Nokia talks up business in the developing world

Editor's note: This speech was blogged live, so be sure to scroll down for updates.

LAS VEGAS--Nokia President and CEO Olli-Pekka Kallasvuo is just taking the keynote stage at CES Friday to discuss the company's strategy for reaching the world's developing markets with its products.

Update at 9:15 a.m. PST: Nokia is the world's leader in cell phones. And while the company has struggled over the past year to hold its dominance in the high-end market, it clearly dominates the emerging market with low-cost phones tailored to the millions of customers who live on less than $1 a day.

Kallasvuo started by showing off the company's first-ever cell phone, the Mobira Cityman. The big brick phone went on sale in 1987. He compared that device to a tiny phone that is being sold today to the developing world.

This new phone sends text messages, makes phone calls, and has an appointment calendar. But it also has a flashlight, a long-life battery, and FM radio. From farmers in India to fisherman in Indonesia, Kallasvuo said cell phones have quickly become a necessity. These devices are sold for about $32, a 300 percent drop in price in the past five years.

Update at 9:30 a.m. PST: Kallasvuo noted that most people in the West like to talk about emerging markets, but he says this is an outdated term. "Is there any doubt that China's and India's economies have emerged?"

He said a one-size-fits-all approach does not work when addressing these markets. It's critical to develop a deep understanding of the people, cultures, and markets they are addressing, he said. Kallasvuo then introduced Nokia's own "Indiana Jones," engineer Jan Chipchase, who travels to the far corners of the world to discover how people are using Nokia phones. And his job, which he has been doing for nine years, is to look at how Nokia phones can improve their lives.

This means figuring out how the 800 million people around the world who are illiterate are using Nokia cell phones. And what consumers who live in places where there is little access to electricity can do to charge their phones.

But he cautioned audience members not to jump to assume that they know what these customers need. He mentioned several examples of traveling throughout the world and finding villagers who are using advanced cell phones. One person he visited took his phone and used Bluetooth to sync cell phones to look for interesting applications.

"The simple lesson worth articulating is that once objects become small enough to put into a pocket, they rapidly find their way around the world," he said. "This means that competing in these markets means competing with the best in the world, because that is the benchmark for these consumers."

He said that manufacturers need to challenge their assumptions about what they think customers want. And he emphasized that in parts of the world where resources are scarce, there is much innovation.

Update at 9:42 a.m. PST: Kallasvuo introduced a travel journalist who works with Lonely Planet and Nokia on a project to document how mobile phones are being used throughout the world. She talked about how mobile phones are connecting people and improving their lives, a bit of a gushy plug for Nokia's programs.

Update at 9:57 a.m. PST: Kallasvuo provided some examples of things that Nokia is doing to service developing markets. For example, the company is helping offer banking and financial services to people who don't have bank accounts. Today there are nearly 4.6 billion wireless subscriptions, but there are only 1.6 billion bank accounts, Kallasvuo said. Nokia is working with carriers and banks throughout the world to offer this kind of service.

Kallasvuo also said Nokia is helping provide e-mail to millions of people in these markets. While people in the West take e-mail for granted, he said 75 percent of people throughout the world do not have e-mail. Through Nokia's Ovi Mail service, Nokia phone customers can sign up for their own free e-mail accounts from their phones, eliminating the need for a computer.

Kallasvuo also emphasized the need for application development for these markets. While software developers in the West are focused on creating applications for smartphones, he said there is also a big opportunity for developers to create applications for lower-end devices. "The opportunity is staggering," he said.

Even though demand for applications in more affluent categories like smartphones is growing, he said that shouldn't blind the industry to the huge untapped markets for applications and services for the less affluent in these economies. Even services that may cost $1 can create big revenue streams when they are sold to several hundreds of millions of customers, he said.

And finally, he said it's important for companies such as Nokia to "do good business and do good at the same time." As part of this mantra, he talked about the company's Calling All Innovators program, which aims to inspire the imagination of developers to make a change in people's lives through mobile phones.

The contest has been running for about two years. This year's theme is "Connecting Apps that make a difference."

Kallasvuo announced that Nokia is working in a new partnership with "Sesame Street," which provides educational programming in 125 countries around the world. He then announced a contest called the Nokia Growth Economy Venture Challenge, which will provide $1 million in funding to a company that that promotes upward mobility to cell phone users in developing markets.

The business that wins the funding must create products that improve people's lives. And it must be targeted in markets where the average income is less than $5 a day.

"We've seen what tech companies can do when they focus on problems that are also opportunities," he said. "And we want to challenge this in the developing world."