Thoughts on Nokia's Dilemma
It's impressive to see a CEO being so honest about how messed up things are -- at least in such a semi-public manner. There's no denying that Nokia is in big trouble. Four months ago when Elop joined Nokia I wrote about its massive structural problems and the enormous challenges he faced in trying to turn around a company that had internalized a culture of mediocrity (gdgt.com/discuss/nokias-fear-failure-as-im-sure-yo...). The memo is the words of a man coming to terms with the reality that he is in an awful situation with no good options.
Let's face the facts: the reason Nokia doesn't have any good options is because the company spent the past several years squandering opportunities and making lots of poor strategic decisions. There is no good reason that Nokia is in the position it's in. It has been the number one seller of phones for years. Nokia has often been the first to market with new innovations, but then because of a poverty of strategic vision does nothing with these innovations, often abandoning them only to see someone else figure out how to do it right.
Elop got it right that it's about ecosystems now. That's something that anyone who studied the rise of the PC would see right away. Windows dominated the desktop because Microsoft was able to create a vibrant ecosystem of OEMs and ISVs that didn't really see any serious challenge until the rise of mobile computing. The network effect was just too strong By being essentially on the outside of any viable ecosystem -- Symbian is a mess and Meego may be DOA -- Nokia has found itself far from the center of the smartphone world. Nokia now has to either dig in and find a way to create its own mobile ecosystem, complete with amazing handsets and a world-class OS that developers want to make apps for (something which is becoming harder with each passing day as iOS and Android further entrench themselves), or it needs to suck it up and work with an existing platform and try and use its massive resources to become the dominant player on that platform.
I'd guess that within Nokia the inclination is to go with the first option. They'd have more control over their destiny, but the big risk here is that they spend a couple of years working on something and it just falls flat -- and at that point it's game over. (Sound familiar? See: Palm two years ago.) If Nokia bets big on being able to create a game-changing ecosystem and it fails to catch on in the market, there will be no salvaging the company at that point. It would continue to see its profits and marketshare erode and would almost certainly be scooped up one its competitors (or possibly Microsoft) for a bargain price.
The mobile market is moving so quickly now that for Nokia to succeed with a strategy like this they don't need to just catch up with where everyone else will be in a year or two, they would need to get everything right. That doesn't just mean introducing a mobile OS with features that blow everyone away and that runs on really advanced, competitively-priced handsets, it means getting wireless carriers around the world behind it PLUS getting developers who are making money from iOS and Android to support Nokia's OS as third (or by that point probably fourth or even fifth) mobile platform for which to make apps. All that is going to be tough, and the only thing Nokia has going for it right now is that it's so large it can still afford to put money and manpower into something like this. Again, we saw what happened when a smaller, cash-strapped rival like Palm tried to do this.
Going with Android or Windows Phone 7 would make it possible for Nokia to more or less hit the ground running and get something out relatively quickly. I have no doubt that the prospect of a Nokia handset running either OS worries Samsung, HTC, Motorola, Sony Ericsson, and LG, all of which are trying furiously to compete with the iPhone right now. The last thing they want is for Nokia to have a serious option in the high-end of the market. Nokia would surely put developer resources into creating great Android or WP7 apps and experiences that would help distinguish it from the pack, but would it be enough? The market is overcrowded with Android phones right now, and Nokia isn't necessarily going to dominate it or even stand out, at least not without a ferocious fight.
Working with Windows Phone 7 is a little trickier to call, since it's so new and it's not clear what its trajectory is yet. I don't doubt that Microsoft has been lobbying Nokia to give it a try (Elop is ex-Microsoft, after all), presumably with enticements like deeply discounted licenses and promises of tons of development support. It'd be a big win for Microsoft, and Windows Phone 7 is early enough that Nokia could have a much bigger impact on its future course than it would on Android's. But that again might not be enough to save Nokia (although adopting WP7 would probably convince the US carriers to work with them).
So it may be that Nokia hedges its bets and introduces either Android or WP7 on a smattering of handsets in order to buy itself some time while it works on creating its own ecosystem. It may even be that when Elop speaks at Nokia's Capital Markets Day on Friday he'll pull a phone running Android or WP7 out of his pocket. Buying some time like this isn't an elegant strategy, and it'll piss off the Symbian diehards, but it's probably the least bad of Nokia's bad options. As Elop noted, standing still isn't going to work when there's fire all around you.
Anyway. I have some software in the Android Market. Last month i noticed a few hits from phones claiming to be Nokia phones when checking my Analytics. Looks like someone might be experimenting with Android at Nokia.
I for one loved my Nokia phones. IMO they had the best user experience and features (I still have my pre iOS/aOS Nokia) and i for one would be very disappointed to seem them die out.
At the moment I put them in the same boat as BlackBerry, except that I don't seem them doing anything about it, where RIM is at least trying to join the next migration.
The reasons why most of these entrenched players want to own their products end to end are pretty clear. It's far more difficult to differentiate and innovate when you're not completely in control of the full software stack. You don't have to look very hard at the history of the PC market to see why one wouldn't want to end up like one of the many low-margin commodity players licensing someone else's high-margin OS.
But the fact is it took the iPhone (and later Android) to make existing players acutely aware that their lack of expertise in software and user experience was holding the mobile space down, and that the only way forward was to ditch the old, early way of doing things in the mobile world. Motorola, Samsung, LG, Sony Ericsson, and nearly every other major entrenched player in mobile realized (some sooner than others) that there's no shame in letting someone else manage the OS if it means doing a better job at their core competency: creating (hopefully) compelling devices at scale.
Nokia has a rich history of capable, sometimes industry leading hardware, and they made a lot of hay back in the days when a few geeky phones was really all you needed to get by in the mid to high range market. But here we are in 2011 and Nokia's only now starting to realize just how long it's been blind to the fact that user experience and a cohesive ecosystem truly matters, and that you can't saddle your phones with some of the worst mobile software ever created and not expect to be swept away.
Now, if you ask me, the decision here is pretty clear. Whether or not you agree that Nokia's competency is as a hardware company -- not as a hardware AND software company -- it's becoming increasingly obvious that their current lineup isn't the way into the future. MeeGo seems like a non-starter (plus, it sounds like Nokia's lone MeeGo phone has already been canned), and Symbian is already years beyond the end of its useful life.
Nokia needs to address the short term AND the long term, but going scorched-earth á la Palm and Windows Mobile only going to put them another couple years behind if they started today, and running with what they've got now until 2013 or 2014 simply isn't an option. If they're going to bridge that gap for the next few years, Nokia's going to have to start turning the ship around now, and I think that's going to mean ditching the dead weight and getting behind Windows Phone 7 or Android.
For Android, with its coffers, it is possible for Nokia to not only secure next generation electronic hardware but also lock brief exclusivity (quad cores, dual screen, etc).
To separate Nokia apart within the WP7 market, Nokia can use "exotic" physical hardware materials (aluminium, carbon fiber, etc).
Nokia can really push the price point because there exists a market with the wallet to match. As shown by custom colored and jeweled iphones and the likes. Nokia's existing clientele will definitely not be alienated by this.
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If they threw out their OSes and just went with Android or WP7, I could see a lot of possiblities for their future. I don't see it as something where they would be buying time, it could be a permanent solution. Of course, like you mentioned, that could piss of the Symbian folks and they'd need to lay off most of their software staff, but they could really do some great things if they weren't splittling their attention and resources across 19,782 different projects while no one department talks to the others.
But with the WP7 restrictions there is not a lot of opportunity to differentiate and with Android its an arms race where every phone becomes meh by the time it hits shelves because another company has announced a product that has bloggers salivating. This along with the fast declines in margins is a recipe for disaster for most manufacturers.
Its a short term win but hard to be a sustainable business when you are the incumbent (in terms of global size).
Using Android or WP7 would make them another "me too" builder and other companies are setup better for that. If they aren't in control of their own software / hardware integration, then they won't survive. The best thing they could do is pick one of their inhouse OSes and get rid of their massive bureaucracy.
Former Nokia people have been coming out for the past 2 years saying that it works like a bureaucratic quagmire where divisions are in-fighting and technological decisions are killed for short-term profits.
An organisational restructuring would not be a bad first move.
I think their physical designs are unattractive, not because of the cosmetic appeal (they lack that, too) but because I don't see how the designs can FUNCTION as well as an iPhone or Android phone. Same applies to their OS...whatever its supposed to be. What kills me is that I feel the same way about WP7 and they plan to partner with Microsoft on this front! Nokia's problem is that they were the first big player in the game, got cocky, then they put the blind fold on and went to sleep. Now they are waking up a bit too late.
First, it gives them instant differentiation from all the other smartphones (except the Pre phones and Veer). I'm sure there must be people who have looked at WebOS and wanted to try it, but balked at the present hardware options. It would be a good advertising bullet point. I might even consider WebOS at that point. None of the just-announced HP phones look interesting to me at all. So, no matter how cool WebOS may be, I won't even consider it if I have to use a Pre to get it.
Second, this would be good for HP because, if they want to build up WebOS as a platform that interests developers, they are going to need more than the Pre 3 and Veer to gain momentum. Additionally, it gives them the leverage that Nokia has with carriers to get WebOS onto other networks that aren't interested in the Pre family.
Third, it gives Nokia a viable solution to venture back into other GSM/CDMA form factors. Perhaps they could release a new version of that netbook they made, only this time running WebOS. That would be pretty sweet, and would get them instantly into the market against the Chrome OS devices. They would also have an option to enter the tablet market instantly.
Tomorrow will tell if I am even in the ballpark, but if I am wrong, I hope someone at Nokia reads this message and considers it. I don't think that android or WP7 will save them as they will be just another device in a sea of similar devices. With WebOS, however, they can save themselves by standing out from the crowd with a truly interesting software offering, and save HP by bringing some decent hardware to the WebOS platform.
What Nokia should have done is bought webOS when they had the chance.
Still praise there margins. My sister (uk resident), couldn't make her sim work in Australia, one appointment at the Genius bar and she walks out with a replacement phone. Anyone else know a tech company that can afford to do that.
Yes, I know Apple does it. Apple is the very definition of niche.
E.g., one of the more popular Indian brands is Intex www.intexmobile.in/ [I hope this site practices good hygiene by using rel=nofollow]. And never forget Nokla, Somy and Sany Ericssan. More here: www.engadget.com/tag/kirf/.
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