Nokia: down but not out?

I wasn’t going to write about Nokia’s latest travails until I read Farhad Manjoo’s article in Pando Daily. What got me going was this statement:

At its peak in the early and mid 2000s, the company fell victim to its own hubris. It began thinking of itself as an unassailable winner of the future, as a mature company that didn’t need to invest in the next big thing. Rather than spend its resources on building a next-generation software ecosystem—an OS that depended on novel interfaces and sensors, that allowed for outside development, that offered a brilliant user experience

The sad irony is that in the early 2000s, Nokia did develop “an OS that depended on novel interfaces and sensors, that allowed for outside development, that offered a brilliant user experience”, at least “brilliant” in the context of the mobile world at that time. At the time of the first iPhone, which at first did not support native app development, Nokia shipped millions of customizable Symbian smartphones (like the N95) that enabled a wide variety of 3rd party apps and novel uses like virtual spray-painting and driving toy trucks, which I was on hand to demonstrate at several trade shows in the late 2000s.

I agree with Horace Dediu, who commented in Quora that Nokia (and Symbian) failed because their innovations were trapped by the preconceptions of their business model, where the only real customers were mobile operators, not consumers. Horace writes, “Symbian was designed to conform to the needs of device vendors first and mobile operators second. The needs of users and developers were never considered high priorities. This is not by mere oversight but by deliberate, repeated decisions driven by the economics of the phone business for a decade.”

In practice, this meant that if you were a developer in 2007 and wanted to get your apps on Nokia devices, the only options open to you were to find a way to get your app “on deck” by making a deal with a major operator, or somehow (it was never clear to us in the platform marketing department) find your way into the on-device catalog of the Nokia Download! service.

To be fair, the other device vendors and operators didn’t have options that were any better. True, developers could always ship apps through GetJar, but that service didn’t have a mobile catalog app for phones to make downloading and installation easy for consumers.

Given the state of affairs in 2007-2008, the Apple revolution looks even more impressive. They came into the business from the outside, without the baggage of the incumbent vendors and their business models. They were able to take advantage of their design and product expertise, and their understanding of the consumer market, to deliver a truly brilliant consumer experience, followed closely by what we in the marketing biz recognized as a “complete end-to-end” developer experience: fun devices, great tools, and a (more or less) direct path to market through the App Store.

To its credit, Nokia tried to respond to the Apple (and later Android) challenge by recasting itself as a software and services company, first by investing heavily in mapping and navigation by buying Navteq (for $8.1 billion!) and Gate5. This was followed shortly by the more ambitious Ovi services initiative, a plan to deliver a suite of ad-supported consumer services.

As a Nokia employee outside the Ovi organization, I was too close to the Ovi experience to have an objective opinion about its strengths and weaknesses. I am convinced, though, that the focus on Ovi meant that Nokia took its eye off the smartphone ball at a critical time. Instead of investing in services, Nokia could have focused more on rebuilding Symbian into a smartphone platform that could really compete with the new entrants from the West Coast. Of course, it’s possible that even this may not have been enough. One thing that became clear during the late 2000’s was that Nokia was never really able to shed its hardware roots and truly embrace software and services as the core of its business.

Given this history, I’m not surprised that Nokia ended up making the deal it made with Microsoft, shifting its focus back to its core strengths of hardware design and manufacturing. If Nokia is going to come out of its current slump, it will do so as a much smaller and much less ambitious company, but one with a solid core business that builds on its biggest strengths. I want to believe that the managers and directors of a 150-year old company will be able to plan for the longer-term, beyond the current iPhone/Android duopoly. We’re still in the Model T days of personal mobility, so there’s plenty of change to come.

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