Putting customers to work, Nokia takes on the Web

By Tarmo Virki

HELSINKI (Reuters) - A popular video on Youtube shows a 'concept phone' that could -- literally -- bend to fit your wrist. Called Nokia Morph, it's also an image of how the world's largest mobile phone maker wants to change.

As the Internet goes mobile and companies like Apple and Google find cool ways to embrace the trend, the mobile market leader is rewriting its product development rulebook. Instead of working in secrecy and isolation, it wants to start sharing.

"For Nokia this is probably the biggest throw of the dice since they entered the cellphone business," said Ben Wood, research director at CCS Insight, who has followed the Finnish firm since 1994.

Besides putting up futuristic ideas on video-sharing sites -- like the Morph concept, which imagines a stretchable, flexible, solar-powered, self-cleaning device which also has a sense of smell -- Nokia has invited bloggers and tech-savvy media specialists to brainstorm on future mobile products.

"We realized in early 2005 that if we only focused on innovation from within, we were limiting our scope for real breakthroughs," Chief Technology Officer Bob Iannucci told Reuters in an interview. "We want more wild ideas."

At stake is a share of the next phase of Internet growth, to offset the commoditization of Nokia's signature product. Forrester Research expects the number of mobile Internet users to triple over next five years to 125 million in Western Europe alone, while Nokia knows its double-digit margins on handsets will shrink.

To make its move in Internet services, Nokia plans to use its base of one billion customers -- one-sixth of humanity -- to consult on what works, what wows, and what doesn't. Compared with Apple's much-hyped iPhone, which has sales of just 5 million so far, its customers put Nokia in a strong position.

The market for Internet services is approaching 100 billion euros, and Nokia is the first big cellphone manufacturer to embrace the Internet media business. Close rivals Samsung and Sony Ericsson could follow, but are a couple of years behind.