Analysis & Opinions - Business Daily

What African Enterprises Can Learn from Nokia

| September 27, 2007

African countries remain marginal players in the global economy and often blame the industrialized countries for keeping their markets closed to their products. While is largely true, the low level of innovative capability in Africa’s public and private enterprise remains the continent’s limit factor.

Markets are not opened by switching on diplomatic dials, but through innovation in products as illustrated by examples from the cell phone industry.

Nokia ranks as the world’s leading cell phone producer. But this icon of the industry has its roots in wood and rubber products, not in electronics.

Its history is not just a story of corporate transformation, but a testimony to the importance of cultivating a culture of innovation in enterprises. Nokia was founded in 1865 as paper producer and located its operations near a river to obtain hydropower for its operations.

It quickly developed expertise in electric power generation which was essential for its operations. It then attracted the Finnish Rubber Works to locate its operations in the same area and sold its products under the Nokia brand.

Knowledge about rubber was an essential part of electric insulation and the firm acquired shares in the Finnish Cable Works after World War II. In 1967 the three firms merged into the Nokia Group.

The firm kept track of the latest developments and was able to move quickly from the electro-mechanical analog telephone switching to the digital technology with its Nokia DX 200 launched in 1982. The switch, which was a standard networking platform, became a critical component in Nokia’s network infrastructure.

The switch from analog to digital switching wiped out many enterprises and only those that possessed the capacity for rapid adaptation survived.

Nokia was one of them. In 1981 Nokia launched the Nordic Mobile Telephony (NMT) as the world’s first international cellular network paving the way for the development of Global System of Mobile (GSM) Communications agreement adopted 15 telephone firms in September 1987.

Today, GSM has over 2.5 billion subscribers in nearly 200 countries, about 64 per cent of whom are in emerging markets. China alone has nearly 450 million GSM subscribers. Text messaging, of which over seven billion are now sent worldwide daily, is largely a GSM phenomenon.

Nokia’s early mobile phones were sold under name of Mobira and their first 1982 Senator mobile brand weighed nearly 10 kg.

This was a significant improvement over the first automatic switching mobile phone developed by Sweden’s Ericsson which weighted about 20 kg. The “sleek” Mobira Cityman that pulled in at about a 8000 grams cost over US$2,000 but was a runaway success.

Later Nokia got overstretched with a diversity of products and was forced to scale back.

It is rumoured that the overextension led to Nokia’s CEO, Kari Kairamo, taking his life. A major streamlining effort resulted in a firm that was more focused on telecoms under the leadership of Jorma Ollila, now chairman of Shell working hard to steer one of the world’s corporate tankers into the world of creativity and innovation.

Major reforms were also introduced in government and higher education to enable them to support Finland’s quest for success. Its MikroMikko personal computer, for example, was transferred to Fujitsu Siemens Computers and the manufacture of Finnish computers came to a close in 2000.

When Finland was hit by a recession in the early 1990s following the collapse of the former Soviet Union, Nokia was already positioned to support the countries transition into a new knowledge economy.

Finland’s innovation policy was reformed largely to support the singular efforts of Nokia to remain a work leader in mobile telephony.

Nokia avoided such folly and bought a lot of GSM-related patents. It was living up to its tradition as an innovative firm that had at various stages in its evolution produced aluminum, cables, bicycles, cables, car tires, computers, electricity, personal computers and of course my favorite Nokia mobility product, Wellington boots.

For a while Nokia was kept aloft by one major balloon, mobile telephony. Nearly 150 years of its creative impulse were focused on the telecoms revolution, which does not show any signs of waning.

Technologies ranging from new generation to the mesh connectivity of the $100 laptops suggest that we are still in the early days of the telecoms revolution.

But the bug of creativity is biting at Nokia again. In May 2007 Nokia shipped over 200 million units of its Nokia 1100, making it the world’s highest selling electronics product of all times.

Two months later it acquired Twango, a media sharing tool for sharing photos, videos and other personal data. This was followed by a series of Ovi web services that enable users to download games, maps and music directly onto heir computers.

The lack of technological vision is not unique to African corporations. Legend has it that in 1877 Western Union turned down an offer to buy patent rights to the telephone for US$100,000. When the firm tried to correct its poor judgment a few years later, Bell rejected its offer to buy the rights for US$25 million.

It is not uncommon to underestimate the pace of technological innovation. Even at Nokia. When the firm launched its 2100 series of phones, it estimated it would sale 500,000 units. They sold over 20 million. In some countries such as the UK mobile phone subscriptions now outnumber the population by over 10 per cent.

The next mobile revolution, according to industry experts, will be mobile broadband technology that will change the way we organization education, healthcare, and service delivery.

Cell phones as we know them might disappear and wireless capabilities become part of many other regular objects such as clothing in the same way wearing watches might become a thing of the past.

African countries can play a key role in the mobile broadband revolution and associated technologies. But they will only do so if they cultivate a culture of innovation and creativity. Their public and private enterprises, however, are the locus of such technological learning.

They must put them to good use otherwise they will continue to remain marginal players in the global economy.

Professor Calestous Juma teaches at Harvard University’s Kennedy School of Government where he directs the Science, Technology, and Globalization Project

For more information on this publication: Please contact the Belfer Communications Office
For Academic Citation: Juma, Calestous.“What African Enterprises Can Learn from Nokia.” Business Daily, September 27, 2007.