Wednesday, April 19, 2017

Cisco Lessons for the Mobile War; the case of Nokia

“Our success at Cisco has been defined by how we anticipate, capture, and lead through market transitions”. This is how John Chambers -CEO of Cisco Systems- referred to their strategy for leading a large corporation when new technologies threaten to change the industry projections.

The success in navigating unchartered waters might not be the norm for most big corporations; as described by Christensen in his book “The Innovator’s Dilemma”, big, well managed companies are more vulnerable to fail at adapting to market changes, especially when those changes comes from disruptive innovation -technological advances that not only offer better products at better prices, but offer alternative solutions that are unexpected and seen as risky and less profitable.

According to Chambers, besides fostering a culture of listening their customers and having a start-up mentality (Cisco allocates around 15% of their revenue in R&D), his company have three main ways of adaptation; early R&D development of the technology, acquisition of new companies, and internal start-up generation -companies that are born inside Cisco but are fully independent in its strategical operations. Even though not always these actions have proved to be successful, in general have allowed the company to keep up with the industry changes and to stay ahead of technological advances.

A different situation has been experienced by Nokia, the company that became internationally known in the 1990’s when it took the mobile industry by storm after deciding to focus only in telecommunication products and sell its other units of television, tires, data and power.
Only ten years later, the prospects for Nokia seemed completely different. The development of wireless technology saw the rapid improvement of mobile devices and the introduction of the Iphone by Apple in 2007 changed the industry to present. Regardless of Nokia’s R&D expenditure which reached 13% during 2003 and 2004 and again almost 16% in 2012; the company ended up selling its mobile device division in 2014.

According to the article “5 reasons why Nokia lost its handset sales lead and got downgraded to junk” an important factor that would explained the company’s failure was its slow reaction to the industry changes, taking them almost 4 years to launch a windows phone after giving up with the launching of upgraded versions of its once successful Symbian Series. By then, Samsung was already a strong competitor that would battle over Apple for each new customer and Huawei was at the lower end marketing cheaper smartphone alternatives.

Even though Nokia fought back with more research and several mobile releases that would incorporate gaming as the main feature, they failed to listen to their consumers, and more importantly failed to seize the dimension of the technological shift their market was going through. Smartphones launched by Apple and Samsung were simply superior and conceptually they were changing the way consumers would use their phones as per the introduction of applications that were far beyond just gaming features. Personally I think it was such a sudden shift that Nokia had little opportunities to react; the chance for them to bring their own innovation to the market was minimal, so the only alternative left  was to become a  “follower” by partnering with leaner companies that could react faster like Huawei. I assume that was not an option for Nokia, but at the end, the result seemed to be much more harmful to the company than having to swallow the pride and adopt a foreign technology.

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