Why Nokia Failed – The Business Failure Story

Why Nokia Failed – The Business Failure Story
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First smartphone in 1996-Internet-enabled phone as the 1990s ended- A prototype of a touchscreen. A Revolution!

Nokia ruled the phone market for the longest time. They were the world’s largest cellphone makers in 1998. Nokia overtook Motorola when no one even expected. Even better, Nokia enjoyed a good 40% share of the market.

Even more strikingly, Nokia was hardly a technological laggard—on the contrary; it came up with its first smartphone back in 1996, and built a prototype of a touch-screen, Internet-enabled phone at the end of the nineties.

For the mobile giant, it was only a matter of time before things went south. It was a time when Samsung and Apple had not yet dominated the market. But can Nokia’s failure be credited to Apple and Samsung alone? The company has faced a gale of criticism over the years.

A closer look into the matter will help you understand why Nokia failed.

Overestimated Its Strength

More often than not, why businesses fail is because they refuse to play by the market rules. They overestimate their brand and do not change. In Nokia’s case, the brand was too late to step up the smartphone game. They refused to change its hardware designs and thought it could catch up with iPhone’s superiority.

That was the beginning of the end. Nokia did not embrace Windows phone. Even though Windows failed, Nokia failed more miserably. With an unintuitive and clunky OS, it failed as a brand completely.

The brand failed to realise that in the era of high technological innovations, any companies that fall behind, fail.

Take for instance, in 2007, when iPhone was launched, Nokia was still boastful of its E-series. What the brand did not realise is that smartphones at this time were already changing. Samsung adapted to the change more cleverly with its off-the-shelf technologies. In other words, Nokia failed to look at the future with innovative eyes.

Taking Symbian Too Far

Another famous failure came with the Nokia Microsoft deal. Symbian technology dominated Nokia’s creations for the longest time until it entered a partnership with Microsoft. And then, it did not make a move to Windows quickly. By the time it understood the importance of changing its operating system, it was too late. By this time,  Android and iOS had already bought everything that the market needed.

Here’s what went really wrong. In 2002, Nokia launched its Symbian 60 series in the year 2002 which did well until 2008. Apple and Android took over quickly. Symbian OS was lax in many areas. It did not have enough applications and Nokia failed at improving its UI.  And then, Nokia made the biggest blunder— trusting Windows.

Brand Strategy Failure

Nokia failed to create a strong umbrella branding. Look at how Apple positioned itself as a phone brand. They used iPhone as the umbrella, subsequently launching all models under that. Samsung was a quick learner and adapted the same concept in its Galaxy S series. Nokia started something similar with N series but failed to play on the umbrella concept.

For instance, Apple has a set month each year to launch its new model under the iPhone series. The brand works around it each year, creating a buzz in the market and triggering consumer anticipation. Nokia’s umbrella branding is an utter failure.

The Fall In Numbers

If you look at the numbers in 2009, before Nokia turned into a corporate failure, it had a clear market leadership at 38.6%. It all changed as 2014 ended. Samsung was cashing in on the lost market by raising its market share from a mere 3.3% to a whopping 23 percent. The rest, as they say, is history.

The Missing Third Leg

Nokia has always known how important it is to have a new growth area to walk hand-in-hand with its every growing phone network. This is what they call the Third Leg. They were pioneers when it came to smart business venturing. But Nokia’s stint with the New Venture Board added to its list of reasons for business failure. This third leg did not gain traction. The core businesses focus on their own activities and success, leaving little time to focus on new concepts and growth.

And then Nokia delved into another visionary programme with the launch of Nokia Ventures Organisation.

This was supposed to the platform of creating new technologies. They managed to nurture a bunch of interesting projects and turned them into successful businesses. But the experts believe, it was way ahead of its time. They were talking about “Internet of things” and concepts that were not known.

Maybe the world wasn’t ready for it. As a result, its long-term agenda contradicted with short-term deliveries, subsequently failing at a time when it could have changed the way the world looks at technology.

Too Many Wrong Decisions

This failure story has also one common thing – So here’s what really happened. Nokia was selling phones in millions. The brand controlled supply chains and was calling the shots in all its deals with carriers. At the time, Apple was designing the iPhone and Nokia was already in control of a whopping share of the market. Google bought Android. Google company CEO announced the “Open Handset Alliance”, calling the industry players to come together and build an open source system. This OS would be available to all smartphones.

But did Nokia join? Of course not. It refused and the numbers came crumbling down for Nokia within just two years. With a market share at Within two years of these events, Nokia was already in crisis.

Nokia’s Value Proposition

Each brand needs to know what its value proposition is. That is, you should know why your products are the best proposition for your customers. iPhones are very clear about creating the concept of an “Apple Family”. Similarly, people relate Androids to versatility. With Nokia, there is no connection to anything special. They are trying to create a concept around the best cameras, but there are already too many players in that market.

With so many competitors out there, it doesn’t seem like the brand can make anything that gives it an edge over its competitors. It seems there’s hardly anything that would make them better than their competitors.

Refusing To Change

The management team at Nokia failed to see how Software is taking precedence over hardware.

The idea was to adapt to the changing environment. The importance of applications-led ecosystems was growing. Nokia did not have the skills to step up with the times. They did not even show the inclination to work towards it.

Not Turning Phones Into Small Computers

Apple and Google make devices powerful. They advertise their products with simple concepts like “Desktop-class architecture”. They create stuff that can handle all your computer work on a phone— from HD videos to 3D games, everything! This is what Nokia and even Blackberry for that matter, failed at. Even today, they do not realise what it means to have a smartphone. It’s a mini computer in your pocket.

Spending More In The Wrong Direction

According to Wall Street Journal, Nokia’s R&D expenses were close to a shocking $US40 billion. These research efforts never saw the light of the day— internal rivalries between strategy teams and Research made this difficult.

Many started wondering what will happen if the company closed down. Because Nokia was not only failing in innovation, it started relying on the strategy of “low end” market. They thought that the company could easily secure a strong database by just catering to millions of customers with “affordable handsets”. In fact, they spent billions creating Symbian and innovating it over the years.

Meanwhile, the other players were tied up with Google and working on operating systems that solved many things. This was probably the biggest mistake that Nokia made.

Launching Its Own Apps Store

In 2009, Nokia launched its own Apps and a Content store called Ovi. This was not even close to the experience that Apple was creating. The platform failed to impress for the simple reason, that Nokia never had any real platform experience.

This platform saw an all-time low. To add to the mess, Nokia launched it in 35 countries at the same time. This was a complete disaster.

Symbian was shut within two years and it just made the brand look weaker and unsure.

Changing Into A Matrix Structure

A lot of leadership changes and roles, poorly implemented in 2004 led to a reorganisation of the company. They changed into a matrix structure— with important members leaving the executive team. This came at a time when Nokia was not ready for changes on the strategy front.

This new way of working did not go well with Nokia’s teams which were used to decentralised initiatives.

Even as Nokia tried to hitch a ride with Microsoft, it failed. Failed businesses have so much to teach. Slow in upgrading its smart features, not taking the market too seriously, and above all, not offering people what they need, Nokia failed at many ends.

Look at what Android did—  they simply followed the footsteps of Android and cleverly expanded on the idea of small computers. The idea was to make a phone work like a mini computer. And it sold.

This is the pulse Nokia could not grasp, leading to its eventual death.

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