Nokia, a downwardly mobile brand

If Microsoft’s mission was to put “a computer on every desk and in every home”, Nokia’s might well have been to put a mobile phone in every hand.

Founded in 1865 as a pulp mill in the town of Nokia in southwest Finland, the company’s audacious transformation from an ill-focused timber-to-tires industrial conglomerate into a pure-play global leader in mobile telecoms has become the stuff of business legend. By the mid-1990s the Finnish group was the darling of every management guru and business writer.

As Andrew Hill points out in the Financial Times, books about Nokia – some published in the past two years – tell a story in themselves: How Nokia Creates Strategic Advantage in a Fast-Changing World, How Nokia Changed the Face of the Mobile Phone, Nokia’s Lessons from the Leading Edge, and so on. In 1999, the magazine of the American Management Association named the Nokia turnaround one of its “50 Best Management Saves” in history, ahead of the US abolition of slavery.

In 2007 Nokia was at the peak of its power. It made four in every 10 mobile phones sold worldwide and demand was exploding. BusinessWeek lauded the Nokia brand as the 5th ‘best’ in the world, one place behind GE.

In June that year Apple released the iPhone. The game suddenly changed.

Nokia’s share price has fallen by two-thirds since then as it tried, unsuccessfully, to produce an iPhone killer. In the meantime, low-cost Chinese manufacturers, using Google’s Android software, have eaten into Nokia’s sales of basic handsets in emerging markets and are moving up the value chain quickly, commoditizing the entire industry in the process.

Value has migrated to software and services. Apple and Android are the dominant brands today.

Apple’s iPhone is a full-blown computer with touchscreen technology that turns the mobile internet into a user-friendly experience. The apps that began appearing in 2008 enabled people to customize their iPhones to suit their lives. It was the precursor of the iPad, which in itself has moved the game forward, and both are natural expressions of the Apple brand ecosystem – form and function are seamlessly linked and forged into objects of desire.

Smartphone shipments overall grew from 177 million in 2009 to 392 million in 2010, a 71 percent growth rate. Nokia’s handset market share dropped from 39 percent to 33 percent in the same period. Stephen Elop, Nokia’s new boss, acknowledged this stark reality in the now famous “burning platform,” memo he wrote to all 132,000 employees. If Nokia did not want to be consumed by the flames, he said, it had no choice but to plunge into the “icy waters” below.

The icy waters are the frigid embrace of Microsoft.

Nokia’s long-standing strength has been in hardware. At heart, the company is a manufacturer, a maker of product – basic handsets capable of call and text messaging. A new deal with Microsoft announced by CEO Elop, himself a former Microsoft executive, is logical in the circumstances but it means Nokia will be wholly dependent in the future on the unsexy Windows phone operating system.

What else would you expect from a phone?

What was significantly lacking in Stephen Elop’s announcement was any mention of the Nokia brand. It is badly in need of renovation. Its tagline “Connecting People” is lamely uninspiring and as dated as a vintage Mobira Talkman. AT&T’s “Reach and touch someone” was airing with similar sentiment more than 30 years ago.

But there was no overriding brand vision outlined to orient R&D to strategic customer outcomes and overcome the device-centric silo culture that has smothered innovation; there was no declaration that Nokia will lead its customers in ways that Apple and Google can’t match.

The calculation was that Nokia simply could not transform itself from a hardware-centric company to software and services company. So it has thrown in the towel. Its time has come and gone. Nokia has become commoditized — a fate that every technology company should fear.

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