Trend trackers keep Nokia's finger on pulse

Nokia wants to evolve from high-volume, low-margin manufacturer to provider of services, so its future lies with the techno geek, writes Richard Gillis

Buried deep within a snow-topped mountain in rural Finland, techno geeks in black rollneck sweaters and trendy spectacles lie in pools of plastic balls rubbing their bearded chins and ask each other questions like: "where now for the mobile phone?"

This is probably not true. But it does sound like the sort of place that Nokia's insight and foresight group should reside. Indeed, the need for the telecom giant to project an image of bleeding edge boffinry is central to the future prosperity of large parts of Scandinavia.

The key aim of this group, a part of the company's internal R&D programme, is to monitor trends in what they refer to as the "converging digital industry".

Nokia, like every other major product manufacturer, is seeking to change its relationship with its customers. In the first part of the 21st century, making things is a high-volume, low-margin business. The next stage in the company's evolution is to develop a layer of added value services.

Stephen Johnston wears a suit and doesn't have a beard. But he is, in spirit, the geek in the ball pool. His role is to take the top 50 trends in the tech sector and feed the best new thinking in to Nokia's "world map", an internal research base. From 9am to 5pm, his finger rests on the pulse.

"It's about learning from the most innovative companies, especially startups, who have the internet in their DNA," he says.

In October, the company made the latest in a series of acquisitions, buying the GPS navigation company Navteq for $8.1 billion from under the noses of Google, Microsoft and Garmin. Nokia maps and sat nav phones make perfect sense, as does the shift toward internet-based services. But the feeling in the blogosphere is the Nordics are playing catch up.

Music services were added by the $60 million acquisition of Loudeye, which forms the backbone of the Nokia Music Store, an attempt, albeit late in the day, to go head to head against Apple's iTunes. Similarly, Twango is a content sharing software developer in the Flickr mode.

Loudeye and Twango were both Seattle-based startups, small and nimble and living close to the zeitgeist. Buying them is a sign that Nokia, a big dog of manufacturing, is trying to ensure that their size does not become a liability.

His central message is an old one: ideas are cheap. Making money from them, that's another thing altogether, a hard slog requiring institutional innovation.

Collaboration is the only way forward. Got an idea? Come talk to us and we'll do it together. Nokia works with an army of external developers, any of which could be the next big thing. The relationship is more akin to the process of open source software development than traditional R&D.

This external network of developers provides the content, the applications and services, that make Nokia phones better, says Johnston. "We have certain core offerings, but we need to be as open as possible for web developers to build on our platforms. Our external developers need to be able to make money." On the flipside, their teams on the inside of the company need to be free to innovate quickly and get rewarded for their efforts above the call of duty.

"Employees now have more advanced collaboration technologies in their personal lives," says Johnston. "Employers letting go of control of their employees is what Enterprise2.0 is about, the changing shape of the corporation being another facet. Why do we need marketing if a product sells itself and the customer manages support through online communities of their own?"

In a mobile market full of devices that have morphed in to cameras, music players and personal calendars, the information within the "world map" offers insight into the shift yet to be made by the telco manufacturers. The next stage in its development is to fully incorporate the internet. The most useful web companies track the trail of digital data we leave behind as we surf from site to site. Currently, this "information wake" he says allows companies to offer informed choices of other products we might want to buy.

"Google has been able to monetise search, in a way that provides relevance to advertisers," says Johnston.

Similarly, Last.FM creates bespoke radio stations based on data mining our iTunes library and Amazon offers personalised book selections. "Until now, these smart recommendation engines have been constrained by the paucity of useful, unique data sets that help the services know that your favourite thing and mine are one and the same."

"91 per cent of mobile users have their mobile within a metre of them 24/7," he says, citing research carried out by China Mobile. This turns the device in our pocket in to something more powerful than that offered by the desk-based browsing experience of the internet.

The mobile device has the ability to capture and deliver a vast number of different data streams, such as location, identify our real friends, those in our mobile phonebook, not the surrogates on social networking services. Even to the extent of what we buy, what we eat or how we exercise. "This data is created by the user and as such is - or should be - owned by them. Getting them to part with it in order to receive useful services is one of the primary innovation and creativity challenges of our generation."

He offers a practical example of what this might mean. "There are so many more areas that make up my digital identity. As an expat, I have to fill out information to the tax man on where I've been, how many days have I spent in the country, how much of that day was I there - my phone knows this but is not telling me. A one-click export of that information to the Revenue would save me hours of work."

The big idea for Nokia is Connecting People, its marketing tagline. "Product innovation will be a lot easier when every product has an online service component providing usage information to improve the experience," says Johnston, who sees mass customisation, making each product to the client's specific requirements, as part of this process. He likes Nike's offer of making a training shoe in any colour via its website. "Telco companies have been trying for years to inject this type of higher-level valuable services over the creeping commoditisation that's a feature of the industry."

Johnston has a broad knowledge bank from which to borrow when talking about innovation. For example, he points out how much innovation occurs in the developing world, where huge step changes are common. "The best place to get cataracts done is in India, and most advanced mobile payments services are in Africa," he says, indicating that necessity and cost constraints create a hotbed of creativity.

Wherever the new thinking is happening, you can be sure that there is a man, who may or may not be wearing a roll neck sweater, who is taking notes.