It was good while it lasted but it must, ultimately, feel good to let go.
Microsoft’s acquisition of Nokia’s devices division has elicited a range of reactions from the press and analysts – some say this is a good use of Microsoft’s offshore cash pile, while others question Nokia CEO Stephen Elop’s loyalties. A conflicting commentary of both doom and optimism fills the week’s papers, with some bemoaning the loss of a Finnish industrial icon to a soulless American giant.
If there’s one thing that’s certain, it’s the fact that Nokia has interesting times ahead. For the past two decades, Nokia has been a consumer brand synonymous with its mobile phones unit. At its peak, it was a symbol of Finnish entrepreneurialism and ingenuity – accounting for 40 per cent of the world's mobile phones, a fifth of Finland's exports and four per cent of its GDP, and boasting a market value of close to $300 billion. It makes the $7.2Bn divestment somewhat… well, underwhelming.
But there’s more to Nokia’s history than its mobile phones. Nokia started in 1865 as a wood-pulp mill on the banks of the Nokianvirta river in southwest Finland, from which it derived its name. According to the company’s website, it went from paper – “one of the most influential communications technologies in history” – to telecommunications, going on to dabble in rubber, cable, forestry, electronics and power generation. Clearly the brand has seen a sea of change and has a rich history behind it, even if not in the lifetime of many of its current constituents. So what’s next for a brand that has had such a colourful and diverse history?
Nokia is set to make a fresh start as an organisation with much greater focus, having effectively cut off what had become the most toxic part of its business. It presents a once in a lifetime prospect for a brand manager – to re-position and reinvigorate a brand that, at least for the past six years, has been bleeding market share in its flailing ‘flagship’ business. Can you imagine what the past few years have been like for a Nokia brand manager? Picture it – day after day, poring over dashboards that display bleak images of eroding market share, poor performance on key attributes against Apple and Samsung, lower spontaneous awareness in countries with high smartphone penetration, low intention to purchase, bottomed-out NPS, slashed marketing budgets… I’m speculating, but you get the gist.
Suddenly there is light at the end of the tunnel. Gone is the baggage associated with being late to the smartphone party – that’s now Microsoft’s issue. By ridding itself of its money-bleeding mobile phone business, Nokia is now on the cusp of earning an investment-grade rating from the bond market. There’s a healthy cash pile, a fraction of which could (hopefully) be used to refresh a brand that is in much need of change. There’s now a very tangible case for evolving the Nokia brand. Once the transaction is closed, Nokia will be transformed into a technology and IP licensing company and cease to be a manufacturer. And Microsoft will become the OEM for its own Windows Phone devices.
Nokia will be left with three businesses – one is NSN, which deals with network infrastructure and services. It might be invisible to consumers, but this business (which includes equipment it sells to telecom operators to run their wireless networks) constitutes the true lifeblood of the Nokia brand, generating around 85 per cent of the company’s annual $18.4bn in revenues. Then there’s HERE – mapping and location services across different screens and operating systems – and thirdly, the Advanced Technologies business.
There are few apparent synergies among these businesses, but that’s what makes this interesting. Nokia will need to do a certain degree of introspection to clarify these relationships and articulate its overall value proposition for clients and investors. Also, Nokia is a national icon in Finland, which makes the entire country an important stakeholder. Several Finnish universities offered courses in mathematics and software engineering with Nokia envisioned as a future employer. With such a prominent divestment, redefining the brand will be more important than ever in order to carve out a new role for the business in the context of the country’s own narrative.
And there will be complexities, too – lots of them. While Nokia will continue to own and manage the Nokia brand, Microsoft is acquiring the Lumia brand and products, Nokia’s Mobile Phones business unit, and will license the Nokia brand for use with current Nokia mobile phone products. Nokia’s mobile phone brand could disappear once Microsoft’s 10-year licence to use it on current models expires, but in the meanwhile, the organisation may need to use its identity and architecture to distinguish between offers that serve different types of customers and originate from two different companies.
Few organisations get the opportunity to completely re-examine such a rich, complex and well-known brand in this way. Letting go of what effectively made you famous may require some degree of adjustment, but if nothing else, it should be an energising challenge.
Veb Anand is executive strategy director at The Brand Union