If the end goal is innovation, the raw material is talent. Very simply, when it comes to great new ideas, the team with the best people wins. And yet Nokia's total head count is static. Its R&D costs have stabilized at just under 10% of sales. But the company keeps proliferating new products at a head-spinning pace. How does that work?
In part, it's a direct result of the extraordinary intellectual and technical resources at Nokia's disposal: The company boasts an annual R&D budget of $3 billion, and 40% of its 52,000 employees are involved in R&D. Most Nokia business units have at least three R&D sites. Those sites are located in 15 countries and are usually adjacent to leading universities and relevant industry clusters.
But just as important, says Alahuhta, is the emphasis that Nokia puts on continuous productivity development. "It's a combination of putting people in the right environment to generate ideas and giving them the power to make those ideas happen," he says. Nokia makes a healthy habit of giving its people fresh challenges in completely new areas. Job rotation is routine, even for senior managers. Lawyers have become country managers. Network engineers have moved into handset design. The goal, Alahuhta says, is to bring new thinking to familiar problems.
Any sound approach to innovation includes both internal and external venturing activities. Nokia has refined both practices. In an effort to find fresh thinking from sources outside the company, Nokia's Insight & Foresight teams seek out disruptive technologies, new business models, and promising entrepreneurs beyond Nokia's walls. Innovent, its U.S. team, goes a step further, identifying early-stage entrepreneurs, buying options in their work, and introducing them to people at Nokia headquarters.
Internal venturing prevents ideas from ending up on the scrap heap or in the hands of competitors -- and keeps Nokia's finger on the pulse of innovation. An incubation unit, New Growth Businesses, develops stand-alone businesses that are closely linked to Nokia's core activities.
In the race to take digital content mobile, Nokia will need to prove its creativity beyond technology. But the Finnish company has been practicing renewal for a lifetime: In its history, it has gone from manufacturing paper to making rubber boots, then raincoats, then hunting rifles, and then consumer electronics, until finally betting the farm on mobile phones. It's all part of an ongoing emphasis on renewal.
One sure way to stifle innovation is to think that your company is the business model. So says Gary Hamel, author of Leading the Revolution: How to Thrive in Turbulent Times by Making Innovation a Way of Life (Harvard Business School Press, 2002). Hamel believes that when your employees no longer challenge the day-to-day definition of your business model, you're in trouble.
Nokia Mobile Phones is breaking free of the handset model, giving one of the business units it launched last year the freedom to explore mobile possibilities in the worlds of gaming and entertainment. "Ninety percent of the time, it feels like I'm running my own company," says Ilkka Raiskinen, head of Nokia's Entertainment and Media Business Unit (EMBU).
"We've been given the freedom to decide what the rules are, what the value chain is, and what the 'story' is in the media world, and then to develop our own vision, strategy, and road map," says Raiskinen. "I consult the Nokia board the same way that a startup would consult its investors."
EMBU's first product -- the Nokia N-Gage mobile phone and game console (see photo, page 46) -- will enable players to square off against each other wirelessly.
EMBU fired the starting pistol on its entertainment entry last May. Within 10 months, the group was testing prototypes among gaming journalists. "Time to market has been the driver," Raiskinen says. "We want to be the first, to be the dominant design, and to define the rules. The first shot has to be meaningful if we want game developers to come on board."
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