The Nokia Ventures Organization of the early 2000s offers enduring lessons for innovation
The track record for corporate innovation is pretty dismal. One major reason is that decision-makers use the same processes for uncertain ventures as they do for their established businesses. There is a better way.
In the early 2000s, I worked with Nokia’s New Ventures Organization (NVO) as it developed a framework for nurturing new business opportunities. It recognized a fundamental truth: the level of investment should match the level of knowledge about an opportunity.
Unlike traditional corporate governance that evaluated proposals based on projected returns, NVO established a dedicated Venture Board designed to provide appropriate governance amid uncertainty. Rather than asking, “What will the returns be?” the board asked stage-appropriate questions like, “Has the team tested critical assumptions?”
Nokia’s framework treated venture development as a learning journey with four stages. Early stages emphasized learning velocity and assumption-testing, while later stages incorporated commercial metrics. This helped NVO avoid funding ventures that would fail.
V0: the exploration phase A venture would be initiated at V0, where a champion with an idea could access modest funding – perhaps €5,000 – based on a one- to two-page document. The questions were fundamental: is there a real customer need? Could Nokia address it? Does this align with strategic intent? Many ideas would never get beyond this stage.
V1: testing the hypothesis To advance, the team would write a five- to ten-page document similar to a discovery-driven plan, laying out key assumptions and a testing plan. One or more people would be assigned full-time with a larger budget (perhaps €30,000) to conduct market experiments, develop prototypes, and talk to customers. The objective was reducing uncertainty around critical unknowns. A V1 venture needed evidence – not just arguments – that customers wanted the offering, and that Nokia could deliver it.
V2: building the foundation Advancement to V2 signaled that initial hypotheses had been proven. Investment increased meaningfully, supporting product development and early commercialization. Remaining uncertainties concerned execution and scale, rather than fundamental viability.
V3: scaling toward independence A venture reaching V3 had proven itself sufficiently to warrant investment at scale. At this stage, the business either prepared for integration into Nokia’s existing business units or continued building toward standalone viability.
Lasting lessons
Nokia’s staged approach embodied several enduring principles. First, it recognized that early-stage venture groups must convert assumptions to knowledge through learning. Second, it protected the organization from overcommitting to unproven concepts while creating space for exploration. Third, it established clear criteria that ensured ventures earned additional investment through demonstrated progress, rather than compelling presentations.
The framework acknowledged that most ventures would not advance through all stages – and that this was acceptable. By keeping early-stage investments modest, NVO could pursue many opportunities knowing only a fraction would prove viable, distributing risk while maintaining exposure to transformative innovations.
Nokia’s subsequent strategic challenges should not obscure the sophistication of this framework. The staged approach anticipated concepts that later became mainstream in startup methodology and corporate innovation practice. For organizations seeking to nurture new ventures without betting recklessly on unproven concepts, the Nokia framework offers an instructive model for calibrating commitment to knowledge.
Rita Gunther McGrath is professor of management at Columbia Business School
