Nokia - A Strategic Goof Up?

Once someone told me there is nothing as a failed entrepreneur, because till the time an entrepreneur succeeds, all his failures are nothing but part of his efforts. Similarily when I see Nokia, I do not see it as a goof up, but a failure. Was there anything wrong with Nokia, yes, there was, and many things went wrong for them, some were expected, others were not so expected.

Nokia, which started as a pulp, rubber and cable manufacturing company, was the leading manufacturer of mobile devices till 2007. Their mobile phones were known for their reliability and the company who sensed the consumer’s needs quickly. It offered a wide range of mobile devices with a wholesome experience in music, video, imaging, gaming and a lot more to its consumers.

There were two markets, high end and low end mobile devices market. Till 2007 Nokia was dominating High End Market with its N-Series phones, while it gave several products in Low End Market to serve all the market segments. Now to see how from being a market leader how Nokia became a market struggler, these two markets need to be discussed in detail, and the incidents which happened in these markets.

Low End Mobile Devices

Even before any smartphone appeared in the market, it was this market segment which was responsible for major part of Nokia’s profits. The reason behind it is not hard to guess, Nokia evolved with the evolving telecommunication industry, there were rarely any competitors in the market. As a responsible company Nokia should have seen the threats of the future. It was not hard to see even at that time that as the telecommunication industry would grow more and more players would enter the market.

The biggest mistake was to completely ignore the biggest threat, China. Almost whole world is flooded with Chinese products, and sooner or later, appearance of Chinese phones in every market, especially in under-developed and developing markets was not hard to guess. These two factors, just like the shark’s jaw took the chopped off a major chunk of Nokia’s market share.

The problems for Nokia didn’t stop here, to make matters worse, Chinese market was not even organized. Since Chinese companies always came up with ‘look alike’ mobile phones, their R&D for mobile phones was negligible, and coupled with Chinese efficient operations, the mobile phones became at a very low cost, which made it tougher for Nokia to compete at cost.

Nokia failed at many fronts; first of all it could not make barriers for new entrants in the mobile phone markets, and secondly it did not add sufficient value added services in the phones to avoid competition from such low priced, low quality mobile phones. Can it be called a goof up of its own kind, yes, to some extent, but more than that I would blame the short sightedness and complacent attitude of the senior managers of Nokia. This market today is still dominated by Nokia, but its market share is the reminiscence of its glorious past.

High End Mobile Devices

This is the part which has acted like the last nail in Nokia’s coffin. The future for mobile phones was guessed almost by every mobile device manufacturer, and everybody made their own attempts to be the first one and the best one in the future. Apple launched iPhone, while Samsung came with Galaxy. Nokia also came up with its own smartphones; they were somewhat like a low budgeted movie which failed without making any buzz.

The “summer – cottage culture” of Nokia  lacked innovation and Entrepreneurial spirit. Every summer since 2007 while  Apple Inc. shipped a new iPhone, Nokia  managers vacationed at their lake cottages in Finland. This shows and tells many things about the company, being careless and complacent are few of the characters, but even more importantly it shows Nokia has no real leader when the time demands them.

The problem with Nokia was not that the phones were not good enough, they still were of high quality, but the problem was they did not understand the market and its competitors. The battle had advanced to another era, while Nokia insisted to fight in the traditional ways. The new CEO of Nokia, chose following words to describe Nokia’s mistake and the market –

Stephen Elop

“The battle of devices has now become a war of ecosystems, where ecosystems include not only the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things. Our competitors aren't taking our market share with devices; they are taking our market share with an entire ecosystem. This means we're going to have to decide how we either build, catalyse or join an ecosystem.”

But can we really call it a goof up, I don’t see it as a goof up because Nokia took the necessary steps in the direction which they thought is the current one. It is a mistake, but certainly not a goof up. The Symbian operating system couldn’t sustain itself, it was certainly a bold gamble, but not a goof up. As an afterthought one may say that taking such gambles is not a good idea for a company which is struggling to survive.

These two failure has costed Nokia dearly, while for 2012, the operating losses are at a billion dollar, one fifth of the Nokia’s staff has been shown the exit gate. The new CEO Stephen Elop has taken up the toughest job in his career. As he said “Nokia was standing on a burning platform”, he actually summarized the whole problem, the competition was tough, and competitors were way ahead. Nokia indeed looks like a lost cause as of now. But the real question is “Do you really think so?” I don’t.

The way I see it, Nokia is going through the necessary changes it had to go through. As we all know with ten years of successful run, Nokia had become lethargic, lazy and complacent, it just needs to restructure itself, bring some good values in the system and shed some flab to be the lean auick and agile company which is a necessity in today’s world.

There are many steps which indicate that Nokia is on road to recovery, like collaboration with Microsoft, for using Windows mobile platform. As I see it, it is a clever deal not just because Windows is better than Symbian, but also because it allows risk mitigation. The failure and cost of failure will be shared by both Microsoft and Nokia, and not by Nokia alone as earlier was the case with Symbian. Restructuring will also help in breaking the vices which had covered the original values for long.

Why do I think Nokia is still alive, a late started by all means, but not a hopeless cause. I would like to believe that Nokia is the late bloomers, and it would be what it was, mobile devices leader. I do not want to believe Nokia will ever be out of the game because I have my own memories with Nokia, and I have seen it ever since I started using mobile devices. Nokia fans are still hoping the best for the company, but even if Nokia fails, I think they will be missed dearly by their lovers.