47 Comments

Summary:

Nokia today is restructuring itself — for the fourth time in nearly as many years. Through all of the reorganizations and new handset models, Nokia continues to fall short in stopping worldwide market share growth Apple’s iPhone. Each attempt is a step or two behind.

Nokia said today that it’s reorganized its devices and services units into three distinct areas: Mobile Solutions, Mobile Phones and Markets. Netbooks and high-end smartphones fall under Mobile Solutions, while feature phones are part of Mobile Phones, and Markets touch both units through sales, marketing and supply chain management.

Olli-Pekka Kallasvuo, CEO of Nokia, explains the shuffle by saying:

“In addition to extending our leadership in mobile phones, we are decisively moving to respond faster to growth opportunities we expect in smartphones and mobile computers. Nokia’s new organizational structure is designed to speed up execution and accelerate innovation, both short-term and longer-term. We believe that this will allow us to build stronger mobile solutions – a portfolio of products and integrated services that connect people and enable new ways of communicating, sharing and experiencing mobility.”

But haven’t we heard this song before?

Indeed, this reorg is the fourth since Apple effectively changed the mobile industry landscape by introducing its iPhone in June of 2007, yet Nokia still hasn’t created a compelling handset to stem the growing tide of iPhone sales in the worldwide smartphone market. Here’s a recap of the steps taken since the iPhone launch, including the launch of Nokia’s iPhone challengers:

  • June 2007 — Nokia collected its trio of units — Mobile Phones, Multimedia and Enterprise — and melded them together into a Devices group. A standalone Software and Services unit was created along with a Markets unit. The goal then, according to comments Kallasvuo made at the time, wasn’t much different than it is today:

    “The convergence of the mobile communications and internet industries is opening up new growth opportunities for us, both in the devices business as well as in consumer internet services and enterprise solutions. We believe this new organization can capitalize on these opportunities while allowing us to increase the effectiveness of our investments and the efficiency of our operations.”

    The referenced growth opportunities were indeed real, just not realized by Nokia as much as they were by Apple — and now by Google, Research In Motion and others. Nokia’s N95 was a flagship model that showed promise, but never truly competed with the iPhone.

  • August 2008 — Nokia rejiggered the Software and Services unit in order to “integrate some of our content delivery services into a single service to create a better experience for consumers and to continue increasing investments into key initiatives.” Nokia’s Ovi app store eventually became the umbrella for services such as mapping, music and data sharing, but it took until March of this year for Ovi users to experience easier browsing and searching for software. Nokia launched its first touchscreen device, the 5800 XpressMusic, but opted for a resistive touchscreen that diminished the experience and highlighted the fact that Symbian S60 isn’t optimized for touch.
  • October 2009 – After another quarter of slowing sales, declining market share and its first net loss in a decade, Nokia tapped its CFO of five years, Rick Simonson, to head up the Mobile Phones unit along with the Devices group. (Note that as part of today’s announcement, Simonson is retiring from full-time duties at the company.) Nokia described the move as a common job rotation, but coming hot on the heels of the stinging financial loss, it was hard to dismiss a feeling of reactionary near-panic. And just two months prior, there were questions of Nokia’s commitment to Symbian as the future platform for its smartphone devices — perceived uncertainty while competitors are focused and committed don’t often make for success. The company then launched the Nokia N900, which Om feels still falls short when compared to the iPhone.

Meanwhile, what has Apple done? Introduce one singular ecosystem for its handset, which has seen incremental — but effective — updates to both its both hardware and software. The mobile operating system on its iPhone has also matured and scaled into an all-day mobile slate in the iPad, which has already topped a million units sold, adding more cash to Apple’s coffers — aside from the hardware profits, the iTunes App Store annualized revenue is on pace to hit $900 million or more in 2010. From a business model perspective, the strategy Apple follows is simple: Define the right vision for the future, commit to it and march toward it, step by step, for as long as it takes to get there.

Nokia’s strategy, on the other hand, comes off as reactive, not proactive. Nokia is still the world leader when it comes to phones, yes. But the company’s recent moves in this iPhone era aren’t setting the trends — Nokia’s competitors are blazing new paths while the company is still waiting to see the results of its last reactionary move. In a situation like that, you’ll always be at least one step behind. And it isn’t helping matters that Nokia supports multiple operating systems across such as wide range of devices. Its feature phones, smartphones, Internet tablets and even netbooks run Symbian S40 and S60, Maemo, Microsoft Windows, MeeGo and in the near future, Symbian 3, which will power the new Nokia N8 (shown). Effectively integrating cloud services across one platform is a challenge — a topic ripe for discussion at our upcoming Structure conference — so perhaps the “less is more” approach might be a good one for Nokia to follow instead of various reorganizations to support a vast array of products.

Om interviewed Kallasvuo last month, and based on that conversation, I have no doubt that the Nokia CEO understands the challenges the company faces better than anyone. In fact he specifically stated that the direction for Nokia “is very clear.” My only question, then is: clear for the long-term future or simply until the next reorganization?

Related research on GigaOM Pro (sub req’d):

Mobile OSes Are No Longer Just About Mobile

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  1. Is that compete as in “continue to outsell the iPhone by at least a factor of two”, Kevin?

    Just askin’.

    1. Kevin C. Tofel Mark Tuesday, May 11, 2010

      Yup, Nokia is selling far more smartphones than iPhones. Clearly then, they always will, right? And haven’t we had this conversation before? ;)

      1. We have but it’s worth pointing out the facts again which are that Nokia continues to outsell its nearest two competitors combined in unit sales.

        Market share tends to confuse a lot of tech bloggers and leads them to erroneous conclusions. The bottom line is Nokia’s share in its core markets has not been massively affected by RIM or Apple or Android.

        Now where it has been affected is the high end which Apple has – for now – a choke hold. That’s not market penetration though.

        Bottom line is Nokia will still be rolling along when Apple have been relegated to a minor player which is pretty much what’s going to happen if they don’t learn the lesson of history and what happens if you continually try to sell people the same product in a slightly different version. Yes Moto: I’m looking at you for the RAZR and to a lesser extent Nokia for having to do some serious back peddling when sliders stopped being cool.

      2. Apple did learn the lesson of history. It’s Nokia who seems oblivious. Apple learned that a single, cool product doesn’t necessarily have a future. You need a rock solid OS, developers, apps, great retail network, content, competitive prices and peripherals. And you need to make sure that a third party can’t hijack the whole thing by ignoring UI guidelines or neglecting strategic software/content/peripherals, for example.

        Apple has fixed all those issues. Rock solid OS, check, developers: 100K, check; apps: 200K; great retail network: most profitable brick and mortar stores plus a worldwide online retail presence, check; content: iTunes Media store, most successful online media store with 100 million credit card accounts, check; competitive prices: check; and peripherals: check, thanks to the common iPod interface on all Apple iGizmos; large user base which continues to attract developers/money: 100 million by the end of the year.

        Now the magic of Apple’s ecosystem is that it allows third parties to make lots of money while Apple also monetizes virtually every aspect of the ecosystem as well! The hardware, the apps, the “made for iPod” peripherals, the media sales, the hardware, the e-books and now the iAds. Apple even makes a bigger retail cut when it sells products in its own stores! No one else has figured out how to do that. Not Nokia, not Verizon, not Sony, not Microsoft and certainly not Google.

        Creating some new cool phone is only about 10% of the battle.

      3. @Synth

        And those points would be nice if you think it’s actually why people buy high end phones. Unfortunately it isn’t. The high end phone market has always been and always will be driven by fashion every other factor is secondary by quite some margin.

        And fashions change.

      4. Saying the high-end market will “always” be driven by fashion is the dumbest thing I’ve heard in a while. It clearly ALREADY isn’t driven by fashion, and it hasn’t been since smart phone sales took off.

    2. Ah Mark… Always forgetting that what companies care about is profit. In the category of smart phones, Apple is already trouncing Nokia when it comes to profit, regardless of them selling more units.

  2. Its a sign management doesn’t know how to react to their competition, so they repeatedly re-org, hoping that activity will be mistaken for productivity.

    1. Yeah exactly but it’s not just competition that triggers this

      when things go bad and management doesn’t know how to make it good this happens. They get one person after another tomake it good again. Except that they don’t realise that this is destructive. And hence the downward spiral

      Been there suffered that

  3. Synthmeister Tuesday, May 11, 2010

    Nokia needs a single OS that has a future–Symbian S40 and S60, Maemo, Microsoft Windows, MeeGo and in the near future, Symbian 3–that’s no way to push your platform forwards, develop an ecosystem or get developers excited.
    And nix the 100 plus models available. Get down to a couple dozen basic models tops.
    And remember, those millions of not-so-smart phones you sell aren’t going to be where the money is in five years They will just keep getting cheaper and cheaper and leave you scrapping the bottom of the barrel.

    Apple makes over $600 per iphone BEFORE sales of music, movies, apps, games, e-books, peripherals and soon, i-ads.

    1. Really? On what basis?

      From where I’m looking using S40, S60v3, S60v5 and Maemo has been pretty good for them given their dominance of the global phone industry.

      As for ‘a race to the bottom’ Nokia’s handset division average a billion dollars a quarter profit. Kevin is right about ‘their first loss in a decade’ however he fails to mention that this was due to Nokia Siemens Networks and not the handset and services division who made their usual billion dollars or so profit.

      Mind you, that’s not quite as funny as the statement about the N95 not standing up to the iPhone given that it demolished iPhone sales in every market except the US where it didn’t appear on a recognised subsidised contract.

  4. WOW reading Marks comments reminds me of the movie “Raging Bull”!

    Whom ever is still measuring the mobile business as they did prior to 2007 with the same metrics is delusional. Nokia will never be what it was nor will they own the “smartphone” market.

    All the OS versions they have today S40, S60v3, S60v5 and Maemo really blow!

    In the end they have a very serious execution problem……

    1. Reading your comment reminds me of Beau Brummell – all style and no substance.

      Markets are measured by the same criteria they have been for centuries – unit sales. By that definition Nokia own the market.

      Simples.

      1. LOL, LOVE IT! A european snob stung by their total capitulation in mobile. Keep on smoking that weed man………. You will come back someday, maybe with S10025v456…..

      2. So you’re a racist as well as a buffoon, Luis?

        OK.

  5. I worked at a Nokia-funded startup, which got our team a warm introduction to Nokia at many levels. Met their president, visited many offices… A few impressions:

    Their international teams were filled with very nice, very smart people who were overwhelmed by the bureaucracy of the company and its distributed, consensus-style decision-making. Even for a very large company it was bewildering, and often there were several teams (in different countries) with overlapping responsibilities for each level of a product or service. It is easy to imagine that this structure just failed them at a certain level of product complexity (app phones).

    They had big ambitions for advanced services and breaking down carrier influence everywhere. They invested in all kinds of companies, started web portals and generally took Microsoft’s approach to web properties (spend a lot, lose a lot, act like you’re in the game). Has Ovi worked out for them?

    The US team was a little off. We had multiple requests for consulting gigs from their US management hierarchy, along the lines of, “Pay us for a white paper, and I’ll help your product.” After all the polite, straight-forward Finns, it was a shock to spend time with these guys.

    1. From your description, it sounds like Nokia is run more like a Western European Parliamentary government, rather than a fast moving technology firm.

      1. Good point. They could use a Lee Kwan Jobs.

  6. Nokia is throwing all kinds of OS’s at the wall, hoping something will stick.

    that’s never going to work. they need to pick one that is scalable across their product line, and turn it in to something great.

    will they? nope. you’re looking at the next General Motors – once the top dog, but someday just hanging on and bleeding.

    1. Sander van der Wal AlfieJr Wednesday, May 12, 2010

      Their great unifier is Qt, which runs on top of multiple OS’es (Symbian, Linux, probably even the OS that powers S40).

      They did advance their Qt usage on Symbian, it was scheduled for Symbian^4 first but now has been moved to Symbian^3.

  7. Unlike Mark, Nokia’s top management understands the predicament they’re in. The Board is looking for change; the re-org is the best mgmt could do until competitive high-end well-integrated products are ready.

    Nokia’s shareholders have been selling because the company is either not executing or management is not able to communicate its great results well to the shareholders. I think most know which it really is.

    1. Actually Nokia’s management realise what I already pointed out: they don’t compete at the high end currently which is where the bulk of the profits are made.

      The core business is pretty healthy though and the low/mid tier smartphone strategy particularly successful.

  8. There is a difference between Oscillation and movement. Nokia is oscillating and Apple, RIM, Google are moving.

  9. The answer is none. No reorgs will fix it. May be new blood. How about hiring some Apple folks and copy their model. Palm has done in, but was striving for cash. We know what happened next , HP bought it. Unfortunately, there is no smaller company available for Nokia to buy. The only option is , hold your breath, hire folks form Google/Apple that would be better than “Re Orgs”. Nokia has money, they can do it.

    1. Who says that wasn’t their exit strategy from the beginning? Now HP has the only viable mobile OS to compete with Apple.

  10. -Mark

    Nokia is king in unit sales, yes but most of those units are low end unprofitable simple dumbohones. Apple ONLY sells Smartphones, as does RIM, Palm, Google and Microsoft. Nokia is still stuck in the last decades mindset in regards to cellphones which is to make a model for every conceivable customer and spread yourself incredibly thin. That model doesn’t work anymore. Nokia still has some time to turn things around, they are still profitable afterall, but they don’t have forever.

    1. Most of Nokia’s sales are feature and dumbphones but since we’re talking about their smartphone range then that’s irrelevant.

      That would be the smartphone range that sold 21.5 million units last quarter at an ASP of 155 Euros which is a reduction but still sufficient to generate good profits and, more importantly, reflects Nokia’s strategy of dominating the low/mid tier of smartphones.

      And judging by the sales it’s a model that works very, very well. Which doesn’t mean Nokia don’t have issues – there is a massive void at the top end which needs filled but then the very fact that they haven’t put all their eggs in one basket should tell you something about their long term strategy. You might also want to ask yourself what happens to Apple and their one product strategy when – not if – the iPhone stops being the phone to have.

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