At the Forefront of Innovation

By Christopher Brown-Humes

It is the biggest company in one of the world's fastest-growing industries. Not only is Nokia selling three out of every ten mobile handsets being made - it overtook Motorola last year to become the world's biggest mobile phone maker - but its market share is rising fast.

The dramatic success gives the Finnish group, led by Chief Executive Jorma Ollila, an obvious claim to membership of any league ranking the world's most respected companies. According to one of the respondents to the FT/PwC survey, the company has quite simply ‘changed the future’.

Success has happened in less than a decade. Moreover, it has happened in a country, on Europe's outer fringes, which has a population of just 5m and where the traditional industry - pulp and paper is anything but high tech. Luck has played a part too: nobody quite realized a decade ago that the mobile phone would move so quickly from being an expensive status symbol to a popular mass-market product. The group's deci­sion to concentrate on the GSM segment was also a fortuitous one, because GSM has become the de facto world standard.

Back in 1992, shortly after Mr Ollila took over as Chief Executive, he wrote down the four phrases which he saw as the key to the group's future. They were 'telecom-orientated', 'global', 'focus' and 'value-added'.

Nobody can say he did not stick to his own brief. Focus meant turning Nokia from a sprawling conglomerate, with a promising mobile business, into a dedicated mobile phone company. Out went much of 'the baggage' – chemicals, tyres, cables and television-set manufac­turing were among the businesses offloaded during the early 1990s.

On the telecommunica­tion side, the company has succeeded in establishing a strong brand that is recog­nized throughout the world. There may even have been an initial benefit from some customers l thinking it was a Japanese company. In fact, the name comes from a town in southern Finland.

The group has out-stripped its rivals, Motorola and Ericsson, because it has allied engi­neering excellence with great marketing flair. Analysts say it has usually produced more fashion­able, reliable, and user-friendly handsets than its competitors.

Moreover, it has kept at the forefront of innovation, shortening product cycles, and launching new models just when the margins on old ones are starting to dive. It has a consistent record of increasing vol­umes by more than enough to offset falling prices. Also, the company has been able to manage its growth - staff numbers have grown from 25,000 in 1993 to 44,000 today – and bureaucracy has not been allowed to stifle the culture of innovation.

If success is measured by market capitalisation, Nokia can have few equals. In January 1994, it was worth just €3.5bn. In mid-November 1999, the figure had risen to €142bn. The company is Europe's fifth largest and singlehandedly accounts for more than 50 per cent of the Helsinki stock exchange and a sub­stantial chunk of Finnish GDP growth.

Analysts, not surprisingly, are fulsome in their praise. 'Nokia has a 30 per cent and growing share of the handsets market and more than 60 per cent of the profit in the sector. It is incredibly efficient, with the best products, the best brand and the best logis­tics,' says Lauri Rosendahl, analyst at Aros Securities in Helsinki.

So far, the company has defied predictions that its rivals will catch up. So far, it has managed growth. And so far, the US Internet giants have stayed out of the mobile arena. But even more advanced technologies are on their way, rivals are snapping at its heels, and living up to the mar­ket's high-placed expecta­tions will be an ever more daunting challenge.

From the Financial Times

D. What is the most successful company in your country? Explain your answer.