To meet the future, the Nokia[i] is leveraging open innovation[ii] to establish a footprint in the market for Internet of Things (IoT). In February 2018, Nokia launched its new strategy called Future X, which is its vision for “Industry 4.0.” Industry 4.0 is a world where industries leverage cloud and analytic technologies to achieve new levels of agility, efficiency, and productivity across multiple industries. Nokia’s focus has shifted from communication in the physical world to digitization of the physical world to ultimately automate and optimize it. The firm has made an initial investment of $350M to crowdsource new ideas for undefined problems. [iii] Its goal is to support companies with novel ideas get-to-market[iv]. Several concerns around cybersecurity and its strategy make the viability of Future X questionable.
How open innovation works at Nokia?[v]
Bell Labs Prize is an annual open competition. The problem is undefined, but the themes are centered around digitization. Participants submit a 250-word essay on their idea and are encouraged to demonstrate a prototype. Proposals are evaluated on three criteria as described in the table below. 10 finalists are invited to pitch their ideas during a two-day workshop in Helsinki, Finland.
Table 1: Bell Labs Prize’s criteria for evaluation of proposal submissions[vi]
|10x Innovation Potential||The proposal involves “out of the box” thinking that could result in a 10x change in performance|
|Technical Merit||The proposal must be technically sound. It must also be balanced on current principles and further/future advancements and innovations|
|Feasibility||Can a proof of concept, simulation or demonstration be built in the course of the competition? What is required to do so? In order to build a commercially viable (revenue and profit-generating) solution, what more would be required?|
Stage 2 candidates are invited to work at Bell Labs’ 17 research centers with a Nobel Prize-winning team[ix]. The top three winners altogether are awarded $175,000 in seed-funding and the opportunity to join Bell Labs to work towards commercial viability.
In February 2018, Nokia Capital Group (NCG) established a $350 M Investment Fund for the competition[vii][viii]. Ideas generated thus far are fascinating. For example, the 2017 winner Continuum Technologies’ created fabrics embedded with nanotechnology. The product provides real-time monitoring of vital signs and health data. This technology has massive potential for the IoT landscape.
Why are Internet of Things (IoT) and open innovation important to Nokia?
IoT is considered the next generation of advanced communication[x]. IoT is defined as sensors and actuators connected by networks to computing systems that autonomously exchange data between them”[xi]. McKinsey estimates that by 2020, there will be 50 billion “things” (machines, sensors, and gadgets) connected to the internet that will increase efficiencies and improve customer service in the Industrial marketplace. Nokia envisions that sensors can be used in a range of industries, including home, retail, oil and gas, shipping, etc. IoT is estimated to generate $1.1 Trillion (including consumer surplus) per year in 2025 across nine business settings[xii].
How does open innovation fit into the short-term and long-term?
Nokia leverages open innovation to diversify its core business beyond its tradition business segments. Since Nokia does not have sufficient resources, it leverages the competition to identify potential partners – universities, start-ups, and companies – with ideas and capabilities. In the short term, Nokia plans to be one of the first movers and early adopters of the latest technologies in IoT. In the long term, Nokia plans to create Future X. It also wants to expand its product mix to include a portfolio of gadgets for the next generation that solve complex industrial problems. Furthermore, it aims to be the biggest player in terms of research (an incubator) for IoT.
Recommendations for Nokia
Future X is a massive undertaking. Nokia must develop practical solutions to several challenges to achieve scale. First, it needs strict protocols for data due to potential security risks[xiii]. Although Nokia has been strategic by investing in cybersecurity (CS), there are concerns about the potential impact an attack could have[xiv]. Secondly, Nokia needs to narrow its scope. Future X casts a wide net in terms of target industries. Is Nokia spreading itself thin? It risks the agility to adapt and respond to consumer demands quickly. Finally, Nokia should consider expanding coverage beyond developed markets. McKinsey reports that a 40% potential increase in emerging markets, albeit their limited infrastructure at-present.
Author’s corner: A few open-ended questions for you?
Cyber security (CS) is a major risk. How can Nokia (and others in its position) think about CS?[xv] [xvi] There’s no certainty of IoT as the next frontier. If Industry 4.0 does happen, would Nokia be the customers’ choice and how does it ensure that?
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[i] “Nokia Corporation”. 2018. Www-Capitaliq-Com.Ezp-Prod1.Hul.Harvard.Edu. Accessed November 13 2018. https://www-capitaliq-com.ezp-prod1.hul.harvard.edu/CIQDotNet/company.aspx?companyId=205573.
[ii] “Open Innovation Challenge | Nokia”. 2018. Nokia. Accessed November 13 2018. https://www.nokia.com/about-nokia/news-events/events-calendar/open-innovation-challenge/.
[iv] “Nokia Growth Partners Announces $350M Fund Focused On Iot”. 2018. Techcrunch. Accessed November 13 2018. https://techcrunch.com/2016/02/21/nokia-growth-partners-announces-350m-fund-focused-on-iot/.
[vi] Surden, Esther, and Esther Surden. 2016. “Weldon Says Bell Labs Acquisition By Nokia Is Good For The Labs And For New Jersey”. Njtechweekly.Com. Accessed November 14 2018. https://njtechweekly.com/2016/05/09/weldon-says-bell-labs-acquisition-by-nokia-is-good-for-the-labs-and-for-new-jersey/.
[vii] Crunchbase.com. (2018). Nokia Growth Partners IoT investment Fund. [online] Available at: https://www.crunchbase.com/fund/nokia-growth-partners-raised-nokia-growth-partners-iot-investment-fund–3b63b128 [Accessed 13 Nov. 2018].
[viii] “NGP Capital”. 2018. Www-Capitaliq-Com.Ezp-Prod1.Hul.Harvard.Edu. Accessed November 13 2018. https://www-capitaliq-com.ezp-prod1.hul.harvard.edu/CIQDotNet/company.aspx?companyId=22690459&fromSearchProfiles=True.
[ix] Surden, Esther, and Esther Surden. 2016. “Weldon Says Bell Labs Acquisition By Nokia Is Good For The Labs And For New Jersey”. Njtechweekly.Com. Accessed November 14 2018. https://njtechweekly.com/2016/05/09/weldon-says-bell-labs-acquisition-by-nokia-is-good-for-the-labs-and-for-new-jersey/.
[x] “Sign In With Insider Inc.”. 2018. Intelligence.Businessinsider.Com. Accessed November 13 2018. https://intelligence.businessinsider.com/post/tink-labs-300-million-round-could-enable-smart-hotels-lg-developing-robotic-carts-to-automate-shopping-samsung-opening-up-bixby.
[xi] “The Internet of Things: Mapping the Value Beyond the Hype”. 2018. Mckinsey.Com. Accessed November 14 2018. https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/McKinsey%20Digital/Our%20Insights/The%20Internet%20of%20Things%20The%20value%20of%20digitizing%20the%20physical%20world/The-Internet-of-things-Mapping-the-value-beyond-the-hype.ashx.
[xii] “The Internet of Things: Mapping the Value Beyond the Hype”. 2018. Mckinsey.Com. Accessed November 14 2018. https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/McKinsey%20Digital/Our%20Insights/The%20Internet%20of%20Things%20The%20value%20of%20digitizing%20the%20physical%20world/The-Internet-of-things-Mapping-the-value-beyond-the-hype.ashx.
[xiv] Hardcastle, Jessica. 2018. “Cisco, Nokia, Microsoft Back $85M Team8-Led Security Fund – Sdxce”. Sdxcentral. Accessed November 14 2018. https://www.sdxcentral.com/articles/news/cisco-nokia-microsoft-back-85m-team8-security-fund/2018/10/.
[xvi] Business, 12. 2017. “The Internet Of Things And Its Growing Role In Business – Navigate”. Navigate. Accessed November 14 2018. https://www.navigatecorp.com/the-internet-of-things-and-its-growing-role-in-business/.