Wednesday, December 3, 2008

Nokia's new maps

In among the various announcements this week at Nokia World (including the N97 and completion of the Symbian purchase), was the third installment of the Nokia Maps saga.

Yes, location-based services will be crucial to the success of mobile devices and services. And the Nokia approach seems to acknowledge that its customers use both handsets and PCs, and that it needs to seamlessly support both. However, Nokia is going head to head with Google and Microsoft (not to mention Yahoo and AOL’s Mapquest).

I guess this explains why Nokia spent $8 billion to acquire Navteq 14 months ago. Nokia seems to see it the lynchpin of winning adoption for Nokia Ovi, its mobile phone portal. And if you want to make an all-in-one portal, maps (like search and email) seem to be an essential element nowadays.

Overall, Nokia’s corporate strategy seems to emphasize the value of internalizing and integrating rather than partnering and using open innovation. So the challenge from investors will be to demonstrate that owning mobile hardware, software and services (while competing with operator-owned services) creates more value than buying the pieces on the open market (or letting its customers choose the best technology for their needs).

While I understand that from a financial standpoint that Nokia hopes services will provide growth as equipment sales flatten out, I’m not sure why Nokia thinks they will be particularly good at these other things. Successful firms focus on where there competencies are, and partner with those that provide complementary goods and services. Nokia could build (or acquire) new competencies, but the general pattern is that such diversification destroys value.

In particular, I’m not thinking of a lot of precedents for a hardware company that’s been a success in the services business. IBM provided VAN (Value Added Network) services in the 1980s and NEC partnered to run Niftyserve in Japan in the 1980s and 1990s. But that was when these services were hard to do — when these became commodity businesses, they had no particular advantage.

Google is diversifying the other way, from services into providing software for handsets (competing with Nokia’s handsets). Is Nokia obsessed with competing with Google (and Microsoft) for Total World Domination? It didn’t work out too well for Scott McNealy or the crew of the HMS Sun, as its 20th century Captain Ahab squandered the 1990s in his futile quest to destroy Moby Microsoft.

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