Nokia organizes for the converging marketplace
Espoo, Finland - Nokia today announced that it will introduce a new company structure from January 1, 2008. The move, driven by Nokia's strategy, is aimed at creating an organization aligned with the opportunities Nokia sees for future growth …
Context & Ripple Effects
In mid-2007 Nokia sits atop the handset market but faces a competitive frame that is visibly changing: its high-end N95 multimedia computer was explicitly positioned as competition to the upcoming iPhone, and just days before this announcement Nokia and other handset makers backed the MusicStation music service — evidence that the battleground was moving from hardware specs to combined devices-and-services offerings.
Against that backdrop, the January 1, 2008 restructuring is Nokia's organizational answer to what it calls the converging marketplace: rather than a product-line shuffle, it re-cuts the company around growth opportunities that span mobile devices, software and internet services, putting structure behind the services ambitions its recent launches had already signaled.
First-order effects
- From January 1, 2008, Nokia's internal reporting lines and unit boundaries change, forcing every business group inside the company to re-plan budgets, roadmaps and accountability around the new converged structure.
- Nokia's operator and carrier customers face a counterpart that now negotiates as both a device supplier and an aspiring services provider, changing the terms on which handsets and content deals are bundled.
Second-order effects
- Rival handset makers — already reacting to the N95-versus-iPhone contest and to joint moves like the MusicStation backing — come under pressure to mirror Nokia's structural bet with their own devices-plus-services organizations rather than competing on handsets alone.
- Software and content partners gain a differently-shaped counterparty: a reorganized Nokia built for convergence will source platforms, media and applications differently than one organized purely around phone categories.
Third-order effects
- If the pattern holds across the industry, the mobile business consolidates around integrated device-software-services players, and companies still organized as pure handset manufacturers become structurally disadvantaged in negotiations, talent markets and platform control.
- A reorg of this kind also raises execution risk inside Nokia itself — convergence strategies demand that device economics and services economics be run under one roof, a management challenge that will define whether the structure creates or destroys value.
The trend: Mobile-device leaders in 2007 are restructuring themselves from phone companies into converged devices-plus-internet-services organizations, with Nokia's January 2008 reorganization as a leading example.