Business Today

"We want to connect the unconnected"

Olli-Pekka Kallasvuo has spent half his 54 years with finnish mobile telephony major Nokia. Since joining the company as Corporate Counsel in 1980, he has played a critical role in transforming the 150-year-old one-time lumber company into a giant of the digital age.

     Print Edition: Sept 23, 2007

Olli-Pekka Kallasvuo has spent half his 54 years with finnish mobile telephony major Nokia. Since joining the company as Corporate Counsel in 1980, he has played a critical role in transforming the 150-year-old one-time lumber company into a giant of the digital age. Nokia has also become the largest multinational corporation in India and, according to estimates, posted revenues of Rs 15,800 crore for the year ended December 2006. Globally, Nokia closed 2006 with revenues of m41.1 billion (Rs 2,30,160 crore). A recent survey by Gartner gave it a global market share of 36.9 per cent in the second quarter of this calendar year during which it sold over 100 million devices. On his first visit to India since becoming Chief Executive Officer in 2006 to check the status of Nokia's second-largest market, Kallasvuo met BT's Kushan Mitra in Mumbai and discussed business, batteries, the iPhone and technology. Excerpts:

There are 85 million Nokia handsets in use in India today (out of 185 million mobile telephony subscribers) and Nokia-Siemens Networks (NSN) is the market leader in the network sphere. India is Nokia's second-largest market after China. How do you see this relationship between Nokia and India developing?

There are several answers to this question, actually. As we expand our business in the normal way, our business in India will expand as well. This means new types of handsets will start getting sold in India, and that is just one possibile area of growth. We have also announced very clearly that we will offer services and software out of India, especially to find ways to include people who do not have access to the internet as the internet and mobile communications converge. In fact, NSN's global headquarters for the services business will be in India and the person in charge, Rajeev Suri, will be based in India.

There is another dimension-India as a sales base. Of course, you have to be present in India but we also want to leverage the talent pool here for our global operations. In R&D, for example, we want to give our Indian teams complete, viable projects that have a lot of complexity.

The theme of your visit to India has been "Towards Universal Access"; you just spoke about how Nokia plans to enable internet access through mobile devices. What does this mean in practical terms?

In 1992, we came up with the slogan "Connecting People". We are in the business of connecting people to what really matters to them. The slogan is ingrained in the way we think and the way we communicate with our employees. But-and this is not only about monetary benefit to ourselves-when we say "Universal Access", it is about extending the benefits of mobility to more and more people. It has to be something that is affordable and convenient and also has to touch masses of people. We hope to connect the unconnected to what matters to them.

You visited your Chennai (Sriperumbudur) plant from which you have rolled out 60 million devices in 18 months. Will you be expanding this facility?

It is important to understand that while there is a Nokia factory in Chennai, the totality is a lot wider. We are working closely with our partners and suppliers in a very close set-up; we invest together and take risks together. When it comes to our part of the totality here, we can still increase our output without increasing our investment. But the time will come when we need to consider further investments here as well.

But I am very happy with the work that we have done in Chennai, and, of course, the output will increase. The factory is only 18 months old and it is still on the learning curve. As we advance on the learning curve there, we will add complexity to the products we make.

So you'll progress from the low-end devices you make to more advanced ones?

Yes.

I am sure you have been asked about the (BL-5C) battery recall issue repeatedly but what was your reaction when you were first told about this problem?

My first thought was that this was something we needed to resolve, but we also needed to investigate the matter. It is quite a complex issue.

You have tremendous brand equity in India and there have been reports of consumer anger at Nokia. Do you believe that this issue might have repercussions for the Nokia brand in India?

I am sure there will be some negative reactions, but overall, in balance, I have had many people come to me and say that "this will also strengthen your brand, because people are seeing that you are taking responsible action and that you have resources to take responsible action". I think there are lots of positives to take from this as well and the outcome may turn out to be positive.

This is the second time in two years that lithium-ion batteries have been in the spotlight. Do you feel that given today's resource-hungry devices, this will be a recurring problem?

As devices become more sophisticated, they will continue to need greater amounts of power; so, this is something that will have to be managed. It can be managed through better battery technology but also by optimising power consumption. Both are important and we are investing in understanding both.

Your phones are not just phones anymore; they have cameras, and are entertainment and communications devices, as well. Then, a large computer manufacturer (Apple) makes phones, and the world's largest software company (Microsoft) is becoming very aggressive in mobile devices. You call your N-series devices "Multimedia Computers". How is this evolution changing Nokia?

There is still a market for voice-optimised devices without a camera and without entertainment. But what you are saying is absolutely correct; the "single-purpose" devices will be marginalised and the share of multi-purpose devices will increase. But we have to support both-voice-optimised phones and multimedia devices or computers. Some of those devices are almost like Swiss Army Knives, because they offer many, many solutions. And consumers do demand different types of solutions (for their various needs).

The (mobile phone) industry has been capturing value from adjacent industries. As you said, mobile phones have become cameras as well and in that sense, the mobile industry has picked up value from the camera industry. We are today the biggest camera manufacturer in the world. And, hence, the camera manufacturers have become our competitors. The same is applicable to music devices and navigation devices and so on and so forth. The mobile device has expanded its footprint and has allowed us to add value in our industry and this has been a major source of the growth we have been experiencing in our topline.

It's interesting… did you ever think that you would compete with a Canon or a Nikon?

The consumer is making a choice whether to buy an N95 or a high-end camera. As mobile phones get more sophisticated, more instances of such competition will emerge. That, I believe, is strategically very important, because our global volumes will allow us to get economies of scale in components needed to make cameras. I think we have a competitive advantage there over the camera manufacturers because of bigger volumes.

You said that you might have a competitive advantage in terms of pricing. Do you believe that you might have a technological advantage over other devices as well because you send things over mobile networks?

I would like to think that the mobile phone gives you everything the personal computer does and then some more. And the "some more" is that you are not tied to a time or place. You have the benefit of mobility. I think this is a very promising area overall-adding mobile context to the internet.

Apple recently launched the iPhone with a whole new interface system; Micrsoft has upgraded its user interface in Windows Mobile. Nokia has always been famous for interface design; but how important is interface design today?

Ease of use and user interface are very important on all devices-it is actually all about ease of use, ease of use and ease of use. That is fundamentally important. And we are investing very heavily in this, but there is also a paradox. Making something easy to use is also quite difficult. And you will hear more from us on this front.

Given the hype around Apple's iPhone, do you think Nokia missed the "touchscreen" bus?

I don't think so. We will come out with touchscreens as well, but that will just be one solution. The markets will diversify; there is no "one size fits all" solution. But definitely, there will be a segment of devices where touchscreens will rule and we do have those as well. The N800 Internet Tablet, for example, is based on touchscreen technology.

What is your opinion of the iPhone?

It is definitely an innovative device. But it is based on a proprietary platform, while our thinking is open. There is a huge conceptual difference between the two strategies. So, you can't compare the hardware only; you need to look at the totality when making the comparison. Apple entering mobile telephony is something that will definitely add consumer interest in the market in a way that is good for the industry. However, when making this comparison, you must remember that we have a portfolio of 40-50 devices. And this market is wide, segmented and fragmented; to sell devices to different types of consumers in different types of markets, you need a wide portfolio. So, one product can never be enough.


Nokia has so many different types of devices in the market. This must have added a huge amount of complexity to your manufacturing processes. How do you manage that?

It adds to manufacturing complexity. If you are making one device only, things are a lot simpler. But I believe that when something is complex in business, it is possible to add value if you manage the complexity. And I believe that we have been able to manage the complexity far better than the competition. But the point here is the portfolio. Consumers do prefer different things and we have identified these different consumers on a global scale and I am a big believer in that-people are different. Very often, someone may not like a device that we make, but then, someone else will say: "I love this". And that is the beauty of a portfolio. But, yes, it does add complexities in many ways and one of our core competencies is managing that complexity.

There are several competing new standards; you have WiMax, HSPA and WCDMA. And then, China is also developing a standard. What does the future hold?

There is not going to be one solution only, there will be several solutions that co-exist and different operators will have different technologies depending on their thinking. In that way, I believe operator strategies will differ more from one another going forward than they have been in the past. From a technology standpoint, we have to be technology-agnostic and support all solutions.

Therefore, different operators might have different technologies. How much of a problem will it be for users?

That is a call that people will need to take, because this is not a technology question, this is a price-point question. Adding new features or adapting new technologies will always add to costs. And you have to find the right combinations of radio technology here, whether it is single-mode in some cases or multi-mode in other cases.

You have experienced great success in India and China. Where do you see future challenges coming from? Africa, perhaps?

Africa is a huge challenge and an opportunity. In fact, I have said earlier that from a telecommunications point of view, there are things happening in Africa today that were happening in India five-six years ago. So, in that way, Africa is getting onto the mobile phone bandwagon as well. A lot of (blood) and sweat will be needed for this, but we are doing that and I see that as a clear opportunity.

What in your opinion are the unique features of the Indian market compared to others?

I think the Indian operators have done a fantastic job. I think the models they have come up with are exportable, very efficient and I take my hat off to them.

Would you say, that at a level, Nokia competes with Nokia?

No (laughs) I would not say that, there is ample external competition. We compete with our competitors.

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