• November 25, 2016

Case Study 01: Nokia

 

PHASE ONE

My first approach was to look at the home page of ‘Nokia’ website and get to see what they think of themselves. Well, my first lesson is to value substance over status. Nokia claims to be the ‘innovation leader in the technologies that enable our connected lives’. The website reads: ‘We create products and solutions that help people thrive’. Well, if the brand had written this about themselves some 19 years back when they had about 52% of the mobile technology market share, I wouldn’t have debated the stand. But since 2012, the market share dropped to about 2% and Microsoft goofed when it bought it for 7.2 billion USD in 2014 and sold it again for 7.6Billion USD after 1 year. Considering the post-acquisition investment of Microsoft in the Nokia technology within that one year, and yet sold it at 7.6billion, it’s easy to affirm the irredeemable status of the company.

Well, entrepreneurs should take two key lessons from Nokia:
1. Know the difference between confidence and hubris.
2. Understand that what got you here won’t take you there.

Well, Nokia started as a paper mill back in 1800. And between then and 1992, they jumped into wireless phones and started marking phones. They started with high-quality phones ‘4U & Me’ with little or no innovation. The company focused on scale, profit margins, and demographic advantage. They jumped into emerging markets and owned it.

What they did right: They made the phones cheap, easy to use, high quality and won customer loyalty. They had a lot of confidence and thought they had won. Well, that is what I call ‘Hubris’. Hubris is thinking you’ve got there. While they were building strong quality phones, they focused less on content. While other companies like Samsung, Motorola etc were developing mobile phones with contents, Nokia focused only on little things like ‘battery strength, display color changes and they were trying to wedge old features into little phones. During the same time, Motorola built a phone called ‘Razor’. The big challenge was that there were many other companies that were developing apps, games, contents, songs and wanted mobile phones to out them into- Nokia was not cut out for that. They developed the cool features and wanted to put them on phones but unfortunately Nokia was not their go-to brand. Everyone in the industry perceived that there would be big changes for Nokia regardless of being the giant. But they were not evolving into the future.

In 2007, they had 52% market share and around that time a company called ‘Danger’ and developed cool phones. Well, Microsoft saw that and acquired ‘Danger’. The strangest thing wasn’t that Nokia management team didn’t see the movement and trends in the industry as a threat to their position in the market, they also didn’t innovate to completely lead.

Three major lessons for companies:
1. Industry leaders by market share must often recreate the way business is done in their industries. Every time you disrupt the industry, you enjoy a monopoly for an average of 6 years. This should be the business attitude of companies
2. Collaboration is business is leverage. One of the easiest ways to lead is to be open to partnerships and collaboration- this gives you insight into what is happening in your industry and helps you develop contents and contacts across sectors
3. Reiteration must match reinventing: The most important thing in business is sales, and while sales improve, profit margins must expand by reducing operational cost. While products are being reengineered through sales iterations, companies must constantly reinvent themselves.

 

PHASE TWO

I decided to hear from Michael Schrage, a Research Fellow at MIT Center for Digital Business. I saw something more instructive and provocative.
 
NOKIA FAILED BECAUSE IT IGNORE AMERICA!!!
 
Yes, Nokia ignored America. And this should help you quickly: In the third quarter of 2007, Nokia global market share was 48.7%. At 2010, Nokia’s global share of the smartphone market dropped from almost 47% to roughly 38%. Doing well, I suppose. But let’s see something unique: Nokia’s North America dropped from 3.5% to under 3%. As at 2010, iPhone approached a market share of 11% and Android had about 23% globally. But in the United States, both iPhone and Android had about 24% and 39%.
 
BUSINESS LESSONS: Nokia focused more on reactive innovation and not predictive engineering. Its little presence in the US gave little incentive for real innovation. Have you heard that your location matters? Yes, it does. You can be everywhere and be nowhere.
 
THOUGHT LEADERSHIP: To be an industry leader, you need to constantly ask a single question. Where is the Canaan?

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