Some of you may already be thinking that the basic idea already existed – Yahoo! Answers. However; I disagree that it is similar to Yahoo! Answers – yes you can ask a question and get an answer but I feel that not only does it have a much greater sense of community (which is helped by its smart credit system) but the quality of the answers are also much better.

At its core Quora is going to be based upon the strength and quality of the answers as well as who the people answering the questions are – and with these two judging criteria in mind, it scores pretty well. It has built up a community and a system whereby users will not want to submit a poorly thought answer, in fear they will damage their credibility amongst their followers as well as amongst casual visitors to the site.

You won’t be able to simply join Quora and start asking millions of questions, the credit system ensures that you will have to earn the privilege by answering questions (which cost a certain number of points).

Logging on you can see the founders of companies such as Spotify’s Daniel Ek eagerly answering questions from Spotify users – building up a great relationship and feedback mechanism.

How does this relate to startups? I have to say Quora has been one of the richest resources for me as I research for my latest startup token.ly, I could immediately hone in on experts within a certain niche and politely ask them questions via PM or write a question and invite them to answer. I would encourage all founders to use Quora – be careful though, you’ll soon become addicted.

Feel free to follow me.

Industry commentary:

• Venturebeat
• Techcrunch
• Uncrunched
• Mashable
• Read Write Web
• Fast Company
• Venture Village
• OnStartups
• Alley Insider
• GigaOm
• PE Hub
• The Funded

Venture capitalists:

• Paul Graham
• Fred Wilson
• Larry Cheng
• Chris Dixon
• Ben Horowitz
• Babbling VC
• Feld Thoughts
• Lightspeed Venture Partners Blog
• Venture Blog
• Venture Hacks
• Dave McClure
• David Skok

If you have any others to add to the list, please feel free to leave them in the comments!

After using it I have to say it is a beautiful application, no one will argue that it is different to most apps out there which try to cram in as many features as possible – creating a clunky user experience. Once you get your hands on it, you will become addicted the satisfying vibrate, sound and colour change to each item you strike off your list.

However, it is hard to escape the fact that at it’s core it is just a basic to-do list application – which would be pretty difficult to make overly complicated. I was hoping that there would be some very cool innovative features that could perhaps inspire use in other apps but unfortunately I don’t think that’s going to be the case.

As a nice simple (tasks limited to 28 chars) productivity tool – I’d advise you check it out.

It really does feel like a new iPad with everything flowing much better – I’m a pretty avid reader of many magazines on my iPad (Wired, GQ, The Economist, and my favourite Bloomberg BusinessWeek). All of the aforementioned now only look better but don’t feel as clunky.

I thought I’d utilise this post to highlight what I’m currently reading as well as a couple of my favourite apps that I could not live without on my iPad.

Books:

1. Repeatability by Chris Zook & James Allen – Currently only available as an eBook, I was hooked after downloading their sample chapter.
2. Business Model Generation by Alexander Osterwalder & Yves Pigneur – I bought this simply because of its great illustrations, the book itself is rather basic but also a handy guide – especially if you want to try and explain a business model to a colleague in an easy to understand format.

Apps:

1. Dropbox – The application needs no introduction, the ability to throw a PDF in my Dropbox and then detach myself from my desk makes for a welcome break every couple of hours.
2. CloudOn – A recent find, again it utilises Dropbox, but lets you edit documents in their native Microsoft interfaces (a little clunky but not too bad) – i.e. it is just as if you are using Word on your computer.

What are you currently reading or what app can you not do with out? Feel free to put it in the comments!

Strategic Analysis of Nokia Corporation

The following report provides an independent strategic analysis on the business of Nokia, the Finnish telecommunications equipment company. Within the report advanced strategy tools are used to analyse the company’s internal and external environment, current direction and competitive advantages. Suggested changes to the overall company direction as well as changes to both the Business Unit and Corporate Level strategic options are put forward and compared with Nokia’s existing strategies.

1. Introduction

Nokia is the largest mobile phone company in the world, selling just over 450 million phones in 2010 – which translates to over 22% of the market (Gartner, 2011), but its long-term dominance is now being challenged more than ever (Global Information, 2011). The once seemingly infallible company that innovated to shape much of the modern mobile phone market has been caught off guard in recent years as the competitive landscape evolved and accelerated from being product driven to ecosystem led (SEC, 2011). This change, coupled with inability to quickly launch a credible response to innovative North American rivals such as Apple and Research in Motion (RIM) who have stolen the lead in high-end smartphones has caused Nokia to lose ground and market share. Low cost Asian rivals are also threatening Nokia’s grip on the mass markets (Thomson Reuters, 2011). Revenues have been declining, market share dominance waning and average sales prices tumbling (Financial Times, 2011). All of these factors have been pivotal in forcing Nokia to re-evaluate and focus its corporate strategy, vision and core values.

Nokia has not been slow in recognising the need to re-think and reformulate their strategy; based around three pillars; regaining leadership in the smartphone market, reinforcing their leadership position in mobile phones and investing in future disruptions (SEC, 2011). Execution has been somewhat lacklustre (LXNews, 2011). In February 2011 Nokia formed a partnership with one of the largest software companies in the world, Microsoft, who is just as eager to make an impact in the mobile phone market (Microsoft, 2011). Making the partnership work will be a huge challenge not only from technological and marketing standpoint but also because of the disparity in size and culture between the two organisations. Having recently posted the lowest market share in fourteen years, 22% – its third year-on-year decline – it is evident that with any strategy undertaken, it is going to be tougher than ever to regain its historical position at the top of the market. Was the fact that Nokia largely ignored the American market a factor in its downfall? Was Nokia too reliant upon the European and Asian markets?

Now, in the fourth quarter of 2011, Nokia stands exposed – the partnership with Microsoft may or may not be the beginning of an essential turnaround (Harvard Business Review, 2011). It must hope that the history of alliances is no guide to the future (FT, 2011).

2. Strategic Analysis

Nokia has three Strategic Business Units (SBUs): Mobile Phones, Smart Devices and Location and Commerce. Its Mobile Phone team focuses on bringing a modern and affordable mobile experience to people around the world (Nokia.com, 2011). The Smart Devices team focus on the creation of smartphones – this is the SBU responsible for the partnership with Microsoft and the Windows Phone platform (Nokia.com, 2011).The Location and Commerce team are responsible for developing a new class of integrated social location products and services for consumers, Nokia Maps. In addition to the services based aspect the Location and Commerce SBU provide digital map information, related location based content and services for mobile navigation devices, automotive navigation systems, governments and business solutions through Navteq, which was acquired in 2008.

Table 2.1 – SBU Identification Matrix

It should be noted that there is another segment of Nokia’s business, a joint venture with Siemens – the Nokia Siemens Network. A leading provider in mobile and fixed network infrastructure; however, for our analysis we have found this part of Nokia has its own strategic plays and decision processes and will not be included in our strategic analysis.

2.1 – Internal Environment

Internal analysis provides a useful method to establish the relationship between Nokia’s resources and capabilities, and how this is used to create value for the customer. The internal analysis can also help identify the limitations within Nokia’s operations (Johnson et al, 2011).

2.1.1 – Mobile Phones

2.1.2 – Smart Devices

2.1.3 – Location & Commerce

External Environment

PESTEL

Political

The external political environment has the potential to impact Nokia significantly – especially due to the fact that Nokia is operating on a global scale and must abide to a whole host of nation specific platforms in which the political and legal systems could differ substantially. “To its success, Nokia surveys its scope of limits in order to isolate prohibited actions, regulations and aid from the government so as to withstand the international trade” (MBA Knowledge Base, 2011). Within the United States Nokia has to devote funds to lobbying on matters relating to patent protection, electronic waste exports and trade barriers (Implu.com, 2011) – in 2011, $500,000 has been spent thus far. Other political aspects that impact Nokia include new and existing laws or regulations, in 2010 Saudi Arabia suspended Blackberry’s messaging service – a critical core feature and competitive advantage – on the grounds of “national security” (Times, 2010) – illustrating how easily national laws can quickly impact and upset core competitive advantages. Labour laws have also impacted Nokia; Nokia China announced plans to cut the number of employees, to which they were accused of violating Chinese labour laws (Buzzom.com, 2011). Nokia works closely with national authorities in order to gain maximum advantage and to not incur any penalties.

Economic

Economic factors such as growth rates, interest rates, exchange rates and inflation rates are critically important to Nokia both in the short term and long term. The impact of these factors can have major implications, including how they operate and make decisions – such as what should be produced, how it should be produced and what demographic of customer the end product should be targeted toward. Gross Domestic Product (GDP), for example, dictates what strategies Nokia should implement and consequently what products should be offered in which countries. This helped shape Nokia’s “Next Billion” strategy for the emerging markets in which more basic cheaper phones are offered. The volatility of the Indian rupee is another example in which it affected Nokia’s topline growth, restricting in their ability to increase price to push the costs onto the consumer – high inflation within India causes price stability problems (IndiaTimes, 2011). The financial crisis has impacted Nokia as customers within developed nations saw their disposable income decrease, delaying new smartphone purchases or opting for less costly contracts with free phones (Times, 2011).

Social

Very few industries can rival the mobile phone industry in relation to constantly changing consumer tastes. Nokia’s products have relatively short product lifecycles; this means Nokia has to pay close attention to trends and social tastes. Developments in how mobile phones and smart devices are used have changed over the years, for example, the emergence of camera phones, touch screens and 3G. Failure to implement features when they first emerge can lead to significant market share erosion (Unwired View, 2011). Nokia operates in a huge number of markets mainly due to its strong distribution network – all of these markets have specific tastes, cultures and expectations; thus, Nokia caters to these differences by providing different models with both subtle and extensive differences throughout their entire range of products. Other social aspects such as advances in the workplace impact Nokia and its workforce; increased use of outsourcing of jobs to other countries, increased demand for work/life balance, and increased demand for job mobility and flexibility.

Technological

Within the telecommunications industry, specifically OEMs, the speed of change and adoption of new technology impacts incumbents significantly – the success of Nokia is based on constant innovation. Nokia analyses research and development advances by competitors – evident from their quick adoption of touchscreen technologies and more recently through their research initiatives into devices such as Tablets that are similar to the iPad. Industry advances, for example cellular telephony spectrums – 3G and now 4G impact both Nokia’s business unit and corporate level strategies; examples of the Pareto principle in action.
Environmental

Changing public attitude towards environmental sustainability as well as product disposal and recycling have transformed considerably over the past decade. Nokia have been proactive with regard to environmental responsibility and sustainability, they put forward that it is “integrated into everything we do. From the devices we build and the suppliers we choose, to our mobile solutions that enhance people’s education, livelihoods and health”. With regard to product sustainability and the trend in recycling products, “Each and every Nokia device is created with the environment in mind. We don’t make one-off eco-friendly devices – all the handsets and accessories we produce fulfil our strict environmental criteria” (Nokia, 2011). Nokia also reduced the packaging size of most devices by 70% between 2005 and 2010. Nokia has set an aspirational target to reduce greenhouse gas emissions caused during the whole mobile device life cycle over 60% by the year 2020 to the level in 2000 (The Economist, 2010).

Legal

Nokia has over 132,000 employees in 120 countries (Mashable, 2011) and thus recognises the importance of issues that relate to employment regulation as well as employee health and safety. For example, Nokia recently signed an agreement relating to the compensation packages to be received by the employees of Nokia working at the Jucu plant with the Romanian trade unions (Business Review, 2011). Product safety and security is another legal issue that is of utmost importance to Nokia – “All Nokia products are designed and manufactured to be safe for users… products have been designed to meet relevant safety guidelines for electromagnetic field emissions…” (Nokia, 2011)

As previously mentioned legal battles over patents and the protection of intellectual property are intense between the leading manufacturers – with many manufacturers usually trying to ban the importation of devices they believe infringe upon their patents (Economist, 2011). To illustrate one example, in June of 2011 Nokia claimed victory in a long running patent battle with Apple – Nokia had put forward that Apple’s iPhone violated at least 7 Nokia patents. As a result of the ruling Apple has now signed a patent licence agreement with Nokia (Financial Times, 2011). Nokia currently has one of the strongest intellectual property portfolios within the wireless industry – holding over 10,000 patents (SEC, 2011).

Porters Five Forces (Porter, 1985)

Porter’s Five Forces analysis is used to assess the attractiveness of different industries and it can help illustrate the sources of competition in an industry (Johnson, Scholes & Whittington, 2011). The Porter’s Five Forces analysis has been conducted with attention on each of Nokia’s SBUs; mobile phones, smart devices and, location and commerce.

Porters Five Forces – Mobile Phones

Threat of Entry of New Competitors – HIGH

Barriers to entry within the basic mobile phone industry are relatively low; hence Nokia stands to, and currently is subjected to, intense competition on their “next billion” strategy. The market within emerging markets is dominated by local OEMs and is extremely price competitive – illustrating that low cost rivals can enter at any time. Nokia’s awareness of this can be seen in their 20-F filing with the SEC: “In the mobile phones segment a different ecosystem is emerging involving very low cost components and manufacturing processes. In particular, the availability of complete mobile solutions chipsets from MediaTek has enabled the very rapid and low cost production of mobile phones by numerous manufacturers in the Shenzhen region of China which have gained significant share in emerging markets.” (SEC, 2011) Competitive advantages within distribution have somewhat cushioned the impact to Nokia; however, customer loyalty within emerging economies where disposable income is very low – means that cost will be the overall determinant of the product purchased.

Threat of Substitute Products or Services – HIGH

Within emerging markets the buyers’ propensity to substitute is relatively high, with the one overarching factor being price. Switching cost is minimal, especially with regard to the handset, rather than the network. If the customer has a laptop and internet connection VOIP services such as Skype could challenge the need for a basic mobile phone.

The Bargaining Power of Customers – HIGH

The bargaining power of mobile phone customers is high within both developed and developing markets as switching costs are low, and competition between manufacturers is high. Brand loyalty is the only real defence that manufacturers can use to prevent switching; Nokia recently saw its brand value fall $9.9 billion in the BrandFinance Global 500 listings – the largest decline of any name.

The Bargaining Power of Suppliers – LOW

Nokia has an extremely complex supply chain that handles 100 billion components, 60 strategic suppliers, and 10 factories worldwide (IBM, 2006). Nokia strives to build partnerships with its suppliers linking supply chain objectives to corporate objectives; within this supply chain redundancies are built so that no one supplier is critical to the production process. The power is further reduced by Nokia’s upstream and downstream vertical integration at its own factories as well as by its strong brand and bulk purchase agreements. Many factories and companies exist solely because they are suppliers to Nokia. Nokia constantly ranks amongst the leaders in supply chain management; historically being a strong innovator (Businessweek, 2005) supply chain best practices have turned ideas into profitable businesses.

The Intensity of Competitive Rivalry – HIGH

Within developed markets the intensity of competition in basic mobile phones has curtailed, with the product line currently in significant decline. Within emerging markets Nokia is facing strong competition not only from the usual players but also domestic firms who are both able to provide innovative basic mobile phones for low cost. China was 21% of Nokia’s sales in 2010 but sharp decreases in revenue in 2011/2012 are expected (Goldman Sachs, 2011).

Porters Five Forces – Smart Devices

Threat of Entry of New Competitors – MEDIUM

Production of smart devices involves highly advanced research and development divisions; with strong knowledge of patents and proprietary technology critical. Significant investment is needed for any potential competitors to achieve economies of scale; it would be difficult for the new entrant to compete against the incumbents that are already operating on cost and differentiation strategies. Although, the smartphone market does boast attractive growth rates – 30% in 2010 (Reuters, 2010) – and high margins; thus, it is not unfeasible that a new player could enter the market, for example what Apple achieved in 2007.

Threat of Substitute Products or Services – LOW

There are few substitutes for smartphones; those people who require a basic device will purchase a mobile phone; those who want a device for applications and other related services will purchase a smart phone. There may be some pressure from tablet devices; however, these will lack the basic functionality of phone calls. Netbooks and laptops could potentially be a substitute. Because the smartphone serves as a consolidation of several technologies – the treat of it being substituted is weak.

The Bargaining Power of Customers – HIGH

Buyers have high bargaining power and will pay for what they value the most; thus, they have a willingness to switch to more innovative products. Customers are also armed with knowledge about which smartphone platform has the best and most interesting applications, functionality and other factors such as battery life through extensive reviews and information. Bargaining power will be predominantly through switching brands rather than substitution of smartphones overall. Bargaining power is diluted by network providers with the inclusion of long contracts, meaning customers are tied to a phone for typically between 12-24 months.

The Bargaining Power of Suppliers – LOW

The bargaining power of suppliers over Nokia is relatively low. Through industry leading and prudent supply chain management, Nokia have many fail safes in place if one supplier was to suddenly shut. For the suppliers that do exist – Nokia orders in huge quantity and is such an important customer that most suppliers would not want to risk damaging the relationship.

The Intensity of Competitive Rivalry – HIGH

In developed markets competitive rivalry within the smartphone market is intense – Nokia, industry leader, faces constant competition from manufacturers such as Apple, HTC, RIM and Samsung.

Porters Five Forces – Location & Commerce

Threat of Entry of New Competitors – MEDIUM

Barriers to entry within the location and commerce field are high, new entrants face high capital requirements. Nokia’s acquisition of Navteq in 2007 underwent an antitrust investigation as the European Commission felt that the acquisition “could stifle competition in the sector because there was only one other mapmaker with global reach, Tele Atlas” (Financial Times, 2008). “Aerial, satellite and other location based imagery is becoming increasingly available and competitors are offering location based products and services with the map data to both business customers and consumers in order to differentiate their offerings. These developments may encourage new market entrants” (SEC, 2011). Attractive high growth rates and potential innovation within the industry will continue to potentially attract entrants.

Threat of Substitute Products or Services – HIGH

We think that the growing field of web-based data providers in the US and Europe presents a serious threat to Nokia’s Navteq and TomTom’s TeleAtlas businesses. While these solutions may not work for auto-OEM grade devices, they are in many ways superior for high growth web-based location based services. This could in turn reduce the demand for Navteq’s fee based products and services which incorporate the Navteq map database.

The Bargaining Power of Customers – HIGH

Bargaining power of customers is quite high as new entrants emerge in a fast growing and rapidly changing marketplace. Historically this bargaining power has been low due to the duopoly of Tele Atlas and Navteq.

The Bargaining Power of Suppliers – LOW

Suppliers to Navteq have relatively low bargaining power this is due to the fact that there are minimal supplier agreements. Navteq is vertically integrated with its own team of 1000 geographical data collectors and analysts; this is their main source of competitive advantage. In the future they may seek to outsource “street view” contractors in order to compete with Google’s free offering.

The Intensity of Competitive Rivalry – MEDIUM

Competitive rivalry has increased in recent years with a host of new players joining the historic duopoly of Tele Atlas and Navteq. Firms within the sector are seeing cannibalisation of personal navigation devices to smartphones. The leading companies within the sector include; Tele Atlas, Navteq, Garmin, Google and community generated Open Street Map. Recently governmental and quasi-governmental agencies are producing more map data with improved coverage and content – available at low costs, if not free of charge (SEC, 2011). An example of competitive rivalry would be Navteq’s competition with Google – Google utilises an advertising based model in which the provision of the maps and data is freely provided with adverts shown alongside as well as integrated within.

A strategic group analysis can be seen in Figure 2.8, this will assist in positioning Nokia relative to its competitors as well as idendifying strategic gaps to exploit. The analysis highlights that there are clear distinctions within the competitive rivalry of the smartphone market. Some players such as those in Group 1 are national firms focused on narrow product ranges, players in Group 4 have a narrow product scope, perhaps one or two products but a large geographical scope.

Industry Life Cycle

The industry life cycle determines what stage Nokia’s SBUs are in, and it should be noted that the power of the five forces typically varies with the stages of the industry life cycle – as highlighted by Johnson et al. (2011).

It can be seen from the figures above that the various industries that Nokia compete within, both in emerging markets and developed markets, differ significantly. It can be seen that traditional mobile phones (3) have started to decline in developed markets as high income consumers demand feature rich smartphones (1). Contrast this with lower income emerging market consumers in which they strive to have a basic mobile phone which is currently in the growth stage (2). The figures above highlight the poignancy in using the industry life cycle to analyse across geographies which possess different characteristics – it aids in the understanding of current strategies as well as in formulating new ones.

Summary of Strategic Analysis

Following the comprehensive analysis of the internal and external factors impacting Nokia, a summary can be seen in Table 3.1, a SWOT analysis that highlights the current strengths, weaknesses opportunities and threats that are likely to impact on strategy development. This has been used as a basis against which to generate strategic options and assess future courses of action.

A scoring mechanism (plus 5 to minus 5) has been used in Table 3.2 as a means of assessing the interrelationship between the environmental impacts and the strengths and weaknesses of Nokia. A positive denotes that the strength of the company would help it take advantage of, or counteract, a problem arising from an environmental change or that a weakness would be offset by that change. A negative score denotes that the strength would be reduced or that a weakness would prevent the organisation from overcoming problems associated with that change. The most important points, in our judgement, were extracted from the SWOT. It can be seen throughout the table that the scoring resulting from potential opportunities that can be acted upon as a result of strengths far outweigh the threats.

In the second table, Table 3.3, we have analysed opportunities and threats in the eyes of competitors, both in emerging markets (ZTE, Alcatel) and developed markets (Apple, RIM, Samsung and Motorola) – these were chosen from our strategic group analysis in Figure 2.8. As one would expect the greatest threat to Nokia’s potential opportunities come from those manufacturers that have the opportunity to develop phones for the Windows Phone platform – Samsung and Motorola. From the grouping analysis we can also deduct that they have similar manufacturing capabilities.

A short term strategy that Nokia are rolling out in early 2012 is the launch of their “Asha” range of smartphones aimed at the upper tier of low income countries (India Today, 2011) – this build upon a number of the strengths and opportunities that can be seen in Table 3.1 with evidence available in Figure 2.10. This strategy is a natural progression and caters for the up and coming middle class of the emerging markets, maintains brand visibility and builds up consumer loyalty.

Furthermore, another short/medium strategy that has higher risk is the announcement of a Nokia tablet, competing against industry incumbent Apple’s iPad. This draws upon a number of Nokia’s strengths; for example, supply chain management (S6) and R&D capabilities (S1) it is also a new market for Nokia; and is reliant upon a strong software offering from Microsoft – with the software being the main distinguishing factor amongst consumers. This strategy will also open Nokia up to increased compensation as other phone manufacturers that use the Microsoft Windows Platform, such as Samsung join in the tablet competition.

Organisational Direction

Nokia’s Mission (Nokia, 2011):

“Connecting People”

Nokia’s Vision (Nokia, 2011):

1. Build a new winning mobile ecosystem in partnership with Microsoft
2. Bring the next billion online in developing growth markets
3. Invest in next generation disruptive technologies
4. Increase our focus on speed, results and accountability

Vision = Mission + Strategy + Culture
(Lipton, 1996)

 Nokia’s recent partnership with Microsoft highlights that the company has embarked upon one of the most significant changes in organisational direction in its 146 year history. Changes in leadership and operational structure have further solidified the company’s admission that they got it wrong over the past decade letting their market share erode; the result of being slow in recognising and executing on the needs and wants of a constantly changing and dynamic market. Failure to implement any radical change could have seen Nokia’s market share further eroded by the innovative North American rivals of Apple and RIM as well as the low cost Asian manufacturers.

Nokia’s new organisational direction consists of four pillars which are highlighted in their vision and highlight their new core competences. The most important of all is perhaps the launch of the new smartphone ecosystem with Microsoft – Nokia need it to be successful; Nokia highlights this worry within their most recent SEC Form-20 filing: “Our proposed partnership with Microsoft may not succeed in creating a competitive smartphone platform for high-quality differentiated winning smartphones or in creating new sources of revenue for us” (SEC, 2011). The strategy was put into action with the launch of the aggressively priced Lumia smartphone range.

Within emerging markets Nokia has adopted a two tiered approach – first, the provision of basic mobile phones for those consumers entering the market for the first time and second, the “upper-low” income consumers who cannot afford a fully-fledged smartphone but are aspirational. For this second tier, Nokia recently launched the “Asha” family of touch/type feature phones, which offer smartphone functionality including app downloads. These products will ship at the beginning of 2012, aimed at first time emerging market mobile data users. Competitive intensity in low and mid-range smartphones is increasing due to rapidly falling Android device price points.

The third aspect of Lipton’s “Vision” equation, culture, is especially interesting in Nokia’s case due to the fact that it has undergone significant changes recently, the direct result of an ‘internal shakeup’ which saw a new CEO appointed. The new leadership has been brought in to change an aspect of Nokia’s culture that was causing them to fall behind competition, speed of execution. This is typical of most large MNEs in which the time to change corporate direction is very lengthy. The new leadership team strive to change the operational structure; focusing on speed, accountability and results. Other foundations of Nokia’s culture such as “achieving together” reflect how Nokia reaches out to others, “very human” illustrating how they do business and work with one another, finally “engaging you” to reflect how Nokia engage customers, suppliers and their own employees (SEC, 2011).

From the BCG Matrix above in Figure 4.1 it can be seen that the SBU “Smartphones in Developed Markets” is the most attractive in terms of future potential with Nokia holding both a high market share and the industry experiencing high growth rates. However, as we have noted throughout this analysis if Nokia were to remain stagnant we would see this SBU migrate more and more to the right as new innovative rivals steal market share. In a more in-depth analysis we would have expanded this analysis to include a “Market Attractiveness/SBU Strength Matrix”. It can be seen that Nokia currently have no “Question Marks” within their BCG Matrix – reflecting the leading position within the telecommunications industry that Nokia possess coupled with their ability to focus.

These renewed business and corporate level objectives move Nokia closer to both their mission of ‘Connecting People’ and the four pillars of their vision.

5. Scenario Planning

Within this section we look at both the most important and uncertain factors facing Nokia within its business units; this aids in the development of possible long term “2020” scenarios which focus on the external environment. The development of these scenarios facilitate robust strategic decision making; we have used scenario planning rather than strategic planning due to the limited range of uncertainties that strategic planning subjects the user too. It should be noted that scenario planning is perception based, there is no mathematical or scientific proof; however, it does arm us with a plausible range of scenarios based upon disciplined imagination.

Scenarios for 2020

Derived from the Most Important & Uncertain Factors

• Chinese Economy Stagnates

China faces a “big speed bump” (Chanos, 2011) – the popping of the real estate bubble has just begun (CNBC, 2011) and the nation is likely to experience the types of problems the US has encountered over the past five years. Recent growth figures which highlighted a slowdown in growth which further supports this hypothesis. This will have numerous impacts upon Nokia’s current strategies.

• Market Development within the Enterprise Market

The enterprise market of smartphones has huge potential, with 29 million units shipped in 2011 and forecast to grow to 54 million by 2016. The current market leader RIM (predominantly through their Blackberry offering – which accounts for 40% of business smartphone shipments) has been on a downward spiral and seen this dominance wane (The Economist, 2011). Since the start of 2011 RIM has missed earnings once, lowered earnings guidance twice and seen its stock fall some 40% (Trefis, 2011). The spiral has been caused by service disruptions, lack of new features, security threats. This will provide a favourable environment in which Nokia/Microsoft can capitalise; either through product development, M&A or a mixture of both.

• Increasing Corporate Social Responsibility (CSR)

CSR as put forward by BusinessLink (2011) is “about understanding your business’ impact on the wider world and considering how you can use this impact in a positive way. CSR can also be good for your bottom line.” In recent years the importance of CSR has grown significantly mainly driven by demands of shareholders, customers and governments for more socially responsible business.
Emerging Market Transition from Low Cost Production to Consumption and Growth

Firms, such as Nokia, currently reliant upon China for low cost production could potentially have to look beyond China for sourcing as low cost advantage diminishes (WSJ, 2011). China’s labour costs have increased substantially over the past few years, couple this with an aging workforce and it is evident why China is losing its foothold as the world’s lowest cost manufacturer of consumer goods. This will obviously have an impact for Nokia, which currently has a number of factories in China.

The VRIO analysis in the tables above lets us consider on what bases organisational capabilities might be the foundation for sustainable competitive advantage and superior economic performance (Johnson et al, 2011). From the analyses in the various scenarios we can conclude that Nokia’s smartphone and mobile phone SBU exhibit most potential for growth and form the foundation from which our strategic recommendation should stem from. Further developing the analysis above, we have put forward a forward looking SWOT analysis that will allow us to better formulate long term strategic options for Nokia.

6. Strategic Options

There are a plethora of strategic options available to Nokia, as a company with significant resource – it is difficult for them not to cast their net too far from positive expectations in entering a market – which is always backed by the strength of the Nokia brand. However competitors, for example Apple, show that it is through focused efforts on a narrow range of products that competitive advantage is built.

If this sounds like something you’d be interested in or if you know someone please get in touch via LinkedIn.

Kim Dotcom

Earlier this month we saw the arrest of flamboyant Megaupload CEO, Kim Dotcom (Pictured left and yes, he did change his surname from Schmitz to Dotcom).  Megaupload was one of the most popular sites on the internet, attracting 4% of all traffic, and gave users the ability to store and share music, films and other content – some of which was legal and some not. The US authorities estimate that the company made $175 million in total revenue.

The Economist puts forward that “American investigators examining Megaupload’s business concluded that it was encouraging its users to share pirated content”. This poses an interesting question to others operating in the same field; some, close competitors, such as Rapidshare and FileSonic and others, distant cousins, such as Dropbox and Box.net.

RapidShare have already went on the record with lawyer Daniel Raimer saying “This has nothing to do with what we do.” Although, I would certainly argue – a simple Google search will arm you with a number of tools organised around searching RapidShare’s content for pirated material.

Some of the sites very similar to Megaupload have stopped users from sharing material with one another, while others have blocked American users from accessing their services and some have shut down altogether in fear of having the same demise as Mr. Dotcom.

RIAA Chief Executive Cary Sherman told Bloomberg Businessweek that services like Dropbox, are clearly legitimate. But in between Dropbox and Megaupload is a huge gray area. I actually think there isn’t that much disparity among the businesses – it’s simply a result of what type of users latch on first. If users organised around piracy latch onto a site and start sharing these links with others, who learn that the site was quite easy to use – they are going to use the site to upload and so on. Dropbox has simply attracted the right users, business users and personal users striving to share and store files in the cloud.

I think the defining factor as to whether they are targeted by the authorities should be how vigilant these sites are to certain file types. If I ran one of these sites and I constantly saw 700mb files being uploaded and within a couple of hours thousands of people accessing these files – it would be pretty obvious that I should investigate the link. This doesn’t even bring in the fact of referring links – it would again be fairly obvious from the referrers whether the link was to legitimate content or not.

Another thought needs to be aired – what about the users that were told time and time again that you should store your files remotely on services such as Megaupload. Now these users are left with their hands tied, with no access to their content. I’m sure there are some businesses that have been significantly impacted by this and I am sure some lawsuits will result. So what are we to do now? Make backups of the backups online? Mirror our content between a few services such as Dropbox and Insync?

The past few weeks certainly have achieved what the authorities/MPAA/RIAA were striving to do – shake up the file hosting industry, unfortunately though a lot of legitimate users have been caught in the crossfire.

Spotify User Interface

History and growth

Spotify was founded during 2006 in Stockholm by Daniel Ek and Martin Lorentzon (featured above) after an autumn long brainstorm. The application was released to the public in 2008 under an “invitation only” registration so that Spotify could control user growth. The removal of the “invitation only” umbrella was in February 2009 – reflected by the sharper uptick in user growth in the graph below.

Estimated Spotify User Growth (Sources: Spotify, Quora, Mashable)

What makes Spotify appealing?

Spotify has experienced pretty solid user growth, but why? How have they convinced their 14 million users to stream songs rather than own them outright? First and foremost it is due to the streaming music being free, supported by ads, and also due to the fact that you have the ability to listen to the songs that you want too. In addition to this Spotify currently has a huge catalogue of over 15 millions songs (which is updated three times per week) – meaning even the most obscure of your requests will most likely be fulfilled, probably best to toggle private listening for that one! There is also the social aspect that they have been pushing hard ever since inception, which was only solidified by their Facebook pairing – it allows users to see what their friends are listening too as well as share songs easily. Intuitive interface and leading technology also contribute to its appeal – Spotify uses some particularly cleaver streaming technology to deliver instant high quality music.  It uses a non web-based client that is essentially a form of peer-to-peer (P2P) network (similar to that of torrents) that can scale up to meet the demands of millions of users.

How did the Spotify name come about? (Via Daniel Ek on Quora)

This again takes us back to my flat that I had out in the suburbs of Stockholm. Martin and I were sitting in different rooms shouting ideas back and forth of company names. We were even using jargon generators and stuff. Out of the blue Martin shouted a name that I misheard as Spotify.

I immediately googled the name and realized there were no Google hits for the word at all. A few minutes later we registered the domain names and off we went.

We were a bit embarrassed to admit that’s how the name came up so our afterconstruction was to say that Spotify stems from SPOT and IDENTIFY.

Revenue generation (Quoted from the 2011 Annual Report filed with Companies House)

Sale of advertisements – The company sells advertisements on its service. Advertising revenues are deferred and recognised over the period in which the advertisement is displayed in the Spotify player provided that no significant obligations remain at the end of the period and collection of the resulting debt is probable. Sale of subscriptions – Subscription revenue is based on the actual number of activated Premium subscriptions and recognised on a straight line basis over the life of the subscription. Revenue from the partner sales premiums certificates is recognised from activation of the account on a straight line basis over the life of the subscription. If a certificate expires without activation revenue is recognised. The expiration time is 12 months from the day of the sale. Sale of Partner Subscriptions – Revenue from the partner sales premiums certificates is recognised from the date when the account is activated on a straight line basis over the life of the subscription. If a certificate expires without the account being activated revenue is recognised at the date of expiration. The certificate expires within 12 months from the date of sale. Interest Income – Interest income is recognised using the effective interest method. Dividend Income – Dividend income is recognised when the right to receive payment is established.

Founder Daniel Ek talking about how Spotify generates revenue:

We have different layers of rights that Spotify has deals with. Those are record labels, publishers and collecting societies. Artists/Composers in their turn have deals with the above mentioned parties. The deals artists have with labels/publishers tend to differ quite a bit and therefore it’s impossible for me to say what an artist actually gets in the end.

Spotify has three buckets of revenue. We get revenue from advertising, subscriptions and paid downloads. All of them are very different as a subscription is €10, a song is roughly €1 and advertising is a pool of revenue based on ads per month. We share the vast majority of all revenue we get in to all the right-holders.

Our part in the end is not that different from how the Apple app store works, where Apple sells apps and get a small percentage. What makes it slightly complex is that we have many more layers of rights in many different countries.

It’s important also to mention that what Spotify is trying to do is to increase the amount of people who are consuming legal music. Our view is that there’s so many people enjoying music out there, every single day, but the massive portion of them are currently not paying anything. We are trying to bring them back to paying for music again.

Spotify has seen its fair share of controversy as some smaller independent labels jumped ship complaining that they weren’t receiving enough royalties. This has been visualised below, the graphic illustrates how many albums or songs an artist would need to sell through conventional channels (self pressed CD, retail album and a track download) to earn the US minimum wage ($1,160 per month). At the minute, this doesn’t seem to be a large threat to Spotify – however if Merlin (a non-profit network of over 12,000 indie music labels) rethought its contract Spotify could see quite a sizeable chunk of their library disappear. Warner Music CEO Edgar Bronfman Jr. was also quoted saying that music streaming services were “not net positive for the industry.”

Source: Information is Beautiful

Competition

US digital music service Rhapsody is setting in motion plans to relaunch Napster in the UK and EU as a competitor to Spotify. I don’t think Spotify will be worrying too much about Napster’s offering simply because there is very little to compete on – once you get beyond the music catalogue and the user interface the only thing left is pricing. As we have seen margins are already very thin, evidenced by Spotify operating at a loss for the previous 2 years – beyond that the only thing that could tempt users is a prolonged trial period.

Grooveshark is probably the closest web based rival of Spotify, having had quite a few friends that used to use Grooveshark religiously that have now switched to Spotify illustrates its ailing position. In the future, as with Napster, I could potentially see Grooveshark adopting the desktop client model and partnering or being acquired by a larger entity.

Apple must be kicking themselves that they did not think of the core business model – one of the few times when they have been caught napping (it can happen too easily when you are at the top). I expect a competitor from Apple in the next few months, easily attaching to the iTunes model further strengthened by their established links with the labels. We could perhaps see some modifying of the Spotify model to facilitate video content which could be distributed through the soon-to-be-launched Apple TV.

What’s next?

I think Ek and Lorentzon were extremely smart partnering with Facebook as it instantly provides them with a competitive edge over new entrants to the market such as Napster. As annoying as the live feed is, it will constantly strengthen the brand of Spotify and push it ahead of the competitors. With regard to where the industry is heading – I think the music labels are slowly starting to understand that streaming is going to become the norm and that it does have positives such as reducing the amount of piracy.

(header image credit)

Taking Facebook as an example, and focusing simply on one feature of their site – events. Facebook’s users have created billions of events (capturing who went to those events, what connections they have, dates, times, declines, etc) – literally billions of interactions and trillions of bytes that are being stored (and this was only one company as an example).

It’s a trend and phenomenon that is only growing larger as the needs of social, locational and mobile (SoLoMo) grow – but what does it all mean? Simply that we live in a more digital age? That the world is ever more intrusive?

In my eyes it isn’t just evidence of an increasingly digital age but one in which the opportunities to undertake and present analysis are very exciting.

I believe there are a plethora of  opportunities out there for entrepreneurs who create companies focused upon gathering, sorting, and displaying big data in a meaningful and informative way. As trends such as NFC come on board it’s not only going to be businesses that are exposed to volumes of data but consumers that will also have the chance to slice and dice personal data, allowing them to analyse aspects of their life such as spending habits effortlessly with a level of control that has never before been available.

How does the data created by these entrepreneurs add value? McKinsey Global Institute (MGI) suggest five areas:

1. Creating transparency
2. Enabling experimentation to discover needs, expose variability, and improve performance
3. Segmenting populations to customise actions
4. Replacing/supporting human decision making with automated algorithms
5. Innovating new business models, products and services

It is these five areas that startups need to focus on if they want to create a viable product; already in the Bay area we are seeing startups like TellApart, Metamarkets, Coudera, Northscale, Datameer and IFTTT.

TellApart is a customer data platform for large online retailers which focuses on transactional retargeting - a pretty nifty idea and just one example of using data to improve the bottom line. Looking at MGI’s aforementioned five areas, TellApart touches on at least two: #3 (Segmentation to customise actions) and #2 (enabling experimentation to improve performance).

So as new social networks, products, trends, etc. come along think of how you could tame this Big Data enabling you to create a startup that drives efficiency, it certainly will be an interesting space to watch over the next few years.

Further reading:

• WSJ – Health Care Is Next Frontier for Big Data
• McKinsey Global Institute – Big data: The next frontier for innovation, competition and productivity
• ITNews – Tennis Australia exposes match analytics (Big data in action…)
• Quora’s ‘Big Data’ Topic