1 00:00:00,910 --> 00:00:02,240 Welcome. 2 00:00:02,240 --> 00:00:04,010 Mr. Jorma Ollila 3 00:00:04,010 --> 00:00:06,640 to MIT as a distinguished speaker 4 00:00:06,640 --> 00:00:09,420 in our series sponsored by the MIT Office 5 00:00:09,420 --> 00:00:11,240 of Corporate Relations 6 00:00:11,240 --> 00:00:13,410 and the Sloan School of Management. 7 00:00:13,410 --> 00:00:15,660 Mr. Ollila joined 8 00:00:15,660 --> 00:00:19,990 Nokia in 1985 as Vice-President of International Operations. 9 00:00:19,990 --> 00:00:22,160 Since that time,he has 10 00:00:22,160 --> 00:00:24,900 risen in the organization to his present position 11 00:00:24,900 --> 00:00:29,150 as Chairman of the Board and Chief Executive Officer 12 00:00:29,150 --> 00:00:31,330 and Chairman of the Group Executive Board. 13 00:00:31,720 --> 00:00:36,600 Mr. Ollila is credited with completing Nokia’s transformation 14 00:00:36,600 --> 00:00:40,520 from a conglomerate,including businesses in paper 15 00:00:40,520 --> 00:00:41,810 and rubber boots 16 00:00:41,810 --> 00:00:45,320 to cables and consumer electronics 17 00:00:45,320 --> 00:00:48,910 to a focus global telecommunications company, 18 00:00:48,910 --> 00:00:53,060 which is now the world’s number one maker of mobile phones. 19 00:00:53,060 --> 00:00:58,310 Nokia’s next goal is to reach the top of the Mobile Internet market. 20 00:00:58,310 --> 00:01:02,750 Mr. Ollila led Nokia to its’ current success 21 00:01:02,750 --> 00:01:07,640 while establishing Nokia’s reputation for being one of the most well-managed, 22 00:01:07,640 --> 00:01:09,490 Hi-Tech companies in the world. 23 00:01:09,490 --> 00:01:14,980 Mr. Ollila’s management vision builds on a foundation laid by his predecessor 24 00:01:14,980 --> 00:01:17,540 who led Nokia in the 1980’s, 25 00:01:17,540 --> 00:01:19,930 by stressing teamwork, 26 00:01:19,930 --> 00:01:24,290 globalism and continuous education. 27 00:01:24,290 --> 00:01:28,710 Nokia contributed greatly to the culture that 28 00:01:28,710 --> 00:01:32,700 a decade later led the company to sweep the world. 29 00:01:32,700 --> 00:01:38,540 Here at MIT,Nokia has a string of strong relationships across the campus, 30 00:01:38,540 --> 00:01:42,750 from membership in the World Wide Web consortium 31 00:01:42,750 --> 00:01:44,100 to the Media Lab. 32 00:01:44,100 --> 00:01:46,580 From the center for E-business 33 00:01:46,580 --> 00:01:51,170 to the Oxygen Project in the laboratory for Computer Science 34 00:01:51,170 --> 00:01:53,870 and artificial intelligence laboratory. 35 00:01:53,870 --> 00:01:59,610 Nokia has also been a member of the Internet and Telecom’s convergence consortium. 36 00:01:59,610 --> 00:02:02,880 All of these interactions are supplemented 37 00:02:02,880 --> 00:02:08,810 and coordinated through Nokia’s membership in MIT’s Industrial Liaison Program. 38 00:02:08,810 --> 00:02:13,140 We now welcome Mr Ollila whose talk is entitled 39 00:02:13,140 --> 00:02:14,650 “Shaping the Mobile Future.” 40 00:02:14,650 --> 00:02:18,900 After the talk there will be an opportunity for questions from the audience. 41 00:02:18,900 --> 00:02:20,660 After that discussion, 42 00:02:20,660 --> 00:02:25,280 we welcome you to join an informal reception outside the auditorium. 43 00:02:25,280 --> 00:02:27,740 Welcome Mr. Ollila. 44 00:02:40,250 --> 00:02:42,690 Thank you,Phil. 45 00:02:42,690 --> 00:02:44,630 That was very kind of you 46 00:02:44,630 --> 00:02:50,290 to use all those introductory words 47 00:02:50,290 --> 00:02:51,860 and it’s great to be here. 48 00:02:51,860 --> 00:02:54,400 MIT is our very good partner. 49 00:02:54,400 --> 00:03:00,580 We have a lot of cooperation with universities 50 00:03:00,580 --> 00:03:03,720 in different parts of the world. 51 00:03:03,720 --> 00:03:06,410 I would like to describe it in this way. 52 00:03:06,410 --> 00:03:10,440 We have particularly much cooperation in 53 00:03:10,440 --> 00:03:14,000 Finland,U.S. and in China 54 00:03:14,000 --> 00:03:18,600 with our longest relationship,really,with MIT 55 00:03:18,600 --> 00:03:21,250 here in the U.S., 56 00:03:21,250 --> 00:03:24,180 in addition to our home base. 57 00:03:24,180 --> 00:03:27,060 And we get results. 58 00:03:27,060 --> 00:03:32,350 I hope MIT benefits in the same way as we do because 59 00:03:32,460 --> 00:03:35,520 I think these relationships are win/win relationships. 60 00:03:36,840 --> 00:03:39,230 So, 61 00:03:39,230 --> 00:03:44,720 some people ask every now and then 62 00:03:44,720 --> 00:03:50,780 what’s,what’s all this 63 00:03:50,780 --> 00:03:57,960 about Nokia’s ability to succeed in terms of the R&D. 64 00:03:57,960 --> 00:03:59,290 You know they can sort of understand 65 00:03:59,290 --> 00:04:02,090 about that marketing, 66 00:04:02,090 --> 00:04:05,900 manufacturing,logistics 67 00:04:05,900 --> 00:04:10,760 all of these you can get modeling from consultants firm. 68 00:04:10,760 --> 00:04:13,990 You can buy into these other areas 69 00:04:13,990 --> 00:04:15,760 but if you don’t have a base in R&D, 70 00:04:15,760 --> 00:04:19,740 understanding of what this research is all about in the telecommunications industry. 71 00:04:19,740 --> 00:04:22,800 Then you better go and do something else. 72 00:04:22,800 --> 00:04:30,030 And,the cooperation with universities has a fundamental importance 73 00:04:30,030 --> 00:04:33,510 in our history. 74 00:04:33,510 --> 00:04:36,280 It’s worked well in Finland. 75 00:04:36,280 --> 00:04:42,690 We have also benefited a lot from our 15 years of cooperation 76 00:04:42,690 --> 00:04:45,140 with U.S. universities and we hope to continue. 77 00:04:45,140 --> 00:04:51,220 So,tonight I was asked really to speak in a couple of words about 78 00:04:51,220 --> 00:04:56,920 how we see the future in the wireless area. 79 00:04:56,920 --> 00:05:01,770 And to talk a couple of points about Nokia as a company, 80 00:05:01,770 --> 00:05:04,640 how it’s managed and all the rest of it. 81 00:05:04,640 --> 00:05:13,300 And these are the topics that I’ve planned to address. 82 00:05:13,300 --> 00:05:19,180 I hope I will not talk more than thirty minutes,at absolute max. 83 00:05:19,180 --> 00:05:23,640 Then,I’m concentrating on a couple of points, 84 00:05:23,640 --> 00:05:25,120 which I think will interest you. 85 00:05:25,120 --> 00:05:27,400 Then, 86 00:05:27,400 --> 00:05:29,490 I’ll be more than pleased to answer any questions, 87 00:05:29,490 --> 00:05:32,250 you might have-on any topics,which I did cover or did not cover. 88 00:05:32,250 --> 00:05:36,340 So,let’s look at that. 89 00:05:36,340 --> 00:05:38,800 A couple of points on this environment, 90 00:05:38,800 --> 00:05:43,380 I think we’re in a very special situation 91 00:05:43,380 --> 00:05:48,590 because,had we met here eighteen months ago, 92 00:05:48,590 --> 00:05:53,290 every single vector would have shown upwards. 93 00:05:53,290 --> 00:05:54,820 And it’s just, 94 00:05:54,820 --> 00:05:59,130 anything you did seemed to work so well, 95 00:05:59,130 --> 00:06:02,630 so now it’s a much more exciting period 96 00:06:02,630 --> 00:06:06,860 when you can really do things. 97 00:06:06,860 --> 00:06:09,310 its where discontinuities happen, 98 00:06:09,310 --> 00:06:16,620 both in business opportunities are seized and lost,; 99 00:06:16,620 --> 00:06:24,780 it’s when these discontinuities happen that also balance sheets are being reshaped. 100 00:06:24,780 --> 00:06:27,750 That is happening in the corporate world today. 101 00:06:29,990 --> 00:06:35,550 So,with both of my engineering and economist background,I do have both, 102 00:06:35,550 --> 00:06:39,880 so I think it’s intriguing to look at where the world is. 103 00:06:39,880 --> 00:06:42,810 Just a couple of very brief comments. 104 00:06:42,810 --> 00:06:46,480 Globalization and the Economy we’re in …. 105 00:06:46,480 --> 00:06:50,490 I think Globalization is a big trend. 106 00:06:50,490 --> 00:06:52,930 It really is, 107 00:06:52,930 --> 00:06:59,980 not very many companies at all have really embraced it and understood what’s it all about. 108 00:06:59,980 --> 00:07:05,890 In Nokia,we have just over one percent of our revenue is from our home country,Finland. 109 00:07:05,890 --> 00:07:13,040 So,globalization,it is,it always was make or break for us. 110 00:07:13,040 --> 00:07:17,030 Because in our home market,we would never have been able to make a living. 111 00:07:17,030 --> 00:07:18,950 We just love competition; 112 00:07:18,840 --> 00:07:20,760 we always just jump into situations of competition. 113 00:07:21,610 --> 00:07:23,960 Because that’s how we survived. 114 00:07:23,960 --> 00:07:30,580 And,and globalization obviously,by definition means free flow. 115 00:07:30,580 --> 00:07:31,980 Then 116 00:07:31,980 --> 00:07:42,600 going towards a knowledge-based economy,that’s that’s you know another cliché’ 117 00:07:42,600 --> 00:07:49,090 but really how do people understand and really act upon it in a corporate life . 118 00:07:49,090 --> 00:07:55,320 Because it’s all about designing your value chain. 119 00:07:55,320 --> 00:07:57,880 What do you concentrate in? 120 00:07:57,880 --> 00:08:01,530 What do you want to be good at? 121 00:08:01,530 --> 00:08:06,340 That’s where you have the opportunity to make a difference. 122 00:08:06,340 --> 00:08:10,010 And moving into a knowledge-based economy is all about 123 00:08:10,010 --> 00:08:14,890 giving us the opportunity to rebuild the value chain. 124 00:08:14,890 --> 00:08:21,500 And the doctrines of building a corporate web, 125 00:08:21,500 --> 00:08:23,230 type of setup, 126 00:08:23,230 --> 00:08:31,270 with a lot of outsourcing and companies being able to concentrate on what they really can excel in, 127 00:08:31,270 --> 00:08:37,660 I think that has changed fundamentally the way companies are being managed today. 128 00:08:38,180 --> 00:08:40,830 That’s the single most important change 129 00:08:42,210 --> 00:08:45,690 in terms of how you build your organization 130 00:08:45,690 --> 00:08:48,740 and how you manage a big company. 131 00:08:48,740 --> 00:08:53,050 And,it has in my view,actually,it’s this fact, 132 00:08:53,050 --> 00:09:03,030 that has given a new lease of life for big corporations. 133 00:09:03,030 --> 00:09:08,340 It’s very easy to say that innovation happens in small companies 134 00:09:08,340 --> 00:09:12,960 without really investigating it. 135 00:09:12,960 --> 00:09:18,550 I think we at Nokia,we were really getting worried about grow, 136 00:09:18,550 --> 00:09:24,920 about what will happen to us when we started to grow in ‘96/’97. 137 00:09:24,920 --> 00:09:30,340 I think we have learned in the last three or four years that if we design our activities 138 00:09:30,340 --> 00:09:33,390 our corporate structure in the right way, 139 00:09:33,390 --> 00:09:39,270 we can actually benefit from the fact that we are the size that we are, 140 00:09:39,270 --> 00:09:41,230 i.e. that we are a big company. 141 00:09:41,230 --> 00:09:50,890 And it all sort of comes back to how the economy is now driven 142 00:09:50,890 --> 00:09:55,550 by the knowledge intensive parts 143 00:09:55,550 --> 00:10:00,090 and then getting the volume benefit in those parts 144 00:10:00,090 --> 00:10:04,190 where the outsourcing is the best solution. 145 00:10:04,190 --> 00:10:11,080 So,the scale benefit comes sort of from outside your core, 146 00:10:11,080 --> 00:10:14,300 outside your company. 147 00:10:14,300 --> 00:10:15,800 And then finally, 148 00:10:15,800 --> 00:10:20,670 technologically,what’s the big paradigm change? 149 00:10:20,670 --> 00:10:24,750 It’s all about digitalization. 150 00:10:24,750 --> 00:10:32,300 Simple to say but if you look at what happened, 151 00:10:32,300 --> 00:10:35,760 what has happened in mobile communication. 152 00:10:35,760 --> 00:10:37,260 In the last five years, 153 00:10:37,260 --> 00:10:39,530 voice has gone wireless. 154 00:10:39,530 --> 00:10:46,340 I wish it would have happened in the same extent in the U.S. as in some other parts of the world. 155 00:10:46,340 --> 00:10:48,980 Here you have a little work to do. 156 00:10:48,980 --> 00:10:51,750 But still, 157 00:10:51,750 --> 00:10:56,410 essentially we all know that also in the U.S. very quickly, 158 00:10:56,410 --> 00:11:00,320 essentially all voice traffic will be wireless. 159 00:11:00,320 --> 00:11:04,550 What is more important is that in the next five years, 160 00:11:04,550 --> 00:11:09,880 digitalization means that content will go mobile. 161 00:11:09,880 --> 00:11:12,870 Because now it’s possible 162 00:11:12,870 --> 00:11:20,360 through digitalization to handle content in such a way that it is accessible through mobile devices 163 00:11:20,360 --> 00:11:22,400 and that is a big one. 164 00:11:22,400 --> 00:11:27,390 I can for instance,make a prediction that in a matter of two years, 165 00:11:27,390 --> 00:11:29,060 two,two and a half perhaps, 166 00:11:29,060 --> 00:11:37,470 mobile phones will be the main devices through which the MP3 downloads will happen. 167 00:11:37,470 --> 00:11:43,700 Music is the biggest entertainment industry there is,just think about what will happen 168 00:11:43,700 --> 00:11:49,930 for the way in which we use the mobile phones when music really gets into the picture. 169 00:11:49,930 --> 00:11:53,300 So,that’s what digitalization brings as an enabler. 170 00:11:53,300 --> 00:11:56,080 A couple of words about Nokia as a background. 171 00:11:56,080 --> 00:11:59,010 You know this, 172 00:11:59,010 --> 00:12:01,790 you know our corporate people they always put this slide in, 173 00:12:01,790 --> 00:12:04,100 so I didn’t want to take it off. 174 00:12:04,100 --> 00:12:08,330 Umm,you know,it’s a good slide.] 175 00:12:08,330 --> 00:12:12,300 1n 1919,Nokia was a company,a conglomerate, 176 00:12:12,300 --> 00:12:14,800 in the true sense of the word. 177 00:12:14,800 --> 00:12:17,390 We manufactured rubber, 178 00:12:17,390 --> 00:12:26,960 we had a power business where we generated electricity for people in 2 countries. 179 00:12:26,960 --> 00:12:29,670 And we were PC makers, 180 00:12:29,670 --> 00:12:31,740 we had cables consumer electronics, 181 00:12:31,740 --> 00:12:40,400 machinery,chemicals and we were making electronics –electric components. 182 00:12:40,400 --> 00:12:45,320 20% of our business was telecommunications 183 00:12:45,320 --> 00:12:50,410 and now that ten percent has transformed into what Nokia is today. 184 00:12:50,410 --> 00:12:55,780 30 billion,about thirty billion U.S. dollars of revenue, 185 00:12:55,780 --> 00:12:58,550 the analyst forecast for this year. 186 00:12:58,550 --> 00:13:05,890 And the businesses range from fixed network elements, 187 00:13:05,890 --> 00:13:15,800 telephone network elements to mobile handsets,software and accessories to those. 188 00:13:15,800 --> 00:13:17,970 So, 189 00:13:17,970 --> 00:13:24,400 we divested about twenty businesses, 190 00:13:24,400 --> 00:13:28,160 we picked two businesses to which we grew to where we are today. 191 00:13:28,160 --> 00:13:32,910 And that’s what you got to do today in a globalized world. 192 00:13:32,910 --> 00:13:37,470 You cannot be all things for all people. 193 00:13:37,470 --> 00:13:45,480 In my view there are three reasons why 194 00:13:45,480 --> 00:13:49,850 focusing is the way to go in a global world. 195 00:13:49,850 --> 00:13:54,390 First of all,in a global world 196 00:13:54,390 --> 00:13:57,970 you have to be among the top players 197 00:13:58,090 --> 00:14:01,290 to really get the revenue, 198 00:14:00,210 --> 00:14:03,640 to really get the returns for your shareholders. 199 00:14:03,640 --> 00:14:16,440 And it’s very difficult to be a master of very many different businesses. 200 00:14:16,440 --> 00:14:21,120 So,the globalization drives into focus. 201 00:14:21,120 --> 00:14:25,410 Also,one of my management paradigms, 202 00:14:25,410 --> 00:14:29,300 I’m ready to discuss on why, 203 00:14:29,300 --> 00:14:35,860 Jack Welsh might disagree here because his concept is slightly different. 204 00:14:35,860 --> 00:14:40,750 But if you basically take a conglomerate model and look at what Nokia has done, 205 00:14:40,750 --> 00:14:43,200 my case is proven. 206 00:14:43,200 --> 00:14:46,300 i.e. that any management team, 207 00:14:46,300 --> 00:14:51,830 any team,cannot really be best at everything. 208 00:14:51,830 --> 00:14:55,410 My philosophy is that the CEO and all the key managers, 209 00:14:55,410 --> 00:15:01,590 have to know all the key products and their characteristics, 210 00:15:01,590 --> 00:15:04,210 the business dynamics,the markets, 211 00:15:04,180 --> 00:15:06,770 where the company is in. 212 00:15:05,670 --> 00:15:09,650 And we all have our limitations. 213 00:15:08,410 --> 00:15:14,740 So,very difficult to be a specialist in very many different areas. 214 00:15:14,740 --> 00:15:22,460 Because if the CEO doesn’t know what the company is doing in detail, 215 00:15:22,460 --> 00:15:28,300 the CEO very quickly becomes just a manager of numbers. 216 00:15:28,300 --> 00:15:31,630 And then,it’s a different ballgame altogether. 217 00:15:31,630 --> 00:15:35,090 You are losing an edge to a company, 218 00:15:35,090 --> 00:15:37,560 which is really dedicated and knows, 219 00:15:37,560 --> 00:15:39,250 what they are talking about. 220 00:15:39,250 --> 00:15:42,320 And then finally the capital market, 221 00:15:42,320 --> 00:15:49,090 the capital market rationale obviously is that investors, 222 00:15:49,090 --> 00:15:51,450 they want to build their own portfolio. 223 00:15:51,450 --> 00:15:57,450 They don’t want to have some management team do the portfolio choice for them. 224 00:15:57,450 --> 00:16:00,970 They like to buy shares in the market from different companies, 225 00:16:00,970 --> 00:16:02,580 which they can choose themselves 226 00:16:02,580 --> 00:16:08,650 so focused companies are also,the choice of the stock market. 227 00:16:08,650 --> 00:16:15,580 And where,how did we pick the businesses where we focus. 228 00:16:15,580 --> 00:16:25,130 The um… There were three reasons or three rationales that we used in the early 90’s. 229 00:16:25,130 --> 00:16:31,240 First of all we wanted to pick businesses,which had growth. 230 00:16:31,240 --> 00:16:42,440 Growth had fundamentally been part of the Nokia DNA for decades. 231 00:16:42,440 --> 00:16:45,030 And we felt that 232 00:16:45,030 --> 00:16:47,120 we had 233 00:16:47,120 --> 00:16:54,850 an ability to survive to do well in growth markets. 234 00:16:54,850 --> 00:17:01,550 And,obviously to get the shareholder return in growth markets to offer superior opportunities. 235 00:17:01,550 --> 00:17:06,530 So,we had both cultures as well as the fact supporting the choice, 236 00:17:06,530 --> 00:17:10,160 as well as the fact that we wanted to go into growth areas. 237 00:17:10,160 --> 00:17:12,460 And then finally obviously, 238 00:17:12,460 --> 00:17:16,920 you better not pick businesses where you are supposed, 239 00:17:16,920 --> 00:17:19,560 where you are expected to be a loser. 240 00:17:19,560 --> 00:17:23,860 Even if you have a culture and there is some growth, 241 00:17:23,860 --> 00:17:24,920 if you are, 242 00:17:24,920 --> 00:17:30,390 if you don’t expect to have some core competencies which are unique vis-a-vis your competitors. 243 00:17:30,390 --> 00:17:39,220 And telecommunication was an area where we felt that because of certain things, 244 00:17:39,220 --> 00:17:43,460 that’s a little bit of a longer story,but anyway, 245 00:17:43,460 --> 00:17:46,550 where there were certain things we knew well. 246 00:17:46,550 --> 00:17:54,820 That was in the area of radio frequency as know-how digital signal processing 247 00:17:54,820 --> 00:18:03,420 as well as the system know-how relating to mobile networks. 248 00:18:03,420 --> 00:18:10,000 You know we simply hadn’t met with people who we felt were better than we were. 249 00:18:10,000 --> 00:18:13,830 You know we found soon that Motorola was pretty good. 250 00:18:13,830 --> 00:18:18,850 But,when you’re young,you’ve got dreams, 251 00:18:18,850 --> 00:18:23,140 you have some oversight and that’s great,because otherwise you wouldn’t try, 252 00:18:23,140 --> 00:18:27,690 if you look at all the hazards along the way. 253 00:18:27,690 --> 00:18:30,790 So,core competencies, 254 00:18:30,790 --> 00:18:34,530 where you think you can be best in the world are needed, 255 00:18:34,530 --> 00:18:43,180 if you go into courageous focusing exercise as we did ten years ago. 256 00:18:43,180 --> 00:18:48,570 And here is basically the result. 257 00:18:48,570 --> 00:18:52,470 I want to show this slide because it explains one thing. 258 00:18:52,470 --> 00:19:00,590 When you have regulated markets, 259 00:19:00,590 --> 00:19:07,190 where the market share is basically dictated by size of the market, 260 00:19:00,580 --> 00:19:10,470 the tariff barriers and you just go on. 261 00:19:07,170 --> 00:19:13,240 The operating profit sort of, 262 00:19:11,050 --> 00:19:14,990 it doesn’t fluctuate too much because everybody makes a certain profit. 263 00:19:14,990 --> 00:19:18,210 You know you get cartels,markets are fixed, 264 00:19:18,210 --> 00:19:20,710 growth is slow. 265 00:19:20,710 --> 00:19:24,210 So,from 1980 to 1990, 266 00:19:24,210 --> 00:19:25,730 Nokia profitability was, 267 00:19:25,730 --> 00:19:30,730 you know,some change,but not dramatic. 268 00:19:30,730 --> 00:19:35,740 Then,a bit of a problem period ’91-’92, 269 00:19:35,740 --> 00:19:42,550 and then we were able to get into a growth path which has resulted in a, 270 00:19:42,550 --> 00:19:50,230 in a pretty spectacular development. 271 00:19:50,230 --> 00:19:53,690 The key thing here to note is that 272 00:19:53,690 --> 00:20:06,000 globalization and technological discontinuity happening simultaneously brought us the opportunity. 273 00:20:07,780 --> 00:20:11,150 This is what happened in early nineties, 274 00:20:11,150 --> 00:20:14,540 gave that opportunity. 275 00:20:14,540 --> 00:20:20,390 So,then a couple of words on where we are today 276 00:20:20,390 --> 00:20:24,550 and what’s happening in this tremendous market transition 277 00:20:24,550 --> 00:20:30,160 which I claimed to be an exciting event a minute ago. 278 00:20:30,160 --> 00:20:36,720 What has happened in terms of our business in the last 5 years as I mentioned 279 00:20:36,720 --> 00:20:41,620 was that voice essentially has gone wireless. 280 00:20:41,620 --> 00:20:43,700 In the world, 281 00:20:43,700 --> 00:20:44,650 there are today, 282 00:20:44,650 --> 00:20:48,940 more mobile phones than there are fixed line connections. 283 00:20:48,940 --> 00:21:00,140 And there are about 929-930 million mobile phones and 800-850 million fixed line connections. 284 00:21:03,850 --> 00:21:05,900 And that gap obviously is growing now, 285 00:21:05,900 --> 00:21:11,360 with much faster growth with mobile than fixed line. 286 00:21:11,360 --> 00:21:14,030 Its only India and China, 287 00:21:14,030 --> 00:21:16,780 which are really making a contribution to,fixed, 288 00:21:16,780 --> 00:21:19,930 line connection increase. 289 00:21:19,930 --> 00:21:25,360 And the move of voice traffic to wireless will continue. 290 00:21:25,360 --> 00:21:32,840 That led in the years of ’99 and 2000 into a hype 291 00:21:32,840 --> 00:21:44,880 where the expectation of data through the 3G and other technologies led everybody to expect 292 00:21:44,880 --> 00:21:49,630 that transition was going to happen immediately. 293 00:21:49,630 --> 00:21:52,440 In 2 or 3 years time, 294 00:21:52,440 --> 00:21:55,820 it’s all going to be 3G everybody’s going to move over, 295 00:21:55,820 --> 00:21:59,750 a lot of data flowing,tremendous business opportunity. 296 00:21:59,750 --> 00:22:05,390 And that led into an overhype, 297 00:22:05,390 --> 00:22:09,450 not only in the stock market, 298 00:22:09,450 --> 00:22:12,370 but I think it’s just possible 299 00:22:12,370 --> 00:22:15,940 that even some of the market players like ourselves believed some of that. 300 00:22:15,940 --> 00:22:21,280 Then simultaneously two things happened, 301 00:22:21,280 --> 00:22:24,210 the economy slowed down, 302 00:22:24,210 --> 00:22:27,540 starting in the U.S. and following, 303 00:22:27,540 --> 00:22:32,220 getting into Europe with a six-month delay. 304 00:22:32,220 --> 00:22:37,430 And,obviously Asia getting it’s own part with Japan. 305 00:22:37,490 --> 00:22:43,910 And the 3G started to be a lot of question marks about 3G. 306 00:22:43,910 --> 00:22:45,820 Is the technology mature? 307 00:22:45,820 --> 00:22:46,990 Will it happen? 308 00:22:46,990 --> 00:22:49,870 And secondly,all you know, 309 00:22:49,870 --> 00:22:56,760 the European mistake of following the U.S. example of arranging auctions, 310 00:22:56,760 --> 00:23:05,560 led into a,led into a exorbitant high licensing fees for 3G. 311 00:23:05,560 --> 00:23:07,880 And very quickly,what happened? 312 00:23:07,880 --> 00:23:12,410 There was a disbelief of what will happen next in our business. 313 00:23:12,410 --> 00:23:18,630 And that led into the over-criticism,so even if the GDP growth was flat, 314 00:23:18,630 --> 00:23:22,100 that’s essentially what’s happening in 2001. 315 00:23:22,100 --> 00:23:31,090 The over-criticism led into a real plunge after a disbelief in the stock market. 316 00:23:31,090 --> 00:23:40,270 And this is how human beings behave – hype and then overly harsh criticism. 317 00:23:40,270 --> 00:23:46,280 The reality being that in the next five years, 318 00:23:46,280 --> 00:23:48,530 we will see content going mobile. 319 00:23:48,530 --> 00:23:51,620 So the next step in the mobile evolution, 320 00:23:51,620 --> 00:24:01,120 with a different kind of content being brought to the richer devices, 321 00:24:01,120 --> 00:24:05,350 which can communicate with each other. 322 00:24:05,350 --> 00:24:14,250 And that’s what’s going to happen in the next five years. 323 00:24:14,250 --> 00:24:15,790 You know,let’s be realistic, 324 00:24:15,790 --> 00:24:16,700 it will take more time, 325 00:24:16,700 --> 00:24:19,220 it’s not a one year or two year thing. 326 00:24:19,220 --> 00:24:25,120 And it means that there has to be a lot of work to recognize the different kind of new businesses 327 00:24:25,120 --> 00:24:28,480 that will be created by the data, 328 00:24:29,160 --> 00:24:33,050 introduction of data into the mobile arena. 329 00:24:33,050 --> 00:24:37,560 And then you might ask,what’s going to happen? 330 00:24:37,560 --> 00:24:38,440 Is 331 00:24:38,440 --> 00:24:42,690 Getting back there for a minute, 332 00:24:42,690 --> 00:24:45,050 what you might ask, 333 00:24:46,380 --> 00:24:47,190 you know 3G,a lot of criticism, 334 00:24:49,190 --> 00:24:51,150 is it going to happen? 335 00:24:51,150 --> 00:24:57,640 My comment is as I did for some of the students a while ago, 336 00:24:57,640 --> 00:25:02,990 with whom we were discussing the technology is that 337 00:25:02,990 --> 00:25:14,960 3G networks and phones today in the labs 338 00:25:14,960 --> 00:25:21,100 in about the same shape as GSM was six months before it was introduced. 339 00:25:21,100 --> 00:25:23,200 So we make calls, 340 00:25:23,200 --> 00:25:25,600 actual calls with actual phones, 341 00:25:25,600 --> 00:25:31,250 with actual pay stations through servers which form the, 342 00:25:31,250 --> 00:25:34,140 what used to be a switch, 343 00:25:34,140 --> 00:25:42,630 and is now the doing a part of the core network in a lab environment. 344 00:25:42,630 --> 00:25:46,450 So,everything other than the switch, 345 00:25:46,450 --> 00:25:52,390 which obviously has to be installed in a real environment. 346 00:25:52,390 --> 00:25:54,720 Everything is there; 347 00:25:54,720 --> 00:25:57,330 we make the calls and the technology is mature. 348 00:25:57,330 --> 00:25:58,760 I mean that, 349 00:25:58,760 --> 00:26:03,570 as sure as GSM was six months before the introduction. 350 00:26:03,570 --> 00:26:05,180 And I’m using the example of GSM 351 00:26:05,180 --> 00:26:11,900 because it was introduced before the digital technologies in the U.S. 352 00:26:11,900 --> 00:26:17,820 The businesses that the operators will be able to make out of it 353 00:26:17,820 --> 00:26:20,570 will take a little more time than 354 00:26:20,570 --> 00:26:28,050 the enthusiasts eighteen months ago would have believed or even we would have predicted. 355 00:26:28,050 --> 00:26:34,700 So,it will take a little more time than what the overly optimistic forecast said. 356 00:26:34,700 --> 00:26:36,810 But,it will happen, 357 00:26:36,810 --> 00:26:38,970 it will fulfill two roles, 358 00:26:38,970 --> 00:26:46,630 offer the necessary capacity that the operators will need and it will, 359 00:26:46,630 --> 00:26:54,020 uh,it will uh,provide the opportunity for the data services 360 00:26:54,020 --> 00:26:57,950 with video streaming in 2003 and 2004. 361 00:26:57,950 --> 00:27:00,260 People will watch the, 362 00:27:00,260 --> 00:27:04,850 go to cinema and their home theater to, 363 00:27:04,850 --> 00:27:08,750 to,to watch films. 364 00:27:08,750 --> 00:27:10,520 That’s not going to happen through mobile phones, 365 00:27:10,520 --> 00:27:13,450 let’s not be ridiculous. 366 00:27:13,450 --> 00:27:18,780 But,it’s wonderful to get a note from a video stream, 367 00:27:18,780 --> 00:27:23,610 either from a family member whose somewhere and wants to send a stream 368 00:27:23,610 --> 00:27:29,250 or you get a spot from a favorite football match 369 00:27:29,250 --> 00:27:33,550 where you want to get the goal being scored or something like that. 370 00:27:33,550 --> 00:27:36,250 You know that type of applications, 371 00:27:36,250 --> 00:27:39,180 of course with all sorts of professional applications, 372 00:27:39,180 --> 00:27:40,380 which you can use. 373 00:27:40,380 --> 00:27:43,220 So,the business is going to happen, 374 00:27:43,220 --> 00:27:50,380 the technology enabling that is there; the business models obviously will take a bit of time. 375 00:27:50,380 --> 00:27:52,740 But,we have every, 376 00:27:52,740 --> 00:27:57,470 every confidence that that will happen in 2002 onwards. 377 00:27:57,470 --> 00:28:03,210 Now,I’ll not spend too much time on here, 378 00:28:03,210 --> 00:28:08,190 but the need for a vision in our industry is a burning one. 379 00:28:08,190 --> 00:28:15,140 It’s very important that one has a true vision and a strategy process. 380 00:28:15,140 --> 00:28:20,890 I say this because a lot of cynicists say that you just do it, 381 00:28:20,890 --> 00:28:23,230 what’s the vision thing? 382 00:28:23,230 --> 00:28:25,940 You need the insight and the foresight, 383 00:28:25,940 --> 00:28:36,590 understand all the key aspects of the business both internally as well as otherwise, 384 00:28:36,590 --> 00:28:38,050 the whole landscape. 385 00:28:38,050 --> 00:28:43,660 And then the foresight of where is the business going. 386 00:28:43,660 --> 00:28:48,650 Insight is necessary to have the kind of view of what technology can do. 387 00:28:48,650 --> 00:28:50,810 Foresight is where is the business going. 388 00:28:50,810 --> 00:28:57,320 And we try and spend a lot of time in understanding what’s going to happen. 389 00:28:57,320 --> 00:28:59,840 I think we got it right during the last five years 390 00:28:59,840 --> 00:29:04,620 and I think the concept of content going mobile is the one 391 00:29:04,620 --> 00:29:08,860 which will carry the next five years if you really want to say it in two or three words. 392 00:29:08,860 --> 00:29:14,590 So,if you look at the new paradigm of mobility and I will spend a little bit of time on that. 393 00:29:14,590 --> 00:29:18,300 In the future a major part of personal communication 394 00:29:18,300 --> 00:29:21,940 be it voice,data,images and video will be wireless. 395 00:29:21,940 --> 00:29:30,110 Mobile phone will become the centerpiece of personal connectivity. 396 00:29:30,110 --> 00:29:32,960 And the key thing here is the word personal. 397 00:29:32,960 --> 00:29:37,720 Because a lot of the traffic will be person to person. 398 00:29:37,720 --> 00:29:46,040 It’s not that you get the film from somewhere 399 00:29:46,040 --> 00:29:48,780 and its’ your entertainment device as such. 400 00:29:48,780 --> 00:29:51,140 That’s not the main thing,certainly not; 401 00:29:51,140 --> 00:29:54,650 it’s all about personal communication. 402 00:29:54,650 --> 00:29:58,480 With different devices bringing content 403 00:29:58,480 --> 00:30:03,950 that is suited for this communication and bringing people together, 404 00:30:03,950 --> 00:30:07,230 that’s really the whole concept. 405 00:30:07,230 --> 00:30:11,670 And in the middle there you have our 7650, 406 00:30:11,670 --> 00:30:13,410 the new product that we will, 407 00:30:13,410 --> 00:30:14,460 we’ve just launched last week 408 00:30:14,460 --> 00:30:20,290 and will be in the market in Europe in the second half of next year. 409 00:30:20,290 --> 00:30:26,140 We had 50 prototypes with press and everybody in Barcelona 410 00:30:26,140 --> 00:30:29,390 when we did the launch last week and it was quite interesting 411 00:30:29,390 --> 00:30:34,190 because all these people could take a picture with a digital camera 412 00:30:34,190 --> 00:30:38,290 which was part of their phone. 413 00:30:38,290 --> 00:30:41,500 It’s at the back of their phone,by the way. 414 00:30:41,500 --> 00:30:44,590 And then you took a picture, 415 00:30:44,590 --> 00:30:48,030 and send,people send it to their own email addresses 416 00:30:48,030 --> 00:30:55,390 and then when they flew back home they could get the proof. 417 00:30:55,390 --> 00:30:57,450 This is what’s going to happen, 418 00:30:57,450 --> 00:30:59,720 you will have the MP3 player, 419 00:30:59,720 --> 00:31:10,570 camera with a color display starting next year in the phones at an affordable price. 420 00:31:10,570 --> 00:31:14,090 Providing the reach of call from person to person, 421 00:31:14,090 --> 00:31:17,400 that will change the way people will communicate. 422 00:31:17,400 --> 00:31:18,730 And that’s next year, 423 00:31:18,730 --> 00:31:20,320 that’s two and half G, 424 00:31:20,320 --> 00:31:23,210 with 3G,obviously you get the bandwidth, 425 00:31:23,210 --> 00:31:26,750 you get the better quality for the pictures 426 00:31:26,750 --> 00:31:35,480 and you get the rest of the horsepower that you need for the services to be available. 427 00:31:35,480 --> 00:31:45,400 And it’s no coincidence that at the top of the list in the middle is messaging 428 00:31:45,400 --> 00:31:50,460 because that’s really what the person-to-person communication is all about. 429 00:31:50,460 --> 00:31:54,270 So,that’s really what will change the way, 430 00:31:54,270 --> 00:32:04,210 the way,we will look at communication in the future,future yes. 431 00:32:04,210 --> 00:32:07,830 Now,I want to spend a couple of minutes on something 432 00:32:07,830 --> 00:32:13,150 that we launched about three weeks ago. 433 00:32:13,150 --> 00:32:16,500 That’s our initiative, 434 00:32:16,500 --> 00:32:19,290 together with other industry players on software. 435 00:32:19,290 --> 00:32:26,430 Three weeks ago we got together with key operator’s 436 00:32:26,430 --> 00:32:28,870 and some of our key competitors, 437 00:32:28,870 --> 00:32:36,170 with a statement that we want to build a mobile software platform 438 00:32:36,170 --> 00:32:39,790 for the industry based on open standards, 439 00:32:39,790 --> 00:32:42,000 in order to avoid fragmentation, 440 00:32:42,000 --> 00:32:45,880 and in order to allow interoperability, 441 00:32:45,880 --> 00:32:51,570 so that different operators and different vendors of equipment 442 00:32:51,570 --> 00:32:54,930 would not build proprietary services, 443 00:32:54,930 --> 00:32:57,210 which would not then be, 444 00:32:57,210 --> 00:33:01,170 then could not be used by, 445 00:33:01,170 --> 00:33:13,850 you know,on,on different operators networks or with different vendors equipment. 446 00:33:13,850 --> 00:33:17,740 And what we are talking about here is making sure 447 00:33:17,740 --> 00:33:29,830 that innovation is made possible through the orchestration of the industry platforms in such a way 448 00:33:29,830 --> 00:33:34,430 that you can create global volumes 449 00:33:34,430 --> 00:33:42,030 that allow the kind of economies of scale which are unnecessary for the low price 450 00:33:42,030 --> 00:33:47,340 while at the same time avoiding fragmentation. 451 00:33:47,340 --> 00:33:53,740 And orchestration is the word which we are using in order to describe the, 452 00:33:53,740 --> 00:34:05,910 how to get together through different industry players to get the, 453 00:34:05,910 --> 00:34:07,740 to form the standards. 454 00:34:07,740 --> 00:34:10,720 And thereby, 455 00:34:10,720 --> 00:34:13,140 stimulating the creation of the services 456 00:34:13,140 --> 00:34:18,560 making sure that the small players can bring their entrepreneurship, 457 00:34:18,560 --> 00:34:21,520 allowing investment and the structural change to happen. 458 00:34:21,520 --> 00:34:23,990 Avoiding fragmentation, 459 00:34:23,990 --> 00:34:28,730 lack of interoperability and creating the critical mass. 460 00:34:28,730 --> 00:34:39,930 The,our industry with so many players, 461 00:34:39,930 --> 00:34:41,500 with so many different agendas, 462 00:34:41,500 --> 00:34:45,560 everybody wanting to be the first one has a challenge of orchestration 463 00:34:45,560 --> 00:34:53,760 and the need to unite so that the players can have a common vision. 464 00:34:53,760 --> 00:34:58,600 Obviously,what you might say is that, 465 00:34:58,600 --> 00:35:06,010 with that,with everybody wanting to be the first one and a winner, 466 00:35:06,010 --> 00:35:13,610 isn’t the Microsoft example of them winning the operating system game,a good example. 467 00:35:13,610 --> 00:35:18,740 We don’t think that is the kind of example that would suit to the mobile world. 468 00:35:18,740 --> 00:35:20,060 First of all, 469 00:35:20,060 --> 00:35:31,600 we would not have been able to create based on proprietary technologies a situation 470 00:35:31,600 --> 00:35:34,300 where you would have avoided fragmentation. 471 00:35:34,300 --> 00:35:36,040 Now,we have a good chance, 472 00:35:36,040 --> 00:35:42,110 when twenty key players have gotten there to really build something 473 00:35:42,110 --> 00:35:51,050 which will allow everybody who has software to contribute to the open standard, 474 00:35:51,050 --> 00:35:52,670 at fair and reasonable terms, 475 00:35:52,670 --> 00:35:57,960 at the same time allowing applications built on that platform. 476 00:35:57,960 --> 00:36:03,850 And creating differentiation opportunities for the operators as well as for the vendors, 477 00:36:03,850 --> 00:36:05,390 like ourselves. 478 00:36:05,390 --> 00:36:06,260 And we will, 479 00:36:06,260 --> 00:36:11,680 we’ll want it to be an example and making our software available, 480 00:36:11,680 --> 00:36:13,180 opening our source code, 481 00:36:13,180 --> 00:36:20,260 so that such an open standard will be created. 482 00:36:20,260 --> 00:36:22,340 And you might ask, 483 00:36:22,340 --> 00:36:23,240 what is it, 484 00:36:23,240 --> 00:36:25,790 what is it all about that we’re doing? 485 00:36:25,790 --> 00:36:30,420 So,it’s all about building around Symbian operating system, 486 00:36:30,420 --> 00:36:34,080 an open standard platform which comprises the, 487 00:36:34,080 --> 00:36:35,310 of the middleware 488 00:36:35,310 --> 00:36:40,260 software parts and the browser, 489 00:36:40,260 --> 00:36:46,990 i.e.… the necessary platform to build the software packages 490 00:36:46,990 --> 00:36:53,820 that will then form the core of the networks, 491 00:36:53,820 --> 00:36:57,810 core of the services for the network operators. 492 00:36:57,810 --> 00:37:01,440 And from the list you will see that there is, 493 00:37:01,440 --> 00:37:04,140 there are all the key operators, 494 00:37:04,140 --> 00:37:10,630 Vodaphone,AT&T Wireless,Singular,NTT Dot com being obviously the most important ones 495 00:37:10,630 --> 00:37:18,160 and our competitors Motorola,Samsung,Siemens,Sony Ericsson 496 00:37:18,160 --> 00:37:20,500 being the most important ones,all there. 497 00:37:20,500 --> 00:37:28,060 So,this is a slightly different approach 498 00:37:28,060 --> 00:37:32,680 and I think we have had a little bit of a job in America 499 00:37:32,680 --> 00:37:40,640 in having people understand what we are after 500 00:37:40,640 --> 00:37:44,790 because this is a different one from the model 501 00:37:44,790 --> 00:37:50,070 that has been applied in particularly in the computer industry 502 00:37:50,070 --> 00:37:54,640 where everybody wanted to dash in with their proprietary technology. 503 00:37:54,640 --> 00:38:06,410 Win the market with their own technology and then make a good living with excellent licensing fees. 504 00:38:06,410 --> 00:38:08,650 And We’re sort of working the other way around, 505 00:38:08,650 --> 00:38:13,340 getting together bringing the software at reasonable terms, 506 00:38:13,340 --> 00:38:16,670 building a platform and then the services and applications 507 00:38:16,670 --> 00:38:21,000 which will differentiate will be built on that open standard. 508 00:38:21,000 --> 00:38:34,220 So,we do have a slight difference in philosophy on how things were done in the computer industry. 509 00:38:34,220 --> 00:38:43,620 And obviously Microsoft philosophy as you did guess is not exactly in tune with this one. 510 00:38:43,620 --> 00:38:46,800 So it will be interesting, 511 00:38:46,800 --> 00:38:52,440 I think this is a sure winner in 18 months that will be evident. 512 00:38:52,440 --> 00:38:54,940 We really have a commitment from everybody here. 513 00:38:54,940 --> 00:39:07,810 And I think we will have really a pre-condition for good increase of volumes for the next phase. 514 00:39:07,810 --> 00:39:15,590 Now,this is a slide about our strategy process. I think I should be closing in a minute. 515 00:39:15,590 --> 00:39:18,630 The point here is that, 516 00:39:18,630 --> 00:39:25,370 strategy work nowadays is not about having a strategy for three years, 517 00:39:25,370 --> 00:39:28,680 putting it into a file and then implementing. 518 00:39:28,680 --> 00:39:36,640 Strategy is all about making changes on a weekly if not daily basis. 519 00:39:36,640 --> 00:39:42,850 Yes,we at Nokia,we do have a strategy but we update it on a continuous basis. 520 00:39:42,850 --> 00:39:51,540 So,we usually sort of finalize our strategy in early June each year 521 00:39:51,540 --> 00:39:55,640 and then when we present it to the Board of Directors in September, 522 00:39:55,640 --> 00:40:02,670 we do a major work to update it in a matter of 3 months. 523 00:40:02,670 --> 00:40:06,100 And that’s supposed to be our strategy for the next three years. 524 00:40:06,100 --> 00:40:08,280 At least,every three months, 525 00:40:08,280 --> 00:40:09,940 you have to do a major update nowadays. 526 00:40:09,940 --> 00:40:12,100 That’s how the world changes, 527 00:40:12,100 --> 00:40:19,210 and that’s how both the market dynamics and the technology pressure pushes on people. 528 00:40:19,210 --> 00:40:27,390 The way in which the corporate challenge goes in terms 529 00:40:27,390 --> 00:40:31,680 of how you build their strategies is a very interesting one 530 00:40:31,680 --> 00:40:39,110 because ten years ago it was all about either you looked at the resource base you have 531 00:40:39,110 --> 00:40:41,320 and you built your strategy on that. 532 00:40:41,320 --> 00:40:46,670 You know once you know how your resources are or then you look at the market, 533 00:40:46,670 --> 00:40:49,850 how you segment the market and how you make a living there. 534 00:40:49,850 --> 00:40:56,490 Now,increasingly what you have to look at is how capable is your organization to renew itself 535 00:40:56,490 --> 00:41:03,920 and how you then build on your strategy based on where your renewal capabilities are. 536 00:41:03,920 --> 00:41:06,620 There’s no point in building on something 537 00:41:06,620 --> 00:41:11,650 where you only have capability to do something for the next twelve months 538 00:41:11,650 --> 00:41:13,990 because you got to be able to look ahead. 539 00:41:13,990 --> 00:41:17,580 What do you do in the next five years or so. 540 00:41:17,580 --> 00:41:18,390 The other thing, 541 00:41:18,390 --> 00:41:19,880 which is crucial in terms of, 542 00:41:19,880 --> 00:41:21,260 is all about culture. 543 00:41:21,260 --> 00:41:23,940 And I’ll be very quick now to close. 544 00:41:23,940 --> 00:41:27,780 When you are a small company, 545 00:41:27,780 --> 00:41:29,280 like Nokia was ten, 546 00:41:29,280 --> 00:41:31,010 fifteen years ago in telecoms. 547 00:41:31,010 --> 00:41:36,920 You do it all with your heart,enthusiasm,drive but when you grow big, 548 00:41:36,920 --> 00:41:42,360 what do you,and by that time it’s all about value based leadership. 549 00:41:42,360 --> 00:41:44,060 But when you grow big, 550 00:41:44,060 --> 00:41:50,120 unfortunately,what you need is some manuals,discipline,structure 551 00:41:50,120 --> 00:41:56,110 and really with companies growing the big divider on whom makes it, 552 00:41:56,110 --> 00:42:08,850 is who is able to continue to maintain and preserve the soul of a small company while growing, 553 00:42:08,850 --> 00:42:15,980 while at the same time putting some bureaucratic features in there because they are necessary, 554 00:42:15,980 --> 00:42:19,520 otherwise you just burst from the seams. 555 00:42:19,520 --> 00:42:26,540 So,the balance between fact based management and value based leadership is a continuous one, 556 00:42:26,540 --> 00:42:32,480 it’s a daily fight on how much process and discipline 557 00:42:32,480 --> 00:42:38,840 you have vis-a-vis how much you want people to go and innovate. 558 00:42:38,840 --> 00:42:42,450 And you got to find the balance on a daily basis. 559 00:42:42,450 --> 00:42:45,350 And when you look at it in these terms, 560 00:42:45,350 --> 00:42:57,240 it’s very interesting because you’ve got this pressure coming from both sides all the time. 561 00:42:57,240 --> 00:43:02,230 Then,one,just just one comment, 562 00:43:02,230 --> 00:43:05,350 before closing and that’s, 563 00:43:05,350 --> 00:43:15,240 that’s my favorite topic because from my hometown,Helsinki, 564 00:43:15,240 --> 00:43:19,090 I have an 8 hour flight to Beijing and I have an 8 hour flight to Boston 565 00:43:19,090 --> 00:43:29,270 and that’s my world and because running a global company is a very interesting challenge. 566 00:43:29,270 --> 00:43:31,750 I don’t think that there is an organization model. 567 00:43:31,750 --> 00:43:36,410 I haven’t found a consultant or an academic professor 568 00:43:36,410 --> 00:43:39,740 who would claim that how do you organize yourselves, 569 00:43:39,740 --> 00:43:44,550 several businesses,150 countries,how do you do it? 570 00:43:44,550 --> 00:43:52,080 You have to get global efficiency from economies of scale 571 00:43:52,080 --> 00:43:54,700 so you’ve got to centralize certain things. 572 00:43:54,700 --> 00:43:58,540 You’ve got to have local responsiveness and flexibility 573 00:43:58,540 --> 00:44:01,450 because your customers want to know that there is a Nokia office in every, 574 00:44:01,450 --> 00:44:04,690 not every village but pretty close anyway. 575 00:44:04,690 --> 00:44:10,920 And that’s not very easy if you want to centralize and have economies of scale. 576 00:44:10,920 --> 00:44:15,050 And then you’ve got to have learning within your organization. 577 00:44:15,050 --> 00:44:21,440 So if you make a mistake in your business in Boston in infrastructure business, 578 00:44:24,700 --> 00:44:30,780 you‘ve got to be able to move that learning to Malaysia in your mobile handset business. 579 00:44:30,780 --> 00:44:37,100 And that,how you build that cross-border organizational learning 580 00:44:37,100 --> 00:44:46,670 is one of the key things in how successful organizations are being managed today. 581 00:44:46,670 --> 00:44:48,970 In order to make that happen, 582 00:44:48,970 --> 00:44:54,040 unfortunately you run into a matrix and that’s not fun. 583 00:44:54,040 --> 00:44:57,840 Because matrix organizations are very difficult to manage. 584 00:44:57,840 --> 00:45:00,100 But it is unfortunately a must. 585 00:45:00,100 --> 00:45:07,270 So,just off-loading a few problems I have, 586 00:45:07,270 --> 00:45:14,930 so – welcoming you to join in. 587 00:45:14,930 --> 00:45:18,390 Culture,fundamentally important, 588 00:45:18,390 --> 00:45:22,100 I think it’s the,actually corporate culture is the only glue today, 589 00:45:22,100 --> 00:45:24,880 holding big global organizations together. 590 00:45:24,880 --> 00:45:27,610 There are very few other ways 591 00:45:27,610 --> 00:45:34,400 in which you can hold together your organization than a strong culture. 592 00:45:34,400 --> 00:45:47,670 Thirty-two percent of our business is supported by our employees in R&D. 593 00:45:47,670 --> 00:45:55,290 So tremendous intensity in R& D,high R&D, 594 00:45:55,290 --> 00:45:58,010 that’s our secret for high return on investment. 595 00:45:58,010 --> 00:46:01,990 The efficiency of R& D is the key to that. 596 00:46:01,990 --> 00:46:05,990 And then there’s a final comment on literature. 597 00:46:05,990 --> 00:46:12,220 Oh,I might let’s let’s look at that because I think there is some meaning to that. 598 00:46:12,220 --> 00:46:15,600 What makes companies successful in the long-term? 599 00:46:15,600 --> 00:46:24,100 There is a lot of argument there and I just throwing in one thought there. 600 00:46:24,100 --> 00:46:34,150 Collins & Porras in their Built to Last book a few years back and I think their Good To Great, 601 00:46:34,150 --> 00:46:36,480 the Jim Collins his continuation is a similar, 602 00:46:36,480 --> 00:46:42,610 makes a similar point that successful companies are made of timeless qualities 603 00:46:42,610 --> 00:46:44,470 of organizational excellence and strong culture, 604 00:46:44,470 --> 00:46:50,700 consistently nurtured and that will then distinguish outstanding companies. 605 00:46:50,700 --> 00:46:56,140 Whereas,Penelope Shee would say that it’s all about leadership, 606 00:46:56,140 --> 00:46:57,440 look at Jack Welsh. 607 00:46:57,440 --> 00:47:02,020 And that’s how you go about it. 608 00:47:02,020 --> 00:47:03,980 My personal view is that, 609 00:47:03,980 --> 00:47:09,380 I’m a little closer to Collins and Porras in their argument, 610 00:47:09,380 --> 00:47:13,820 but leadership has a lot to do with it surely you need good people at the top, 611 00:47:13,820 --> 00:47:19,840 but you cannot rely on a couple of good people. 612 00:47:19,840 --> 00:47:23,790 You got to have a soul and a heart of a company has to be defined 613 00:47:23,790 --> 00:47:26,990 in such a way that it carries you through generations. 614 00:47:26,990 --> 00:47:30,420 That has kept us,Nokia,alive for 136 years, 615 00:47:30,420 --> 00:47:33,510 so we’re at the same time a young company and an old company. 616 00:47:33,510 --> 00:47:36,360 That’s an interesting thing. 617 00:47:38,390 --> 00:47:46,480 Ok,I usually overstay my, 618 00:47:46,450 --> 00:47:50,350 the time given but I’m pleased to answer any questions, 619 00:47:50,100 --> 00:47:58,990 so please go ahead. 620 00:47:52,110 --> 00:47:54,040 So,we’ll welcome questions and we’ll ask that you please identify yourself. 621 00:47:54,040 --> 00:47:58,840 You can start from there. 622 00:47:58,840 --> 00:48:02,320 Oh,start with the lady up there. 623 00:48:02,320 --> 00:48:09,120 As I know Nokia has the biggest market share in the world, 624 00:48:09,120 --> 00:48:15,350 but in Japan Nokia’s market share is not big, 625 00:48:15,350 --> 00:48:19,550 maybe I can say it’s very small (1%) yea 626 00:48:19,550 --> 00:48:24,830 and I think Japan is the most important wireless market in the world. 627 00:48:24,830 --> 00:48:30,470 Japan is the first country to launch 3G and wireless data service is very successful there. 628 00:48:30,470 --> 00:48:35,300 So my question is why is Nokia’s market share so small in Japan 629 00:48:35,300 --> 00:48:41,250 and is it because Nokia didn’t put a lot of effort into Japan 630 00:48:41,250 --> 00:48:45,540 or is it because it is difficult to enter the Japanese market? 631 00:48:45,540 --> 00:48:52,250 And what’s Nokia’s approach for the Japanese market? 632 00:48:52,250 --> 00:48:53,390 48:50 Pause 633 00:48:53,390 --> 00:48:56,170 Yea,I think your suggestions for the answers were pretty good. 634 00:48:56,170 --> 00:49:05,890 The Japanese market is very different in terms of how its structured, 635 00:49:05,890 --> 00:49:08,820 very very different, 636 00:49:08,820 --> 00:49:11,820 you basically have one operator, 637 00:49:11,820 --> 00:49:19,090 which is a close to monopoly,NTT DoCoMo which does about 70% of the market. 638 00:49:19,090 --> 00:49:23,390 They have a what they call the DoCoMo family. 639 00:49:23,390 --> 00:49:31,230 Four suppliers whom,DoCoMo designs the handsets, 640 00:49:31,230 --> 00:49:41,310 so they have 5000 R&D engineers with the operator that is like AT&T Wireless,Verizon,whatever. 641 00:49:41,310 --> 00:49:54,910 They design both the crude hardware and they actually code, 642 00:49:54,910 --> 00:50:00,640 design and code the software for the handsets that they want their suppliers to make. 643 00:50:00,640 --> 00:50:05,930 There’s,this family always gets the information a little earlier 644 00:50:05,930 --> 00:50:09,040 and the specs a little earlier than the rest of us 645 00:50:09,040 --> 00:50:17,790 and that includes the non-Japanese companies as well as the Japanese non-family companies. 646 00:50:17,790 --> 00:50:32,870 The NTT DoCoMo in a very efficient way puts together the technologies 647 00:50:32,870 --> 00:50:35,130 that area available in the market. 648 00:50:35,130 --> 00:50:40,020 It’s not dramatic in terms of a technology innovator because the technologies they use, 649 00:50:40,020 --> 00:50:45,600 they use the RIPR available in the marketplace, 650 00:50:45,600 --> 00:50:52,120 when they design both the services as well as the hardware and the software of the phones. 651 00:50:52,120 --> 00:50:59,250 And it’s a very interesting way of structuring a market. 652 00:50:59,250 --> 00:51:06,100 So,thereat’s a description,nowthen to the reasons why. 653 00:51:06,100 --> 00:51:13,140 And,we really have not put seriously resources into Japan, 654 00:51:13,140 --> 00:51:19,380 other than a bit of test marketing to get the feel and so on. 655 00:51:19,380 --> 00:51:25,770 We will be serious in the 3G, 656 00:51:25,770 --> 00:51:38,850 starting in the 2nd half of next year when NDTTDotComaMo and J-Phone will launch the 3G service 657 00:51:38,850 --> 00:51:43,920 which is based on the commonly agreed standard 658 00:51:43,920 --> 00:51:49,260 because what NDTTDOtComaoCoMo launched first of October, 659 00:51:49,260 --> 00:52:00,280 this year,i.e. eight weeks ago is not the network that will be used next year, 660 00:52:00,280 --> 00:52:02,230 i.e. the commonly agreed standard. 661 00:52:02,230 --> 00:52:07,570 But it was a proprietary pre-version of, 662 00:52:07,570 --> 00:52:09,830 which is a very different technology. 663 00:52:09,830 --> 00:52:11,180 Why? 664 00:52:11,180 --> 00:52:14,110 Because NDTTDOtoComa wanted to prove that Japanese is first 665 00:52:14,110 --> 00:52:20,780 and they had to take a proprietary technology because the agreed standard wasn’t ready. 666 00:52:20,780 --> 00:52:23,760 It was frozen in June of this year 667 00:52:23,760 --> 00:52:30,030 and there’s no way you can do in two months a phone for such a technology. 668 00:52:30,030 --> 00:52:34,100 And we didn’t want to participate in that test phase. 669 00:52:34,100 --> 00:52:37,900 The real thing will start next year and these phones, 670 00:52:37,900 --> 00:52:39,060 which are now being used. 671 00:52:39,060 --> 00:52:42,450 They will not be used twelve months from now because there will be no network. 672 00:52:42,450 --> 00:52:44,530 You know,this is a test thing, 673 00:52:44,530 --> 00:52:48,950 for a pre-version of the standard, 674 00:52:48,950 --> 00:52:51,480 the real thing just as in Europe, 675 00:52:51,480 --> 00:52:54,070 will be there next year. 676 00:52:54,070 --> 00:52:59,420 So,we don’t want to be part of that test phase, 677 00:52:59,420 --> 00:53:04,510 we want to be there, 678 00:53:04,510 --> 00:53:06,510 that was a common choice and we saved a lot of money, 679 00:53:06,510 --> 00:53:08,770 by the way,on that. 680 00:53:08,770 --> 00:53:14,640 There are cultural issues in Japan, 681 00:53:14,640 --> 00:53:22,780 which make it very difficult to penetrate through the distribution for a non-Japanese company. 682 00:53:22,780 --> 00:53:27,070 The other non-Japanese companies haven’t got any market share today. 683 00:53:27,070 --> 00:53:28,460 We’re the only one there, 684 00:53:28,460 --> 00:53:32,740 so it’s not a coincidence that we have a low market share. 685 00:53:32,740 --> 00:53:35,030 It is a very difficult market to penetrate, 686 00:53:35,030 --> 00:53:40,400 that’s a nice way of putting it. 687 00:53:40,400 --> 00:53:42,740 Hello. My name is Enrique Perez53:43; 688 00:53:42,740 --> 00:53:44,600 thank you very much for coming to Sloan today. 689 00:53:44,600 --> 00:53:46,760 My question is where, 690 00:53:46,760 --> 00:53:52,700 given the exponential growth you have shown in the last five years, 691 00:53:52,700 --> 00:54:00,760 how do you predict that for the next decade and what are the sources for this growth? 692 00:54:00,760 --> 00:54:06,980 As you might of seen we had some analyst meetings yesterday 693 00:54:06,980 --> 00:54:18,770 and we gave some of our views on where,how we see growth evolving. 694 00:54:18,770 --> 00:54:23,740 You know this year is flat,so no growth on previous year. 695 00:54:23,740 --> 00:54:28,040 When our,all of our competitors had negative fifteen to twenty percent, 696 00:54:28,040 --> 00:54:33,110 so we kind of feel pretty ok,not good,but ok. 697 00:54:33,110 --> 00:54:41,470 Next year,we’re looking at 15% growth and the year after unless there is, 698 00:54:41,470 --> 00:54:48,050 there’s no disturbance at least 15% growth, 699 00:54:48,050 --> 00:54:55,060 with no significant employee growth, 700 00:54:55,060 --> 00:55:00,810 so that we look at getting productivity growth,all of about 15%. 701 00:55:00,810 --> 00:55:06,520 R&D personnel up but in other areas reduction. 702 00:55:06,520 --> 00:55:15,340 The source of that growth coming in the next three years both from handsets and infrastructure, 703 00:55:17,400 --> 00:55:23,050 about the same percentage growth in both and by 2003, 704 00:55:27,530 --> 00:55:30,490 3G phones will be already be, 705 00:55:30,490 --> 00:55:36,370 3G phones and 3G infrar equipment will already be a significant part of that. 706 00:55:36,370 --> 00:55:39,710 So,slower growth but still significant, 707 00:55:39,710 --> 00:55:47,950 double digit allowing us to grow in productivity by about 15% 708 00:55:47,950 --> 00:55:52,000 if we have the same operational excellence, 709 00:55:52,000 --> 00:55:57,400 that we used to have in the last five years. 710 00:55:57,400 --> 00:56:01,230 You’ll be the next one,sorry. 711 00:56:01,230 --> 00:56:04,680 Actually,I have the mic. 712 00:56:04,680 --> 00:56:14,560 (56:09-56:12 Question being asked byut volume to low to hear it) 713 00:56:14,560 --> 00:56:24,280 Recipe for success,there is not one. 714 00:56:24,280 --> 00:56:32,330 There is not one recipe,there are a few. 715 00:56:32,330 --> 00:56:45,300 I think the,the,let me go around a bit and say it like this. 716 00:56:45,300 --> 00:56:53,490 In early 90s when we said we’ll make this a telecom company now,w 717 00:56:53,490 --> 00:56:56,710 e looked at,where are we good at,where are we bad. 718 00:56:56,710 --> 00:57:00,760 We had this feeling that R&D,we kind of noticed, 719 00:57:00,760 --> 00:57:03,580 you know we can make phones we know RF, 720 00:57:03,580 --> 00:57:11,020 so we’ll just do it a little better then we said to ourselves, 721 00:57:16,430 --> 00:57:22,720 we’ll we’re worse than our competition in manufacturing and in marketing 722 00:57:22,720 --> 00:57:26,900 and we’re a pretty international bunch of people, 723 00:57:26,900 --> 00:57:29,640 so we felt that we couldan be, 724 00:57:29,640 --> 00:57:37,040 that we couldan learn to be global as easy as anybody else,Motorola,whomever. 725 00:57:37,040 --> 00:57:42,250 So,we had weaknesses manufacturing and marketing, 726 00:57:42,250 --> 00:57:45,220 so we really put a lot of energy on that, 727 00:57:45,220 --> 00:57:48,350 you know we really hired a lot of good people. 728 00:57:48,350 --> 00:57:50,960 And we said we want to be number one in manufacturing 729 00:57:50,960 --> 00:58:00,770 and we want to build a brand and we want to learn how to market and build a global organization a 730 00:58:00,770 --> 00:58:03,780 nd make sure we have R&D in shape. 731 00:58:03,780 --> 00:58:10,490 So,if you want a secret or a concept, 732 00:58:10,490 --> 00:58:13,240 I think a concept is a better word 733 00:58:13,240 --> 00:58:19,490 because no secrets,I mean nowadays it’s all transparent you can all comment on it. 734 00:58:19,490 --> 00:58:24,670 So,it does happen all the analysts and journalists, 735 00:58:24,670 --> 00:58:25,860 you know they do comment, 736 00:58:25,860 --> 00:58:27,070 they have their x-ray. 737 00:58:27,070 --> 00:58:28,000 A