Nokia Takes a Measured Approach to Being Bold
One of the big stories to come out of Nokia’s Capital Markets Day was the revelation that it plans to cut its smartphone portfolio in half (see CCS Hotline about the event here). It set me thinking, “Is this a bold move?”
It’s quite easy to argue that it probably is. Why? Because it risks opening big holes in Nokia’s smartphone portfolio at a time when there will be an avalanche of competitors who could fill the gaps (particularly with Android phones).
Yet Nokia has to do something, because I don’t believe its current model is working. Having so many devices has produced mediocrity in many areas: software, hardware (which has historically been a major strength for Nokia) and, most recently, the way it’s delivered services on top of that hardware and software. It’ll be hoping that fewer products equals better products.
Alternatively, you could say that Nokia is merely responding — and perhaps a little late — to the fact that one competitor (Apple) has grabbed a disproportional slice of the smartphone market with essentially one product and that another (RIM) is doing rather well with a pretty limited set of devices.
But is Nokia a company that takes bold moves? And if so, what examples have there been in the past?
The boldest move in Nokia’s history is probably its decision to get into the services business. It has bet billions of dollars on this one, most notably the $8.1 billion purchase of Navteq. When Nokia announced Ovi, I stated it was the “biggest roll of the dice” the company had made since abandoning tyres and TVs for phones, and I stand by this view.
Another bold step that comes to mind is buying Symbian. The problem, however, is that it’s too early to know whether either of these moves will pay off.
However, looking at the bigger picture, I actually think Nokia is a relatively conservative company that has made a series of well-structured and highly accurate long-term bets and succeeded. Its success is partly due to “sisu”, a particularly Finnish trait of inner strength and determination. This characteristic is why I tell Nokia’s rivals that you underestimate the Finns at your peril. Just ask the Russian army!
One major thing struck me while listening to the string of speeches from Nokia’s leadership team at the Capital Market Day event. They all committed to a set of bold and measureable promises, such as fixing Symbian and Ovi, slowing down margin erosion, and manufacturing and distributing phones even more efficiently. These were so explicit that failure is not an option.
That’s certainly a bold move, and if the executive team doesn’t deliver, the speakers for next year’s event could look very different.
Tags: Android, Mobile, nokia, ovi, Symbian
Posted By Ben Wood On December 7th, 2009
December 14th, 2009 at 7:29 pm
I firmly believe the N95 has a lot to answer for at Nokia.
There is no doubt that the product was way ahead of its time but I’d go as far as to say that on reflection the N95 has done to Nokia’s high-end devices what the Razr did to Motorola.
The difference being that Nokia can make mistakes and make money, whereas the focus on the Razr almost brought Motorola down. The N95 made Nokia rich and complacent, gorged with compliments and high margins. It led to the ill-fated N97 and took the company down the dead end it’s now reversing out of.
It’s no coincidence that Nokia’s Eseries development team (unencumbered by the legacy of the N95) has made huge steps forward in its portfolio and design skills, and in my opinion now leads the Nseries team in design, execution and product experience.
Looking back now, would Nokia have been better off producing a very good N95, rather than an outstanding N95, and concentrating on more innovative successors?
December 14th, 2009 at 7:32 pm
Hey Ben,
Provocative post as usual.
The corporate history of which Nokia are so understandably proud is full of bold moves. But is the company bold? I’d argue Nokia’s history is one of bold strategic moves that contrast with tactical conservatism.
This is not universally true — Club Nokia, for example, was hardly conservative for its time. But when it comes to devices, Nokia’s almost always a fast (or not so fast) follower. I remember the media uproar when Ericsson beat Nokia to market with colour screens. Nokia was not first with colour, cameras, thin devices, clamshells, touch screens and so on. These are tactical setbacks. But with Nokia’s scale, it’s never the case that it can’t close the gap and win the war… until the rules of engagement are rewritten, as now.
The services direction is bold. It’s certainly similar in magnitude to historical moves away from paper, rubber or copper wire. A major difference is those bold moves were opportunistic exits in favour of big bets on opportunities in entirely different sectors. I don’t believe anybody rewrote the rules of rubber or timber, at least in not the way Internet economics are rewriting the rules of mobile. Nokia’s latest transformation is a function of changes imposed on its core business by disruptors. Whether it’s reactive or proactive is debatable. Nokia have historically done well at anticipating the manner in which the sector would evolve and positioning themselves accordingly.
I particularly like the point about sisu. Yet that quality has not prevented Nokia from abandoning losing or waning propositions in its corporate history. Tenacity and stoicism are admirable qualities but they can make you too inflexible. Perhaps the sisu foundation could stand a bit more realpolitik.