In the previous article we discussed Nokia’s exciting rise to become the absolute leader in the mobile telephony market.
Now we will review one of the most complicated stages a company can face, the loss of market leadership.
Continuous improvement vs. innovation.
At the peak of its leadership, Nokia began to launch very successful cell phone models, such as the 3310/3330, which in 2000 was one of the best-selling cell phones in history with more than 126 million units. Then followed models that integrated the camera, such as the Nokia 3600, which was launched in 2003, and then in 2006 the N95 model won the award for “cell phone with the best image” in Europe.
In 2007 Nokia shares reached their peak and dominated 51% of the market.
However, despite this vertiginous trajectory towards success, in the same period there were some stumbling blocks that already represented failed attempts at innovation. Such as the 3650 model produced in 2002 with a circular keypad and the first to be offered in the United States with an integrated camera, or the third-generation 7600 model (3G) that integrated an MP3 player and Bluetooth, Infrared or USB interfaces for downloading music from the computer.
With original designs, but not very intuitive in the way of use, these models were not well received in the market and from a critical perspective, they represent rather aberrations of innovation, since they are practically the same cell phones with more buttons arranged in an almost extravagant way, trying to provoke a new user experience that turned out to be totally fictitious.
In all fairness, it can be stated that continuous improvement is not innovation.
The devil is in the buttons.
Today, when we pick up a cell phone and make a call, it seems so natural and ordinary that we can easily overlook all the work of the many scientists and engineers who have made such a technological marvel possible. At the same time, the technological novelties that happen every day have made us immune to the amazement and curiosity of knowing how this or that works.
The new Nokia models already integrated cellular telephony, music and camera, which already implied a challenge to facilitate the use of the different functions to the user. However, continuing to add buttons to the device had major disadvantages that had already been proven in the market with the 3650 and 7600 models.
So the solution seemed simple, remove the buttons and use the touch screen instead. After all the “resistive” touch screen had already been invented since the 70’s (3). In fact, the Nokia 7710 launched in 2004, already had a touchscreen, but still maintained the need for buttons to manipulate functions, compared to the iPhone, which had a clean, elegant, aesthetic look and with thumb and index finger open/close gestures allowed to intuitively perform functions on the device, such as zooming in and out of a picture on the screen.
The intuitive and user-friendly interaction, plus the sophisticated design of the iPhone, were unmatched.
It was needed to upgrade to the Symbian operating system, used by Nokia cell phones, but it was not easy and it seemed like starting from scratch since the Symbian operating system had evolved very close to the hardware, for example, the S60 version for the Nokia 7650; the S90 version for the 7710 in 2004 and so on.
It was not until 2011 that the Nokia E6 was launched with the Symbian*3 version of the operating system that already supported “multitouch” on the touch screen. In other words, Nokia was 4 years behind and even more so because the E6 was not competitive in the market at that time, due to the fact that other strong competitors such as Samsung, using the Android operating system, had already entered the market with phones more similar to the iPhone.
Proactivity vs. Reactivity.
In a lateral move into the adjacent video game market, another tailspin occurred with the failure of the N-Gage game console and integrated cell phone. Although it managed to sell 3 million units, it did not represent a winning game against Nintendo’s Game Boy, which sold almost 30 times more, reaching more than 81 million units (1).
On another front, also reacting to the moves of giants such as Google, Nokia acquired Navteq in 2007 for 5.7 billion euros, to later sell it for 2.8 billion euros to the German automotive consortium (2).
In the battle for the cell phone market, Nokia reacted again to Apple’s onslaught and in its desperate desire to compete with the iPhone, it bought Symbian Ltd. and created the Symbian Foundation in order to accelerate software development through the open source scheme. A failed strategy that would lead to an alliance with Microsoft to develop Windows Phone as its main strategy (who would have thought that a little later, Microsoft would buy the entire cell phone business from Nokia for 7.2 billion dollars)(4).
However, the masterstroke would come on another front, from a company with a leader who knew the right order of evolution, the DNA of innovation. Apple, under the leadership of Steve Jobs, launched the iTunes platform in 2001, revolutionizing the business model of the music industry… but in its guts, it also contained the DNA to transform the telecommunications and entertainment industry. Nokia, in a counterpart would announce 6 years later its Ovi Store platform, although it was actually launched 8 years later, until 2009 (in 2012 it was renamed to Nokia Store).
When you move from proactivity to reactivity you lose leadership.
Valuable lessons for posterity.
“With great power comes great responsibility,” “Uncle Ben” would say to Peter, the superhero Spiderman. Nokia, representing great power in the cell phone market, did not have the knowledge, ability and perhaps not even the humility to visualize the right order of doing things.
In a fairer hypothesis, based on the culture of the organization, it is very likely that the culture of the organization, specifically of the mobile telephony business unit, remained unchanged, with the same culture of the Nordic company Mobira, acquired a little more than 2 decades ago, specialized in telecommunications.
Another hypothesis may come from the perspective of specialization (the so-called “shop-floor blindness”). Nokia, since the acquisition of Mobira, became a specialist in cellular telephony and, by focusing only on this technology, lost sight of the evolution of other technologies and the fine elements that should be developed with excellence, such as the operating system and the business model through a platform in what we now call “cloud”. Challenges that are precisely in another highly complex area, such as software development.
Another hypothesis regarding leadership is that the CEO’s of the time did not have the astuteness shown previously to create alliances and achieve acquisitions that would allow them to innovate at a business model level. Perhaps the glory years, coupled with the organization’s culture and specialization, plunged Nokia’s leadership into a morass of complacency. Drawing an analogy to the hypothetical experiment of frogs in water slowly rising to a boil, when they tried to jump in, it was too late.
1) Video games: https://en.wikipedia.org/wiki/List_of_handheld_game_consoles
2) Navtec: https://en.wikipedia.org/wiki/Navteq