Analysis: The Fall of Nokia

THE NEED TO FOCUS
The reality is that Nokia had been fighting in all three fronts, against very 'weak' rivals - many of which really 'threw in the towel' - Siemens, Philips, Panasonic - and others who were pretty clueless for long - Sony and Ericsson took years to get their act together - and Motorola got drunk on the Razr. Nokia HQ got to believe that they were somehow so smart, that they could fight a three-front war and win all three. That is not possible, not when you get real rivals in all three. Today clearly Apple and Google/Android are far ahead of Nokia in customer satisfaction; Samsung, Sharp, Apple etc are more innovative than Nokia in the speed corner; and ZTE, Huawei, G'Five and even Samsung are beating Nokia in the price leadership corner. Nokia is not leading in ANY corner. It has to now make clear strategic choices, pick one corner and fight for that - and/or [taking ideas from the car industry] to split the company into very clear divisions with a lot of internal autonomy, to have one unit to fight for each corner - the luxury satisfaction brand, the tech innovation brand, and the cheap brand.

CONCLUSION: (NOKIA) IS NOT LOST...YET
Nokia is still by far the biggest phone maker. They are still by far the biggest smartphone maker and dumbphone maker. They own the biggest smartphone OS platform, Symbian, and they have a credible migration path to MeeGo via Qt and Ovi. The Q3 results were alarming but that could have been a temporary blip and Nokia could have recovered. Now the Q4 results tell us that the current product portfolio, and the strategy, is not working. Nokia grew the least of all major makers, and lost market share in all price segments. The current trends suggest that Google's Android may pass Nokia's Symbian OS during this year 2011. This is a ship which is seriously taking in water and will sink if management doesn't turn it around very rapidly.

I think the biggest critical mistakes are that Nokia is almost willfully annoying its loyal customers. Customer loyalty is a fickle thing and if you lose it, you may not get a chance to try to recover it. Think about it, in terms of market share, out of all those customers who bought Nokia branded smartphones in 2006, for every three customers Nokia has managed to keep - it has lost another two! Only three out of every 5 loyal Nokia smartphone users five years ago, still support Nokia today. What is worse, Nokia's loyalty is strongest in markets and segments of low-cost smartphones - India, Africa, China etc. - but Nokia has all but lost the top end of the market. In 2006 Nokia's top N-Series phone cost literally 1,200 dollars [the N93i]. Today Nokia has no phones even offered in that price range, the last superphone Nokia was selling was the E90 Communicator which ran for about 1,000 dollars in 2008. The N8 sells for about 500 dollars and the upcoming E7 will sell for about 700 dollars [no-subsidy iPhone 4 costs about 600 dollars]. Imagine if you were BMW and you bought the rights to sell Rolls Royce, and then you just stop selling it - even as the car was profitable and there was a big global market for it. But because Audi sells a popular mid-priced car - which BMW also matches - they would abandon their top product. That would be crazy!
And the very little things like suddenly no longer hot-swappable microSD cards [i.e. deliberately making your phone incompatible with all older models!] or not letting users swap batteries, etc.

Yes, there also are big issues with Symbian - at least those are being worked on. Yes, the Ovi store is not anywhere near perfect but again, Nokia is working on it. Most smartphones are not bought for the app store [said several surveys last year]. Those are yes, important things too, but they will not fix the problems that are already deep inside Nokia. Nokia used to be the must-have phone. Now it's a phone its owners dare not recommend to friends. That is the core of Nokia's problem. At one point you bought Nokia and you knew you got ultimate value and you would not be disappointed. Now even the most loyal Nokia fans, whenever they write about their newest Nokia phones - write about one disappointment after another. This is the problem the new CEO needs to address. Else it will continue to lose customers - and unfortunately, the phone replacement cycle is far faster than that for cars, the demise of Nokia could happen before Mr. Elop gets a chance to retire…

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