NEW PRODUCT DEVELOPMENT
INTRODUCTION
The rapid growth of technological advancement in the society has brought people ease in all the things that they do. Part of this technological advancement is through development of new products and the emergence of the innovative activities for each and every organisation. Evidence of innovation is spread thinly in the business population, as most profess that innovation brought out excellent performance for the company in terms of profit and resource maximisation. Management of innovation is often regarded as the unquestioned cornerstone towards competitiveness in the 21st century. These technological advancements have brought people, especially those in the business world, to utilise a strategy that would be helpful in enhancing the business value of any organisation. Furthermore, this development has made changes and development with regards to the plans and strategies of the management of any organisation, notably those in the marketing environment.
Within the market place, one of the most important things to consider is to establish a strategy that will be useful for different activities of the organisation and enhance the value of the business as a whole. Part of the changes brought by the competition of these industries globally is the development of new products in the market. In line with this, more and more organisations are trying to impose and implement different innovative activities that will further make their business more competent and to have a competitive position in the market place. Primarily, the purpose of this paper is to have insightful details about two of the innovative activities implemented within the Nokia organisation, a world leading telecommunications firm known for the manufacture of a variety of cellular phones.
The 21st century has become the era of adopting innovation as a premise for doing business. The higher echelon of management in organisations is now driven towards innovative strategies designed to provide a competitive edge in the marketplace. As business gravitates towards a global scale, entrepreneurs find themselves faced with the challenge of producing new and better products at reduced cost and market price. Daft (2003) pointed out that in managing a global environment, managers must be characterised by the ability to bring about change through innovation and creativity. Further according to Daft, a revolutionised manager sees change, rather than stability, as the nature of things (2003). Innovation as a ground for doing business in the 21st century will be the consistent tugging force that the organisation must either strive to adopt or suffer the consequences of being left behind by competitors.
BRIEF NOKIA BACKGROUND
With its historical roots in a wood-pulp mill originally founded by engineer Fredrik Idestam in southern Finland in 1865, the modern telecommunications giant has given Finland a high technological profile throughout the world (Huuderman, 2003). Kent (2004) related that in 1898, the company had acquired a factory for the production of galoshes and tires. Noam (1992) noted that fourteen years later it began to produce industrial cables. But the modern Nokia only came into being in 1967 when the Nokia Group of Companies was formed (Mendelson & Ziegler, 1999). It was then that its subsidiary, The Finnish Cable Company, began to develop its electronics department, along with its two other sister subsidiaries (Gruber, 2005). This cable company produced Finland’s computers in the late 1970s, leading to an extension into telecommunication that has made Nokia a household name (Sull, 2003).
Today, the company has long since moved from Nokia into a present headquarters at Espoo, Finland, and has over a third of the worldwide handset market, and a 50 per cent share of the European market (Haig, 2004). This is even more of an achievement if it was considered that the wireless handset market is regarded as the world’s largest consumer electronics industry, measured by units. Nokia’s ten largest markets are the United States, United Kingdom, Germany, China, United Arab Emirates, India, Italy, France, Brazil and Spain (Ahlback, 2006). The firm is all the time trying to maintain their position as the world’s dominant mobile phone manufacturer by constantly coming up with phones of the latest music, video, interactive gaming and a host of other software applications. Nokia has been through many transformations since it was founded in 1865 as a pulp mill on the Nokia River in Southern Finland. Business experts say that Nokia has done a good job of combining technology and marketing to bring consumers along the continuum with new and fashionable mobile products (Jonash, 2000). Basically, as of 2008, Nokia remain to be a number one mobile brand in Europe (Eurobrand, 2008). However, they are still facing the challenge of being overpowered by very stiff competition in the mobile phone manufacturing industry. Nokia’s strategy of searching for opportunities in short-term markets may add up to continued long-term success.
DISCUSSIONS
According to Taylor (1984), the new product development process should follow the so-called seven step process i.e. product criteria, idea, generation, idea screening, business analysis, prototype development, market test and full commercialisation. However, the process may be revised and adapted to the unique needs of each company. Actually, Nokia always follow this process with little revisions. As part of new product development of Nokia, the latest reported development for the company is the new software platform, called the Open EMS Suite which will let network equipment providers, independent software vendors and system integrators develop network management solutions more cost efficiently, leading to faster market entry (Nokia shows innovation leadership with new Open EMS Suite platform’, 2009). This innovation aims to boost cooperation across the industry, freeing up resources for innovative new solutions by lowering overall R&D costs and cutting down the ‘systems integration tax’. The second innovation is with respect to their mobile products, per se, which is specifically innovations for 3G WCDMA, multimedia and enterprise, as they have launched several mobile phones with 3G capability, optimized for visual sharing and to enhance user experience with respect to camera phones.
According to Jonash (2000), to achieve breakthroughs in product innovation, executives must address three critical elements: (1) the integration of technology and strategy, particularly as they relate to a strategic view of the market; (2) a comprehensive view of the innovation process; and (3) a culture of innovation. And this has been the principle of Nokia for the recent decades that they have been operating. However, stimulating innovation on the scale necessary to sustain long-term growth demands that Nokia managers do more than beef up the research and development (R&D) budget. A next-generation model of innovation is marked by two uncommon features–a wide-open beginning in which product concepts are varied and plentiful, and a broad ending to the process whereby an array of products and services are rolled out to customers to capture maximum value (Shelton & Davila, 2005). In the middle of the process is speed and flexibility to replace poky methods of getting new products to market. This is one aspect which Nokia should focus on, as their innovative activities these past few years have experienced a slowdown, considering that the telecommunications industry is one where innovations are fiercely continuing to arise.
Because of the enormous energy expended in a successful launch or rollout, many businesspeople believe that they are effective managers of this end of the innovation process. The problem is that nobody bothers to sew up–let alone dream up–all the possible ancillary markets or applications, particularly those that are beyond the scope of a company’s current distribution channels or manufacturing operations. At this end of the innovation process, underexploited opportunities often abound. There is, from observation and from the numerous Nokia news abound, that the company has taken a complacent approach to innovations lately. With the focus on high-end products, especially in the marketing aspect, the firm has taken for granted that their mid-range products contribute the largest portion to their overall sales. With regards to the New Product Development practices of Nokia, let us now assess their strengths, weaknesses, opportunities and threats.
SWOT Analysis
Strengths. As mobile manufacturers increasingly compete on price, Nokia’s vast production volume is an obvious strength. In fact, when Nokia streamlined in the 1990s, it already had the advantage of size. With several consecutive years of multibillion-euro profits despite a sagging economy and struggling telecommunications market (and rather flat sales at Nokia itself), the company has outshined its major competitors to become a model firm. Also, Nokia’s decision to focus on only one market after years of diversity was a courageous one, but it has led to its current position as one of the top global brands. The firm has likewise been characterised by many analysts to have an ability to adapt to changing market conditions in order to maximise profit. Listening to and identifying with consumers has allowed Nokia to construct a corporate culture that bears little resemblance to the Nokia of the past.
The firm’s weapon in this industry is their research and development department. The latter has gained increasing importance from company planners in its effort to stave off the competition. Nokia has been found to devote 10% of its revenue to research and development concentrated specifically on telecommunications mobility and Internet Protocol advancements (‘Nokia’s Success Story Pushing Wireless World’s Envelope’, 1999). This current research and development focus has allowed the company to maintain an appropriate balance between high-tech development and phones that are better-suited for first-time users in emerging markets. Further, part of the company’s innate strengths has also been attributed to its early adoption of the RossettaNet supply-chain management system, which is being adopted by many of the most important links in Nokia’s supply chain, which consists nearly of 2000 companies (Miller & Morey, 2004). Recognising that speed and scale matters in the telecommunications industry, RosettaNet implementation is just another example of how the insurgent Nokia stays ahead of the competition. Further, the company has strategies that generate sustained successes: rapid technology development, fuelled by innovative research and development, and keen market awareness, characterised by frequent product launches and updates. The ability to continuously renew and improve their product mix while effectively managing demand and supply is the key to maintaining Nokia’s leader status. Only by continuously using the insurgent strategies of global brand building, effective communications, supply-chain management, and control of the telecommunications dialogue through rapid product development is Nokia able to continue dominating the world market.
Weaknesses. Not all of their products are successful, which exposes a flaw in their research and development area. Take for example the N-gage series, which was widely considered as a flop. Also, they have shown slowness in adopting new paradigms of thinking. For instance, clamshell phones, which are favoured by many customers was taken for granted by Nokia until last year, when they finally launched its first model. They have also been shown to not have a strong market presence in China, as Motorola has taken over the said region. This is a very significant weakness on the part of Nokia, as China is has very fast-growing wireless market. A weakness in the mid-range portfolio is also notable. Analysts have accused the company of focusing too much on their high-end products. And in some countries, the value of their phones depreciates very quickly. This may be due to the reason that they have a lot of models to choose from ,and peoples’ attention are thus distracted very easily with new Nokia models that come out. Market analysts have also been shown to detect complacency and arrogance on the part of the company, and also of a failure to predict market trends and adapt to them accordingly. Furthermore, Nokia has been lagging in design innovation.
Opportunities. The basis for long-term competitiveness is the ability to develop continuously new generations of more advanced products. Therefore one of the company’s opportunities is to tap into more markets as a result of the innovations being introduced in the telecommunications industry. Also, the interaction with their suppliers allows for the pooling of resources and focus of efforts that make for major technological breakthroughs. No firm can hope to be among the world best in high-tech manufacturing as well as in public service provision. So the selection mechanism of the market tends to keep these two organisational fields wide apart. Yet, they need to co-operate intimately in order to develop the market. Localised capabilities enabling or even enhancing such co-operation will always make a difference when it comes to first-mover advantages. The company’s presence in the CDMA market, which they are just entering, as well as 3G and Edge markets, also present huge opportunities that Nokia could very well sustain. The opportunity to penetrate new growth markets where cell phone adoption still has room to go, including India and other countries is likewise a very attractive horizon. Leveraging Nokia’s infrastructure business to get first choice and stronger position against rivals is also an opportunity. They also have the opportunity to get ahead of Motorola in the China market, and this should be the case, since the said market is a potential sizeable source of income. The trend of changing new model of mobile phone every now and then within a short period of time is observed, thus frequent purchase from a single customer is likewise an opportunity for Nokia.
Threats. Competitors are major threats to the business. Ericsson, for instance, has been in this industry for more than a century. Nokia, in contrast, started out in other lines of business and entered telecommunications only during the last three decades. While Ericsson has gradually developed its core competencies and technologies over a very long time period, some of the major technological assets that underpin Nokia’s contemporary competitiveness have initially been developed by other firms, and subsequently been acquired by Nokia. The firm’s inability to keep up with innovations, or recognise its demand, creates a threat for them, a risk that they could be displaced by other industry leaders like Motorola, Sony Ericsson, Samsung and others. The legal and political environment in the countries where they operate in could potentially affect the business negatively. Their apparent complacence could be used by their competitors to their advantage, and take Nokia by surprise, with the latter realising too late that they are not the industry leader anymore. Customer discontent is also a very potent threat being faced by the company, connected to the hasty decrease in the separate product’s life circle. The inevitability of using all the possible phone variants became one of the side effects of having wide product line, as Nokia products would show.
CONCLUSION AND RECOMMENDATIONS
All of the discussions above attest to the fact that in the contemporary economy, the greatest rewards go to companies that create new business models–ideas that spark new sources of revenue based on New Product Development process, changing technology, demographics and consumer habits. This means that the statement of Kotler is essential to any business i.e. to develop new products to maintain competency. However, it is also evident businesses should cautious to their actions. They need to review and evaluate certain new product development processes carefully to avoid downturn and failure. Companies can sustain profitability and trigger growth by creating breakthroughs with their products, performance, and customers. Growth through breakthrough product innovation requires solutions achieved in multidisciplinary ways. Nokia should illustrate the necessity of multidisciplinary innovation to create new value at multiple points on the value chain. Nokia’s commitment to R&D could arguably one of the most potent forces moving economies and nations into the information age. Consistent breakthrough product innovation rewards all of an organisation’s shareholders. As a result, the company is more valuable.
As part of Nokia’s New Product Development process, an innovative environment can be consciously created if a company is willing to abandon old rules, shed old habits and upend cherished conventions. The key is recognising that past achievement militates against future adaptability, by creating well-worn ways of doing things that cause a company to undervalue or ignore rule-breaking insights. Yesterday’s laser-like focus becomes today’s set of blinders, narrowing an enterprise’s field of vision from what it truly new to what it already knows. Glimmers of great ideas are evident in most organisations; the problem is that in direct proportion to the degree those great ideas are different, the part of the challenge is demystifying innovation, by breaking it down to its constituent parts. Nokia must recognise that innovation doesn’t follow a schedule. Most companies are so boxed in and bounded by existing orthodoxies that have hardened around yesterday’s business model that they think they can schedule strategic insight the way an executive records a reminder in his day-planner. But the truly innovative bursts of insight that trigger new ideas don’t obey the corporate planning calendar. Additionally, Nokia could start new conversations. New ideas don’t obey an organisational chart. Companies that want to get serious about innovation need to break the ‘strategy monopoly’ that closes off the executive suite from new ideas percolating in other corners of the company. Innovation-minded companies spark new conversations by bringing together executives with employees of all ranks to question corporate orthodoxies and search for new ways to do business. They should also seek new perspectives. If Nokia wants to do a better job of envisioning the future, they should ask the people who will get to the future first: their youngest employees. If they want to know how consumers act, don’t observe them in focus-group captivity–join the Nokia execs for a day at the beach. Want a new vision? Try a new vantage point, and see a world of opportunity open up. Also, Nokia should spark new passions. Innovation comes from the heart as well as the head. Companies that aren’t afraid to innovate engage employee energies in a new and profoundly different way. When people are part of a cause and are not considered as just a cog in the wheel, their innovation quotient skyrockets. And above all, recognise that in today’s economy, capital is plentiful; good ideas are scarce. Companies that look to incremental change to generate additional revenue will tend toward subsistence at best–eclipsed by companies that create an environment of innovation, spawning the new ideas that generate new wealth. That’s why an ambitious enterprise must replicate within itself the basic DNA of innovation: A culture of continuous experimentation imbedded broadly and deeply throughout a company.
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