NCPA - National Center for Policy Analysis

Case Study Of An Idea Company

August 17, 2001

Large companies face two conflicting interests: the need for personal initiative and the necessity of enforced coordination. Both are essential for success. Strong corporate hierarchies achieve the latter, while small enterprises achieve the former. A recent study finds that Nokia, the Finnish telecommunications company, has found a way to achieve both objectives within affordable parameters.

While other telecommunication companies have been struggling to survive, Nokia has done extremely well:

  • Nokia managed to post a 22 percent increase in revenues in the first quarter of 2001.
  • It gained a 2 percent market share from its competitors handing it a substantial 35 percent share of the world's mobile handsets.

What are the reasons why? In 1998, Nokia create the Nokia Ventures Organization (NVO). NVO was designed to test and develop ideas that had the potential of turning into $500 million to $1 billion businesses. Its objective is to study growth opportunities beyond the current Nokia structure, but within Nokia's reach. NVO has only a few permanent managers; most of the personnel come for specific idea research.

NVO's success offers several lessons:

  • New ventures need their own room to develop with their own resources.
  • New ideas should be put to a market test within the company.
  • Existing corporate hierarchies should not be the sole source for new ideas.
  • Once developed, a new venture should be sold quickly or quickly reintegrated within existing operations.

Thus NVO acts as an accelerator, taking a nascent idea out of the existing opportunities, speeding up it development and returning it back to the organization at an appropriate time.

Source: "Keeping Ideas Mobile," Economic Intuition, Spring 2001; based on Jonathan D. Day, Paul Y. Mang, Ansgar Richter and John Roberts , "The innovative organization," McKinsey Quarterly, 2001, Number 2, and Jonathan D. Day and Jim Wendler, "The new economics of organization," McKinsey Quarterly, 1998, Number 1.


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