Nokia, once the world’s biggest maker of mobile phones, plans to start designing and licensing handsets again once an agreement with partner Microsoft allows it to in 2016, its chief executive told Germany’s Manager Magazin.
“We will look for suitable partners,” Rajeev Suri said in an interview published on Thursday. “Microsoft makes mobile phones. We would simply design them and then make the brand name available to license.”
So Nokia will design the handsets, and an interested party would pay for the manufacturing and the brand name. Basically, it’s tight risk management by Nokia. Why? – remember the Product Factors / Business System Factors from yesterday (here)? Even if you have a great product, if you don’t have (most of) the Business System Factors — consumer installed base, developer base, brand, distribution channels, marketing budget — you know it’ll be an uphill (nearly impossible) slog.
Here’s the dilemma, as I laid it out yesterday:
If you’re a smaller smartphone maker, and you stumble upon a killer feature […] what do you do? Meaning, you could launch it, get some modest uplift in sales, and then watch your (larger) competitors copy its best elements. And then what? Or you could sit on it. And then what? (Assume licensing is not an option […].
For Nokia, licensing is a decent option. It’s the way to have unique hardware (in performance, or in ability to reach a low-price cost-effectively) and to still profit from the innovation, even if Nokia itself can’t reach consumers. It also allows Nokia to act with a fairly small staff (see question #2 (Talent) in the earlier post I wrote on Nokia’s potential return.) But, it’s not a path to self-determination, even if that’s a hope for one or two steps from now. As I mentioned in yesterday’s post, there’s really no good answer.
It’ll be very interesting to see who Nokia works with. It’ll either be a low-cost competitor, or one that’s made the tough choice to go dual-brand (whether split by region or by tier). It will be equally interesting to see if Nokia adjusts its strategy in the coming years.