George Wright April 13, 2012
A Nokia Lumia 800 smartphone running Windows Phone software. Photo: Simon Dawson
Nokia, a company that I have for so long admired, continues its downward slide if a Reuters poll of analysts is true. The expectation is that Samsung will have outsold Nokia in mobile phones between January and March.
It is hard to say that this event is surprising, I think most people in the ICT industry could see it was only a matter of time.
Samsung has continued to build its offerings across all markets and phone types flexing its manufacturing might, R&D investments and a good deal of consumer focus. Samsung, at least in the mobile space, has been reading from both Nokia and Apple’s playbook (some may argue a little too closely) by delivering the breadth of device types at different price points combined with an emphasis on luxury and polish. Samsung, to some degree is a hybrid of the two business models.
My admiration for Nokia springs from its history of innovation and ability to transition to entirely new markets and opportunities. The origins of Nokia are fascinating. It is a business that embraced change and could see potential in new technologies and more importantly succeeded in commercialising them.
Nokia’s roots can be traced back to 1865 when it was a paper manufacturer which diversified into rubber products and hydroelectricity. This was a business that was able to reinvent itself many times to embrace and extend new products and into new markets. This fluidity, which I think is demonstrative of innovative thinking, implies that a business can change and remake itself and respond to opportunity while being successful and profitable.
Nokia would select, acquire and back a technology and continue to keep its mind open. Nokia’s global strength was built upon its ability to straddle many industries without making a single product its sole identity.
Telecommunications would be the jewel in the Nokia crown and mobile handsets the technology that made them a superstar brand. No one can take away the massive contribution that Nokia has made to mobile computing.
So what happened? I think that the Innovator’s Dilemma might be one lens which could explain the current situation. The Innovator’s Dilemma, put forward by Clayton Christensen, tries to explain how technology innovation drives business model disruption. Of particular interest to Christensen was why very successful businesses in their prime failed, and fell so rapidly.
At some point as a business model matures around a technology, business efficiencies, price points, product features become better understood in terms of the existing market incumbent's worldview. The market leading organisation, at the height of its success and influence, tends to invest in and drive initiatives which further refine their existing model.
Constant reinforcement of existing practice creates a system inertia which aims to promote and protect itself and the environment in which it is successful. This calcification makes an organisation vulnerable to disruptive innovation, which occurs when a competitor (usually an outsider) doesn’t play by the existing rules or eschews the establishment's standard practices. Product features and pricing strategies are often the first to be disrupted.
Nokia seemed to break with its historical self when it let the cement set and determine its mobile device manufacturing become its identity. In fact, the deal with Microsoft, while being a bit of a lifeline, actually just entrenches this view and locks the company's mobile identity further.
Apple managed to change the mobile phone from simply a device to a platform which was outside the comfort zone of the then mobile heavy-weights.
Yesterday I heard an academic refer to the iPhone as a “service avatar” - the device is a clever physical manifestation represents an entire ecology. Devices like the iPad and the Kindle are successful because the functionality is not entirely limited to the device and therefore it can continue to evolve within a larger context. The product avatar idea struck me as quite profound.
This is not a eulogy. Nokia have remarkable assets which when viewed in new ways may be the way forward. One such strength is its relationships with most of the world telecommunication service providers - such operator-billing capabilities combined with a global transaction processing platform which underpins OVI could make an interesting play in the world of micropayments in emerging economies. Could Nokia reinvent itself as a distributed financial platform provider?
Another area in which Nokia is already a player is in-car navigation and entertainment devices. If it can continue to invest and innovate in this area, it could leverage its manufacturing capability and embedded systems knowhow to diversify beyond the car.
I am sure they are looking at this and more, which is why I hope that Nokia will surprise us all and continue to evolve as a business with the spirit in which they were founded.
Is it too late for Nokia to get back to mobile leadership? What do you think Nokia could do next?
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