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Why Nokia Fell From Grace

Posted by Bob Apollo on Thu 10-Feb-2011

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My first few mobile phones were all made by Nokia. They earned my brand loyalty with devices that performed well and - in stark contrast to the labyrinthine menus of contemporary Motorola phones - were easy and intuitive to use. They deserved their market leadership, and their reputation as one of the world’s most valuable and respected brands.

Nokia 2What a contrast to today. In a brutally honest memo Stephen Elop, Nokia’s newly appointed CEO, describes Nokia as “standing on a burning platform”. They have plunged from undisputed market leadership to crisis. Will they be consumed by the flames or have to leap into icy, unknown waters? And what can we learn from their experience?

The Failure to Deliver Innovation

Apparently, one Nokia employee, only partly in jest, suggested that the Chinese OEM phone makers were designing and delivering new devices in the time it was taking Nokia to polish up a PowerPoint presentation. When getting your presentation right takes precedence over getting your product right, you know you're in trouble. I've sat through some Nokia presentations in my time, and I know exactly what that employee means.

It seems that Nokia were also playing by the old rules, focusing on creating new devices while Apple changed the game by establishing an entire ecosystem intentionally designed to give their users the best possible experience from cradle to grave. As Elop points out, the battle of devices has become a war of ecosystems. A war that Nokia has been losing - and may already have lost.

Between a Rock and a Hard Place

And while Apple and Google were making dramatic inroads into the high-end smartphone market, progressively carving premium market share away from Nokia, the Chinese mobile phone OEMs were making massive inroads into the low-end market. Nokia have been caught in the middle between a rock and a hard place - and their margins are being squeezed.

Elop acknowledges that Nokia have had some brilliant sources of innovation - but that they are simply not bringing the right sort of innovation to market fast enough, nor investing enough effort in building the sort of ecosystems that have, in their different ways, established the foundations for Apple’s and Google/Android’s new-found success in the market Nokia once owned.

How Did This Come to Be?

Elop has some explanations. He acknowledges that Nokia hasn’t delivered innovation fast enough. They haven’t been fighting with the right weapons. They haven’t been collaborating enough internally. They have fallen behind, missed big trends, lost market share, lost mind share, and lost time. He has the challenging task of turning the situation around.

The solution, as Elop acknowledges, has to start with a dramatic change in behaviour, and will require a huge effort to transform the company. He plans to share his new strategy on 11th February, and to set out a path to regaining market leadership. I’m sure we all look forward to learning more about his plans. I only hope that he hasn't laboured too much on polishing his presentation.

What Can We Learn From This?

First, if market leaders are to retain their position, they have to continually reassess and reinvent themselves, and avoid falling into the “trains or transportation” trap that befell the US railroad industry. They have to diagnose and deal with the bottlenecks that constrain innovation - not just in products or technologies, but in business models.

Next, I believe that many of Nokia’s current difficulties stem from their previous inability to understand (or to react effectively) to the fact that competition in a growing number of technology-related markets has shifted from competition between vendors to competition between ecosystems.

Last, they allowed themselves to become big and slow. They took their eye off the factors that were dramatically redefining what made for a great customer experience. They evolved, rather than disrupted. They failed to build an effective ecosystem (Symbian doesn't count). At the end of the day, I suspect that they lacked vision and courage. Let’s hope that Elop can restore some of Nokia’s traditional virtues.

What Do You Think?

I’m interested to hear your perspective. As B2B sales and marketing professionals, what can we all learn from Nokia’s experience? And what steps are you taking to ensure that your organisation does not repeat it?

Topics: Scalable Systems, Thought Leaders