What should Nokia do ?

October 14, 2012 1 Comment

At ITG digial author Mr. Erich wrote a great article investigating various possible root causes for Nokia’s fall and ruled out some of the most common misconceptions of bloggers. I wanted to take it a little further down that thought process and pay more close attention to current situation and what Nokia can do about it ?

Before delving into the causes for failure, let’s look at how Nokia became successful in the first place. Nokia was one of the pioneers of wireless telecommunication and developed GSM standard for the early wave of mobile communication breakthrough. On the strength of those patents, Nokia developed simple OS based phones and penetrated large markets. As competition grew, Nokia focused more on grabbing market share by introducing cheaper and cheaper phones for various carriers around the world. Nokia’s focus was always to protect and defend this customer base and never really innovated the mobile OS beyond the traditional customer needs. How this relates to current Nokia’s situation can be explained by Clayton M. Christensen theory of “disruptive technologies” .

As per Christensen,

“from incremental improvements to radically new approaches—as long as those technologies address the next-generation performance needs of their customers. However, these same companies are rarely in the forefront of commercializing new technologies that don’t initially meet the needs of mainstream customers and appeal only to small or emerging markets.”

As late as in 2007, Nokia commanded a market share of 56.4% and Nokia’s management thought they had it all. And then came the “disruptive technology” called “iPhone”. Essentially by being close to “customers” and making them happy Nokia really lost of the touch with “new” generation of mobile customers.

Now let’s look at Stephen Elop’s decision to go with Windows phone in Nokia’s product line. Having worked for Microsoft from Jan 2008 to Sep 2010, Mr. Elop was destined to pick Windows OS as the default mobile OS for Nokia. Even If Nokia board were to pick a different CEO, the new CEO would have arrived at the same decision but there is greater chance of trying Android OS on some of the phones to balance the risk. But Microsoft badly needed a partner to fight its mobile wars and Nokia was in perfect spot with Mr. Elop at the top. What else Mr. Ballmer could have asked for ? Mr. Elop essentially made a “bet the company” decision just like Microsoft did with the Metro interface. But there is one big difference in the risk for Microsoft vs Nokia’s. Nokia’s survival is tied to the success of Windows Phone. Not just for survival but to start grabbing the market share. For Microsoft, Nokia partnership is a “pilot” program for Windows Phone. And as Mr. Ballmer clearly stated in his Oct 2012 newsletter to shareholders,

“In all our work with partners and on our own devices, we will focus relentlessly on delivering delightful, seamless experiences across hardware, software and services. This means as we, with our partners, develop new Windows devices we’ll build in services people want.”

Microsoft CEO Steve Ballmer sending a clear signal to all its OEM partners including Nokia that “if you can’t build one we will”. And that seals the Nokia’s fate once for all.

Now, let’s look at what Nokia can do ?. Here is my five point program for Nokia. First, Nokia should start working on it support for Android eco system as soon as possible not as a source of revenue but to put Microsoft on notice and get the best out of the partnership. If Microsoft ever were to abandon Nokia for whatever reason, we can be sure that Nokia is history. Second, as already suggested in Mr. Erich’s article they should really go back to their current customers and figure out how to defend their interests. Third, leverage the patents. Fourth, work with carriers to capture market share for LTE devices. Last but not the least, watch your foe friend Microsoft all the time.

What do you think ? Leave your feedback. Negative is better and positive is ok.