One of my favorite things to write about is the competitive landscape in the industry. I have seen many companies come and go. Some remain. Some are stronger and some are weaker. There are those that burst on the seen looking to change the world. They end up like Kim Kardasian on stage with Prince, bright lights and large audience but in the end they just can’t dance. Netscape and MySpace come to mind. They are then politely asked to leave the stage. Then there are those that burn so bright they are the future and the end is something they can only define, Facebook and Apple seem to be those stars of late.  We call them Lady GaGa.  How long will they last?  Who  knows.  They may end up becoming the next Madonna (Apple probably already is this category), constantly changing and exciting us or they could end up like…Lady GaGa.   Then there are those that were stars of huge magnitude and now they are like an aging Frank Sinatra or Mickey Mantle. The people who were there when they started revere them and those that came after are told to revere them, they just don’t know why. Microsoft and Nokia fall into those camps.  With the recent announcement of a partnership between Microsoft and Nokia,  I thought it would be good to go back and have a deeper look at Nokia.

Nokia has an interesting history.  Unlike your current high flyers who have a history that can be measured in some instance less than a decade.  Nokia is over 140 years old.  Being located in Finland they started in an industry that Finland has by default…timber.  The founders Fredrick Idestam started a pulp mill and Nokia stated manufacturing paper.  I am sure at the time it was sexy but in todays world  it just seems so un-environmental now.  That was back in 1865.  It would be much later during the era of diversification and mega conglomerates that they would diversify into another vertical,  telecommunications. This would lay the foundation for the Nokia that we all know.

When mobile phones came onto the scene Nokia was well positioned to provide the phones and start the drive towards where we are today.  Nokia had some keen insights that would propel them to the leadership position in the industry. As a a friend told me who has a deep history in wireless what Nokia really figured out was that you could do more with those phones then just make phone calls.  There was software on them.  You could show what day it is, the current time, all sorts of cool things.  You could even do this text thing pretty easily.  It was also one of the first companies to have accessories for their phones.  Those original dove bar phones that sold 80 million world wide pretty soon had all sorts of colorful cases, the kids loved them.

Things were going good for Nokia and then they made a series of unfortunate decisions.  Though people liked the dove bar phone there was a whole group that did not like them, but preferred the flip phone.  Nokia tried but did not persist in trying to create the next cool phone.  All companies should try to influence the market however they should not dictate to it.  It is a fine line, but I am afraid on this one Nokia decided to cross over it.  There was also the debacle with the US market.  For a long time the US market was perceived to be behind the rest of the world when it came to wireless. In all fairness this was true.  Part of the reason is in the rest of the wireless world used mobility to get around a lot of network constraints and government regulations related to traditional LAN line services.  Nokia being headquartered in this part of world understood it.  However the US is a very competitive culture, to dismiss the US and think we would not catch up at some point and be an exciting and aggressive market, well it is inexcusable.

Finally we have to look at the mobile OS that Nokia chose to build around, Symbian.  Symbian started as a open source project backed by NTT DoCoMo, Ericsson, and Nokia.  It operated independently for many years until Nokia bought the Symbian LTD in 2008 and became the main contributor to the source code.   Through the years it seemed that Symbian and then Nokia struggled to maintain a vibrant developer community.  With the move by more and more consumers to smart phones Symbian seemed to lose direction.  Though the largest mobile OS on earth by market share, recent years have seen a steady decline as more viable platforms like iOS and Android emerged on the seen. Those two platforms have obtained the perfect marriage; developer loyalty with consumer love.  Another interesting tidbit is Finland is the home of Linus Torvalds, the father of the open source movement.  Just think the birthplace of open source is standardizing in Windows Phone 7.  Turns out David didn’t beat Goliath.

Which brings us to today and the big recent announcement that Nokia is going to move to Windows Phone 7.  This deal even on the face of it has so many connotations and implications that it is hard to get ones head around it.  But in short Nokia is ditching the Symbian OS and letting Microsoft do the innovative things in software and reducing Nokia to a manufacturer of handsets.  It is, I am sure a hard pill to swallow for Nokia as for a long time they were perceived as the leader in mobility, a company that would try and set the future course of mobility.  They are walking into the wilderness deciding that their primary competition is HTC, Samsung, LG, and China is now also getting heavily into this space.  Nokia has decided they are going to compete on design.  Good luck with that.  The Asian handset manufacturers have made a living  off of creating cool inexpensive handset models.   At a time when the world is realizing the value of mobility in ways far larger than originally imagined, Nokia has decided not to lead and to walk away.  It’s a stunning fall from grace.

Will this partnership work? Possibly.  It’s two companies that really needed to do something different.  Nokia and Microsoft were losing market share.  What they were doing was  not working.  Focusing on the Nokia side the challenge will be selling the new strategy internally.  Early on there has been a lot of backlash, but lets be pragmatic and look 6-12 months out.  The big challenge for current CEO (and former Microsoft President) Stephen Elop will be managing a big cultural shift in the organizations mentality and the companies outlook toward the future.  I am sure of late they have paid a lot of attention to Google and Apple, moving forward that will be more a Microsoft issue.  How much input will Nokia have in these discussions?  What kind of input will Nokia have into the Microsoft software? Will they have more than HTC or Samsung?  Or will they just be another OEM partner?  I think in the end there are a lot more questions than answers, but one thing is clear the era of Nokia leading in the mobile industry is over.  It did not follow the traditional trajectory and now it looks like Kim Kardasian is back on stage trying to dance, Nokia it’s your turn to leave the stage, you just can’t dance.

Good Night and Good Luck

Hans Henrik Hoffmann February 18, 2011