Nokia stands at crossroads on rocky route to change
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Should the once-great handset manufacturer follow Polaroid’s path or seek to build its fortunes in the developing world?
It’s funny how things change. Back in 2007, there was a mobile phone brand pushing at the limitations of its business. It promised that a new “internet services brand” would take consumers into an as yet untapped world of mobile music, games and maps.
Exciting stuff. And last week, Google finally launched its long-rumoured own-brand Nexus One handset to take on Apple’s iPhone. With 3 billion application downloads for the iPhone, Apple has already moved consumers into a world of entertainment and information greater than could have ever been imagined three years ago.
Except the company launching itself into new territory in 2007 was not Google or Apple. It was actually Nokia, bringing its Ovi online store to the world. Before either Apple or Google started to offer mobile music, maps or games, it was the Finnish handset manufacturer that planned to grab the applications market.
So what went wrong? Sure, Nokia is still a leading name in mobile phones but it seems to have fallen behind newer entrants such as Apple in terms of content. While Apple has just delivered 3 billion apps to its customers in 18 months, Nokia’s Ovi Store achieved just 10 million in its first three months. By December 2009, Ovi was claiming downloads of 1 million each day - still substantially behind Apple.
The figures tell a similar story. A report at the end of last year from Strategy Analytics says that Apple’s profits outstripped Nokia’s in the US for the first time, taking $1.6bn in profit in the same quarter as Nokia managed $1.1bn. Nokia may still churn out huge volumes of phones, but it is slipping in profits and innovation.
The problem doesn’t appear to be a lack of good ideas. The early announcement of Ovi shows that Nokia spotted the trend for mobile entertainment and information. It realised the importance of making mobiles more than simply a device for making and receiving calls.
Rather, the issue seems to be a lack of understanding of how best to innovate in an age where everything is open source. After all, mobile phone handset companies have traditionally created new models under great secrecy and then launched them with a fanfare. Some still do. I recently attended a swanky and exclusive launch at upmarket department store Selfridges for the Sony Ericsson Xperia model at a limited-edition pop-up restaurant. You virtually needed a biometric passport to get in.
That’s pretty different from the Apple method, which seems to be all about getting anything new out to market as soon as possible and refining any issues afterwards. Since its applications are developed by outside businesses, Apple has had to become more flexible and adopt open-source thinking (with strict controls, of course).
These days, no brand is safe from rapid change. It can happen in months, rather than years. The Economist reported last week that industry experts believe Nokia now needs to become “a different company”. Rather than having teams working in isolation on different handsets, it should get its workers in various units to collaborate closely to produce technology and content that works across multiple handsets.
I guess some might argue that this new way of working would see Nokia become a customer-centric company, rather than an innovation-centric concern. It would be harder to keep any great leaps forward in terms of technology secret but the business would be creating products that are designed around how useful they can be for consumers.
Nokia should be able to handle this change in focus. After all, it is a brand that has demonstrated its ability to change numerous times already. Nokia started out as a paper mill before moving into electricity generation and even rubber boots. And it does understand customer-centricity; its early mobile models were notable for their ease of use.
It could also take heart from recent reinventions from the likes of photography brand Polaroid. For decades, Polaroid was the only brand selling instant photographic equipment and film until digital cameras eroded its business. The company was strong enough to see off Kodak in the instant market in the 1980s, but digital cameras proved too much.
While Polaroid did move into digital cameras, it was overtaken by brands that specialised in making electronics easy for consumers, such as Sony. In 2001, the business filed for bankruptcy and it stopped making instant cameras altogether in 2007.
This should have been the end of Polaroid. But after some controversial reorganisations, the company has moved into products mixing its original purpose with digital means, such as an instant mobile printer. Last week, it even announced that it had appointed pop star and marketing whizz Lady Gaga as its creative director to help develop new products for modern youngsters.
So will Nokia change its business in 2010 and start the year with a new focus and strategy like Polaroid? I’m not convinced that it will be able to change its innovation cycles quickly enough to catch up with developments at Apple and Google. But perhaps the brand has other plans altogether.
Nokia announced last week at the Consumer Electronics Show in Las Vegas that after selling 750 million “basic” phones in 2009, it has created the “Nokia Economic Growth Venture Challenge”, an initiative encouraging mobile phone developers to create programmes useful to those in developing countries.
Nokia may no longer be the darling of the smartphone world. But this kind of project shows the company still has some interesting ideas within its walls. It may be that while media types like myself download our latest app for the iPhone or Nexus One, millions of people in emerging economies are doing their banking through Nokia - which could make it the most consumer-centric mobile brand of all.
Readers' comments (8)
walid | Wed, 13 Jan 2010 3:59 pm
I am a Nokia shareholder and I disagree with you. Nokia is more innovative than Apple and say now Google! Nokia lacks marketing big time. Here, all the news is about the Ihype aka Iphone and now the Google HTC aka Nexus One! talking about the latter, the Nexus One is failing big time but obviously reporters and wall street analysts are hesitant to say so! Iphone is nothing more then a toy phone that u can download Apps! it is not a smartphone... It can not multitasks! so sad that the media keep hyping the Iphone like it is the best! Take a look at the Nokia N900 (which I bought and currently using it), it blows the iphone out of the water and that is not only my words, it is also the tech geeks words! N900 gives u an unmatch true internet experience with its Fire fox Mozilla and Adobe Flash! I blame the Nokia management for not marketing well the likes of the N900 in the USA! it is sad, but true, the media is so bias toward Apple and Google and forgetting that there is a company called Nokia that sell samrtphones also! Nokia smartphones sale is more than the three top smartphones sellers, Apple, Rimm, HTC! this year with Symbian been redeveloped and Maemo 6 coming up in H2, nokia will show the media what it has up its sleeves! enough with pumping the Iphone and the failling Nexus One phone!
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Anonymous | Fri, 15 Jan 2010 3:38 pm
Great article - to the Nokia shareholder I suggest to face up to reality, and off-load those shares! I would go as far as suggesting that both Apple and Nokia have missed the boat, Google have crept up behind you both and have social mobility sewn up and with music heading away from downloads to access I can't think of anyone better placed!
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Matt | Fri, 15 Jan 2010 3:41 pm
The phone is just an object / possession, it's what you can do with the phone that should be the most important aspect.
Surely, the phone is just the platform to run the innovative apps? The best, most advanced phone on the market is worthless if there are no apps that allow it to use all that "power." Without apps it's just a very expensive way to make telephone calls.
You wouldn't buy a PC with one game pre-installed, and then by another to play another game. Top end phones cost as much as a half decent laptop nowadays, far more if you consider phone bills!
When people wake up to the fact that it's "OK" to have a phone for a number of years, I'd be surprised if it wouldn't be the app developers rather than the handset makers that see a huge increase in sales growth.
I don't think anyone would really be surprised if soon the ability to make calls is just one small part of the functionality offered, and not even the main reason for having a "personal device."
Innovative app companies able to produce "killer apps" could find themselves in a position like Microsoft did with the PC. I have to assume that MS turns over far more money than a large number of PC manufacturers combined.
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Sonia Franklin | Fri, 15 Jan 2010 3:51 pm
The previous poster is quite right in saying that there is not enough marketing for Nokia. As an iPhone user, and huge Apple fan, who only ever used Nokia prior to buying my iPhone last June, due to their user friendly menus and easy texting facility, I'm not able to comment on whether they have phones that are in a similar league as I simply don't know. Now I have used the iPhone, there is no going back... Nokia would have to come up with one hell of a competitive product for me to consider it. Or maybe there already is one, but I just don't know about it...
Just goes to show the importance of marketing! (not at all biased of course as a marketer...)
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Chris | Sat, 16 Jan 2010 5:06 pm
Far more than US profits and number of apps downloaded need to be considered to comment on this properly. Nokia are not sitting at some sort of crisis crossroads.
Has Nokia been slow to react to the rise of the iphone? on the surface yes. Was the launch of various Nokia services fudged? Yes. But are they on the same path as Polaroid? Certainly not.
For the best part of three years the iphone has effectively had the smart phone market to itself, its only competition coming from and outdated Symbian OS and a woefully inadiquate Windows Mobile. However the last 12 months has seen the OS rather than the hardware take centre stage largely thanks to Microsoft, Palm and Nokia significantly uping their game and of course the introduction of Google's Android.
What, specifically Android and Maemo, have done is highlight the iphone's short-cummings. Poor camera, no multi-tasking and ironically an open source platform with such tight controls that many developers regard it as a walled gardern. You won't hear the tech savy talk about the need to 'jail break' their Nokia N900's.
Many are already hailing the N900 as a better device than the iphone and lets remember that in terms of Maemo this is a 1st gen handset, Maemo 6 will produce even slicker and sleeker devices.
Yes, Nokia lies along way behind Apple and Android in terms of apps but the stunning and unrivalled web browsing on the N900 renders so many apps unnecessary. I'd rather multi-task than have a 1,000 apps, take Spotify for example, a cracking application on the iphone but to think you can't do anything else whilst using it is crazy and if reports are to be believed Apple seem to have no immidiate plans to change this.
What about using maps for navigation, oh, hang on i need to make a call or send a text. I have to wait until all my pics are uploaded to facebook before i can do anything else, so in short you have to shut down one app to use another, Hardly utting edge.
Apple do design and user experience better than anyone but they are not tech or innovation leaders in this sector. Nokia services have finally all come under the same roof with the relaunch of Ovi and as long as they can produce attractive packages and decent revenue opportunities for developers they will quickly break the perception that apple is the be all and end all in the smart phone market.
Marketing high tech products like mobile devices on a global scale is not an easy task. Launches get delayed as bugs need to be fixed and production levels altered, along with the need to balance such a diverse product range it means that strong, coherent roll out strategies and extremelly difficult for the likes of Nokia to excute. Apple has one phone to market, they do an excellent job, as they should!
Mobile is of course going to be a vital marketing/advertising channel but the sooner marketeers realise that it's future is not solely to be found under the Apple umbrella the sooner we'll see better and more diverse opportunities in this sector that will provide far greater reach to a far wider audience.
If you are a marketeer and you have just comissioned an iphone app where is your foresight? In the next 18 months significant changes are afoot and Nokia will, as they have throughout mobile's short history, be leading the charge.
Pleased that you mentioned Nokia's Economic Growth Venture Challenge because it highlights that whilst we are swept up with the potential of the smart phone market it remains such a small part of the overall global mobile market and future strategy.
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Pete | Mon, 18 Jan 2010 12:54 pm
The long-term story isn't Apple vs Nokia. It's more likely to be Apple vs Android. There is nothing to stop Nokia making an Android phone, they probably are right now aren't they?
When every other handset manufacturer is using Android, every app developer will develop for Android first and then it will be Apple playing catch-up.
The iPhone will be seen as an expensive option that looks nice and has a few marginally better features that suit some people. Exactly like their computers.
The business model of an OS locked to one set of hardware (no matter how good it looks) won't work in the long-term.
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David | Tue, 19 Jan 2010 10:35 am
Interesting article - and there's no doubt that Nokia has fallen behind in the smartphone craze. But on a global scale the future of mobile is in India, China and other markets where mobile penetration is outpacing PC web penetration. No surprise that Nokia has been focusing its efforts there.
The danger, of course, is becoming trapped as a maker of low-end phones. Nokia still needs a smartphone breakthrough (maybe using Android?) to carry emerging-market consumers as they trade up.
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Anonymous | Tue, 19 Jan 2010 1:51 pm
What about RIM and their BlackBerry devices. The new Bold 9700 is pretty nifty and most say it outclasses the iphone with its features and much improved battery life.
BlackBerry seem to be moving focus away from pure business users and trying to capture social users too.
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