--Mike,
re: NOK & Christensen
<< I think you left out the most important part of Christensen's comments about Nokia. You wrote: "worries about Nokia" ... Nokia "makes all the money and their vendors get hammered"
That was a preview to entice the board to listen ... <g>
<< You seemingly forgot to explain that the reason he worries about Nokia is because "Nokia is about at the point that they begin overshooting the functionality that people can actually utilize in those handsets." He explains that as Nokia becomes more entrenched in that phase, it's Nokias suppliers that make the money, not Nokia.>>
I've clipped a transcript from S100 below paraphrasing what Christensen said.
I'm not sure what your thoughts were when Christensen was asked the question about Qualcomm & Nokia, and he ducked the Qualcomm side and responded about Nokia but my reaction was that he knows a little, but not a lot, about Chasm Groups client Nokia, and he force fit them into his favorite (maybe only) thesis "when new technologies cause great firms to fail".
The tipoff to my thinking that he does not know that much about Nokia is in fact his statement that "Nokia is about at the point that they begin overshooting the functionality that people can actually utilize in those handsets." Nokia increasingly thinks of itself as a software company, and its expertise and key differentiator lies in making tiny and powerful data appliances eminently useable, and consequently not only appealing but a must have, for every category of user. their 3G reference models (that they will back down to 2.5G) reflect this.
My read on Nokia is that (along with Qualcomm and perhaps TI who are in related but entirely different business - the potential beneficiaries he refers to) they amongst their peers are best positioned to transition into the next generation.
They made the transition into the last generation better than their peers, and should be able to do so in this one.
This is not to say that Nokia can not fail, however. They have several vulnerabilities, but this is true of every gorilla and king we hold to some extent when they migrate technology generations, and especially when they do so in the face of exceptional economic uncertainty of the ilk of what we face today in telecom (wired or wireless).
I previously referenced a rather objective book by Dan Steinbock called "The Nokia Revolution", and talked about his (Nokia's) concept of strategic inflection points. Hopefully Nokia's understanding of this concept will help them weather through. Hopefully Qualcomm can deal with this as well.
At the conclusion of the book Steinbock devotes 3 pages to what he calls "The Drivers of Nokia's Strategic Failure". First he summarizes 6 key drivers of Nokia's success (Nokia's secret code) and says "to understand the driver's Nokia's strategic failure, the strategist must simply reverse the drivers of its current strategic success. The company would then suffer in [those] general circumstances".
Sobering. I guess one could say that past performance is no guarantee of future success.
Here is the promised paraphrase of what Christensen said in regarding Nokia at 25 minutes:
I worry about the future of Nokia, in the sense that when the product, ... I go back to this thing I just gave about when the product is not good enough, the architecture is inter dependant, the way you compete it is to make better products and being an integrated provider is a big advantage. And then as it becomes more than good enough, an industry standard architecture emerges. Nokia, with it's products has been in the first camp on the left hand side and the architecture of it's products is inter dependant, and during that era the people that make the product itself that the customer uses, they are the ones that make all of the money and their suppliers get hammered. So when General Motors was the dominant integrated maker of cars, which was in that era, they were the ones that made all the money and the suppliers get hammered and IBM made all the money and their suppliers got hammered and the same thing is true of Xerox, RCA and others.
But then when the product becomes more than good enough and you develop this modular industry standard architecture, then the company that makes in the stage of the value added, where you used to make the money, which is designing and assembling the product that the customer uses, it becomes very difficult to make money. And a good way to visualize that is if you were an engineer at Compaq and your boss told you to go and design a better computer than Dell, how would you do it? You would put a faster microprocessor, higher capacity disk drive and anything you can do, the competition can do instantly because if the industry is integrated around the industry standards it just becomes that all of the functionality resides in the subsystems and not in the assembled product. And I think that Nokia is about at the point where they begin overshooting the functionality that people can actually utilize in those handsets. And what you will see happen is that the handset itself will become more and more economically and technologically the equivalent of a desktop computer. And the ability to make money in that value system will migrate back to the companies that used to not be able to make money like Agilent, because they will then begin to provide subsystems to the cell phone makers which themselves are somewhat equivalent to the Intel inside. So I would have a bias that the ability to make money in that world is going to migrate away from Nokia in the future. <<
... all this why Nokia participates in the overall design of the product with trusted long term partners like the one they moved in beside in Fort Worth, and based on the open standards that they help drive which bear their footprint, and then they take a step further adding some proprietary hooks that make their product difficult to clone in its entirety, and differentiates them, All this while becoming more and more intimately connected to what they see as their real customer - the end user - while the commodity manufacturers focus on the carrier, which Nokia most certainly does not neglect, services exceptionally well, and shares the feedback from their end user customer to their carrier customer. Its a complex strategic business model, with some risk attendant, but so far, so good.
They face a crisis right now because they have spent massive amounts of R&D money on 3GSM WCDMA, and there is a real possibility that the technology could be ready before the market is ready, not only for lack of IP experience and lack of 3G business models, but also because of the economic climate.
Many of our favorite primates and royalty face this dilemma, including our favorite wireless primate.
- Eric - |
