Nokia has had a history of adaptation and change, stemming from its beginnings as a paper mill chain in the 19th century. Best known for its affordable mobile phones in the early 2000s, the Finland-based technology group has since become one of the world’s top three providers of 5G infrastructure.

Central to Nokia’s prominence in the next generation of telecommunications is Bell Labs, the R&D arm acquired as part of its €15.6bn purchase of Alcatel-Lucent in November 2016. Since its foundation in 1925, the research centre, now known as Nokia Bell Labs, has won several high-profile awards, including nine Nobel Prizes – most recently for physics in 2018 – and four Turing Awards for advances in computer science. 

Thinking globally

Greenfield investment monitor fDi Markets has tracked nine greenfield FDI projects undertaken by Bell Labs since 2004, the most recent of which created 500 jobs at a 5G development centre in Nozay – a commune near close to Paris – in November 2018. Marcus Weldon, president of Bell Labs since 2013 and also chief technology officer (CTO) of Nokia, says the research arm’s global strategy for product development is to balance the “minimum number of sites for maximum resonance”.

“The minimum is not one [site], as you want to be round-the-clock, [rather] you want the number to be somewhere around five to 10. We then pick those sites based on where the talent pools are. Acquiring companies – such as when Alcatel-Lucent and Nokia merged – means you end up with more sites and you reduce those sites to the optimum again,” says Mr Weldon. “In short, we want to do our research globally, but optimised to the minimum for the maximum impact.” 

Beyond its headquarters in Murray Hill, New Jersey, Nokia Bell Labs boasts 17 locations worldwide in countries such as Finland, Germany, China, Belgium, Israel and the UK. Mr Weldon says that Nokia Bell Labs’ major site is in the US “because it’s a very agile culture that changes direction quickly, but we import people to that US site from around the world”.

“We like to be infused with diverse cultures, but we like the American aspect of ‘anything ispossible’,” he adds.

Incentivised R&D

FDI from Nokia Bell Labs, like other research arms of global tech companies, is much sought-after by locations worldwide because of the benefits such as high-value job creation and boosts to both the innovation ecosystem and brand image of recipient locations. In the battle between locations vying for R&D operations, often a range of incentives to attract and retain these investments is offered.

“A 50/50 match for the cost of the research headcount – so for each person we pay half and the government pays half – is very attractive. It means we can hire more headcount in that country for the same budget. We really like those schema,” says Mr Weldon. “We prefer that to doing the low-cost approach – or outsourcing to low-cost locations – [because] it is often harder to manage because it is often in a more remote place and maybe there is even a linguistic or cultural dissimilarity.”

Aside from specific incentives, the strength of the innovation ecosystem and talent in particular locations are key drivers of FDI in the R&D business activity. The general characteristics of hot ecosystems around the world are “well educated, culturally compatible, linguistically compatible – which often means English is strong because that’s a common language – and entrepreneurial”, says Mr Weldon.

Beyond general characteristics, however, matching cultural similarities is central to ensure the success of new research teams. Mr Weldon contends that certain cultures may be more suited to different types of innovation and stages of productive operations. 

“You could argue there are some cultures that are a bit more regimented and disciplined, but that could be very valuable in product development,” he says. “There are some [cultures] that are more inventive and expansive, and that’s good in the early or innovation phase, but not so good in the product development stage. You can match cultures, but they have to be complementary, not at odds with each other, where they’re competing to do the same thing.”

Strategic drivers

Nokia Bell Labs’ research goals, which Mr Weldon says include “the original invention of pioneering technologies and prototyping with the more subsequent development work being undertaken by Nokia’s business groups”, are enabled through three main channels: organic greenfield investment; partnerships with the R&D arms of other companies; and collaborations with the research teams of universities. Nokia also uses mergers with and acquisitions of established companies, and venture capital (VC) investments in early-stage companies to complement R&D.

The primary investment in Nokia Bell Labs is in cementing the future of Nokia’s current businesses, such as 5G infrastructure, but also “inventing the future of the company that might be different from our current businesses”, says Mr Weldon.

“Nokia’s primary strategy is organic, and our second strategy is acquisition. We also make secondary investments through our venture capital arm, NGP Capital, where we invest in start-up ecosystems to get visibility for them, and pick strategic investments where we want ecosystems to grow,” he adds.

Focused on the Internet of Things (IoT) – sensors and devices which connect with one another through the internet – a recent $350m fund raised by Nokia Growth Partners has made minority investments into companies such as Lime, a sustainable mobility company that runs an electric scooter and bicycle app, and Sensoro, a company focused on IoT solutions for smart cities.

The reason behind such VC investments is to acquire “more knowledge into that ecosystem and help it grow, potentially collaborate with these companies [and], as all those things attach to networks, the more successful the investment, [the more benefits there are for] us as a network provider”, says Mr Weldon.

In a rapidly changing and competitive world, Nokia still faces challenges, especially in the war for the best tech talent. Mr Weldon maintains that Nokia’s biggest challenge is perception.

“I think the perception is that all innovation is in [Silicon] Valley, and is related to web problems that solve business, social or e-commerce problems,” he says. “I think fundamental innovation is different from that. It’s about deeptech, [such as] new sensor and device technologies, new software modalities and systems, and new operating systems. We see that as more foundational innovation… because all web innovation is built on those innovations... I struggle with convincing people that the big problems are not web problems, they are something more foundational than that.” 

Aside from challenges and differing strategies to drive innovation, it is clear that Nokia will continue its attempts to evolve and stay relevant as it has done throughout its history. “My intention from a CTO perspective would be to invent the next version of the company,” says Mr Weldon. “Nokia has transformed itself into a new company every 20 years or so. I think my job is to invent that different company while helping the current company.” n