Nokia and Open Innovation

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    Optimizing open innovation

    With Nokia as case

    Aarhus School of BusinessAarhus University

    March 2012

    Department of Management and Statistics

    Author: Lars Rasmussen

    Academic supervisor: Martin Kloyer

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    Contents

    Abstract ............................................................................................................................. 1

    1. Introduction................................................................................................................. 2

    1.1 Problem statement ................................................................................................... 3

    1.2 Methodology............................................................................................................. 3

    1.3 Scope and delimitation ............................................................................................. 5

    1.4 Structure of the thesis............................................................................................... 6

    2. The smartphone industry ............................................................................................ 7

    2.1 Description of smartphone vendors .......................................................................... 7

    2.1.1 Nokia ................................................................................................................. 7

    2.1.2 Apple ................................................................................................................. 9

    2.1.3 Samsung ......................................................................................................... 10

    2.2 The integrated portfolio........................................................................................... 11

    2.2.1 The market portfolio ......................................................................................... 11

    2.2.2 The technology portfolio................................................................................... 13

    2.2.3 The evolution of the integrated portfolio ........................................................... 20

    3. Open innovation the theory.................................................................................... 21

    4. The companies innovation processes ...................................................................... 28

    4.1 Apples innovation processes ................................................................................. 28

    4.1.1 Apples internal innovation process.................................................................. 28

    4.1.2 Apples use of open innovation ........................................................................ 30

    4.1.3 Assessment of Apples innovation processes................................................... 31

    4.2 Samsungs innovation processes ........................................................................... 34

    4.2.1 Samsungs internal innovation process ............................................................ 34

    4.2.2. Samsungs use of open innovation.................................................................. 36

    4.2.3 Assessment of Samsungs innovation processes............................................. 37

    4.3 Nokias innovation processes ................................................................................. 40

    4.3.1. Nokias internal innovation processes ............................................................. 40

    4.3.2 Nokias use of open innovation ........................................................................ 43

    4.3.3. Assessment of Nokias innovation processes.................................................. 48

    4.4 Partial conclusion ................................................................................................... 51

    5. Discussion - Where have Nokia failed?..................................................................... 53

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    6. Conclusion and further research ............................................................................... 59

    6.1 Conclusion ............................................................................................................. 59

    6.2 Suggestions for further research ............................................................................ 61

    Bibliography..................................................................................................................... 62

    Books........................................................................................................................... 62

    Articles/slides ............................................................................................................... 62

    Internet sources ........................................................................................................... 63

    Appendix A A short description of OS suppliers ............................................................ 72

    Appendix B Mobile phone and smartphone market shares ........................................... 74

    Appendix C Specifications for smartphones.................................................................. 76

    Appendix D Apples hardware suppliers:....................................................................... 77

    FiguresFigure 1: structure of thesis ........................................................................................ 6

    Figure 2: The three companies in the integrated portfolio ......................................... 20

    Figure 3: The open innovation paradigm for managing industrial R&D...................... 21

    Figure 4: The Want, Find, Get, Manage Model ......................................................... 24

    Figure 5: Apples innovation processes..................................................................... 33

    Figure 6: Samsungs innovation processes............................................................... 39

    Figure 7: Nokias innovation processes..................................................................... 50

    TablesTable 1: Review of the three smartphones................................................................ 15

    Table 2: Companies use of OI tools ......................................................................... 51

    Table 3: Companies in the Want, Find, Get, Manage model................................... 52

    Table 4: Some of the differences between Nokia and Apple..................................... 53

    Table 5: Worldwide smartphone sales to end users by operating system in 2010

    (thousands of units) .................................................................................................. 73

    Table 6: Worldwide mobile device sales to end users in 2010 (thousands of units) .. 74Table 7: Global smartphone vendor market share (millions of units) ......................... 74

    Table 8: Smartphone market shares 2008 and 2009 ................................................ 75

    Table 9: Worldwide mobile communications device open OS sales to end users by OS

    (thousands of units) .................................................................................................. 75

    Table 10: Specifications for the three competitors best smartphone......................... 76

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    1

    Abstract

    This paper is about the former industry leader within the smartphone industry, Nokia

    against the two current industry leaders, Samsung and Apple. Open innovation is a

    necessity for the participants within the smartphone industry since many technologies

    need to be mastered. But the focus is not only on open innovation since the paper also

    assesses other strategies within customer focus, marketing strategy and their own R&D

    strategy. These parts have a direct or indirect effect on the companies use of open

    innovation. Secondary sources are used to evaluate how the companies innovate.

    Slowinskis Want-Find-Get-Manage approach for managing open innovation is used to

    assess Nokias innovation strategies which are compared to its two main competitors

    innovation strategies. The model shows where Nokia might have failed and it is primarily

    within the want-/goal part. The market and technology leader, Apple know what they want

    and how to reach those goals. Their strategies have created the most efficient money

    generating machine within the smartphone industry. Nokia want to serve a lot of segments

    and they also wanted to have their own OS, the Symbian, which was inadequate. Nokia

    primarily focus on cost, but they also want to provide proper hardware, good design and

    serve all segments, which includes the feature phone- and the emerging markets. They

    are the ones who use the most open innovation tools and have also spent the most on

    R&D. Nokias situation has, however, improved after they started to cooperate with

    Microsoft and abandoned their own OSs. They created the new Lumia-line together which

    has made the two companies a new serious contender within the smartphone industry.

    It is assessed that Nokia have several opportunities to improve their situation. Nokia have

    rejected potentially good ideas since the managers could not assess the ideas properly or

    were too focused on cost. It is advised that they start to focus on value first and