Stephen Ezell

1. Innovating in a Service-Driven
Economy & The Service
Innovation Triangle
Presenter:
Stephen Ezell, Vice President, Global Innovation Policy
August 12, 2015

2. Value:
innovation outcomes
Management:
innovation ability
Resources:
innovation capacity
LayersofInnovation:Resources,management,value
Value
Service
system
Business
model
Customer
experiences
Tangible
assets
Technology
Financial
assets
People
Intangible
assets
Owners2
The firm and its
environmentService
Innovation
T r i a n g l e

3. http://www.bi.edu/PageFiles/214077/Service%20Inn
ovation%20Triangle%20Booklet.pdf?epslanguage=en

9. Value
Service
system
Business
model
Customer
experience
Tangible
assets
Technology
Financial
assets
People
Intangible
assets
Apple Advantage/
Differentiator
Parity
Nokia Advantage/
Differentiator
vs.
© Cuthbertson, Ezell, Furseth, 2015.

10. Customer
Experience
• Steve Jobs “Humanized technology and made
it work in wondrous ways that genuinely
improved our lives.”
• Jobs set out to build products (and services) in
the iPod, iPhone, and iPad that “he would
want himself as a customer.”
• Used design principles not only to make
elegant devices but also to create elegant and
seamless experiences.
• Solving real problems that enhanced the user’s
experience.
• Breakthrough insight for Nokia had been
viewing the mobile phone as a fashion
accessory.
• In the 2000s, Nokia phones with their
personalizable cases were viewed as hip
fashion accessories.
• Catered to mass of younger customers,
beyond the business customers that
dominated mobile phone use at the time.
• But, over time, customer experience
deteriorated and Nokia lost core customers.
Apple vs. Nokia – Customer Experience
© Cuthbertson, Ezell, Furseth, 2015.

11. Apple vs. Nokia – Intangible Assets (Brand)
• Valued as high as $185 billion, Apple has
became the world’s most valuable brand.
• Now Apple has the “hip” products.
• By 2010, one UK customer satisfaction survey
of Nokia phone owners planning to get a new
one found they would not recommend Nokia
to a friend. They were almost ashamed to
own Nokia phones.
Intangible
Assets
© Cuthbertson, Ezell, Furseth, 2015.

12. Apple vs. Nokia – Technology
• iTunes (and later AppStore) were
revolutionary Internet content platforms.
• iPhone and iPad introduced breakthrough
technologies to phones and tablets
• Seven critical years passed before Nokia
developed a similar site to iTunes. Nokia
fundamentally failed to anticipate the threat
that the iPod/iTunes ecosystem posed.
• Nokia’s response to the iPod/iTunes/iPhone
trilogy was largely to try to build better
smartphones.
Technology
© Cuthbertson, Ezell, Furseth, 2015.

13. Apple vs. Nokia – Service System
• Though not without a few hiccups, has
performed far better at coordinating service
operations behind launch of new iPhones and
iPad products.
• As it scrambled to catch up with Apple,
Nokia tool to announcing new smartphone
models (e.g. Lumia 820 & 920) without
stating when they would become available,
where to buy them, or what they would
cost.
• That frustrated carriers, consumers, and app
developers for those details let consumers
plan purchases, carriers plan marketing
promotions, and app developers schedule
new updates.
Service
System
© Cuthbertson, Ezell, Furseth, 2015.

14. Apple vs. Nokia – Tangible Assets
• The 450 Apple Retail Stores generate more
revenue per square foot than Tiffany’s
stores.
• Confounded skeptics in establishing the first
truly successful retail store by an
electronics/computer manufacturer.
• Apple retail stores encourage “tryout” and
“play” with Apple’s products.
• Some successful retail stores in major
European cities, but never reached global
critical mass.
Tangible
Assets
© Cuthbertson, Ezell, Furseth, 2015.

15. Apple vs. Nokia – People and Culture
• Apple’s location in the heart of Silicon Valley
made it easy to acquire the very best
engineering and software talent.
• Jobs managerial style was combative but
often brought out the best work in his
people.
People
• Perception in high-tech community that Apple
offered better environment for risk-taking and
financial reward “posed a challenge for Nokia’s
management in attempts to hire software
engineers.”
• Risk-averse and consensus-based culture
lacked innovation and entrepreneurial spirit;
not able to keep up with pace/speed of digital
innovation.
• Decisions being made within the firm were
often cancelling each other out.
• Complacent, overly bureaucratic structure
with poor accountability.
© Cuthbertson, Ezell, Furseth, 2015.

16. Apple vs. Nokia – Business Model
• Built product/service ecosystem with iPod,
iTunes, iPhone, iPad, Mac, and AppStore that
encourages cross-sales
• Developed the iPhone in part to cannibalize the
iPod (fearing competitors would do so).
• Open approach with 70/30 split allows others
to monetize Apple platform; generating more
revenues for Apple.
• Developers have earned a cumulative $25
billion from the sale of apps and games
• Retail store space generates more revenues per
square foot than Tiffany’s.
• Generated an advantage by producing just one
phone (e.g., Southwest Airlines model), unlike
rivals like Nokia who made multiple devices.
• To the end, predominantly focused on
manufacturing technologically superior
smartphones.
• Drove stake in its own heart by shutting down
Symbian OS and going with Microsoft.
• Ovi app store underwhelmed and was shut
down.
• Failed to demonstrate clear commitment to U.S.
market (pre-MSFT purchase); had only 2% share
of U.S. smartphone market.
• Fought a multi-front war and lost. Lost on high-
end to Apple/Android and on low-end in
developing markets to cheaper feature phones
from Asian manufacturers.
Business
Model
© Cuthbertson, Ezell, Furseth, 2015.

17. Apple vs. Nokia – Value
• Today’s smartphone business is less about
specific devices than about ecosystems—
combinations of hardware, operating
systems, and applications.
• Nokia lost because its ecosystem was bested
by Apple’s iPhone (and Google’s Android), as
these ecosystem platforms have attracted
the most developers, investors, and users.
Value
© Cuthbertson, Ezell, Furseth, 2015.

18. Twitter: @sjezell
Facebook: facebook.com/innovationpolicy
Blog: www.innovationpolicy.org
Website: www.itif.org
Follow ITIF:
Thank You
Stephen Ezell
sezell@itif.org