Nokia's Chairman on how the digital revolution will change business

Nokia Chairman Jorma Ollila describes how the growth of the Internet will create a new world of business.

The digital revolution will change our way of doing business and create value in a fundamentally new way. The new digital economy will change the fundamentals of economic growth as a number of new factors come to play important roles in economic activity. The digital revolution is pervasive by nature: it will have an economy-wide impact on all private, business and public players alike.

The growth of the Internet is one of the drivers of the digital economy. There are approximately 250 million Internet users today and this number is expected to double within the next three years. In addition, we believe that mobile access to the Internet will outnumber PC connections by the end of 2003. Both fixed-line and mobile data transmission capacity will increase in such a way that voice, data and video can be transmitted simultaneously. Within a couple of years, we all will have easy access to all the services that the Internet can provide. When we have the Internet in everyone's pocket e-business will become mobile. We will see a completely new business environment emerging.

In the information society, technology will provide easy and seamless access to services. Open markets and competition will result in more competitive pricing. This leads to greater use and better services. This, in turn, leads to improved infrastructure and devices and increased competition, which leads to lower costs etc. A virtuous circle is created which, in the course of time, will lead to more cost effective access to a variety of high-quality services. The economy can, in these conditions, enjoy low inflation and high employment and productivity gains.

The growth of the digital economy has been driven by business-to-business transactions. In the future, we will have a more balanced development of b-to-b and business-to-consumer business. In fact, the growth of these two market segments will reinforce each other helping both businesses and consumers to familiarize themselves with the Internet. New business models now emerging in the b-to-b business will penetrate into the consumer business changing the relationship between the supplier and consumer in a fundamental way.

In the digital economy, markets are global. National or regional markets will loose their relevance in may business areas. But also market structures are changing. Horizontal markets will gradually replace vertical structures. Conventional industries will have to find a new role in this transition. Today, we can see attempts to better control the new value chain vertically and acquisitions to control a larger share of the horizontal market.

The value chain will move towards content provision i.e. the services distributed through the Net. The productivity of conventional business can be enhanced significantly. Internet-based solutions can give a competitive edge to those who can move fast and with the right timing. On the other hand, completely new industries will emerge that create and distribute content directly through the Net or provide logistics for those who sell conventional services or goods.

In the new business environment the consumer will make the choice. Every purchase is an auction. The supplier and the customer meet each other directly in the marketplace. The supplier needs to have an understanding of the life-style and preferences of the customer. Nobody can control or own the customer. Suppliers have to win the customer's confidence each time. In these conditions it is necessary for businesses to have a communication channel to the consumer to be able to deliver personalized services - at any time and any place the consumer may wish.

All the business players will have to assess what kind of a transition strategy to follow. The roles of the players will change. In particular, in direct supplier-customer interactions the traditional role of a middleman can change dramatically. All players will have to decide whether they want to be forerunners, early adapters or those who want to wait and see. The forerunners will select high-risk opportunities, but with a high prospect for revenue. In the other direction, waiting and seeing for too long may turn out to be fatal.

The digital economy is based on trust. The customer has to feel that his or her money and privacy are as safe as they were in the traditional economy - or even safer. Trust cannot be compromised. In this fast changing digital economy, global solutions and codes of conduct can only be created by industry, but in a continuous dialogue with government. The role of government is to facilitate and enforce the solutions, which enjoy full confidence of customers, can survive.

Success in the new business environment requires speed, flexibility and continuous innovation to up-grade products and services but also to take advantage of unexpected new business opportunities. Business organizations have to be able to detect and process them quickly. This requires new management principles that emphasize close interaction with a variety of partners, flexibility in organization, effective incentive systems and the delegation of decision, power and responsibility. At the same time, corporate culture and values are the elements, which create predictability, continuity and the right conditions for organizational coherence and learning.

In conclusion, the digital revolution is a great opportunity for Europe. However, many things will have to change. The challenge for European Governments and institutions is to make Europe a strong intellectual leader, which can pave the way towards the new economy and global codes of conduct. We also need to make sure that people have opportunities to develop their competencies and skills. Finally, the digital economy will open an infinite number of new business opportunities. In order to reap the benefits companies need to face a strong renewal challenge.

This is a summary of a presentation by Nokia's Chairman and Chief Executive Officer to the European Business Summit in Brussels.