The Story of the Collapse of Nokia Mobile Company
The Story of the Collapse of Nokia Mobile Company
What happened to Nokia? How did this giant suddenly lose relevance on the global stage? What were the factors responsible? Were there mistakes made? What lessons can we learn from it all? Come along as we explore…
A Brief History of Nokia
During the late 1990s and early 2000s, Nokia dominated the mobile phone market, capturing a substantial market share. Iconic phones like the Nokia 3310 became cultural symbols of the era, known for their reliability and long battery life.
Nokia had stronger global brand recognition than Toyota, Walt Disney, or McDonald’s. One analyst said, “Nokia was to mobile as Kleenex was to tissue. Nokia was referred to as the “tech wunderkind” powering the “Finnish miracle.” Business experts extolled “the Nokia Way.
By 2008, Nokia owned just over half of the global smartphone market, having sold over 2.5 billion mobile devices, which accounted for 45% of the total market. The closest competitor was Ericsson with 21%.
Nokia had emerged from obscurity to become a powerhouse in the hottest new industry of the time: mobile phones. Its phones had cutting-edge technology and great designs and people around the world were gobbling them up.
Some notable designs were:
- Nokia 9000: Communicator (1996)
- Nokia 8110:(1996)
- Nokia 3210: (1999)
- Nokia 3310: The Tough Cookie of mobile phones (2000)
- Nokia 7650: (2001)
- Nokia N-Gage: (2002)
- Nokia 3300 (2003)
- Nokia 7600 and Nokia 7280 (2004)
- Nokia N90: The Multimedia Marauder (2005)
- Nokia 5300: XpressMusic (2006)
Revenue Sales and ProfitabilityNokia Mobile Division results in Euros Year Revenue Operating Profit 2002 23.2 5.2 2003 23.6 5.5 2004 18.5 3.7 2005 20.8 3.5 2006 24.7 4.1 2007 25.1 5.4 2008 35.1 5.8 2009 27.8 3.3 2010 13.4 1.4 Figures in Billions
Between 2012 and 2015, Nokia's market share fell to 10%, while Apple - 7% and Samsung - 12% grew.
Nokia had lost 90% of its value. Operating Loss for 2012 was €2.3 billion ($3.06 billion) and it laid off more than 10,000 staff.
Revenue was on a free fall and the share price lost 89% of its value; it was barely €3, down from about €28.
What went wrong?
When Nokia began developing smartphones, it partnered with Ericsson and Motorola to acquire an operating system developed by Psion and together formed a company called Symbian. Instead of owning the operating system, as Apple did with its iOS or Google did with Android, Nokia chose to make Symbian a joint industrial effort among all the main competitors in the mobile phone market.
Nokia allowed Symbian to be customized for each device. This is understandable because, at that time, the software portion was small for devices as the codebase was small and it was easy to customize for different devices.
After a few years, though, Nokia was so dominant that it threatened the other partners in the joint venture. From their point of view, letting Nokia get what it wanted was dangerous, even when what it wanted made sense to all parties. From their point of view, preventing Nokia from taking big steps forward in Symbian’s development was critical and would help them competitively.
When the smartphone era was in full swing by 2006, Nokia was introducing a dozen different Symbian devices a year, and each new model was often customized with device-specific software. There was a great amount of duplication, obscure idiosyncrasies, and overall confusion.
The Symbian OS was in such a sorry state that it stymied innovation instead of accelerating it. Symbian devices were notoriously cumbersome to use with confusing menus, numerous options and settings, and a multitude of confirmations required by the user whenever something new was done with the device. What gave Nokia its competitive edge, became a hindrance to innovation.
Putting the hardware over the software had been the right approach for simple mobile phones. In the smartphone era, though, things have changed. Software, especially the operating system, i.e., the platform, now defines competitiveness.
The smartphone was a new world, but the people at Nokia felt it was already theirs. In fact, they felt that because they had invented the smartphone years earlier and quickly commanded more than half the global smartphone market, they could not fail.
However, Apple launched the iPhone in 2007 by announcing “We’re going to get rid of all these buttons. We’re going to use our fingers.” The iPhone dismissed two popular trends of the time, a dedicated keyboard and a stylus, in favour of a 3.5-inch sheet of glass and a single button. Nokia did not react. Rumour had it that in their management meetings, they didn't even discuss Apple, as they already commanded about 50% of the market share of smartphones. The board seemed unconcerned about Apple's impact, citing Nokia's dominant position in the global mobile device and smartphone markets. That was a mistake.
Failure of leadership
In my opinion, leadership failure is the singular factor that resulted in the decline of Nokia.
The leadership failure in Nokia encompassed a range of issues from strategic misjudgment, underestimation of competition, organizational inertia, and poor execution of pivot strategies. These failures collectively contributed to the company's decline in the face of rapidly evolving market dynamics and more agile competitors.
Nokia's board meetings were described as lacking in depth, with a focus on short-term issues rather than addressing the root causes of Nokia's challenges. The board's agenda appears overloaded with various topics, and only a fraction of the time is allocated to discussing long-term competitiveness. There was a lack of competitive analysis and a failure to understand market shifts and emerging talent requirements. Nokia was resting on its past achievements without looking into the distant future.
There was a constant reorganization within Nokia; this was creating confusion and hindering the company's ability to adapt effectively.
Top management's fear of Apple's advancements led to a high-pressure environment. This fear trickled down, creating a culture where middle managers prioritized status over innovation, stifling honest dialogue and risk-taking. In a bid to appease top leadership, middle managers often painted overly optimistic pictures of Nokia's situation. This culture of withholding critical information blinded the company to its actual competitive standing, hindering timely and necessary strategic shifts.
Nokia's leadership and staff, isolated in their perspective, also failed to accurately assess the competition. This overconfidence, rooted in a misplaced belief in their superiority, led to a dismissal of emerging threats and an underestimation of the industry's shift towards smartphones.
Lacking technological insight, Nokia's top management could not grasp the shift in consumer demand towards software-driven devices. This gap in understanding, combined with an overreliance on hardware expertise, left Nokia unprepared for the smartphone era.
Competing product lines
Given that Nokia had several dozen product launches every year, those groups competed for resources and forced them to update and patch the outdated Symbian operation system to an extent where it became unusable for smartphones.
Conclusion
In summary, Nokia's story serves as a cautionary tale for businesses navigating the treacherous waters of technological innovation and market competition. It underscores the importance of a corporate culture that values open communication, encourages dissenting views, and fosters psychological safety. Moreover, it highlights the necessity for visionary leadership that is not only technologically astute but also adaptable and open to challenging its assumptions. In the end, Nokia's failure was not just about missing the technological curve but also about a leadership and organizational culture ill-equipped to navigate the challenges of a rapidly evolving industry.
In essence, Nokia's leadership and cultural shortcomings offer crucial lessons on the importance of fostering a culture of openness, adaptability, and clear-sightedness in today's fast-paced technological landscape.