Getting back to profitability.Learning. Always.

Done by: Shang

Innovation Office, Nokia Singapore

For: Board of Nokia, Stephen Elop

Agenda

1. Nokia “in bad shape”

2. Why are we in such bad shape

3. Relook Mission and Vision

– Mission

– Vision

– Looking Ahead

4. Mobile Trends

5. Our Competitors

6. How to reach our goals?

7. Annex

Nokia “in bad shape”

• Posted a loss of $523 million in the second quarter

• Total shipments of mobile devices are down 20% compared with 2010– Smartphone sales dropped 25.8%: from more than

100 million in 2010 to 74.4 million units this year– Feature phones sales dropped 16% to 71.8 million

units

• Overall worldwide market share down from 34% in 2010 to 25%

Reported second quarter 2011 results

EUR million Q2/2011 Q2/2010YoY

Change Q1/2011QoQ

Change

Net sales 9 275 10 003 -7% 10 399 -11%

Devices

Net sales 5 467 6 799 -20% 7 087 -23%

Smart Devices net sales 2 368 3 503 -32% 3 528 -33%

Mobile Phones net sales 2 551 3 190 -20% 3 407 -25%

Source: Nokia 2nd Quarter Interim reporthttp://investors.nokia.com/phoenix.zhtml?c=107224&p=irol-newsArticle&ID=1587484&highlight=

DigiTimes Research

S@#%!!! Its not the market’s problem!Among the top 10 cell phone

manufacturers, Nokia will be the only one to experience

negative growth

Source: http://www.digitimes.com/Reports/Report.asp?datepublish=2011/09/06&seq=202&pages=PR

Why are we in such bad-shape?

• Logistics issues?

• Phones too over-priced?

• Unreliable phones?

• UBS Survey: People just don’t like Nokia?

– Not a cool and sleek phone to have.

= Low IMPACT on its users.

– Have we have fallen back on R&D?

Survey on Brand Loyalty

• “consumers…considering changing handset…Nokia appears to have a negative net beneficiaries (less users won than users lost).”

• Low Retention Rates => 42%

AnnexWhy low retention rates?

• Missed key game-breaking technological handset trends

• Weak brand – Poor marketing of products– Lack of support from a major carrier

• Unusual design– Thin phones, flip phones, touch screens

• Failed OSes -> Symbian, Meego– Slow to get off this OS

• Insignificant Ovi app store– 20,000 titles in comparison to Apple’s

55,000

– Poor Execution

Relooking at Our Mission and Vision

• MissionConnecting People.

• VisionTo build great mobile products and to enable people, like us, to get more out of life’s opportunities through mobile.

• Our Plans: To regain our former position of being the top mobile company, by growing our world-wide market share to 40%.

Looking Ahead

• Our Plans: To regain our former position of being the top mobile company, by growing our

world-wide market share to 40%.

Oct - Dec 2011:Consider why we are failing and how to reinvent ourselves

2012 - 2013:Regain our lost market share and start new initiatives plannedGoal - 25% � 34%

2014:Regain our top position in the mobile market

Goal - 34% � 40%

2015 and beyond:Innovating for the future

Mobile Phone Growth Areas

• Nascent technologies including NFC, Mobile Payments/Wallets– Mobile Smart Phones enables the ‘touch’ and on-the-go

in contactless and paperless billing

• LTE and WiMAX multimode phones• Mobile 3D and AR new power technologies• GPS capabilities, location technologies• Mobile TV

Mobile Phone Growth Areas

• Market areas

– Emerging Asia

• Western China

• Rural India

• Vietnam, Cambodia and the Indo-China region

– Africa

– South American giants

• Brazil

Paying Attention to Our Competitors

Our Competitors

• We must pay attention to what really matters = Paying attention to what our competitors are doing

• Apple’s innovation and sleek design with its abundance of apps offering a lifestyle

• Google’s Android phones are also offering as many apps as the AppStore coupled with the freedom of Open-Source

• RIM’s Blackberry is slowly dying• Low-end manufacturers like ZTE and HuaWei

compete on extremely low pricing

So what can we do to reach our goal?

1. Change of Organisational Structure

2. Low-cost SmartER-Phones

3. Changing to a better OS– Suggestions for WP7

– Baidu’s Yi (licensed under another brand)

4. NFC Strategy

5. Future location-based developments

6. Further Development of the Meego platform– Deep social integration

Change of Organisational Structure

Stephen ElopCEO

Henry TirriCTO

Mobile phones

Smart devices

Location and Commerce

Juha ÄkräsHuman Resources

Manager

Jerri DeVardCMO

Sales

Corporate Development

Markets

Timo IhamuotilaCFO

Esko Aho

Corp R&R

Legal & IP

Innovation

Office

Nokia’s Competitive Strategy

Cost Effectiveness

Differentiation

High Cost Low Cost

High Innovation

and functionality

Low Innovation

hTC

Low-Cost SmartER-Phones

• Create a blue ocean for Nokia smart phones– Budget smart-phones– Allows for dual-SIM functions– Provides Near Field communication (NFC) technology to

boost functionality and convenience for its users

• This will also create demand for NFC accessories like headsets and wireless music speakers

AnnexNokia’s WP7 Strategy

• Launch of WP7 phones in 2012

• Should join forces with Microsoft in encouraging the creation of more WP7 apps

• Increase the number of apps in WP7 MarketPlace

Nokia’s partnership with BaiDu Yi

• Alternative OS if the WP7 phones do not take off

– Why not adopt Google’s Android? � Purchase of Motorola

• Newest member of mobileOS scene = Baidu's Yi

• What about Dell?

– Baidu already has licensed Yi to Dell

– but Dell is new

• Opportunity for "guan xi“ and tap into the Chinese market

• Opportunity to move factories to cheaper countries like China

Nokia’s NFC “Acceleration Strategy"

1. Releasing NFC enabled phones– Allow mobile payment using NFC apps

2. Partnering Orange, a major carrier, and creating its NFC eco-systemi. Aim to "seed the market" with NFC-enabled SIM

cards and devices

ii. Orange wants to move into the Asian emerging markets and a "worldwide alliance" charged with growing the NFC market would help them get there

iii. Orange will help solve the interface problems

Nokia’s NFC “Acceleration Strategy"

3. Investing in NFC or mPayment or mWallet related mobile startups

4. Organise startup competitions and student business plan competitions

5. Distribute NFC services to encourage adoption

NFC “Standard"

• Introduce NFC-ready devices (and related technologies) using its standards

• Achieve this together with a partner mobile carrier like Orange

• Potential for newly created NFC accessories, working together with the new NFC smart phone, like headsets and wireless music speakers

We want to make the ‘N’ in NFC,

stand for Nokia!

Future of ‘Nokia’FC

• We would move from NFC-enabled secured SIM to secured-NFC built-into the smartERphone

• Enabling Nokia to integrate horizontally and not need to integrate its systems with the TTP and the MNO

SIM Card Manufacturer

&Card Issuer

MNO

POS Service Provider

Trusted Service

Manager(TTP)

SIM Card Manufacturer

Application Owner

Future location-based development

• Through Navtaq, Nokia will enable indoor location-based tracking– a new product called “Destination Maps”

• It is a new in-built miniaturize technology enabling both asset and people tracking

• Aims to provide the data that would enable guidance services inside public buildings

• Functions– “Indoor GPS” functions– Security functions– Marketing & Advertisement infrastructure

Further Development of the MeeGoplatform

• Develop the MeeGo platform further– Deep social integration– Following the foot-steps of Apple’s iOS

• Social messengers (enabling groups)– Similar to Blackberry’s BBM and iOS’s iMessenger– Deep integration of What’s App

• Allow more personalisation of content from mobile browsers and native app content– Creating shared cookies function

• Social gaming within the phone– Widgets– Alerts

Thank you for listening ☺

Annex

AnnexDigiTimes Research

Source: http://www.digitimes.com/Reports/Report.asp?datepublish=2011/09/06&seq=202&pages=PR

DigiTimes Research

S@#%!!! Its not the market’s problem!Among the top 10 cell phone

manufacturers, Nokia will be the only one to experience

negative growth

Source: http://www.digitimes.com/Reports/Report.asp?datepublish=2011/09/06&seq=202&pages=PR

Nokia getting whacked in “home country” India

• India although an important country to Nokia is losing its market base steadily.

AnnexWhy are we in such bad-shape?

• Logistics issues?

No, we get our phones to places on-time and we never had that problem before even during the period when there was greater demand for our phones.

• Phones too over-priced?

No, we have been adopting the pricing scheme making us the lost leader so our phones are not over-priced.

• Unreliable phones?

No, users do not have a lot of trouble with our phones.

• UBS Survey: People just don’t like Nokia?– Not a cool and sleek phone to have = Low IMPACT

Annex

IDC's Mobile Phone Technology and

TrendsIDC's Mobile Phone Technology and Trends service provides a comprehensive, global analysis of the key technologies and market trends relating to both consumer and enterprise mobile devices.

Markets and Subjects Analyzed• Smartphones and feature phones• Wireless access standards• Evolution of wireless technology trends• Mobile device operating systems and browsers• User interface technologies, including touchscreen• Multimedia and input methodologies• LTE and WiMAX multimode phones• Nascent technologies and services, including NFC, mobile

payments, 3D, and AR new power technologies• Emerging markets and entry-level smartphones• GPS capabilities, location technologies, and presence• Platform creation• Mobile TV

Source: http://www.idc.com/getdoc.jsp?containerId=IDC_P1600

Annex

IDC's Mobile Phone Technology and

Trends

Source: http://www.idc.com/getdoc.jsp?containerId=IDC_P1600

AnnexChange of Organisational Structure

• bureaucratic organisation � flat structureA recent finding stated that “… (the) number of positions reporting directly to the CEO has gone up significantly over time while the number of levels between the division heads and the CEO has decreased.”The advantage is as GE CEO Jeffrey Immelt-“faster decision making and execution”A great believer of these benefits � Apple’s late-CEO Steve Jobs

• Innovation department reporting directly to the CEO

AnnexFlattening the Firm

Source: THE FLATTENING FIRM by Raghuram G. Rajan

Annex

• Using a detailed database of managerial job descriptions, reporting relationships, and compensation structures in over 300 large U.S. firms

• Find that firm hierarchies are becoming flatter• The number of positions reporting directly to the CEO has gone up

significantly over time while the number of levels between the division heads and the CEO has decreased.

• On the one hand, the CEO is getting directly connected deeper down in the organization, a form of centralization. Increasing span of control suggests he is more directly involved in decision-making across a greater number of organizational units

• On the other hand, decision-making authority and incentives are also being pushed further down, a form of decentralization and empowerment

• Decisions need to be taken more quickly to take advantage of fleeting opportunities in the marketplace

• Faster decision making and execution as it takes time for each managerial layer to give approval to a decision

• final decisions are delegated further down a hierarchy with attendant loss of top management control

Flattening the Firm

Source: THE FLATTENING FIRM by Raghuram G. Rajan

Porter’s Theory on Competitive Advantage

AnnexNFC Eco-system

Annex2 Ways to Achieve NFC

1.

2.