How Nokia Didn’t Listen To Itself

32 Comments

Earlier today Nokia (s NOK) stock hit a 13-year-low. Despite what CEO Stephen Elop says, it is hard to reconcile the falling share price in what is arguably the hottest mobile market. The funny thing is that as a company they shouldn’t have been in this position.

Started as a timber company, Nokia expanded to produce products including rubber and telephone cables. In 1992, Nokia focused on telecom, and by 1998 it was the largest mobile company in the world. By then the Nokia ringtone seemed as ubiquitous as Coke and Big Macs. In late 1998 it launched Nokia 7111, the first mobile phone with a WAP browser, and, with that, the mobile Internet.

At the time of that launch, in an interview with Business Week magazine, Nokia CEO Jorma Ollila said:

The convergence of Internet to mobile phones will not lead into one single player becoming master of the universe. You’re likely to see the horizontal value chain, like in computers. You’ve got to find your place in the value chain. Our special edge will be in voice and data terminals, where the radio link is a crucial element. Voice terminals, to a major degree, will be wireless. That will mean that our weight in the industry will grow.

Nokia 7110, First Phone with a WAP Browser

I wonder if anyone from the company was paying attention to what Ollila said.It was clear to him that in the future mobile hardware landscape would look pretty much like it does now: PC-styled economics and companies having their special edge. Of course, he, like others in Nokia, didn’t quite grok the power of the Internet and the browser.

In March 2001 when speaking at Stanford School of Business, Ollila said:

“The key challenge of technology companies today is how we renew ourselves. The technological cycles are shorter. We must build on our discontinuities and turn them into our favor….3G handsets will be affected by the number of types of software embedded in the devices. The way in which software is changing what used to be a simple product will change the industry significantly.”

Just as it took Nokia six years to become the largest and most influential mobile player in the world. It has taken Apple and Google about four years to become the most influential forces in the world of mobile. One can only imagine where those two will be in six years.

When I sifted through the transcript of CEO Stephen Elop’s interview at an industry event earlier today, I was overcome by a sense of despondency for the company that introduced me to the magic of mobile. Somewhere in the interview he told Walt Mossberg that it was a battle of ecosystems. Sadly, the company that once owned the largest ecosystem in mobile is depending on another hobbled giant – Microsoft.

As I look into the future, I do know one thing — Nokia won’t be setting the mobile agenda and controlling the zeitgeist for a long time. And frankly that is a shame.

32 Comments

NokiaPivots

Interesting article & quotes!
Though I think you forgot to point out that Ollila was and still is Chairman of the Board.
HUGE disconnect between what he said and what the company he was Chariman of, actually did.

Sanjay

Om, From what I can tell, do you think the Microsoft deal is a case of it being “too little, too late” for Nokia or do you think that if somehow both these companies manage to execute properly and with the carriers who are already sick of Apple and Google’s behavior willing them on that they might be able to salvage something.

TRZ

As an ex Nokia employees, I can tell you the writing was on the wall for us as far back as 2006 when the N95 was introduced. Yes, even then. That device was introduced to the market with so many bugs and flaws, and many of us were concerned. But nobody cared inside, because at the time, nobody cared outside as it was selling like hotcakes. But it was clear back then that quality was not a big concern as there was no competition. That’s complacency. And that complacency continued as Apple launched the iPhone in 2007. Instead of the company waking up and saying, ok, this is serious, we kept downplaying it. The same people that are still in leadership today, unfortunately, are the ones that sat back and said there’s nothing to worry about. EVERYONE in there knew that the N97 was a catastrophe, yet the let it go out. No heads rolled, nothing. Oh, and don’t get me started on Ovi and that strategy. So, I am not at all surprised at the fate of Nokia today. It’s sad, but they decided their own fate.

Naresh Sehgal

Besides providing an Internet browser from a cell phone, this company became the largest camera seller integrated in their phone and decimated Kodak’s film business. Just goes to show that there are no long-term winners in the crooked highway of technology and consumer preferences. Betting on Windows for phone OS is also not the right thing to do as that OS was written in another era for a different user base. I am quite happy with IOS on my iPhone4.

Vijay Mukhi

I am writing this from Mumbai India. Nokia deserves its current fate. I foolishly bought a Nokia E7 a couple of months ago. You will not believe this, in India you cannot download any paid app from the Ovi store. This means that I cannot use any paid apps, all that I can use are the free apps. I always thought that people did not use phones anymore, they used apps on their phones. Only Nokia in India does not understand this. I went to the extent of creating my Nokia Avi account from the Amamzon cloud, it accepted my international credit card details, but it would not allow me to download any paid apps as I was using my phone from India. Their rational is that nokia is waiting for operator billing for the Ovi store which will not happen at least in my lifetime. Even God cannot save nokia.

Droidfan

A number of comments here portray Nokia as a company paralyzed by bureaucratic quagmires. So they join forces with Microsoft. A company known for lumbering fiefdoms, moving at glacial speeds and usually at cross purposes with each other. And this partnership is trying to pace the most fiercely competitive market on the planet. It might happen. And Myspace will join forces with AOL and blast Facebook into oblivion.

shinjan

Interestingly, Nokia is (was) investing quite a large amount in research. One of the highest in the league, still they suffered the fate. Makes me imagine, without a clear vision and an “outsider-insider” kind of CEO things can go totally in the wrong dimension.

vanessa j.

I wouldn’t rule Nokia out. Being off the grid for awhile as the big boys play, does not mean they are threw. Nokia has had really excellent products. By that I mean QUALITY. Maybe that’s why they’re not in the front right now. When they make a return I hope that does not change.

Vivek Iyer

“The key challenge of technology companies today is how we renew ourselves”
Well i think Elop took this on another sense and Put a deal with Microsoft and he would definitely Love to renew it.

Abbie

Nokia is driving over a cliff.

When the dust settles in the aftermath of the Windows Phone Disaster, historians will realize that Windows Phone was a product without a business model, which could never have worked in this post license fee era.

han

for the way they treated customers, I hope they tie themselves firmly to Microsoft and sink quickly and promptly into the abyss

Tom Anderson

The other implication is that it’s taking less time for a new company to become top dog in mobile. So Apple and Google have much to fear. Nokia isn’t a big loser. Nokia made 10 billion dollars in Q1 of 2011, while Apple made 6 billion net for iPhone. Nokia is still winning, but it can’t continue to compete unless it redefines the event horizon in its favor.

Lava

Uhh, Apple made something like $12 billion from iPhone sales last quarter. Apple surpassed Nokia in mobile revenue months ago.

Om Malik

Indeed. I am not sure why people harp on the number of devices sold every quarter as a metric. When it comes to making money Apple just makes more on smaller device footprint.

OpenMind

Where do you come up with these data? Where have you been in last 6 months, or what are you smoking this morning?

A S

Why isn’t nobody saying it? The single most biggest reason for Nokia’s current woes is Android. All that Nokia had to do to avoid this fate was embrace Android early on. They could’ve still turned around the ship if they had decided to manufacture Android phones instead of Windows phones. Who wouldn’t want an Android phone with Nokia hardware?

PhoneBoy

Nokia had a serious case of “not invented here” during the time I worked there. It’s taken them this long to accept they couldn’t do it on their own.

Taking on Windows Phone 7 is a bold, albeit very risky move, given the relatively lack of market share Windows Phone 7 has so far. However, it gives Nokia the opportunity to differentiate itself from Apple and Android without having to reinvent their own OS (which hasn’t gone well).

I still think the inevitable result of this partnership is that Nokia and Microsoft will merge.

Sam P

While Nokia is in deep doodoo, recall Apple before Jobs came back. Apple spent years attempting to build a new OS to take over from System 6 (7 was a nice update but the writing was on the wall even as it shipped, and the later releases were desperate placeholders). My recollection (without digging for details) was there were at least two significant failed next generation OS efforts before they ended up simply buying NeXT to get NEXTSTEP and Jobs. Counting out Nokia (and RIM) seems premature.

Dameon Welch-Abernathy

I remember the dark times at Apple as well. The difference there is that the market moved much slower back in those days and Apple had enough cache that people were still buying their stuff despite it being vastly inferior.

PhoneBoy

It’s very sad to watch the decline of such a great company. Having spent 10 years there (albeit in a division unrelated to mobile phones), I saw a lot of the problems from the inside that are now obvious from the outside. I saw a lot of great ideas that never saw the light of day due to stifling bureaucracy or launched but left to languish without a clear plan or vision to bring it forward. Many smart people with vision and ability to execute hampered by a corporate culture almost afraid to take the bold steps necessary to succeed.

I really hope it’s not too late, but the prognosis does not look good for Nokia.

Om Malik

Phoneboy

Agreed. And that is why in 2007 when I told Nokia about the iPhone and how it would upend their world they didn’t seem to care. I think the joke is on them and frankly it is hard to see the light at the end of the tunnel here.

PhoneBoy

It goes back farther than 2007, though. Remember the Motorola RAZR? It sort of solidified the whole “flip phone” phenomenon. Nokia thought it was “just a fad” and didn’t bother to build a credible alternative. They eventually did two years later, but only after some market share was lost, especially in the US market.

Paul

They did understand what they had to do, but their management structure and personnel just made inspired product impossible.

Love the well-chosen photo of the 7110. Nokia gave them to the company I was working for back in 2000. They were investing in all sorts of Internet startups (eCal, FusionOne, our company) to build a mobile ecosystem around Nokia phones. Later they built Ovi to tie things together, invested in mapping tech and social networks.

Their philosophical mistake was in thinking that they needed to control everything too closely (which I suppose is your point about not seeing what Ollila had implied with his pick-a-spot exhortation), a mistake made worse by a RACI array that thwarted even their own best ideas.

Even 10 years ago a reasonable person who spent a month trying to get product-related deals done with Nokia would have concluded that these guys were going to fail. Pick a project, and they couldn’t identify anyone whose job depended on making it happen. Meanwhile, they could point out 8 of the 14 people who could kill the project. Sort of like what Cisco sounds like now.

Om Malik

Ouch! I guess you worked with them during those days? Having covered this company forever, I cannot disagree with your assessment and sometimes I feel if this is the end of everything and Nokia, the company needs to build something new.

Dan Hays (PRTM)

It’s also often forgotten that Nokia introduced the world’s first, large-screen, qwerty keyboard enabled smart phone. When did they do it? It was 1996 – 15 years ago when the Nokia 9000 Communicator launch. I was a part of the team from Intel that helped them to develop it. It was easily 5 years ahead of the competition.

The tough message here is that you can never become complacent or afford to lose your edge in the high tech world. You have to keep watching the entire ecosystem as it evolves, no matter how big you are.

I don’t rule Nokia out at all, though. Their channel relationships with network operators and retailers are superb, and we can’t even appreciate it here in the U.S. Are changes needed? Sure. But there’s still a lot to build on.

nick

I had a 9000i on Pacific bell mobile in the late 90s. I think it cost like 900$ and weighed about as much as a boat anchor, but what an amazing device for its era.

Om Malik

Dan

I still have it. It still works. It just was too slow :-) I still love it. I think the mobile game has changed quite a bit and I am not so sure they will catch up. I hate to disagree with you though :-)

Mark

Dan, I just fail to see how things like channel and network relationships are worth a damn these days. HTC more or less didn’t exist a few years ago, but these days it’s selling Verizon a lot of handsets, and I suspect there is a lot of happiness at Verizon over that.

Nokia can’t leverage what was into what is any more than RIM can. These guys need products people want and they are stuck with OSes people don’t want anymore while trying to swim upstream to catch up with OSes people already do want. Maybe there is room for Windows Phone and QNX in and Android/iOS world, but that’s just hard to really get one’s head around. Those seem like clear 3rd and 4th placers, despite some market research declaring Windows Phone’s imminent victory over iOS.

Mark

It’s a shame? These guys came up with the best UI for a mobile phone ever around the time of the 5100/6100 series. That’s the last time I clearly remember them having something that was head and shoulders ahead of everyone. Thank goodness someone else took leadership away. And let’s remember, it was RIM long before it was Apple/Nokia. (Well, it was DoCoMo really, but somehow that never did really export.)

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