Sunday, September 29, 2013

Mobile Body and Agile Mind: The Prescription for a Wholesome Life

Human life is one of the greatest gifts of God. It is also one of the most complex phenomena in terms of predictability and management. The multiple destinations one reaches in one’s life journey, and how fulfilling some of the sub-journeys would be are in many ways beyond one’s control. For centuries, therefore, Hindu religion, spirituality and philosophy analyzed the phenomenon of human life in terms of multiple models which combine materialism and spiritualism and which harmonize existentialism and nirvana. All through the models and paradigms of life, the need to keep one’s mind and body healthy comes through as a constant underlying thought. Over the centuries, the human race has learnt to understand itself and the environment better, and seek comfort and security for itself better; modern lifestyle and modern medicine are products of that awareness. Yet, there remains much more to fathom, and worse still, the human race’s solutions of industrialization and commercialization have created new problems; from profligacy and pollution to domination and exploitation. Economic growth with social equity continues to be a distant goal even in the most advanced countries.

The knowledgeable individual is at crossroads today. He or she has to compete on the current rules of society to live a useful life. He or she also is painfully aware that relentless competition, without matching competency, is not a winning game either. The Indian family system has been providing a safety valve; the current generation invariably gives up competition at some point of time and expects its future generation to become what it has failed to become (or has given up becoming). Even the family safety valve is now getting clogged. Life seems so remorseless, for the young and old alike, with the multiple options that influence and beckon the young, and the crumbling joint family and community options that stare at the elders. In a sense, and probably in the only logical sense, the individual in the contemporary world has no one except himself or herself to rely upon. The mushrooming of spiritual leaders and institutions points to the fact that the Indian individual is yet to come to grips with the challenge of self-management and needs support and guidance. Yet, the prescription for fulfilling life, independent of any particular stream of religion, spirituality or philosophy could be just very simple: a mobile body and an agile mind!  
Good life, balanced life or wholesome life?
Everyone seeks a good life; unfortunately like the multiple meanings the word good has, the word good life has also different meanings for different people. Some of the meanings or implications of good are high quality, pleasant, sensible, favorable, morally right, skillful, following rules, kind and thorough, to take some of the more prominent or popular meanings. Generally, good reflects agreeable. Good life does not differentiate between personal life and professional life; either or both can be described by all these nuances or not. There is a natural flaw in pursuit of good life as a goal it is highly individualistic, and enables high variability unrelated to one’s capabilities and environmental positioning. Of late, there is a view that individuals in the competitive world tend to maximize returns from their professional life in order to pursue a good personal life. This has led to two types of professionals. The first type is for whom work has become a passion, an obsession and an end in itself leading to individuals becoming workaholic  to utter neglect of their personal side; here personal does not mean merely family life, it also means the life-space for one’s own development. This has led to the formulation of the concept of work-life balance. This again is a highly variable concept, and leaving the options to individuals to define balance, and the goodness within each life segment. There is a third concept of wholesome life, which this blog post proposes,  that could be considered to as an alternative to the apparently determinate concept of good life and the truly indeterminate concept of work-life balance. 
Wholesome life covers the physical and intellectual dimensions of life. It is a holistic concept of life that combines the concepts of goodness and balance in terms of what one can deliver for oneself and one’s family as well as for one’s organization, society and nation. Every individual, from the mason who constructs a laboratory, to the scientist or the engineer who operates the laboratory and its equipment and the financier who funds a project qualifies for the concept of wholesome life. The dimension of physical wellbeing is ignored while that of intellectual life is misunderstood. Neither of these can be pursued independent of the other and, in fact, the two dimensions are interrelated, interdependent and even synergistic.  Physical wellbeing is often seen in terms of athlete-grade strength, lean frame and even sleek abs. The real wellbeing is maintaining oneself strong, stable and self-reliant with optimal physical alertness and responsiveness under healthy circumstances and assured resilience under conditions of sickness. Physical wellbeing is part genetic but largely developed through a lifetime as well. Intellect is often linked with formal education. Everyone has, and does exercise, intellect. The mason who judges the heights and slopes, understands the strength and malleability of steel, knows the right proportioning of concrete and builds the building brick by brick with the right tolerances has as much intellect as a civil engineer would have in respect of construction. The physical and mental wellbeing is determined by two factors: mobile body and agile mind.
Mobile body
Human body is a wonderful musculoskeletal system that is connected with, and operated by, the brain through the neurological and blood capillary systems, among others. Not one of the human systems is less or more important than the other. However amongst all the human tasks, maintaining physical mobility or movement must rank amongst the highest priorities of life. Mobility is the essence of life; the more mobile a person is in terms of using all the limbs and muscles the more healthy and more productive he or she would be for himself or herself, his or her family and the larger organizations and communities. Today’s industrialization favors largely sedentary lives (office environments) or stationary lives (factory environments) with minimal human effort. It, therefore, devolves on the individuals to achieve as much mobility as possible, both at work and off-work. Safety and mobility are highly related. The more stable and safer a person is the more mobile he or she can be. Conversely, the more unstable and unsafe a person is the more immobile the person is likely to be. Walking, running, jogging, sprinting and climbing are some of the mobility options one can exercise.  Office systems that confine people to eye movements on computer screens and factory systems that limit people movements to machine movements are invitations to progressive immobility. If one understands the scientific kinetics of movements well, one can master the intricate dynamics of personal productivity.
Every human discovery, made ostensibly to make life more secure and comfortable, has ended up creating new problems. To provide flexibility of indoor walking treadmill has been invented. It has brought in its wake problems of unnatural impact of walking and running. To cater to the need to provide safety and comfort, running and jogging shoes have been created. They have started modifying the kinetics of using the foot. The personal automobile has emerged as one of the greatest inventions, but it ended up enhancing and curbing mobility at the same time. Escalators and elevators, ideal for the aged and handicapped, are mobility-curbing temptations even for the young and fit. The march of technological progress is relentlessly oriented towards curbing mobility. It is, therefore, necessary for making mobility an essential ingredient of one’s daily life. It will boil down to how one manages one’s time to provide for mobility. Five factors determine safe mobility for a human being in his or her quest for quick mobility. Safe mobility can be achieved by choosing the appropriate base of support for the feet, low center of gravity,  appropriate positioning of the center of gravity over the base of support, movements aligned to body mass and weight, and the coefficient of friction of the movement surfaces. There is more physics and engineering to the science of safe mobility than is commonly known. Daily exercise routines and office/factory ergonomics must integrate the kinetics of safe mobility in day to day life.
Agile brain
If physical mobility is the essence of physical wellbeing, mental agility is the essence of mental wellbeing. Many people incorrectly see body and brain apart, with body being dedicated for action and brain being dedicated for thinking, feeling, cognition, memory and sensory functions. On the other hand, the end goal of all human body, including brain, is aimed at action or movement. The motor system of the brain is a critical facet of physical mobility and mental agility. The brain has a huge memory of prior knowledge, and every moment it keeps receiving new data as new sensory inputs. The brain has the intrinsic wonderful capacity to combine both of these to trigger a motor control mechanism that can physically display itself as ultimate movement, which could be one of the following: verbal talk, body language, writing or typing and physical movement. It is important to understand that the speed and specificity of the brain to store, retrieve and analyze memory on one hand and to receive and analyze new data inputs on the other hand leads to the agility of the brain. There is, however, a big catch. The set of beliefs, some positive and some negative, some action oriented and some inaction oriented, stifle or speed up, and distort or reinforce the motor control mechanism of the brain, influencing the ultimate agility of the brain to proactively or reactively act.
The above illustrates that the agility of the brain is a function of not only knowledge and sensitivity, which must be at high levels, but also of the beliefs which must be appropriate to the situation. There is, however, one more paradigm that influences the agility – the feedback mechanism. Every movement of the type mentioned above leads to a new sensation; the brain always has a prediction of the intended response. The ability of the brain to sensitively receive the physical response and read the actual response determines the effectiveness of the feedback mechanism. Here again, the set of beliefs one has, about people, circumstances and outcomes, influences the effectiveness of the feedback mechanism.  The outcomes of each of the feedback experiences go into the memory bank.  There is, of course, the importance of sleep in the agility of the brain. A well-rested brain is an optimally agile brain. A sleep-deprived brain is a negative influence on physical mobility and mental agility. It is, unfortunate, that not much research has been conducted to enable personalization of sleep as a daily prophylactic essential medicine that each person needs to have. In the absence of that individuals tend to adopt erroneous models of sleep (often benchmarking with other individuals), with unknown adverse influences on the motor ability and mental agility.
Mobile body with agile brain
This blog post aims to draw attention to the fact that a wholesome life that is enabled by a mobile body and agile mind is essential for fulfilling life. There is a larger challenge in understanding the interdependence and synergy that exists in the mobility of body and agility of the mind in the context of wholesome life. There is an enormous understanding of the physical attributes and kinetics of the human body. Though much less understood, the secrets of the brain are also getting unraveled at a fast clip. Unfortunately, individuals view the knowledge, even if expressed in layman’s language, as a subject of medicine rather as a valuable component of active living. The interrelationship between physical mobility and mental mobility needs an even greater appreciation. The prescription for wholesome living is in one’s own hands. The blog post cannot obviously deal with all the associated factors that have certain fundamental importance to the two goals; factors such as food and nutrition, lifestyle and exercise, emotional stability support the two goals enormously.
Today (September 29, 2013) is World Heart Day. The Indian newspapers are flush with valuable information on exercise and nutrition, among others, that enables a healthy heart and a happy living. The information also contains warnings on the deleterious impact of alcoholism and smoking on the human wellbeing. If nothing else, they adversely influence mobility and agility. Yet, we see the twin temptations simply not moving away from the society. There are, of course, several other person-specific detractors of good health such as carbohydrates, sodium and gluten. Processed foods have an overdose of these factors. Governing one’s life through these and other ‘gifts’ of modern, instant living is truly a complex challenge. The only way to address the complexity is to have a simple all-encompassing objective of wholesome life, whether at work or off-work, and achieve it through a synergistic combination of mobile body and agile brain. Beyond the God-given DNA, this requires a carefully cultivated iDNA (Indian Dietary Nutrition Ayurveda). In a climate when the hoary Indian vegetarian food system is under threat of instantaneous modernization and westernization, the society, at least in India, requires an iDNA revolution much like the famous Green Revolution and White Revolution that transformed the agriculture and dairy scenarios n India.
Posted by Dr CB Rao on September 29, 2013   

Sunday, September 22, 2013

Slow and Steady Wins the Race: The Five Oxymoron Theorems of Good Life and Good Business!

One of the most interesting and intriguing adages that has been passed on through generations is that ‘slow and steady wins the race’. The message is further driven home by the rabbit and tortoise parable, where a slow and steady tortoise wins the race over a sprinting and napping rabbit. The proverb started losing its sheen even the jet age that set in a few decades ago. It is considered even more anachronistic in today’s instant world of random challenges and expectations of instantaneous results. In social life as well as in business life this instant phenomenon has resulted in a way of life that is characterized by intense competition and unthinking consumption.  This generation, for example, multitasks far more and builds redundancies far greater than earlier generations used to do.

The supply-demand equation is artificially altered in an instant world. Because everyone is in such a hurry to hit the market earlier and better than anyone else, there is that much more anxiety and speed, and even cramming more inputs in lesser space than ever. For individuals, it means a relentless focus on growing faster materialistically, offering more of one’s services and attention in exchange for monetary benefits in an ever-engaging fashion. For businesses it means churning out more products at a faster rate, pushing up physical deliveries and clocking up ever-greater revenues. There are several areas that have benefitted from such intense competition and consumerism but several areas have also seen adverse environmental impact.    
The only way these deleterious trends can be reversed is through the judicious application of certain oxymoron theorems which enable greater efficiency and effectiveness in individual and business lives. Some of these are considered below.

Less is more (LIM)

Fundamentally, the world will be a better place if with lower inputs we could achieve greater outputs. That said, we need to apply the LIM theorem judiciously, and certainly not perversely or cynically. At an individual level, it does not, for example, mean that with fewer educational qualifications one must target better job opportunities. It should also mean that one should aspire to succeed just because one has got into the ring. It should, however, certainly mean that one should practice a discipline of study that enables one to acquire greater knowledge with lower time allocation. It should also mean that the intent should be to reap a reasonable reward that is commensurate with genuine effort.  At a biological level, frugality of right eating is known to ensure disease-free longevity and at an economic level, prudence in expenditure is known to ensure stress-free prosperity.

At a business level, Henry Ford pioneered how just one standardized car model can generate a mass market. More contemporaneously, Steve Jobs demonstrated how just one iPhone model can generate close to 200 million units of sales. General Motors and Samsung as respective follow-on competitors did exactly opposite in terms of differentiation and segmentation through multiple products to upstage the pioneers in terms of sales volumes and market share. The LIM theory at a business level needs to be applied judiciously. For example, simple technology that can achieve greater functionality will deliver greater value even in a mono-product situation. Doing a few core management processes correctly will fetch better results than undertaking scores of peripheral processes elegantly. There is no classic 80-20 rule that is universally applicable (varies depending on industry context) but mastering the core is mightily important for maximal impact.
Filtration adds more (FAM)
The second oxymoron theorem is that filtration adds more to strategic and execution power. In a technical sense, filtration removes impurities and makes a liquid pure. In a life sense, filtration helps the individual or business to add more content and catalysts. At an individual level as well as at a business level, we are today spoilt for choices and never left starved for inputs. From education to employment, an individual has choices that confuse and confound, with the added signals and compulsions from parents and families. FAM theorem states that the more an individual filters the inputs based on appropriate sieves of existing competencies and intrinsic aptitude the more effective will be the individual’s growth plan and its execution.  Use of inappropriate sieves, on the other hand, would lead to wrong residues.
FAM theorem works somewhat differently for businesses. Existing businesses need to be continuously osmotic with the environment to achieve the right equilibrium. Business competencies have to be built up to meet the higher business opportunities of the environment. In respect of new businesses, competencies have to be absorbed from the environment to prepare an organization that can fit the environment. In both cases of business, appropriate osmosis can occur only through appropriate cultural filters. In business, people speak of stage gates, decision trees and funnel- down approaches as approaches to filter business ideas. The more effective filtration approach in business is truly invisible. Competency-opportunity osmosis tends to be effective only with cultural filters that can only be experienced rather than explained.
Complex is simple (CIS)   
Complexity rules today’s world.  Even the apparently simplest decisions are challenged by the need to evaluate several simulations with multiple choices and alternative logics. At an individual level, such complexity can be tackled by inherent simplicity. There exist two ways to delayer complexity to discover the internal simplicity; understanding what one wants and understanding what it takes to get what one wants. Matching aptitude to opportunity through a means often reduces complex decisions of life to simple pathways. The same imaginative ability of an individual that enables him or her evaluate several alternatives will also help the individual relate each of the scenarios to his or her desired scenario. Often, there tends to be only one criterion that is relevant; the rest is noise. The CIS formula for tackling complexity is simple: hear or see everything, listen to or retain a few things and accept the right thing.
At a business level, complexity is tackled by focus. Business development, strategic planning and operational excellence often require evaluation of complex situations. Corporations, by design, are tuned to create and relish complexity, given multiple functional departments and multiple professional viewpoints. The same CIM formula that helps an individual achieve simplicity helps corporations achieve focus. What business or businesses the corporation would like to be in, what core competencies and core strategies the organization needs for realizing those businesses and in what operations that the corporations need to excel in are questions that provide the focused pathway of success to corporations encountering business complexities. Often, strong leadership is required to engage corporations prone to plurality of thinking into simple choices and focused execution.  Successes of organizations that are driven by entrepreneurs and strong leaders point to the validity of the CIS theorem.
Instant is distant (IID)
In today’s instant world, the drive to achieve instant results keeps real success distant. In this case, the word  ‘instant’ needs to be interpreted in a manner of speaking; in terms of seeking results as fast as possible without understanding what, and how long, it takes or without marshaling requisite resources. At an individual level, strategic goals require long term planning and assiduous effort. Individuals seeking success in terms of entry into premium institutions (such as IITs and IIMs in India or Top Schools abroad) and premium courses (such as medicine, genetics, robotics and nanotech) require the requisite time and effort. Making sporadic and spontaneous efforts with expectations of instantaneous results almost always makes the goals elusive. The proliferation of development handbooks abroad and coaching institutions in India reflects the recognition that personal and professional growth is a process. Individuals who aspire for instant success and adulation, more often than not, tend to get disappointed.   
In successful businesses, what seems an instant success is, almost invariably, preceded by unseen focus, effort and lead time adopted, behind the scenes, by such business corporations. On the other hand, rapid business development (eg., seeking to grow twice as much and twice as fast as industry leader) and hasty product launches (eg., seeking to saturate market with self-cannibalizing products) tend to  lead to weak foundational support with risks of business collapse. Similarly, mergers and acquisitions that are carried out without due diligence by managements as quick-fix solutions for instant business expansion, diversification or growth tend to flounder on challenges of misaligned expectations, troubled integration and elusive synergies. Forbes in a March 2012 research article concluded that almost 50 percent of the mergers and acquisitions either fail completely or do not generate the substantial part of anticipated value. Clearly, instant calculations and instant results are not so synonymous with success in business
Slow is speed (SIS)  
Edmund Burke stated, “The march of the human mind is slow”. He also said, “To read without reflecting is like eating without digesting”. Confucius said, “The expectations of life depend on diligence; the mechanic that would perfect his work should sharpen his tools”. He also said, “Those who break down the dikes will themselves be drowned in the inundation”.  Mahatma Gandhi said, “Strength does not come from physical capacity. It comes from indomitable will” He also said, “There is more to life than increasing its speed”. For individuals as well as corporations, these sayings from educational, philosophical and spiritual leaders across generations indicate that it is important to be thoughtful and deliberate in planning, and appropriate and contextual in governing the speed of one’s life. Different people are blessed genetically and developmentally with differential abilities to shape and cope with life. Being slow and safe saves individuals from huge setbacks that could occur with impulsive, unplanned and momentary speeding up in life.  
The Japanese corporations are living examples of giving less importance to speed and according more emphasis on durability, illustrating the SIS theorem. Though the Japanese economy and industry have been beset by decades of flat growth, the Japanese corporations remain technologically competent, competitive and relevant; the same cannot be said of corporations of certain advanced and emerging countries which race ahead under propitious circumstances only to stall and stutter under the first signs of adversity. The Japanese are able to succeed despite being slow and steady because internal standardization and external harmonization as well as intrinsic politeness and extrinsic elegance which are essential constituents of the Japanese society are integral components of the Japanese corporations as well. Societies and corporations in emerging economies must emulate the Japanese credo of being slow and steady, sure and safe, polite and persistent, consistent and standardized, and harmonious and elegant to ensure sustainable success. A behavioral mindset on these lines alone can ensure pleasant progress, for individuals as well as businesses.
Posted by Dr CB Rao on September 22, 2013     



Sunday, September 15, 2013

Nokia’s Lumia: Microsoft’s Visible Surface or Invisible Fascia?

The last few months have been momentous for Microsoft. An acknowledged leader in software with annual revenues of USD 79 billion and market capitalization of USD 235 billion, Microsoft is a formidable player in the global technology space, notwithstanding the emergence of new Internet technologies and new players, and the changing business models. There have been two momentous decisions the corporation has made over the last two months. Firstly, the corporation has decided to transform itself from a software DNA to a devices and services play. Secondly, it has made its most ambitious acquisition yet of acquiring Nokia’s mobile business including all of its design, manufacturing and sales organization, along with long term 10 year licenses to Nokia’s patents, maps and the Nokia brand itself.  The author has analyzed the Microsoft-Nokia deal from a strategic perspective, and has found it to be a win-win for all, as declared by Microsoft CEO Steve Ballmer. Interested readers may see the blog post titled “Connecting with Nokia: Microsoft’s Timely Idea?” in Strategy Musings, September 9, 2013 (

The above referred blog post analyzed the acquisition from a strategic and business perspective that could be interesting for students of management and strategy. Typically, strategies and businesses are built around products and technologies. In this context, it would be appropriate to take forward the analysis of the previous blog post in terms of product and technology management in a rapidly evolving industry. Such analysis is bound to throw up valuable insights into how the new Microsoft could be stacking itself up in the devices and services space, and what could be the challenges and opportunities for the acquiring Microsoft and the acquired Nokia division. The analysis could also throw light on the options available for other troubled software and hardware behemoths and embattled handset makers. That the acquisition is taking place at a time when the barriers for entry into the handheld mobile phone industry have sharply fallen makes the analysis even more interesting and relevant.
Microsoft product divisions
Microsoft has indeed evolved from the business model of providing only operating system software to personal computers to four other areas. Microsoft’s  current five divisions are windows, servers & tools, online services, business, and entertainment & devices. These five divisions account for approximately 22, 28, 4, 35 and 10 percent of the total annual revenues, trending from the Q4, 2013 data. Of these five divisions, three are profitable (Windows at 25, Servers and Tools at 42 and Business at 68 percent of divisional revenues) while two are loss making (online services at 50 and Entertainment and Devices at 5 percent of divisional revenues), again trending from Q4 results. These, however, are not watertight product or service divisions, and except the entertainment division, the other divisions are interrelated to personal computing software. To understand Microsoft’s perspectives on these divisions, it would be best to consider extracts from Microsoft’s official website as below.
Windows Division develops and markets operating systems for computing devices, related software and online services, Surface RT and Pro devices, and PC accessories. This collection of software, hardware, and services is designed to empower individuals, companies, and organizations and to simplify everyday tasks through seamless operations across the user’s hardware and software. The general availability of Surface RT and Windows 8 started October 26, 2012. The general availability of Surface Pro started on February 9, 2013.
Server and Tools Division develops and markets technology and related services that enable information technology professionals and their systems to be more productive and efficient. Server and Tools product and service offerings include Windows Server, Microsoft SQL Server, Windows Azure, Visual Studio, System Center products, Windows Embedded device platforms, and Enterprise Services. Enterprise Services comprise Premier product support services and Microsoft Consulting Services. Microsoft also offers developer tools, training, and certification.
Microsoft Business Division (“MBD”) develops and markets software and online services designed to increase personal, team, and organization productivity. MBD offerings include the Microsoft Office system (“Office,” comprising mainly the core Office product set, Office 365, SharePoint, Exchange, and Lync), which generates over 90% of MBD revenue, and Microsoft Dynamics business solutions. The general availability of the new Office started on January 29, 2013.
Online Services Division (“OSD”) develops and markets information and content designed to help people simplify tasks and make more informed decisions online, and help advertisers connect with audiences. OSD offerings include Bing, Bing Ads, and MSN. Bing and MSN generate revenue through the sale of search and display advertising, accounting for nearly all of OSD’s revenue.
Entertainment and Devices Division (“EDD”) develops and markets products and services designed to entertain and connect people. EDD offerings include the Xbox entertainment platform (which includes the Xbox 360 gaming and entertainment console, Kinect for Xbox 360, Xbox 360 video games, Xbox LIVE, and Xbox 360 accessories), Skype, and Windows Phone, including related patent licensing revenue. Microsoft acquired Skype on October 13, 2011.
The above does indicate that Microsoft has been seeking to diversify its offerings and be in step with, though not step ahead of, times. The acquisition of Hot Mail and Skype platforms as well as development of Azure cloud and the launch of Xbox gaming consoles were some success stories. However, the best what Microsoft could marshal was not good enough for the corporation to be on top of the dramatic changes in computer and connectivity technologies and the immensely growing popularity of tablet and mobile products.
Scratching the surface
The first sign that Microsoft took the tablet revolution seriously, though belatedly, came when the company launched innovative looking Surface tablet in RT version in October 2012 and in Pro version in February 2013. Surface, on paper, had additional ports, micro SD card and USB drive. It had also a sleek magnetic cover which doubles as a QUERTY keyboard and a capacitive touch screen on which a pen could be used. In addition, unlike iPad, it could provide an ability to utilize a complete Office suite. It appeared as though Microsoft found a niche in tablet computers with Surface that could do content creation as opposed to iPad which was primarily developed for content viewing. That was because Surface as mentioned above had additional functionalities which would enable a more compatible notebook performance.
Sales of the two sleek Surface models have anything been but tepid, with Microsoft having to take a USD 900 million inventory adjustment charge in the last quarter. The reasons lie in the complexity of Surface. Market favored the simplicity of iPad while the gap between content creation and content viewing was bridged by accessories and applications for iPad.  The high price set by Microsoft for Surface reflected Porter’s classic entry deterrent price level for a new player seeking a foothold in a hotly competed tablet computer industry. What was a clear USP in terms of keyboard magnetic flap was elusive, coming as it does with additional price. The other reason for lackluster performance of Surface, probably, was a lack of emotional connectivity of consumers with Microsoft as a device maker.  Microsoft is reportedly working on a successor model of Surface but whether and how it would make a different mark remains to be seen.
Mobile phone pecking orders
Given that Surface could not even scratch the surface, in a manner of speaking, in the battle of the tablets Microsoft had to go back to the drawing board particularly in the context of the publicly declared objective of becoming a devices and services company. The indications that the inroads made by Xbox One in the gaming console business are getting finally halted or even rolled back by Sony’s PS4 in the battle of the eighth-generation gaming consoles (again due to a typically Microsoft desire to aim high-end with price premium), Microsoft really has been facing a real strategic challenge in quest of viable and dominant devices business objective. The recent acquisition of Nokia’s mobile handset business with its products and people (along with a 10 year licensing of Nokia brand, patents and maps) for USD 7.2 billion, in the context, emerges as a timely strategy to redouble the devices effort.
Nokia’s mobile handset business achieved a turnover of USD 15 billion in 2012, with a physical sales of 336 million units, of which 35 million units were smartphones, with market shares of 19.3 percent in total mobile sales and 4.9 percent in smart-phones worldwide (for Nokia, smartphones were just 10.4 percent of its total sales). Samsung has been the market leader in mobile phones with an estimated turnover of USD 20 billion in 2012, with a physical sales of 406 million units, of which 236 million units were smartphones with market shares of  23.4 percent in total mobile phone sales, and 30.3 percent in smartphones worldwide (for Samsung, smartphones were 57.7 percent of its total sales). Apple, the original smartphone pioneer and leader is the second dominant player with a turnover of USD 15 billion in 2012, with a physical sales of 136 million units, of which all the 136 million units were smartphones, with market shares of 7.8 percent in total mobile phones and 19.1 percent in smartphones worldwide (for Apple, smartphones were 100 percent of its total sales). Worldwide, total mobile sales were 1736 million units, of which smartphones were 713 million units (41.1 percent to total).
Excluding Samsung, Apple and Nokia all other phone manufacturers (including but not limited to such names as ZTE, HTC, LG, BlackBerry and Sony) sold 858 mobile phones worldwide, of which 326 million were smartphones, with market shares of 49.5 percent in total mobile phones and 54.3 percent in smartphones (for other manufacturers, smartphones were 45.1 percent of total mobile phones). In terms of operating systems, of the 713 million units of smartphones sold, Android led the pack with approximately 70 percent share, followed by iOS at 21 percent, BlackBerry at 3.5 percent, Microsoft Windows at 3 percent and all others at 3 percent in 2012. All these statistics point to the enormous challenge as well as opportunity that Nokia has under Microsoft ownership. The challenge is one of uphill battle in terms of operating system share and overall market order. The opportunity is one of being able to maintain and enhance the overall Nokia share in feature phones, and increasing the share in smartphones several times over, to the levels of Apple and Samsung, as an aspiration.  
Beyond classic theories 
The answer to this lies in likely environmental trends and competitiveness of smartphones (which did not exist a few years ago but have taken center stage now).  Would the ratio of smartphones to basic phones which has reached an almost equal share increase even higher, to say 75 percent, in favor of smartphones? Or, will all mobile phones will only be smartphones in one scenario and new range of feature phones with simpler operating systems revive the feature phones in another scenario? Will Microsoft-Nokia follow these trends or shape these trends? Will, in an anxiety to push up the Windows operating system, Microsoft ignore the still formidable franchise that Nokia has in feature phones and cause its decline, with or without a commensurate increase in smartphone sales? Would Microsoft be better off making Windows OS as its proprietary OS for its Nokia/Lumia phones, much as Apple iOS is for iPhones? On the other hand, in an increasingly commoditizing smartphone technology market, what would be the differentiating feature of Windows OS?   
Students and practitioners of strategy have, therefore, an excellent case study coming up in the Microsoft-Nokia deal. The technological and competitive dynamics of the computing and communications industries are so multifaceted that no single management paradigm, be it competitive strategy, core competence, lean or reengineering alone can provide a solution. However, all of these need to be collectively applied by Microsoft to achieve cost leadership, product differentiation and mass customization on the strength of current and additional core competencies.  On the face of it, Microsoft brings a world-class operating system and considerable finances while Nokia brings world-class hardware and worldwide marketing. The combination should have every chance of success. The only hurdle to the achievement could be any misjudgment on the part of Microsoft on the future evolution of industry and competition. The misjudgment could arise from an unwillingness to understand the necessity of addressing the full market spectrum in terms of multiple products and value points, a strategy already undertaken by Nokia in recent times. Appropriate judgment will reinforce and expand this process.
Industry evolution
Porter’s theory of competitive strategy considers industry evolution and the definition of industry to operate in, and the definition of industry boundaries. The computer and connectivity industries are undergoing a tremendous industry evolution. Hitherto, personal computers were the target of cannibalization by tablets.  According to IDC, the device industry research firm, phablets, which are smartphones with larger screens, will start to cannibalize into the market share of tablets over the next 12-18 months. Generally, phablets are smartphones with screen size that ranges from 5-8 inches and are designed to combine the functions of a phone and tablet. IDC expects a new round of device cannibalization to kick in, but this time with large-screen (5-plus inch) smartphones beginning to impact the smaller (7-8 inch) tablet market. Also, cost will continue to be a key parameter. IDC expects lower-cost devices will drive global interest and aid in increasing uptake among first-time buyers in commercial sectors like education. That said, the overall device industry would continue to offer great potential for Microsoft, in terms of both operating systems and a range of products, with the twin strategy being possible with the Nokia device technology with IP and organizational strengths (engineering, manufacturing and marketing) now acquired.  
According to IDC projections, globally, smart connected devices -- PCs, tablets and smartphones -- will continue to surge with overall shipments surpassing 2 billion units by the end of 2015 with a market value of USD 735.1 billion. Shipments of desktop PCs are expected to touch 134.4 million units by 2013 and 123.11 million by 2017, while, that of portable PCs are expected at 180.9 million units by 2013 and 196.6 million by 2017. In the case of tablets, shipments are projected to touch 227.3 million units by 2013 and 406.8 million by 2017. Smartphone shipments are expected to touch 1,013.2 million units by 2013 and 1,733.9 million by 2017 (double the current level in just four years!). In terms of device mix, total PC shipments accounted for 28.7% of the smart connected device market in 2012 while tablets accounted for 11.8% and smartphones for 59.5%. By 2017, total PCs are expected to drop to 13%, while tablets and smartphones will contribute 16.5 % and 70.5%, respectively to the overall market. The shift in demand from the more expensive PC category to more reasonably priced smartphones and tablets will drive the average selling price (ASP) for the collective market from USD 462 in 2012 to USD 323 in 2017.
Visible surface; invisible fascia
In the communication and computer industries, the product is the visible surface. Without any pun, Microsoft thought, for good reasons, that its Surface tablet computer would lead the visible product revolution in the device strategy. Despite the setback, a new generation of Surface may still click. That said, Microsoft should fight against the temptation of using Lumia as just another Surface, that is just as a premium product. Lumia range could be highly visible products but their contribution to Microsoft has the potential to be internal and expansive, in terms of device engineering, technology and hardware. Rather than being a mere skin or surface of the device strategy, Lumia could be the fascia of a new Microsoft, both in terms of corporate anatomy and corporate visibility. Anatomically, fascia is the thin fibrous tissue under the skin that covers and ties the muscles together. Technologically, it also signifies the dashboard of a motor vehicle which provides an interactive platform that connects the motor vehicle with the external world. The fascia analogy perfectly fits Nokia/Lumia in/for Microsoft; it presents itself as a unique techno-marketing opportunity for Microsoft. The reasons lie in the likely dramatic evolution of the computer, tablet and smart-phone industries as discussed above.
The strategic opportunities for Microsoft lie in leveraging the acquired Nokia/Lumia technological capabilities to develop a full range of basic and feature phones, smartphones, phablets and tablets, with screen sizes from 2 to 10 inches. This should be accompanied by reinforcement of high-end and low-end manufacturing strengths, deploying premium manufacturing and low cost manufacturing simultaneously. It should be a grand expansive strategy, rather than an incremental niche strategy. A matching organizational strategy that reinforces and builds upon Nokia’s proven global distribution, sales and marketing strategies, rather than reformats them in a Microsoft format, would also be called for. Microsoft, clearly, has no time or need to rediscover the wheel, and worse still discover in an expensive manner a wrong wheel after considerable effort, time and cost! And in this nimble and agile expansive strategy, Nokia Lumia would be both the visible and invisible fascia.  India, as a country of low cost mobile phone development and manufacturing for Nokia India would offer great opportunities for driving Microsoft’s new device and services strategy, increasing Microsoft revenues manifold in the process.
Posted by Dr CB Rao on September 15, 2013     



Monday, September 9, 2013

Connecting With Nokia: Microsoft’s Timely Idea?

Microsoft’s decision to acquire Nokia’s mobile business along with a clutch of patents, announced on September 3, 2013, marks the corporation’s big move to reinforce the corporation’s strategic shift into the devices and services domain, from its predominantly software business space.  This move comes days after Steve Ballmer, the longstanding CEO of Microsoft announcing his retirement to take effect in approximately a year from now. This move also follows his earlier announcement on the corporation’s intended strategic transformation into a devices and services company; Ballmer and the corporation are clearly in a hurry. The decision to acquire, expected in some manner or the other ever since Nokia decided to dump its Symbian operating system for its handheld devices and tie its fortunes up with Microsoft’s Windows mobile operating system, is logical from a strategic perspective but is intriguing from a financial perspective. Unlike Blackberry which has not demonstrated its capability to come back into the game, Nokia has demonstrated a distinctive flourish and competency to reassert itself with its new Lumia range of smart-phones, notwithstanding the constraints of a still evolving Windows mobile applications ecosystem.

While all the details of the deal are not available in public domain, Microsoft-Nokia acquisition offers several strategic insights and poses a number of strategic questions to debate for students of strategy and management. The events leading to the acquisition and those that could unfold in future for Microsoft and Nokia mobile businesses post-acquisition and integration are fascinating. Any deal of this nature needs to be analyzed in terms of certain key parameters such as industry evolution, firm-specific factors, business options, strategic synergy, deal valuation, customer response, execution capability, and risk-reward balance.  Some of these are industry level factors while some are firm-specific factors. All are equally relevant as the two firms involved in the transaction aim at a more prosperous future post-acquisition. Given that both the firms are engaged in industries that are at the cutting edge of rapid technological developments, Microsoft-Nokia acquisition promises to be a classic case study in strategic management.
Industry evolution 
Both Microsoft and Nokia operate in industries that are relatively recent and were almost shaped by them in a way from their inception until competition began to enter. The personal computer industry, for which writing the operating system is the mainstay business of Microsoft and the mobile phone industry for which making the mobile handsets is the mainstay business of Nokia have seen unprecedented changes. The personal computer has yielded place to notebook computers a few years ago and together both the devices are set to yield ground for tablets. The mobile phone has moved far past the functional objective of enabling people talk; they perform a host of services from photography and music playing to data and document management. The two industries of software or operating systems (for computers and mobile phones) and hardware (in terms of computers, tablets and smart-phones) overlap, interconnect and need each other more than ever.  Microsoft and Nokia were not ahead of the curve in their respective industries and faced in a sharp fall in market capitalization of both the companies; Nokia’s of course has been far steeper. Microsoft’s market capitalization fell from a peak of USD 642 billion in 2000 to a low of USD 252 billion in 2013 (around 40 percent of the peak value). Nokia’s market capitalization slumped from a peak of USD 245 billion in 2000 to a low of USD 10 billion in 2013 (less than 5 percent of the peak value).
Under the evolutionary scenario, it is evident that the classic vendor-user industry concept has ceased to exist between the software and hardware industries. It is also evident that the operational and economic benefits of control over each other can no longer be achieved through vendor-user arm’s length relationships, at least for the large players. Put differently, computing and communication as well as hardware and software began to merge as one seamless industry. It is no wonder, therefore, that Apple which had its own proprietary operating system and chips, in addition to other proprietary designs in other areas began to achieve industry dominance, challenging Microsoft in operating systems and Nokia in mobile phones. Simultaneously, third party manufacture of hardware, from chips to display panels and open source operating systems such as Linux for computers and Android for mobile phones became available widely, rapidly making both the industries fragmented and highly competitive. The need for proprietary integration across the two industries has become a new strategic imperative for large incumbents. 
Firm-specific factors

Microsoft, founded in 1975, has been a pioneer in developing operating systems for personal computers. Starting with MS-DOS in 1981, it has so far launched eight major operating systems for computers (Windows 3, Windows 95, Windows 98, Windows 2000, Windows XP, Windows Vista, Windows 7 and Windows 8) and four operating systems for mobile devices  (Windows Mobile 5 and Windows Mobile 6, Windows Phone 7 and Windows Phone 8). Without Microsoft operating systems, the personal computer industry would not have grown the way it did over the last fifty years. Without other collaborative tools of software (eg., Outlook, Office and Sharepoint) and hardware (eg., Servers) of Microsoft and other firms, networking and networked computing would not have become a transformative chapter in information technology. That cannot be said of Windows mobile operating systems which did not become popular.  Its latest Windows 8 OS, however, has been developed as a bold cross-device OS platform. While Microsoft led and dominated the personal computer industry, it has been slow to recognize the points of technological inflection that were occurring through the emergence of tablets and smart-phones. As a result, its operating systems failed to innovate for the new devices.
While Windows 8 has been acclaimed for its elegance and efficacy, tilted more towards mobile phones than computers, it has not still been embraced enthusiastically by other phone makers for several reasons. The other operating system Android, free of license fees, became popular and came up with continuous upgrades and updates. The fourth major Android upgrade, KitKat is now on the anvil. Google, the owner of Android, also allowed additional customization through user interface (UI) by individual phone makers.  Android has been able to notch up 800,000 applications, nearing Apple iOS while Windows has only around 150,000. Windows upgrades and updates have not only been less frequent but were often unfriendly to previous generation phones unlike Android. Android mobile OS met 79 percent of OS needs and Apple 14 percent while Windows had a lowly 3 percent.  With a total projected mobile phone sales of 1.8 billion units per annum, of which over 50 percent were smart-phones, strategic lock-in between Windows OS and a strong mobile phone brand became inevitable.
While the story of Microsoft mobile OS endeavors has been one of delayed uphill battle, the story of Nokia mobile phones and its Symbian OS has been one of rapid downhill slide. Nokia, doubtless, has had a hoary history.  Founded in 1871 as Nokia and with a century old history of making tyres, boots or cables, the company pioneered the first handheld mobile phone in 1987 and the first digital handheld GSM phone in 1992, after divesting its non-mobile business. Its first mobile was a runaway success and Nokia quickly became a global leader in handheld mobile phones accounting for over 40 percent market share in 2007. However, by 2012, its share fell to 19 percent (330 million units) compared to Samsung at 22 percent (385 million units) out of total global mobile phone shipments of 1,746 million units. More importantly, Nokia’s share in smart-phones was down at a meager 5 percent (35 million units), compared to  30 percent of Samsung (216 million units) and 19 percent of Apple (136 million units) of global smart-phone shipments of 713 million units in 2012.
Nokia’s decline has been essentially due to its inability (or complacence in) reading technological and market signs in terms of smart-phones, touch screen phones and dual-sim phones, not to mention the lack of synergy from a tablet lineup.  Nokia which prided itself in its superior hardware design and brand leadership decided to fight its way back with the induction of Stephen Elop from Microsoft as its CEO in 2010 who quickly decided in 2011 to disband Symbian OS platform and instead opted to hitch Nokia’s fortunes exclusively with Microsoft Windows platform. Under his leadership, Nokia was quick to launch its new flagship brand of Lumia smart-phones, first on Windows 7 platform and more recently on Windows 8 platform. In addition, it set new benchmarks in camera phones by incorporating 41 megapixel camera sensors and adding new photographic features like optical image stabilization. Its body engineering has also won applause for its durability, elegance and premium looks.  Notwithstanding all these measures, Nokia’s market share continued to fall and share price also  fell dramatically from USD 28 in 2007 to USD 8 in 2010 and to USD 2 in 2012! Clearly, while Nokia technologically was on the right path, the financial resources to achieve global dominance through Lumia and other developments were in question.
Business options
Both companies may have had their respective business options to reinforce and diversify their business models. Microsoft had successful business initiatives such as Servers (from 2003 onwards) and Xbox entertainment device (gaming console) diversification (from 2001 onwards) and moderate success in Search Engine, Bing (from 2009 onwards) but had failures in its tablet computers (in 2002 and again in 2012). Nokia had some successes with its communicator devices (eg, Nokia 7710 in 2004), Nokia Maps (from 2007 as Ovi and now as Here)  and Asha basic phones (2012 onwards). All these were, however, no more than initiatives for consolidating and reinforcing current businesses rather than staying ahead of emerging technologies and businesses. Both companies could have chosen to aim at operational excellence in their basic businesses (Microsoft in terms of faster and better OS upgrades and Nokia in terms of cost-effective basic and premium phones) but such strategies could have meant business downsizing rather than up-scaling. That would also have been a non-option in the face of aggressive moves by the respective competitors.
The Microsoft-Nokia partnership of 2011 was at best a cosmetic move for both the companies, dealing with their core issues at fringes. For Microsoft, Nokia was one more licensee, even if a committed licensee dedicated to Windows exclusively; and for Nokia, Microsoft potentially could provide an added differentiation to its distinctive product engineering and manufacturing build capability. Given the significant business challenge posed by a transforming communication and computing environment to Microsoft and the severe market competition unleashed by aggressive competitors taking rapid strides in smart-phone technologies on a resource-strapped Nokia, clearly a more radical approach was called for. It is still enigmatic why both the companies chose to live on an arm’s length partnership for two years instead of putting all their combined resources in 2011 by making the acquisition happen then itself. Whether it has been due to the complacent confidence that marks the DNA of market leaders that they could still make things work by themselves or it was a deliberate strategy of Nokia to build value through a new smart-phone lineup or it was a carefully crafted strategy by Microsoft to reach an economically optimal deal valuation, that too after a clear internal consensus on a device and services strategy, may not be known anytime soon.    
Strategic synergy
For Microsoft, the buy will assure a world-class mobile device platform which is known for its excellence in hardware engineering and build quality. Apart from Stephen Elop, the CEO of Nokia who will return to Microsoft as the head of its devices division (and even as a potential successor, along with other contenders, to Steve Ballmer), the transaction will bring to Microsoft some of Nokia’s best technical leaders and a human resource base of 32,000 people worldwide, of which 18,300 people are directly involved in manufacturing, assembling and packaging of products worldwide. It also provides access to a distribution, sales and marketing platform in 130 countries, known once for its market leadership whatever the country. It will also get access to all of Nokia’s patents, licenses and mapping services (through licensing arrangements), the maps offering additional potential in Microsoft search engine, Bing.  For Nokia, clearly the transaction is a bailout, providing immediate cash inflow of USD 7.2 billion and additional money of Euro 1.5 billion through three tranches of convertible bonds (In fact, within a week of announcing the deal Nokia has already utilized this offer to fund its buy out Siemens share in the Nokia Solutions and Networks joint venture). Given the somewhat unusual nature of only licensing the Nokia brand for 10 years, and Nokia patents for 10 years rather than buying them out for perpetuity, there could be certain additional funds flow in the long term for Nokia, not only from Microsoft but also from other players. Given that Nokia still gets to retain the existing networks business and about 50 percent of revenues through non-mobile businesses, the synergy for Nokia could be in terms of providing a new life for the residual Nokia.
With the Nokia transaction, theoretically Microsoft would be on par with proven in-house integrated product and operating system platforms akin to Apple and even superior to Samsung (its proprietary Bada OS has not been a success). Unlike several other Android phone providers, Microsoft-Nokia could be a more exclusive, proprietary differentiated option. Also, unlike Apple which depends on its own retail stores or franchises, Microsoft-Nokia would have a more omnipresent sales and distribution space.  And, Nokia with its iconic corporate brand power and Lumia with its emerging product brand power would be available to Microsoft, the former albeit for ten years unless extended.  Importantly, Microsoft can leverage Nokia’s design and manufacturing team to not only develop more mobile phone models but also diversify aggressively into phablet and tablet space.  There is no other handset manufacturer who would provide the same level of strategic synergy to Microsoft, BlackBerry included.  For Nokia too, the deal provides more degrees of strategic flexibility with financial backing for its residual networks business and continued ownership of Nokia brand, Here maps and the patents. Given the rapid changes in technology, Nokia may continue to play a major role in the telecommunications and mobile networks space, with attractive future earnings.       
Deal valuation

The Nokia buy is valued at USD 7.2 billion for Microsoft. It is just half the sale value and 50 percent of the market capitalization of Nokia, which increased by nearly 40 percent to USD 15 billion after the announcement of the deal (Microsoft was down by a few basis points). In financial terms, the acquired business should add USD 15 billion to Microsoft’s current revenues of USD 75 billion (20 percent increase).  Microsoft-Nokia deal value of USD 7.2 billion compares with the deal value of USD 12.5 billion for Motorola mobile phone business, and Motorola was at a much weaker position when that deal happened in 2012. Motorola contributed only USD 6 billion to Google’s annual revenues of USD 56 billion (13 percent increase). The Microsoft-Nokia deal value of USD 7.2 billion which is at 0.5 times of sale value of the acquired business seems very favorable to Microsoft compared to the Google-Motorola value of USD 12.5 billion which is over 2 times the sales of Motorola Mobility division. It may even appear to be a steal, given the strengths Nokia has in design, manufacturing, distribution and marketing.
Deal valuation is not necessarily solely financial or economic arithmetic, notwithstanding multiple valuation models that are available. Neither can they be evaluated in comparison across two time points, like some analysts are doing with Nokia and Motorola deals. Certain deals could be strategic in the overall but mandatory in certain facets. It may be hypothesized that the patent estate of Motorola (17,000 patents and 7,500 patent applications) is much larger and more mandatorily required for Google which had a weak patent position; also, it was  acquired by Google for perpetuity. In contrast, the patent estate of Nokia is possibly narrower and is also subject to certain licensing covenants on Microsoft. Similarly, the iconic Nokia brand remains with Nokia, albeit licensed for ten years to Microsoft, in comparison to Motorola Mobility brand perpetually acquired by Google. Overriding all these, Android mobile platform is reportedly weak in terms of intellectual property and the vast Motorola patent estate adds strategic assurance to Google far more than the deal value would suggest. Given that the smart-phone battles are being fought in law courts based on patents, Google probably paid fair value, and probably Microsoft is also paying fair value to Nokia, despite the apparently higher and lower frontend values in each case respectively.
Customer response
In any market facing deal, the response of the customers to product integration in the marketplace would be a wild card. A distinct marketing plus for Microsoft is the huge multi-million customer base of Nokia which may still be using a Nokia phone or could have used it at one time or the other. An overwhelming proportion of Nokia population has been basic and feature phones. It may be Microsoft’s tempting gambit to upgrade the huge Nokia base to Windows smart-phone, a gamble which may or may not work. Nokia, as brand, has a clear emotional appeal to its fans, rich and poor alike. Microsoft’s strategies would need to have a significant Nokia brand equity to provide continuing appeal. Any preemptive or presumptive withdrawal of Nokia brand in favor of Microsoft brand could de-emotionalize the product. Simultaneously, Microsoft would need to ensure that Windows 8 emerges as a much more popular operating system. It would be indeed a Catch 22 question for Microsoft given the conflict between tying up Nokia product and Windows OS exclusively and the tactical advantages of pushing the Windows OS more universally. The more Microsoft brings distinctly superior features to Windows OS, the more would be the chances of its success on the back of a singular Nokia platform.
Microsoft has other challenges as well. Historically Microsoft, with its dominant business of computer operating systems, has been an enterprise oriented company. The mobile phone business, on the other hand, is all about people. Mobile phones, over time, have become an integral part of people’s personalities. With the strides being taken in mobile technology, mobile phone could well represent the electronic control of all human life going forward. To become ubiquitous in that manner, Microsoft needs to create for itself a huge heart share before it can hope to drive up its market share. With electronic giants like Sony, Samsung and LG becoming path-breaking in handset designs and technologies, Apple continuing its formidable position and a host of other companies coming up with follow-on models, Microsoft cannot imagine that the current Lumia mobile phone line-up alone, however impressive it is, will drive a new high. As many as six manufacturers have already moved into smart watches as handy accessories to smart phones while Google is advancing with its Glass. Microsoft and Nokia have to come up with a grand expansive strategy of all-devices, including basic phones, feature phones, phablets, tablets and also a supplemental strategy to develop and market their own models of wearable computers. Nokia acquisition could tempt Microsoft to view it as a Windows OS initiative and lose track of a whole other important canvas of wider customer opportunity. Put differently, Nokia acquisition gets Microsoft a platform that can be developed further to cover the complete canvas of personal devices. Connecting emotionally and technologically with individuals, likely 7 billion subscribers, is both the challenge and opportunity that Microsoft now has.
Execution capability
Most acquisitions achieve their objectives and reap their synergies, or falter in the endeavor, in the execution processes. In any acquisition, the integration, harmonization, optimization and expansion processes that follow the acquisition milestone cannot afford to lose sight of the original strategic objectives unless the environment and strategic drivers themselves have changed substantially. Microsoft and Nokia need to be appreciative of the post-acquisition execution pitfalls. Fortunately, both companies are indeed well-positioned in this aspect, thanks to the two year old partnership for Windows phones and Stephen Elop being the continuing bridging leader. Whether or not there is truth in the rather uncharitable analysis of Finnish media that Elop has verily been the Trojan Horse for Nokia, Elop’s stewardship did provide clear direction to Nokia. He could coalesce the Nokia teams into one nimble organization to rediscover and refine its product engineering skills and also achieve a dramatic reduction in the product development, build and launch cycles at Nokia from 18 months to 6 months. Both Microsoft and Nokia technical teams could understand the hardware and software integration in the process, which augurs well for future post-acquisition processes mentioned above. What probably is required now is leveraging of the execution capability to develop grand product plans to capture the wider market opportunities discussed in the previous section, which can close current segment gaps and create new segments.
In terms of execution capability, it is probably Microsoft that would now need to double up, contrary to the traditional, and often misleading, presumption that the acquirer is more right than the acquired is. Microsoft must get into a virtuous and agile cycle of upgrading its Windows platform every year and providing updates every six months. Such upgrades must be friendly to generations of devices, and also simultaneous with application development. Without such agility in OS development, it is unlikely that the new Nokia mobile business would be able to face the competition from the likes of Apple and Google. In addition, new software needs to be developed for wearable computers. Microsoft would also need to develop the capability for mass customization of its products, across the segments. Both low-end and low-cost devices as well as high-end and high premium devices would be equally important. In addition, the corporation would need different execution models for different countries, particularly for the populous countries like India, as brought out by Nokia India MD in a recent interview. This strategy may require new operational models as well. Traditionally, Nokia made its low cost models in countries such as India. In future, manufacture of such phones may have to be outsourced and the Indian plants upgraded to manufacture more premium products.  Post-acquisition, the execution models would also be challenged by the fact that centre of gravity of Nokia as an organization lies in its Finland headquarters and the growth drivers in the international markets. Execution improved with Elop basing himself in Finland. With Elop returning to Redmond, new execution models which balance centralization and decentralization as well as accountability and empowerment in the combined outfit would need to be evolved.  
More rewards than risks

Any acquisition has its risks. However,  Microsoft’s acquisition of Nokia seems to have more rewards than risks. The developed and developing industry environment clearly points tectonic shifts in computing and connectivity technologies and practices. Players like Microsoft and Nokia who are weighed down by late recognition of, and inadequate responses to, such trends must pool the resources end-to-end to reposition in the competitive game based on design successes. Clearly, there is ample strategic synergy which is also bolstered by attractive deal valuation. Even the challenging arena of execution has had some nice early traction, thanks to the strategic collaboration that was unveiled in 2011. The deal itself is fairly and equitably valued. The risks, of course, are that the dominant competitors who are all hardware giants, ably supported by universally popular operating systems, and who are already ahead of the curve with greater vibrancy across broader product range, would intensify unanticipated product development, taking Microsoft by surprise (once again!). By focusing on prudent and proactive execution and being cognizant of integrated technological trends and playing its part in accelerating and utilizing them with agile business and operational models, Microsoft can make the newly acquired Nokia connection work really well!
Posted by Dr CB Rao on September 9, 2013