Business model and strategy

The 21st century will present extraordinary challenges for many sectors that are key components of today's economy.

The companies that are able to benefit rather than suffer from these challenges will be those that are prepared to evolve their business model to the transforming economy, rather than remain static and/or seek to defend and maintain their old business model as it becomes increasingly irrelevant.

An example of a company that went through a genuine transformational change by modifying its business model and strategy to changing circumstances is the world's largest manufacturer of mobile phones, Nokia.

When Nokia started in 1865, it made paper. During its first century, it became a major industrial force with growing interests in rubber and cables, as well as pulp and forestry. During the 1960s and 1970s, the company started to play a pioneering role in the early evolution of mobile communications and in the 1980s it began to commercialize its in-car phones for use on Finnish highways.

The transformational change that occurred to Nokia in the 1990s, however, can be traced back to a decision made by Jorma Ollila who became its president and CEO in 1992. He made the crucial and, at the time, extremely bold strategic decision to focus on telecommunications and move Nokia out of its traditional sectors. During the 1990s, the rubber, cable and consumer electronics divisions were gradually sold as the company developed a strong focus on mobile communications and, with that focus, the fortunes of the company changed dramatically.

By 2005, just 13 years after Ollila's decision to refocus the company, Nokia has sold its billionth handset. Two years later, Nokia became the fifth most valued brand in the world.

Nokia's extraordinary success occurred because it was willing and able to redefine itself to reflect technological breakthroughs and changing societal behaviours. In so doing, it has also driven much of the technological and behavioural change associated with mobile communications over the last two decades. In some respects, it would be true to say that the company changed and, in turn, it changed the world.

Although Nokia's transformation was not driven by issues relating to sustainable development, it provides an excellent example of the sort of opportunities that will exist over the coming decades for those companies that are ready and willing to redefine themselves as the world changes around them - and how they, in turn, can drive deeper system change.

The more companies that are able to redefine themselves to meet the needs of a low-carbon economy, the faster that low-carbon economy will be achieved. Changing a company's long-term business model and strategy to reflect this may represent the single most important action it could take in response to climate change, both from a commercial and sustainability perspective.

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