Virtually all its shareholders gave their approval, and with a stroke of pen the Finnish firm that once dominated the global mobile phone market officially announced the sale of its mobile phone unit to Microsoft Corp yesterday.
The $US 7.4 billion deal will see Nokia transform its business model into a telecom equipment and network services provider, a major step towards re-bundling itself into a super networked business. The move was given a green light by virtually all Nokia equity owners, who saw it was time to let go of a high-fixed-cost and increasingly-low-margin division. The company has been lagging behind at number 8th in the smartphone arena, although it still maintains number two position in the overall mobile phone market according to Gartner. Chairman Risto Siilasmaa told investors. “We have no doubt that this is the right decision.”
Talks surrounded Nokia’s string of wrong turns in the past such as investing in the smart phone technology too early (as noted by former chief executive Jorma Ollila), and reaping poor results from software design efforts. “Nokia’s high fixed costs signal underlying issues in its supply chain management.
The network of supplies has not been optimally selected and articulated to maximize its product offerings to the end customer. At the same time, both Apple and Samsung have created partnerships to leverage their business network to the maximum. For example Samsung’s partnership with Android allowed it to bypass costly software development that plagued Nokia. Similarly, most of Apple componentry is still manufactured by its business network partners” – said Vivek Sood, author of “Move Beyond the Traditional Supply Chains: The 5-STAR Business Network.”
A key reason cited for the poor performance of Nokia’s phone division is not enough innovation. While its rivals such as Apple and Samsung continue to gather momentum with their smart phone lines revamped utilizing the core of their business network partners, Nokia’s only notable attempt was when it embraced the Windows operating system in 2011. Even so, the move did not substantially lift Nokia to its market leading position decades ago. Life after mobile handsets for Nokia will include attempts to make its existing business units profitable, by focusing on its infrastructure. Speculations are already underway about the new moves.
For example acquisition of Alcatel-Lucent’s wireless-equipment unit could build a substantial competency base to enable robust market competition. A super networked business is created by a business forming strong supply networks that allows efficiency and effectiveness in three core competencies: customers, infrastructure and innovation. Vivek Sood, who is the CEO of Global Supply Chain Group, said: “Now that Nokia has freed itself of its past legacies, it is the perfect time to focus on its core competency and cherry-pick its partners that can complement the gaps. If done properly, Nokia can then re-emerge as a super networked business again ready for the next few decades.” Click here to get first three chapters of the book The 5-STAR Business Network
Just one day after Microsoft announced its phone-based voice assistant Cortana, Apple made known its plan to dramatically improve Siri. With 15 acquisitions under its belt in the last fiscal year, Apple’s latest purchase is of Novauris Technologies.
The UK-based speech-recognition software company has a team of former Dragon Systems R&D employees. Some of its clients in the past include Panasonic, Verizon Wireless, BMW and Samsung for speech recognition system integration.
Apple’s acquisition, of undisclosed amount, is said to actually have happened last year. Analysts have pointed out that the tech giant seems to be working on Siri’s offline capabilities. One of the shortcomings of Apple’s signature voice command system is its reliance on an Internet connection to function.
“Given Apple’s recent CarPlay initiative, the importance of having stable voice command functionality while on the road is increasingly apparent.
“Meanwhile, we can expect to see intense competition from rival Microsoft’s Cortana, which is set to become smarter. Apple is quietly swallowing a number of smaller companies, giving it the advantage of fast integration and turnaround,” says Vivek Sood – CEO of Global Supply Chain Group.
Unlike its rivals such as Google and Facebook who routinely spend billions of dollars on high-profile purchases, Apple tends to acquire smaller tech companies along with their technology before launching new products or features.
In fact, Siri came to life after Apple’s purchase of a company of the same name in 2010.
Kristin Huguet, a spokeswoman for Apple, says: “Apple buys smaller technology companies from time to time, and we generally do not discuss our purpose or plans.”
Also recently, Apple is looking to improve product displays and battery life through a potential purchase of a Japan-based company. Renesas SP Drivers, a unit of Renesas Electronics, develops LCD chips for mobile devices and owns about one-third of the global market share.
Investors are expecting a lot of product launches from Apple, who have just rebounded from the worst monthly loss in a year. Among the anticipated products are Apple’s iTV and iWatch.
Not only developing new products, Apple is also trying to protect its patents. The most recent, yet familiar lawsuit against Samsung, has evolved to include Google.
At the same time, Amazon is taking on both Apple and Google on the TV device’s front. The world’s biggest online retailer unveiled Fire TV priced at US$99 on April 3rd.
“One of the biggest challenges in this TV gadget market is setting up a network of partners that lets you fully showcase your product’s functionality.
“Google’s Chromecast has had recent issues persuading British media companies, Apple is negotiating with Time Warner, while Amazon’s Fire TV already includes Netflix and Hulu applications. The winner will be the one with the most extensive reach within its business network,” said Sood, author of the book “The 5-Star Business Network“. “Gone are the days when companies used to create products on their own and market them on a standalone basis. In today’s networked business world, both product creation as well as marketing required strong ties with an A-class business network.”
On the face of it, the two companies could not be more widely apart. One is the paragon the new paradigm, while other is an old dying breed! I am, of course, talking about Facebook and NewsCorp. That is what all the pundits will tell you. They will also explain the logic of why News Corp bought MySpace in those terms.
Admittedly, NewsCorp business model was broken in 2005 and it had hoped that MySpace would provide the much needed fillip. That never happened, as it could not have happened. NewsCorp let MySpace go after 6 years for $35 million, a fraction of the $580 million it had originally paid. People have their own opinions on what MySpace has become by now, and I have nothing to add to that discussion.
However, Facebook is a company of intense interest at the moment. If you have studied the business networks for as long as I have (in fact I wrote the book ‘The 5-STAR Business Networks) you will also start thinking of it as a company more akin to NewsCorp than to MySpace.
Most people think that Facebook has a minor problem that teens are losing interest in the platform. I think the problem runs deeper – its business model is not sustainable. As explained by 2veritasium in this 7-minute video
(great Australian content – original, thought provoking and myth-shattering) which has already had more than 1.3 million views in nearly 6 weeks, the problem with Facebook is that it is already starting to resemble the old-age companies – almost like “The Curious Case of Benjamin Button“.
As the video hints, companies do resort to desperate measures in desperate times. That is the reason why Facebook’s purchase of WhatsApp reminds me of the deal between News Corp and MySpace. Only time will tell whether Facebook’s decision to start a new chapter with WhatsApp will lead to a bitter “divorce” or not.
A switched on team of senior management makes all the difference. No matter which part of the world, and how unfamiliar the concepts are – an interactive team will always find how to use ideas for their business. I recently had the pleasure of interacting with the chairman and top management team of one of the most strategic companies in Asia. The healthy discussion and the response proved the power of ideas to me once again. Was also pleased to be presented the Chairman’s award. Thank you. You can see a gist of ideas I presented on my book “The 5 Star Business Network”.
As the economic centre of the world moves more and more towards its more populous nations in Asia, a number of businesses are realising that they must adjust their business models, as well as their 5-STAR Business Networks to this new reality. Take the example of airlines industry. A recent recent article in Bloomberg explains
Seven of the world’s 10 busiest routes by passenger volume are in Asia, according to the report, with the globe’s busiest link being between the South Korean island of Jeju and Seoul, followed by flights between Sapporo, Japan, and Tokyo.
There is do doubt then that the airlines in rest of the world will have to move to get a piece of action in this growing market. Not only is the market penetration much lower in Asia than it is Europe and the US, but also lack of surface infrastructure makes it doubly attractive to fly over all those bad roads and railway tracks. The two major alliances of the airlines – Oneworld and Star alliance – are a result of an old business model which is now struggling to adjust. Qantas found a way around by making a an alliance with Emirates that could hugely benefit both the companies on trans-continental flights to and from Australia, via Asia to Europe. Lufthansa is talking about starting a low cost carrier focused on Asia. Bloomberg reported:
Air France, Lufthansa and Iberia of Spain are among former flag-carriers revamping short-haul operations in an effort to end losses and stave off the advances of Ryanair and its peers. Cologne-based Lufthansa said last month it might also establish a low-cost operation to Asia in response to airlines that have exploited the Gulf’s geographical position to grab a growing share of lucrative inter-continental transfer traffic.
As I noted in my book The 5-STAR Business Network, the changing economic reality always creates an imperative for newer business models – to survive and thrive. There is no doubt airlines will need to create much more robust and engaging business models in coming years.
What is your view on the emerging business models in the airlines industry? How can the airlines ensure their survival amid the current turmoil? Please comment below.
One of the best definitions of Corporate Social Responsibility is perhaps provided by Archbishop Desmond Tutu’s The Benchmark Foundation. It states:
“Corporate Social Responsibility (CSR) is the decision-making and implementation process that guides all company activities in the protection and promotion of international human rights, labor and environmental standards and compliance with legal requirements within its operations and in its relations to the societies and communities where it operates. CSR involves a commitment to contribute to the economic, environmental and social sustainability of communities through the on-going engagement of stakeholders, the active participation of communities impacted by company activities and the public reporting of company policies and performance in the economic, environmental and social arenas.”
There is a strong connection between Corporate Social Responsibility and Green Supply Chains. One of the most effective tools to achieve green transformations in the corporate world is Green Supply Chain management. It focuses on sustainable design that increases environmental and social awareness across the supply chain. Sustainable design involves reengineering of design processes to meet current and future human needs without compromising the environment. The basic objectives of sustainability are to reduce consumption of non-renewable resources, minimize waste and create healthy, productive environments through:
Despite an area of significant overlap, GSCM is however not a subset of CSR. While CSR focuses on area under the direct control of a particular organization, Green Supply Chain thinking goes beyond that to recognize that in today’s corporate world, the area of influence of an organization persists far beyond its boundaries. Hence GSCM calls on all partners of a particular supply chain to collaborate to create an end-to-end Green Supply Chain to assure a sustainable and prosperous future.
Source : Emmet & Sood – Green Supply Chains : An Action Manifesto. This book was awarded certificate as “The Most innovative Supply Chain book in the last decade (2000-2010)
There are five type of environmental stakeholders group who drive green initiatives within an organization:
Based on the roles of each player in the supply chain there are different incentives to migrate towards Green Supply Chains and briefly these are as follows.
Factors that drive manufacturers towards Green Design and Green Production include:
Environmental drivers of suppliers include:
Logistics providers are implementing Green practices due to government regulations and customer expectations and agreements
Source : Emmet & Sood – Green Supply Chains : An Action Manifesto. This book was awarded certificate as “The Most innovative Supply Chain book in the last decade (2000-2010)
Extract from the book “The 5-Star Business Network”, written by Vivek Sood
There was a time, not more than a few decades ago, if you were General Motors you would attempt to own every part of your business. The assembly lines, the parts manufacturing plants, the stamping units, the ancillary units and even the software that runs the business, the dealerships that sold the cars, the steel mills, even the mines that produce iron ore for the mills. This was for good reason – you either could not trust others to be savvy enough to produce and send you the material you wanted when you wanted it, or the margins in each of those businesses were big enough for you to try and own all those operations.
There was only one thing wrong with this structure. Your business became an insular behemoth – far removed from the customers and moving slowly in a marketplace going through a rapid transformation. Your more nimble competitors, with loose networks of aligned companies, could easily run rings around you in no time – both in terms of developing and launching new products, and producing and selling high quality products at lower prices.
Eventually, realizing the truism inherent in the folk wisdom of farmers when they say that you do not have to own the cow if all you want is the milk, you would investigate ways of carving out parts of your business into independent entities that could be run as loosely aligned network of businesses, similar to what your competitors had evolved into. This is not a book extolling the virtues of Keiretsu, chaebols or similarly exotic-sounding Japanese and other Asian business structures. It is, however, useful to take some lessons from the evolution and success of these business networks.
Over the past several decades, both the global economy, as well as business structures have evolved dramatically to such an extent most businesses have no recourse but to create business networks akin to those mentioned above (notify on the book). So what is the magic of these business networks? Why are they so important? What makes one business network better than another? Is there a way to systematically assess, measure, report upon, improve and monitor the quality of your business network? What outcomes should you expect out of a well-tuned business network? These are some of the questions we will answer in this book.
When the Tsunami flooded the eastern coastal stretch of Japan in March 2011, the ensuing nuclear disaster combined with the devastation caused by the ocean to disrupt businesses around the world. The Japanese economy sits right in the middle of the global business network and it was natural for businesses as diverse as auto manufacturing, electronics, chemicals, petroleum products, computers and metals to experience the disruptive shock. For example, the price of the Toyota Prius went up by nearly $2,400 after rumours of shortages. While it is natural for a variety of businesses to experience the disruption, it was remarkable to note that those, which had the most responsive and resilient business networks, were the ones to recover from this catastrophe the quickest. Later on in this book, we will see how to recognize the quality of business networks and make them more resilient and responsive at the same time.
The results are in, and for PC sales they are neither good, nor bad – but ugly! The pundits are out to find a scapegoat – and the most convenient scapegoat at the moment is Microsoft. For example see this report in today’s Wall Street Journal – which hails Microsoft’s mea culpa.
There is no doubt Microsoft is partly to blame for the debacle. I am no fan of Microsoft’s ketchup strategy (constantly throwing money to catch-up with the successful rivals). On top of it the company itself admits that “The world is changing and changing fast, and frankly we also didn’t get everything we dreamed of done in the first release,” of Windows 8. The report quoted above goes on to say:
Windows 8, the operating software launched in October, was intended to catapult Microsoft and its allies into the market for new kinds of computing devices—including tablets—and help generally get consumers more interested in buying new personal computers. Six months after the operating software’s debut, it isn’t yet a hit by the accounts of some PC executives and research firms.
One market-research firm, IDC, went so far as to say that Windows 8 did more than fail to revive the PC market—it actually turned off users with changes to basic elements of the widely used operating system.
Ms. Reller disputed IDC’s contention, and said the company is seeing steady if not steep sales progress. She said Microsoft has sold 100 million copies of Windows 8 since October, up from 60 million in January.
However, let’s pause to think about it for one moment. What about the roles of hardware vendors – HP, Dell, Lenovo, Asus, Acer and others. What have they done to create products that consumers would like. Where is the innovation in the hardware arena that would appeal to the customers?
As I said in the comments to the above article:
I think it is wrong to blame just Microsoft or Windows 8 for this debacle in PC sales. As I discuss in my recent book The 5-STAR Business Network (http://www.amazon.com/The-5-STAR-Business-Network-Corporations/dp/061579419X/ref=sr_1_2?ie=UTF8&qid=1367705465&sr=8-2&keywords=vivek+sood) it is always the business eco-system that is responsible for the success or failure of a concept. The entire Wintel business network has failed to innovate to improve the customer experience much beyond windows XP. I am still using the same laptops with same programs with marginal improvement in speed. Apple, on the other hand, and Google/Samsung in its footsteps has created entirely new categories of products, as well as, improved the customers’ usage experience much better. If you want to look at the success of a product or concept, look at the Business Network that works behind the scene to create the user experience – not at an individual company.
In a previous blog post I spoke about Intel’s role in this picture. Here is what I wrote at that time:
No doubt, the continued softening of the PC market is not only hurting HP and Dell, but also partly responsible for what is happening at Intel. The key question is that while Intel is extremely good at Advanced Product Phasing (APP), is it capable of proving itself adept at Fire-Aim-Ready (FAR) Innovation? Without innovation, and creation of new product for where the market is moving too – cloud based mobile gadgets, Intel is likely to continue to lose ground.
Troubles at HP continue to make headline news with regular periodicity. Dell is not immune to such news either. Lenovo is now thinking about selling its low end server business. The fact remain that the business model is changing again. Cloud is doing to Wintel, what Wintel did to AS400’s. The entire Business Network must move in line with this changing business model. Those companies who can configure a new 5-STAR Business Network that fits in with this new business model will prosper. The rest will continue to look for scapegoats.