Leader: A tricky problem for Nokia

Must a market leader innovate? It's a big question. When this publication asks almost any top-dog vendor, the answer is invariably an emphatic 'yes'. Ask their rivals and many a pundit and they'll have another view.

Companies such as Dell and Microsoft have a reputation for letting others make the technological mistakes - though this is slightly misguided in the case of Microsoft, which now boasts a mammoth $10bn annual R&D spend and has, some might more unkindly say, made plenty of mistakes of its own over the years, alongside its successes.

In mobile, it's arguable the situation is different. For much of the 1990s Nokia built a reputation as the mobile phone brand. This extended from low-end consumers (kids watching their pennies with text messaging) all the way through corporate IT departments and up to the boardroom (executives watching their fingers with text messaging).

Now there are new kids on the block, stealing market share mainly through innovation. Players such as Samsung and LG Electronics from Korea have made an impact, as have an increasingly revitalised Motorola and the Sony-Ericsson dream team.

At a big conference in Helsinki today - harping back to a workmanlike past - Nokia was asked about its future; whether it could continue to lead, whether it could command its desired 40 per cent market share.

A strange irony was at play. It is through embracing rather than ignoring the clamshell form factor that the company hopes to win back much of the mid-market. Its infrastructure and other businesses have been doing OK but it is in mobile phones where it lives or dies - and the last couple of years have seen uncharacteristic complacency.

So, for example, Nokia's swivel-design 6260 phone not only looks good but also ships with a VPN client and uses Series 60 on top of the Symbian OS. In other words, it addresses the style-conscious and serious business user.

Other handsets include an entry-level clamshell design, a 3G model and other smart phones that should prove popular. Initial impressions on handling them are good.

But the other half of the irony, of course, is that when Nokia has pushed the boat out, it has usually found the targeted market as cold as Helsinki's surrounding waters. Sales of the N-Gage game deck have so far been disappointing and the 7700, a stylus input multimedia tablet (of sorts), is now merely a prototype for products that may appear next year. The company continues to spend on R&D, though, with €3.7bn going into development in 2003.

The jury is out on the flip-open, Qwerty-keyboard 6810 and other initiatives but it looks like the company won't be afraid to bin more ideas as well as, in the words of one executive, "copy with pride" when necessary.

So to answer the original question: Nokia must be able to listen to end users and learn from competitors, to get things right and not cede more of its core market. But it also cannot hope to maintain its pre-eminent position by playing catch up 18 months after others have led the way.

That's the tricky problem it faces and one that will determine just how much the company's products are seen in your working environment and home.