Nokia – Still Connecting People

Nokia manufacturing Factory of the Future

Today, it’s hard to imagine a world without Internet connectivity. We stand at the edge of a new era with an ever-growing list of devices that can communicate: virtual assistants that turn on our lights and tell us answers, smart devices that monitor our behaviour and health. The Internet of Things is most definitely here and when 5G speeds arrive it will open up a whole new catalogue of applications that don’t even exist yet.

Most people don’t know that one of the leading companies driving the research and standardisation process of 5G, is Nokia - a company many believe no longer exists - it never disappeared in the first place.

In the years since the smartphone era brought an end to its dominance in the mobile handset business, the company not only stayed relevant, but its technology is actually still in pretty much every phone out there. The world’s top three smartphone developers, Samsung, Apple, and Huawei own a market share of nearly 40%. All three of them use Nokia patents in their devices. A reported 32 Nokia patents are used in the iPhone alone. And, today, Nokia is one of the largest network equipment providers in the world counting 90% of the world’s key mobile operators like Vodafone and AT&T among its customers.

The rise and fall of Nokia’s handset business

To speak the name “Nokia” to a millennial today is to speak of nostalgia. For a simpler time of robust mobile handsets with a distinctive ringtone. At the height of its modern success in 2008, Nokia owned 40% of the world mobile market share. Prophetically entering the market with its first handset just as the mobile phone and mobile connectivity were becoming an affordable luxury – and swiftly an essential utility – Nokia enjoyed a quick rise to dominance thanks to user-friendly, robust and innovative products. It was the global market leader for over two decades as texting and games of Snake became commonplace. The company expanded its reach through an efficient supply chain which enabled it to bring mobile communications to lower price points and bring developing countries in Asia and Africa to mobile communications. Nokia seemed an infallible behemoth, the Nokia brand indistinguishable from the mobile phone industry it served. Yet, after just a decade, it collapsed almost as fast as it had risen.

The coming of the smartphone took consumers by surprise, but Nokia had been given notice. Tuuli Ahava, Head of Innovations at Nokia, remembers the day clearly. It was early 2005 and sitting in a meeting room at Nokia HQ in Espoo, Finland, she was listening to a presentation about rival developments and upcoming devices. One of the slides showed a competitor’s acquisition of a company called FingerWorks. Its founders, two engineers at the University in Delaware, had invented a multi-gesture touchscreen technology, intending to help people with Repetitive Strain Injury and other medical conditions.

Watching those slides, the team felt that this would appeal to a limited market only. Nokia regularly conducted large-scale studies into consumer trends and demands. No matter which part of the world the studies were conducted, the feedback was the same: customers did not want touchscreens.

We all know what happened next. The technology didn’t just change the phone business, it changed people’s relationship with technology. It was more than a revolution, it was evolution. One that Nokia had glimpsed on the horizon, but failed to recognise for what it was.

Survival - The Finnish way

It was a difficult time not just for the Nokians, who lost their jobs, but for the ones that were left. Lauri Oksanen, Vice President for Research and Technology, has been with Nokia for 30 years and recalls the pain.

As throughout its history, Nokia was made out of several businesses, with the handset business being the biggest one at the time - the mothership, as Oksanen calls it. When the iPhone arrived it torpedoed the mothership, and from a distance, all the other ships could do was watch it go up in flames. There were many friends on that ship, says Oksanen.

What a lot of people don’t know is that throughout its 152-year history Nokia has had more than its share of setbacks and failures, of which the mobile business was just the latest. Each time it has demonstrated a clarity of understanding and acceptance of its failings, then stoically and swiftly moved on. Few companies in the world have been able to reinvent and transform themselves over and over as successfully as Nokia has. Its secret? Sisu.

The Finnish word ‘Sisu’ lacks an exact synonym in any language. It can mean a number of things: determination, perseverance, and resilience. An integral element of Finnish culture it is relating to mental toughness and the ability to endure significant stress while taking action against seemingly impossible odds. For Finns, sisu is a way of life, a philosophy, a mindset that enables individuals to reach beyond their present limitations, take actions against all odds and transform barriers into frontiers.

Yet, sisu does not allow time to mourn. After the handset business collapsed, the message from the leadership was: business as usual. Each division was responsible for its own destiny and thus the failure of the handset business was taken as an arms-length experience by the remaining employees. After all, Nokia’s biggest clients hadn’t vanished – they’d never bought handsets in the first place.

Paper, cables, networks

All companies start life on paper. Nokia literally was. In 1865, Knut Fredrik Idestam a mining engineer and businessman founded a paper mill 100 miles north of Helsinki in a town called Tampere. Idestam expanded three years later and started a second mill 10miles west of Tampere on a plot of land by the Nokianvirta River. The land came with a big mansion named Nokia.

When Idestam officially incorporated his company in 1871, he named it after that mansion. The company’s physical expansion transformed the rural area around Tampere in such a way that, in the late 1870s, people referred to the area as ‘the industrial village of Nokia’. By the 1920s it was made official: the township of Nokia. It’s common for a company to take the name of its founding location – Nokia was so big it was the other way around.

From the beginning, Nokia was an international company, exporting paper products to Russia, Germany and the U.K. to resellers who would then distribute it even further afield. The company archives show that by the late 1800s Nokia paper was sold in China.

Yet its biggest customer base for over a century was in Russia. Before World War I one-third of Russia bought Finnish paper, a large part of it from Nokia. Proximity was one reason for the strong trading relationship, the other was the company’s founding when Finland was still an autonomous Grand Duchy of Russia (the company and the trading relationship is, therefore, older than the country it calls home, which only celebrated a century of independence in December 2017). Finnish-Russian trade was further cemented in 1948 when the two countries signed a bilateral trade agreement, which forbade Finland from joining the European Community and obliged the country to defend the Soviet Union against attack. Over time trade with the Soviet Union represented a substantial revenue for both Finland and Nokia - representing 40% of the company’s export revenue during the entire 1970s. By then Soviets weren’t just buying paper and pulp, they were also getting rubber boots, chemicals, cables, and electronics, reflecting the diverse range of products Nokia had diversified into making.

But this cosy arrangement came to an end when the iron curtain fell. The cold war ended in 1991 and Nokia lost its major customer base. Far more than the loss of its mobile business, this was by far the most serious crisis the company has faced.

There isn’t an exact date as to when Nokia turned into an electronics company. One could argue that its transformation began in the 1960s after merging with Finnish Cable Works Ltd, a phone and power cable producer. However, the conscious move from a pulp, paper, chemicals and rubber goods manufacturer into an international leader in electronics and networking has been attributed to its then chief executive, Kari Kairamo. Known for his tenacity, boldness, and unpredictability, his behaviour came across as erratic. Kairamo himself described his management style as devilish. Yet he was far from mad when he lead Nokia into a new direction. In the late 1970s, he was convinced that the future for Nokia was going to be in the electronics business.

His push into this sector has been described as visionary. By the late 1980s, Nokia was ninth-largest maker of television sets in the world and the third largest in Europe. Yet its biggest revenue stream would begin in the Spring of 1989 when the company received its first GSM network order in Finland from Radiolinja Oy, the operator established in the previous autumn by the country's private regional telephone companies.

On July 1, 1991, Radiolinja launched the world's first GSM network - using Nokia tech and equipment. It was a huge success. Nokia soon received network orders from the all over the world and by 1998 it was supplying GSM technology to 74 operators in 37 countries, was the world's largest supplier of GSM 1800 networks. It was a leading supplier of mobile and fixed telecom networks including related customer services. Today, its anchored in pole position as the largest network provider in the world with 90% of the worlds key operators being Nokia customers.

A conscious Factory of the Future

Being a major player in the 5G standardisation process and its consequent success is key to Nokia’s leading automation research in manufacturing. Nokia’s Oulu factory, 400miles north of Helsinki, went from 50% to 71% automation today in less than two years. A big improvement, but Erja Sankari, head of innovation at Oulu isn’t satisfied yet. Her end-goal is to create not just full automation, but a factory that is conscious.

Some companies talk about a digital factory of the future, Nokia has a vision of a self-predicting and self-directing factory - a conscious factory. It isn’t a far-fetched idea. Nokia’s near 100% automated manufacturing line is down to more and more advanced robotics, which wouldn’t have been possible even 5 years ago. Today, as the co-working of machines and people is increasing, it is making possible a manufacturing process where machines talk to each other with no human intervention. Nokia sees the conscious factory transformation starting with the change of distribution methods. Material flows to and through the factory via delivery portals and warehouses driven by intelligent, autonomous vehicles. Sankari goes further and shares her visions of a “dark” factory of the future. Here very high automation rates, where human intervention is only needed to physically coordinate and solve issues, meaning when a human needs to step into the physical factory and switch the lights on.

Currently, Nokia is working on improving the predictive and preventative manufacturing process. As an example, in the maintenance area, Nokia has hundreds of testers in production lines. Currently, the process includes scheduled maintenance and calibration breaks, checking cables and connectors in regular intervals to replace them before they break. The aim is to generate enough data that can be used to assess when maintenance is actually needed and helping replace or repair with zero downtime. The end goal is that the machine recalibrates and replaces parts itself.

Nokia is always looking forward and pushing new technologies into the market and into standardisation. In the last couple of years, Nokia has gone on a strategic multi-billion-dollar spending spree, acquiring various businesses with the intent to branch into new markets and create more demand for its networks. And it’s a move that’s leading it back into the consumer electronics market.

Company Values

Nokia has always understood that by developing good products and increasing usability it will increase demand in such products. It knew decades ago that the key was in getting devices to better communicate with each other. It makes sense that it, therefore, chose to focus on the very essence of what devices need to communicate - networks and GMS, 2G, 3G, 4G and today 5G development. Since the early 2000s, Nokia has been signing deals and cooperating with competitors to develop shared operating systems and standards. It is one of the leading companies at the table of the 5G standardisations process. Internally, it still maintains a nimble and flexible management style. Even its 300-people strategy and incubation team lead by Katrin Buvac is divided off into several groups and shows the company’s reach and focus. Market forecasting teams review exponential megatrends and competitor intelligence. Strategic partnerships - technology and webscale- anchor Nokia’s position amongst tech giants such as Google, Apple, Amazon, Microsoft, and Facebook. Nokia’s brand still has high brand recognition in the consumer space. With an abundance of patents and licenses out in the consumer market, it seems natural that the company has decided to re-enter the consumer market. It has done this through a brand licensing agreement with a company called HMD Global, which means people can now use Nokia phones once again.

Arguably, Nokia’s ongoing resilience can’t be all down to sisu. Spending time around Nokia one finds the organisation creates an environment of meritocracy where you are allowed to make a mistake, there isn’t much of a hierarchy and leaders are extremely approachable and open-minded. Crucially, the leadership nurtures a start-up mentality in which it welcomes and is open to new ideas. Nokia is focused on providing diversity and equality which plays an important role in its horizontal management style. What becomes clear though is that Nokia’s strength is its people. Nokians feel a strong bond to their company, their family. Loyalty, belonging and pride repeatedly comes across when speaking to a number of people. It might also provide a ground for people generally to stay. Employees have been with the company on an average of 11 years. Perhaps it is the company’s set of values which cultivates the strong bond Nokians feel to each other and their work. In any case, Trust, Reliability, and Quality - should be in everyone’s set of values.

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