Making the Call

By Maryanne Murray Buechner/Helsinki

His smile is more Stuart Smalley than business genius, but sit down with Jorma Ollila and it quickly becomes clear that Nokia's chairman and ceo doesn't need to practice Daily Affirmation. He knows he and his people are good enough and smart enough to make the world's best mobile phones--and that, yes, people like them, buying more Nokias than Motorolas or Ericssons (Nos. 2 and 3 in the market, respectively). Yet after listening to Ollila, 49, tell of his Finnish firm's transformation from a money-losing industrial conglomerate better known for toilet paper and tires into a $20 billion global telecom powerhouse, what sticks with you is his charming knack for understatement. "We've done pretty well," Ollila says, kicking back in his chair inside Nokia's Espoo headquarters, a modern construct of glass and steel towering over the Gulf of Finland six miles west of Helsinki. You'd think he was talking about his tennis game.

The truth is, Nokia has had an amazing run, tripling sales and driving its stock price up 2000% in five years. Industry experts give Nokia much of the credit for the world's growing infatuation with mobile communications, and few doubt that the next phase of the wireless revolution will also be led by the Finns. A whopping 70% of the inhabitants of this small country straddling the Arctic Circle carry mobile phones--the world's highest penetration (and more than double the U.S. rate). It's a phenomenon attributable to liberal telecom-licensing policies (which stimulated early innovation) and to Nokia's effective use of its home base as a laboratory. Citizens of this otherwise low-key society are addicted to mobile text messaging and mobile banking, and primed for mobile commerce and whatever else comes along.

Nokia's own revolution began in 1992, when Ollila was appointed CEO and told to come up with a survival plan. He shed the rubber, paper and other businesses in favor of a new focus: wireless telecom. As a junior exec in charge of the mobile-phones division, Ollila, a former banker with a master's degree from the London School of Economics, had thrown his support behind an emerging digital network standard known as GSM (Global System for Mobile Communications), a gamble that has paid off handsomely. Today GSM rules more than half the wireless world, and Nokia's sales of GSM phones account for most of its 30% global market share. Nokia's big coup came in 1998 when it surpassed Motorola. This year's first-quarter earnings beat the most optimistic projection, whereas both Motorola and Ericsson remain in recovery mode. "It would take a moon shot to make a dent in Nokia's position," says Dataquest's Bryan Prohm.

The simple explanation: Nokia's phones work well and look great. The company, notes Josephthal & Co.'s Mirva Anttila, was the first to recognize that different models would appeal to different market segments--teenagers, the fashion-conscious, bargain hunters and mobile professionals. The 2100 series, unveiled in 1994, was its breakthrough product, the first with changeable face plates and an attractively curvy design. Nokia reinvented the mobile phone as an accessory that more and more people just had to have.

Beyond production efficiency that has helped Nokia achieve a profit margin of 24% (others "barely eke out 1% to 5%," says the Yankee Group's Craig Ellingsworth), another Nokia strength is a corporate culture remarkably free of politics and oversize egos. That lends itself to fruitful partnerships, such as Nokia's deal with AT&T to develop a phone for the launch of the carrier's Digital One Rate plan in late 1997, which was crucial to establishing the Nokia brand in the U.S. Ollila, a married father of three, explains, "When you come from a little country this far north, you learn to be a bit humble; you can't do everything yourself." (It's no act: he wears a photo ID like the 1,000 other workers in the building and queues up in the cafeteria.) Ollila says Nokia plans to increase phone sales in the U.S.--where it is admittedly vulnerable to the dominance of non-gsm networks--as carriers improve data speeds and pocket Internet really takes off.

When that happens, Japanese consumer-electronics giants like Sony and Panasonic are likely to stage their own assaults on the market and chip away at Nokia's lead, warns Iain Gillott of IDC. But Ollila is undaunted. "In 1991," he recalls, "people were telling me, 'Now that you've been able to get [your mobile-phones business] into the black, you should sell it quick, because the Japanese will eat you all up.'"

And then he smiles.