Nokia's innovation story, Part 1 - key trends

Blimey, this is turning into being quite a tome. It looks like there's going to be two parts to this story - first, some of the key trends that set the context for the discussion, and second a selection of the innovation activities that we have been working on recently to ensure we accomodate these trends.

During the conference mentioned in the previous post I only got to talk to about a few of these ideas, but I wanted to document them while fresh. It's worth bearing in mind that everyone at Nokia will have a different take on this universally discussed, but rarely adequately defined theme of innovation - since there is an assumption that innovation is owned by everyone. In terms of what innovation is, this was a topic of the night before, and the Editor of the Economist's favourite definition, courtesy of Goldman Sachs, was "fresh thinking that creates value". That works for me, since it reminds us that new ideas alone are nice but irrelevant if they don't have an impact.

So, to the trends. As a company we are grounded in fundamental trends. Nokia is full of fact-loving engineers, and there needs to be data and evidence for what we do. We're unlikely to jump like a jitter bug to the latest shiny thing. That means that sometimes we may be seen as cautious, and may not get it right first time, but when we do it, we know we're doing it for the long haul. (N-Gage comes to mind). When I joined Nokia in 2003 in the delightfully named Insight & Foresight group, one of my tasks was to write the macro economic section of the annual Nokia WorldMap of the top trends in the converging digital industry. This was organized in terms of consumer, business, technology, macro trends, and some overall disruptions, and had about 50 trends that were the summary of a year's worth of analysis of the team. These are updated every year, and I picked a selection that I found most compelling to set the tone: the net generation, the search for authenticity, the information wake, harnessing collective intelligence, mass customization, consumerization of the enterprise (aka Enterprise2.0) and leapfrog innovation. So, now to provide more meat on the bones:

The demographic shadow of the baby boom generation is the net generation, today's 14-30 yr olds that are globally the most influential demographic, accounting for 25-40% of populations (highest in India and Pakistan) and something like 80% of consumer tech purchases, since they advise their parents (data from Don Tapscott's Net Generation project). They live in a polychromatic world (one of Joi Ito's favourite phrases) - vibrant, instant, colourful and multichannel, sharing their lives, often in breath-taking technicolour intimacy with the world, but more often just the people and communities who matter to them. These are people used to being exposed to 3000 brands a day, but not letting them stick. They filter out noise and froth, as if reared subconciously on the Cluetrain. They're the teflon generation, which drives traditional marketers crazy. They're used to being intimate with each other, and ironically, can also be intimate with brands, in particular those that demonstrate authenticity. Authenticity here can be defined as tranparency coupled with high performance, in areas such as environmental sustainability, provenance, employee relations and conversations, not marketing. It means cutting out the spin and the intermediaries between people and the things they want to connect to. Relationships - undiluted. Authenticity means people and companies articulate and share their own unique values, they don't just follow fads. And perhaps more than anything it means mountains of data. There is a high bandwidth for information, and the filters are expected to be client-side. The more blogs the better – not just from the CEO (unless he or she is interesting in their own right), but from the product managers who can talk with loving micro detail about obscure features. The data doesn’t need to be packaged – the rawer the better, otherwise it seems patronizing. Hence the carbon footprint of a packet of crisps – let the people decide. Data about the provenance of things and people is everywhere nowadays, and the smart companies are collecting and analysing it to create better services. Last.FM, Amazon and NefFlix filtering that learns your taste and suggests new things being a simple example. Up til now, these smart recommendation engines have been constrained by the paucity of useful, unique data sets that help the services know that your favourite thing and mine are one and the same. Similarly singers and their products, with the notable exception of a number of Stock, Aitken and Waterman clones from the 80s, are generally unique and different. Meaning can be layered on top, and smart algorithms do their bit. The most obvious (and bankable) recommendation engine to date is of course Google, that uses that wholly unique asset, the URL.

So, here I believe lies the potential of the mobile web – opening up new datasets for analysis and recommendation, with monetary values far in advance of the pennies that vendors pay for the click of a potentially interested surfer. If Amazon can use its smarts to get me to a buy a book based on my behaviour, why not allow someone to recommend what car I should be driving based on an analysis of my actual life, not just the slice of me inferred by my purchasing habits on one book-orientated website. The beauty of the mobile device is that it's not only smart, but connected. According to a China Mobile study, 91% of owners keep within 1 metre of them 24/7. Unlike traditional surfing through the web, this mobile device is moving with you through the "three dimensional" (i.e. real) world, leaving an information wake. The mobile device has the ability to capture and deliver a vast number of different data streams, such as location, who are your real friends (ie those people in your mobile phonebook, not the pale imitations found on social networking services), who do you call the most, and even in future, what you buy, what you eat or how you exercise. This data is created by the user and as such is – or should be - owned by them - getting them to part with it in order to receive useful and services is one of the primary innovation and creativity challenges of our generation. So far, I don’t see clarity in the industry on this and it’s dangerous. We allow Microsoft to create the tools that allow us to write novels, but do not expect them to claim ownership. Similarly, we hire the phone companies for the reason of connecting us with people we chose to connect to. If in doing that, we create a digital trail of commercial value, it would be folly not to assume that most of this value resides with its creator.

Smart companies will figure out how to get the customer to let them tap into these data streams, and use them to generate collective intelligence about what the customers want, often before they even know they want it. Automating data collection and feedback on products will be a breakthrough in terms of productivity, and here again the mobile has the potential to be part of this story. I often wonder why on earth the operators don't actually do something useful with their aggregate view of mobile users. How hard would it be to deliver very powerful real time traffic reports, just based on observing the anonymized progress of the swarms of phone-toting commuters?

Product innovation will be a lot easier when every product has an online service component providing usage information to improve the experience. Who would have expected that rowing machines - a product if ever there was one - would be turned into a social-networking compliant "rowing experience" by bundling net-connected service with the product, allowing you to race against other strangers and friends around the world. With products that can now talk back and among each other, it's a lot easier to have an aggregate view of what is actually happening around your customer's world, and how to fill the gaps. However, this is happening everywhere, with a surfeit of products and services clamouring for the every drop of customer attention.

The natural response to this is to dive into a niche, ever closer to the customer. And it is here that mass customization starts to become both necessary and ubiquitous. With the provision of a service layer on top, even the most anodyne, commodtized product can be differentiated. Telco companies have been trying for years to inject higher level valuable services over the creeping commoditization of connecting bits that is happening to their communications services. Whether its Nike's online service for creating a unique pair of shoes, or the 3D printer that can create a product while the customer waits, people are expecting their products in any colour they like, including black.

However, this supply chain flexibility does not come cheap, and will be another factor that puts pressure on profit margins, in addition to declining entry barriers and commoditization. As such corporate managers suffer quarterly performance anxiety, and face intense pressure to control every moving thing, and cut costs to the quick. Letting go of control and allowing innovation to meander throughout an organization, unencumbered by ROI concerns, must be very hard for people in this position. However, this is exactly what needs to happen in some cases, as in any event, corporates are losing control of their employees. Consumerization and Enterprise2.0 means, in short, Web2.0 principles and processes coming to the workplace, and the resultant empowerment of the edge (in this case employee rather than employer). Employers are learning they are often only coming second (or third or fourth) in the prioirity of their employees. No longer poorly designed collaboration, knowledge management and communication services stand up to scrutiny - employees now have more advanced collaboration technologies in their personal lives, and will expect to use them in the workplace.

Employers letting go of control of their employees is just one element of Enterprise2.0, the changing shape of the corporation being another. Why do we need marketing if a product sells itself and manages the customer support through its own Satisfaction-like community? The only interaction a customer may want with a company is to speak directly to the product manager themselves. As mobiles become more contextually keys for advertising, how will companies be able to accomodate the switch from mass, non specific advertising, to micro, personalized conversations with an audience of one. Finally, not only with corporate hierarchies change, but geographies too. Micro-multinationals mean that companies can locate anywhere, and take advantage of different cost structures and innovation clusters to become worldclass on a shoestring budget. In this vein, leapfrogging occurs - innovations happen first in the developing world as they are driven by creativity inducing constraints. Hence the best place to get cataracts done is in India, and most advanced mobile payments services in Africa.

So, here are a handful of the key trends that I feel are most important in shaping our competitive space - some more relevant than others, and some still debatable. Anyway, next post I'll take a look at some of our innovation activities that we've been putting in place to meet the challenges posed by these trends head on.