Nokia: Not Connecting People!

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Though it’s very common to see major brands being changed hands for one reason or the other, we sometimes feel sorry to see a certain brand exit, and Nokia with its famous tagline ‘Connecting People’ is one of them.

[Nokia was founded by Fredrik Idestam, a mining engineer in Espoo, Uudimaa, Finland in 1865, and the name Nokia was decided in 1871. Through its Devices & Services, the mobile handset division, Nokia had been an uncrowned monarch of the mobile phone empire for more than 14 years.]

The other day I had a formal discussion with a new client of mine who was planning to launch a wonderful business (details of the business withheld for the sake of my client’s privacy). During the long conversation, which is my regular practice with every of my clients, old or new, I asked her what her long term plans for innovation, expansion and diversification were, and I was taken aback when she casually waved the question aside, saying as she was only at the beginning stage she hardly thought of them as important. After composing myself I explained to her that it was even more important to take those long term plans into consideration even at this infant stage no matter whether you applied them later or not! To emphasize the need for such mind-set for any businessperson, I had to mention Nokia, the mobile phone mogul that ruled the cellphone arena for decades but had to close up shop when much less reputed companies were doing good business.

And immediately after the discussion which resulted in my convincing her to consider those future plans right now, something inside me urged me to do this write up, and so here I am with my understanding, along with other experts and analysts’ opinions, of the importance of accepting market changes and trends and acting in time.

Some of us might feel it a waste of time discussing bygone lapses, but I feel it is from those lapses that we learn how to keep our business safe and dry above the rough and wet tides. Discussing a failure is not to resurrect the loser or to show a consultant’s spite but to alert, rather caution, the other one who might face the same situation and become a have-been eventually.

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Who/what put the jinx on Nokia?

So, what happened to the multi-national, multi-billion dollar Finnish mobile phone brand that had to go on sale? Was it bad planning?
No. You daren’t say that a brand that had almost monopolized that particular market segment for some decades hadn’t done proper planning.

Was it faulty design and poor quality that spelled its doom?

No, not at all. Never a single model had to be recalled. In fact, when they introduced 2100 series in 1994, their target was to sell a modest 400,000 pieces but they sold over 20 million of them world over! Could it be just a stroke of luck? I wouldn’t dare say it was! (Yet sadly the result was: “Nokia that connected millions of people failed to connect itself with people!”)

Was it bad financial management that made the coffers empty?

It’d be blasphemy to utter it because from 1996 to 2001, Nokia saw a staggering fivefold increased turnover, from 6.5 billion euros to 31 billion euros.

Didn’t Nokia bring in new toys to attract the different customer levels?

The answer is again a huge NO! In 1999 Nokia’s 7110 was the first phone with rudimentary web-based functions including emails; in 2001 its phones had built-in camera; and just after a year or so, Nokia’s device Nokia 3650 was capable of capturing videos. Between 1999 and 2002 Nokia’s R&D was very active and its share prices soared sky high.

Didn’t Nokia’s R&D make any innovations?

It wouldn’t be fair if anyone said yes because Nokia smartphone Nokia N95, with ‘Symbian OS’, for instance, outsold the Apple’s iPhone and enjoyed a domination of 62.5% of market share in 2007.

However, in 2010 the decline started: the rampart started showing cracks, which grew bigger and bigger. Isn’t it true that to go up is slow and tedious but to fall down is quick and humiliating? Apple with its iOS and Google with its Android operating system started encroaching Nokia’s domain. There were Samsung and Sony Ericsson who switched from Symbian to Android system attacking Nokia from the sides. (While fighting the losing battle, Nokia still stuck to good old Symbian system!)

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In 2013, the axe fell on Nokia and Microsoft acquired Nokia’s mobile phone business as part of a deal involving 5.44 billion euros ($7.17 billion).

Just not to be forgotten, Nokia licensed product designs and technologies to third-party manufacturers to keep the Nokia brand presence in the mobile consumer market. A modest gesture to be in the ring.

(However, Nokia company’s other ventures are alive and kicking; it is currently focusing on large-scale telecommunications infrastructures, licensing and technology development and online mapping services.)

So what and where did Nokia go wrong?

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Public Opinion Matters!

‘Arrogance’ is the one word what one of the disgruntled Nokia fans spilled on their website. Some went on to point out each of the “beliefs” Nokia clung on to: Nokia didn’t believe that Apple iPhone would catch up with the people at such a fast rate, and though realised the lapse later, Nokia didn’t act quick enough to patch up, though made some frantic efforts with its N8 and S60 0/S, which proved to be too late.

Making a singular impression on one’s customers occasionally results in damage. Fans left Nokia in millions when they had realised that Symbian became obsolete and Nokia was not tearing itself off from Symbian system long before Nokia switched to Windows and had a chance to bring its first device with Windows capabilities.

‘Nokia, like dinosaurs, failed to adapt.’ is the disappointed fan Sumeet Kr Sinha said on Quora.com.

‘They (Nokia) were too proud of themselves that they couldn’t see/care where the market was going.’ is what all Arpit Saxena, Lifelong learner of Computer, said on Quora.com.

‘Nokia failed to respond to the iPhone and the shifting consumer demand that came with it. Nokia Moved Too Slowly.’ opined Alexandra Chang in the article “5 Reasons Why Nokia Lost Its Handset Sales Lead and Got Downgraded to ‘Junk’” on Wired website.

‘It’s a lot more difficult to be nimble and react to the changes in the market if you’re already a leading player.’ Alex Spektor, Strategy Analytics analyst, told Wired.

‘… over two years after the introduction of the iPhone and Android picked up market steam, Nokia didn’t market itself as an innovator, and frankly, it hasn’t been doing much innovating anyway… at least not until it entered the Windows Phone space.’ is what Wayne Lam, IHS senior analyst has to say.

According to Nitish Singhal, a software engineer pursuing his PGDM, Finance, from Fore School of Management, on nEXT iNsight website in 2013, Nokia ignored stiff competition from Samsung and Apple, and lack of focus on innovation was the second big reason of collapse. Nokia not only failed to realize competition from Apple, Samsung, Sony, Blackberry in the high-end smartphones, it also failed to notice the stiff competition in the lower segments of phones… Nokia failed to create the “buzz” among customers which Apple did successfully. The problem with Nokia’s umbrella branding was that they couldn’t build anticipation in users. He concluded the Nokia story with: in this high-tech era with change in consumer power, the company which was missing the constant innovation had the high probability of getting punished from the customers!

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Photo Via New Yorker

James Surowiechi in his article ‘Where Nokia Went Wrong’ in the New Yorker, while praising Nokia’s good intentions and much lauded marketing strategies, lamented that Nokia was, at its heart, a hardware company rather than a software company and its engineers were experts at building physical devices, but not the programs that make those devices work. He complained that the company profoundly underestimated the importance of software, including the apps that run on smartphones, to the experience of using a phone. He further added that Nokia’s failure resulted at least in part from an institutional reluctance to transition into a new era. He concluded, agreeing with Nitish Singhal, that the high-tech era had taught people to expect constant innovation; when companies fell behind, consumers were quick to punish them, and for Nokia “late and inadequate” was a deadly combination.

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Photo Via Financial Review

“Nokia could have competed with itself and won,” was the final remark that ended Paul Smith’s article ‘The Nokia Insider Who Knows Why It Failed Warns Apple It Could Be Next’ on Financial review in 2013. Paul quoted Frank Nuovo, the industrial design guru of Nokia’s mobile devices, as saying: “Nokia became a victim of its size.”; “Nokia missed opportunities by seeking to protect what it had.”; “… lacking the sense of urgency.”; “Nokia became more of a maintainer, more of an iterator, whereas innovation only comes in re-invention and Nokia waited too long to make the next big bold move…” and “… the intention and rhetoric within Nokia was always about trying new things and pushing boundaries, but in reality everything was too centrally controlled.”

Julian Birkinshaw, Professor of Strategic and International Management, London Business School, and Co-founder and Research Director of the Management Lab, on Fortune 2013 wrote, among several other very important facts, the following observations on Nokia: “… measure customer behavior very carefully — are they defecting? (If yes) To whom? and Why?”; “… sharing front-line information — sales people, developers working with third parties, purchasing managers — quickly with those at the top, as well as informal networks and cross-cutting task forces designed to address specific threats and opportunities.”; “Lack of diversity. Nokia’s top executives were all Fins of similar age and background, and this surely hampered their ability to make sense of their changing business environment.”; and “Intolerance of Failure. The bigger and more successful a firm becomes, the more risk-averse it becomes. (I prefer to call it ‘being in comfort zone’!) Executives want innovative new products and services, but they expect them all to succeed. The solution here is clear: you need to find ways to develop a culture that encourages trial and error.”

Steve Litchfield, in his Symbian website on AAS, in 2012, was being direct and a bit sentimental, too. He felt the exclamation mark in “Download!’ app on Nokia smartphones with S60 was the culprit which brought the company down as it had done with “Yahoo!”, while suggesting that Nokia failed because it did not put any time into the project, and regarding N97, Nokia skimped on the specifications. (He personally believed that N97 could have ruled the world, given the right treatment!) He further added that one couldn’t afford to waste in the hyper-fast world of mobile was ‘time’ and felt sorry that Nokia’s year or two lead in smartphones back in 2006 turned into, by some metrics, being at least a year behind the competition in 2012.

Travis Hessman in The Road to Failure: Nokia, Blackberry and…Apple? in Technology Trends went a step further and blamed Nokia, together with Blackberry, for not straying: “Nokia and Blackberry fell because they didn’t stray.” and he suggested companies should break their own laws in order to get a new trend, and he reaffirmed the mantra: “To stay alive and to stay relevant, top companies have to continue to invest in ground-breaking, disruptive technologies — the same investments that got them to the top in the first place — even if that means working against those early wins.”

Conclusion:

Now, it’s clear from the public opinion that major and minor companies have to make business moves according to the changing market trends, while leaving enough room in the plans and in the mind for those who make the plans.

The fable ‘The Tortoise and The Hare’ is always there for us to remind us that we can’t be enjoying the comfort zone all the time. There is a War going on out there right at your door-step and everyone, small or big, is a prime target. You can’t relax because you have covered much more distance than your rival who seems to be simple and humble.

Always be on the lookout; keep your eyes peeled and ears thoroughly de-waxed; be ready to make necessary changes; feel the customers’ pulse; follow your mentor’s instructions, even when some of them don’t go down well with your philosophy; leave enough room for mobility within your philosophy and out on the drawing boards; and learn that there’s nothing wrong in keeping the good and leaving the bad, even when the bad is what has brought you to the top.

In business, as in life, you’re on a tight rope; one false or slow move, you’re a goner!

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