By Randy Giusto- For two decades, as far as mobile phones were concerned, the 800 pound gorilla in the room was always Nokia. The company’s legendary when it comes to its impact on the country of Finland, dominance in Europe, and rise in prominence among the world’s leading commercial brands.
From its beginnings in forestry products, it’s evolved into a mobile communications giant, with strong internal and countrywide pride. Nokia for many years has also been a model of production efficiently. No company has produced devices more economically nor leveraged components and device engines across so many products. For years, and against industry forces, Nokia manufactured most of its offerings internally instead of outsourcing them to Asia, while it maintained some of the lowest production costs.
While Nokia’s global footprint was also unmatched by others, North America has always remained elusive. There is no doubt that Nokia invented the smart phone, it’s just that US brands made the category bigger and the products better.
I’ve followed Nokia closely for many years, visited their headquarters in Espoo multiple times, and met many of their top executives in Finland, the US, and abroad. Nokia’s always been known for highly engineered products and many were shining examples of technology leadership. However, its overemphasis on flagship products and technologies has not translated into big successes in smart phones, the category that Nokia defined.
Over the last three years, seeing opportunity in emerging markets, Nokia went into China, India, Brazil and other nascent countries with large populations, grabbing large amounts of market share and new device customers. This resulted in a steady, unrelenting slide in device AUP (average unit price) each quarter, impacting margins.
Like other technology brands heavily aligned towards one product area over the years, Nokia, like HP, Dell, IBM and others pursued the services business. They embraced multimedia, and tried to play both consumer and enterprise sides of the coin. Nokia has tried to reinvent itself several times, launched new business units, and has made several attempts to penetrate North America. It moved US headquarters to White Plains, New York to be close to the headquarters of many American corporations, aggressively launched an Enterprise division, and bought middleware, software, and navigation companies in a plan to move beyond being recognized as “just a device brand.” It did a joint venture with Siemens resulting in Nokia-Siemens Networks in hopes of dominating the mobile infrastructure business as well.
Nokia’s one of the few technology companies that I know of that releases it’s quarterly unit results to the street and also tells the world each quarter how big the market was, and how big it will be for the rest of the year. It believes in it’s own numbers, and no one else’s. Not from Gartner, NPD, IDC, GfK, or any other third party firms whose businesses are built on sizing markets, tracking shipment volumes, sales, and market share. There isn’t another technology vendor that exhibits this behavior- not Microsoft, Apple, Samsung, HP, Motorola, Dell, or even Google. Nokia doesn’t have a special spyglass into the market, and they don’t own any NOCs (Network Operations Centers) like RIM does, where RIM can see the activation of multiple device brands across carrier networks around the world. No, the insistence that it always knows how big the market is can be described as an offshoot of Finnish pride, although it’s increasingly seen as arrogance by many, especially the street as Nokia continues to stumble.
Nokia is still a formidable global force in mobile phones, with a lot of internal talent. However, Apple has clearly usurped Nokia as far as innovation goes. Google, with Android has become a formidable force in the mobile developer community. Although Nokia has its own operating system, Symbian, few customers know its name. While its low-end and mid-range phones have dominated the market outside the US, it’s various investments in gaming (nGage), developer communities (Forum Nokia), social community (Club Nokia), enterprise devices (E-series), and app store (Ovi) have not paid off, and have been a drag on the bottom line, and has the NSN business.
The strain on Nokia this past year has been recognizable as Apple and Android clearly are more marketable, creating more buzz in a booming smart phone market that again Nokia defined. BlackBerry continues to dominate in the global enterprise market despite Nokia’s numerous attempts to crack North America in that segment. And yet, RIM’s biggest competition ahead seems to be coming from Apple and Google as they penetrate business accounts, not Nokia.
Olli-Pekka Kallasvuo was a rising star within Nokia’s marketing ranks for many years and was given the reigns and some tall orders to right the tall ship. After a few years, results didn’t materialized, and now he is out. And last week, Anssi Vanjoki, Executive Vice President of Nokia’s Mobile Solutions Group resigned. However, Vanjoki was known to be responsible for some of Nokia’s biggest misses— nGage, Club Nokia, the N90, the E-Series, the Communicator Series, and also not licensing thin technology that was later exploited by Motorola with it’s RAZR line.
Nokia is still a very big, dominant player in the overall market. However, many on the street have unfortunately already written the company off because of its layers of bureaucracy, and sluggishness. Nokia reminds me of IBM in the late 1980’s and early 1990’s when its core business, hardware, was slipping away to more nimble firms such as Compaq, Dell, and HP, who could out execute and out market it. The street for some time has been calling for new blood at the top and within the executive ranks as well, as Apple and Android continue to dominate mindshare in North America, and now increasingly around the world. Investors were looking for a top visionary and new team to plan Nokia’s rebound, perhaps plucking talent from leaders at new technology empires.
So there was a lot of surprised on the street and in the blogosphere when Nokia announced that Stephen Elop, who led Microsoft’s Office franchise was becoming it’s new CEO, an exec who hadn’t really been in Redmond all that long. It was also a surprise when it was revealed last week that Peter Skillman, the designer of the Palm Pre, who was clearly not staying for the HP transition, would be in charge of Nokia’s user experience and services division for MeeGo, a Linux-based OS being developed jointly with Intel for next generation products. While Palm’s products and UI weren’t bad, the company has been a shell of it’s former self for the better part of the last decade. And HP now owns the IP on the Palm OS.
So amidst all the executive changes, Nokia held Nokia World in London last week, announcing three new devices— the E7, C7 and C6, powered by a faster and easier to use Symbian OS and tightly integrated with enhanced Ovi services and apps, while also showcasing its previously announced N8. Nokia also announced a new set of developer tools. I have always been amazed by how many clicks it took to do something on a Nokia device, despite years of analyst feedback. It took Apple to really apply the competitive pressure.
Niklas Savander, Executive Vice President, Markets at Nokia stated last week that “today our fight back to smartphone leadership shifts into high gear,” and “despite new competition, Symbian remains the most widely used smartphone platform in the world.” I might point out that few customers know the name of Nokia’s OS like they do of Apple’s or Google’s. The E7, C6, C7, and N8 may also be the last products of the Kallasvuo and Vanjokki era.
What Does Nokia Need To Do?
Cut Through the Bureaucracy and Streamline Decision Making
Can Elop do is? He clearly was a force running the Office group at Microsoft and his exit there was a surprise to many. Elop was seen as one of Microsoft’s few stars as that company also struggles to turn around multiple divisions, especially in mobile.
What Elop needs to do is start assembling his own team, start cutting through the layers of Finnish bureaucracy that has stifled Nokia’s market response, highlighted its lack of nimbleness, and dispersed its marketing message.
Unify the Platform Under One OS, Not Three
Nokia needs to move off of Symbian and a heavy reliance on Java and kick-start it’s MeeGo efforts across its product line up. Many have been asking for this since MeeGo debuted. Peter Skillman can clearly help in this direction as Meego will be his focus, but MeeGo needs to be the future, and Symbian needs to be the past, despite Finnish pride.
The Ovi Store Needs to Become Profitable
Since debuting the Ovi Store, Nokia’s response to selling applications and services, the entity has not been profitable. For most of this past summer, the firm was looking to bring in outside talent and run Ovi from the US in hopes of making it profitable, raising its visibility, and getting developers worldwide excited about developing for Nokia. But the first exercise in marketing and branding that Nokia should execute should be in dropping the Ovi name, which doesn’t mean anything to anyone outside of Finland. Call an app store an app store, even if it increasingly includes services. Its competitors’ app stores are evolving anyways.
Hire An Outside Expert to Build a New Developer Program and Then Get Out of Their Way
Nokia clearly needs to hire someone experienced in building and managing a mobile developer program, and give them full autonomy. The firm has never had a comprehensive, well-executed developer program. Forum Nokia was a feeble attempt to do this. The best mobile developers today have migrated to the Apple, Google, and RIM platforms due to their buzz factor, open toolkits, or dominance in the enterprise, respectively. Developers have only so many resources (i.e. time and money) and look for the platforms that give them the biggest short-term jump, and the best tools for long term app development efficiency. Until last year, the mobile developer community had been largely regionalized around the world, depending upon the stronger platforms in each region. But Apple and Google are now growing stronger outside the US, so developers supporting Symbian will increasingly look to these platforms as their bases grow within each region off of the buzz that their devices are producing.
Let Regional People Run Regions With Autonomy and Not as Espoo Satellites
There are many examples, especially in the US where Finnish executives have overridden decisions and directions proposed by local experts. Nokia needs to hire local executive talent in region, and then give them the room to lead. This is also perhaps a hard thing to do based on Finnish culture, but with Elop at the helm, this may finally be possible. Companies like Sony, Toshiba, and Samsung have all learned this lesson the hard way and have gone through a regional and cultural shift in some form, and have improved their brand positioning because of it.
There is a still a phenomenal amount of talent within Nokia on a global basis, but a cultural shift must occur if the company is to change its course. There are eight mobile operating systems in the smart phone market today—
- iOS 4
- Windows Phone 7
In two years time there may be only room for three at best. Gartner last week came out publicly to say that by 2014 there will only be two smart phone operating systems, Google’s Android and Nokia’s Symbian. That made headlines, but it lacks common sense. Google is headed towards the mobile browser as the focal point of application development, RIM remains entrenched in the enterprise— I guess Gartner expects RIM to be bought out or to wither away— and I would argue that some folks in Cupertino will not be a flash in the pan over the next three years, as Gartner apparently sees it.
Going forward, Nokia needs to stand for more than “Connecting People.” If Apple is all about ease of use and seamless integration, Google is all about open platforms and experimentation and freedom, and RIM is all about a rich services experience, then Nokia needs to stand for something more than its aging slogan.
Nokia has always orchestrated complex customer segmentation studies to identify and define new sub-segments of customers to go after. More than any other vendor I have worked with. They have historically had way too many different device offerings with cryptic names, focused on these micro-segments. Instead, they should focus on providing value around a core set of customer needs, with a handful of recognizable product names that can be leveraged around the world. That is the essence of true innovation in tomorrow’s economic climate. Hopefully with Elop, Skillman, and more new talent on board, Nokia will see the light, slay its old dragons, and move forward once again.
– Randy Giusto