Sunday, June 17, 2012

Nokia’s downfall

Hirokazu Kitahara

Nokia shared a severe outlook of its smartphone market and announced an additional restructuring plan to cut 10,000 jobs and streamline to save cost. [1] The decline of Nokia began with the emergence of a smartphone. Although the frontrunner of a smart phone was Nokia, the second row runners, Apple and Google took the front line with iPhone and Android terminal respectively. As of 2010, Nokia occupied 33% of worldwide smartphone share, but it becomes only 15.7% in 2011. [2] What did cause this downfall of Nokia?

Based on Seven Ways to Fail Big, it seems to be caused by a staying the course and wrong technology bets at least at this moment. [3] Firstly, they keep on focusing their Symbian OS too much. Currently three-quarters of smartphone’s OS is occupied by iOS and Android, but Nokia did not apply for that mainstream and adhered on their Symbian OS. The performance is not inferior to that of other OSs, but it failed to obtain the support of third party developer because of its inferior upload system of Apps. Nokia did not change their OS strategy for smartphone and the delay eroded their market share.

The next reason of Nokia’s decline is the adoption of Windows Phone (Microsoft’s OS for smartphone) as OS for Nokia made terminals. In February 2010, Nokia‘s new CEO, Stephen Elop, made a decision to make a strategic alliance with Microsoft and shift the input from Symbian to Windows Phone. The market share of Windows Phone is only about 4%, so it is hard to make enough profit to substitute Symbian. At least now the choice to bet on Windows Phone seems to be wrong technology bets. Of course we know it takes time to get fruit from the big shift, but the stock market is not tolerant to wait so long. [4] Nokia must accelerate their speed of change.

[1] Moody's downgrades Nokia to junk status
[2] Global mobile statistics 2012
[3] Paul B. Carroll and Chunka Mui. Seven Ways to Fail Big. HBR. September, 2008.
[4] Microsoft 'mulled Nokia buyout, ran away screaming'

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