-Pekka Kallasvuo as the CEO, Nokia is staying profitable and competitive by cutting costs, keeping its focus on mobile communications, investing in marketing and accurately timing its entries to new markets.