Nokia updates on group strategy
December 12, 2023
Nokia will host an investor and analyst event today [December 12th] to provide an update on its execution against its group strategy, initial planning assumptions for 2024 and a revised comparable operating margin target for 2026. It will also outline its strategy to give more autonomy to its four business groups.
The Presidents of Nokia’s Mobile Networks and Cloud and Network Services business groups will also present their strategies and future opportunities.
Group strategy update – increased autonomy for business groups to accelerate value creation
In 2021, Nokia says it significantly streamlined its operating model, moving from a matrix organisation and creating four P&L-responsible business groups structured around unique customer offerings. Since then, its business groups have increased investments in R&D and made significant progress in strengthening technology leadership.
- Network Infrastructure has extended its technology leadership position and is growing faster than the market
- Mobile Networks substantially improved the competitiveness of its products, taking a leadership position in 5G and gaining significant market share
- Cloud and Network Services has grown faster than the market in its five growth segments, including Enterprise private wireless, while rebalancing its portfolio
- Nokia Technologies has expanded into areas such as automotive, multimedia and consumer electronics, and has signed new, long-term patent license agreements with Apple and Samsung
During its third quarter update, the company announced increased operational autonomy for its four business groups by embedding dedicated sales and go-to-market teams with each one. Moving forward, the business groups will have increased strategic autonomy to pursue investment that supports growth, portfolio management, and deeper strategic partnerships.
Nokia’s lean corporate centre will act as a strategic architect, providing oversight in key areas, including target setting and performance management, portfolio development, and compliance. The company says it will continue its commitment to long-term research through Nokia Bell Labs, as evidenced by its recent announcement of a new venture studio and venture partnerships to unleash the full commercial potential of Nokia Bell Labs technologies outside of Nokia’s strategic perimeters.
Accompanying the move towards more autonomous business groups and to provide investors with greater transparency in assessing their financial performance, Nokia will begin reporting cash flow and regional sales at the business group level in 2024.
Tommi Uitto, President of Mobile Networks (MN), will today present on how MN is revamping its strategy. It has begun to re-baseline its operations for resilience and profitability while maintaining its commitment to technology leadership and protecting its R&D output. These combined actions, to be completed by 2026, will enable MN to achieve a double-digit operating margin at net sales level of approximately €10 billion, compared to the approximately €11.5 billion threshold level that would be required today. In addition to serving CSP customers, MN will accelerate its offerings to faster growing segments, including Enterprise, Cloud RAN, O-RAN, and the defence sector.
Raghav Sahgal, President of Cloud and Network Services (CNS), will present the business group’s journey as it positions itself to lead the networking software revolution towards cloud and as-a-service deployment models. Saghal will outline next steps in the CNS strategy, including expansion in the enterprise connectivity segment, and maturing its business model with SaaS and Network as Code at the core. During his presentation, he will focus on the five growth segments outlined for CNS, including private wireless, AI and analytics, security, digital operations and 5G Core.
Pekka Lundmark (pictured), President and CEO of Nokia said: “Today marks another step forward in the strategic journey we started in 2021. When I arrived at Nokia, we took the decision that end-to-end as a core strategic idea would be replaced with one where we have financially accountable business groups, each driving market-leading technology. Each Nokia business group is distinct, with different customers, R&D requirements, market cyclicality, cash flow profiles and target margins. Therefore, this October, we announced actions to give the business groups more autonomy and greater agility to pursue opportunities in their respective markets. We are also revamping the strategy for our Mobile Networks business to capture mid to long-term value opportunities. Across our other business groups we are seeing positive results. Network Infrastructure is seeing improving order intake across its business, and CNS, following a robust performance so far in 2023, has continued to make solid progress in 5G Core, Enterprise and network monetization. We want to provide better value for customers’ network investments and ultimately create more value for our shareholders.”