From 51% of the global mobile market to none in under a decade – The story of Nokia
Nokia was founded in 1865 as a paper mill in Finland and transitioned into the mobile phone business in the 1980s. By the late 1990s and early 2000s, Nokia had become the world’s leading mobile phone manufacturer. The company was renowned for its durable and user-friendly mobile phones, which featured a wide range of models catering to different market segments.
A major reason why Nokia grew against its main competitors at the time, Motorola, and Ericsson, was that they managed to cater to the consumer youth market and fashion-oriented consumers, most significantly with the Nokia 5110 and 3210 handsets which featured a large range of colourful and replaceable back-covers called Xpress-on. One of the earliest fashion phones in 1992, from Swiss watchmaker Swatch, was based on Nokia’s 101 handset. The company would also form the Vertu division, creating luxury mobile handsets. At its peak, Nokia manufactured and sold a wide range of mobile phones, from basic feature phones to high-end smartphones. Nokia’s iconic devices like the Nokia 3310, for example, were known for their affordability and durability and were often priced in the lower to mid-range segment making it a very popular phone. Another major reason for Nokia’s dominating market share was the acquisition of Motorola in 1998. When Nokia overtook Motorola, they became the world’s largest mobile phone brand. At its peak in 2007, Nokia had 51% of the global market share in mobile phones. To put that into context, Apple had roughly 29% of the global market share in 2023.
While Nokia had excelled in the feature phone market, it struggled to adapt to the paradigm shift brought about by smartphones and the introduction of the iPhone. Nokia initially dismissed the potential of smartphones, underestimating their impact on the market. Several key mistakes by Nokia’s leadership contributed to the downfall from the world’s largest mobile phone brand to the end of Nokia’s mobile phone era in 2014.
Critical missteps
Nokia’s leadership failed to recognise the potential of the new technology. They did not consider how the technology a smartphone contained would make life easier for the consumers. The company initially dismissed the threat posed by these new devices, clinging to its traditional feature phone business model. This complacency was reflected in decisions such as the failure to embrace touchscreens and the delayed adoption of the Android operating system. As a result, Nokia’s market share plummeted, and its dominance eroded rapidly.
In an attempt to regain relevance, Nokia entered a partnership with Microsoft in 2011, adopting the Windows Phone platform. However, the alliance failed to reinvigorate Nokia’s standing in the market. The company’s inability to match the innovation and ecosystem of competitors like Apple and Android-based manufacturers led to a continued decline.
By 2014, Nokia’s mobile phone business faced insurmountable challenges, and Microsoft acquired Nokia’s mobile market for 7 billion euros in 2014. However, Microsoft’s plans failed, long story short, in 2015 Microsoft wrote off $7.6 billion as a consequence of the Nokia acquisition and laid off 7,800 employees and a roughly $800 million restructuring charge, writing down the vast majority of the phone business purchase price.
Several former Nokia executives have shared their thoughts on the overwhelming transformation that the company went through. I find one most interesting. The iPhone almost instantly dethroned Nokia and any other runners-up. The director of user experience management at Nokia reports himself to have been explicitly tasked with creating an “iPhone killer” for the next year. This sounds similar to Kodak’s strategy, they also wanted to kill what customers wanted. But as both stories tell, that does not work.
Nokia, once an undisputed leader, had become a cautionary tale of leadership miscalculations and technological myopia.
Why did Nokia fail big?
- Nokia’s operating system, Symbian, was outdated compared to Apple’s iOS and Google’s Android. Nokia was slow to develop a competitive smartphone operating system.
- Nokia continued to produce a wide range of feature phones while failing to allocate sufficient resources to develop competitive smartphones. This lack of focus hindered innovation where it would have matters in regard to what customers wanted.
- Nokia’s corporate structure was known for its bureaucracy and slow decision-making processes, making it challenging to respond quickly to market changes.
- In 2011, Nokia entered a partnership with Microsoft to use the Windows Phone operating system for its smartphones. However, this move was seen as too little, too late, as Apple and Android had already gained a significant market share.
- Nokia also had a weak brand perception. Nokia’s brand perception declined over time due to the lack of innovation and failure to keep up with the competition, leading to a loss of customer trust and loyalty.
- Nokia failed to communicate effectively. They had ineffective marketing and communication and hence Nokia failed to effectively market its products and communicate its value proposition to consumers, leading to a lack of awareness and interest in its products.
Avoid making the same mistakes as Nokia
The Nokia story imparts crucial lessons for organizations navigating the fast-paced tech landscape:
Embrace innovation:
Nokia’s reluctance to embrace touchscreen technology and the Android OS limited its ability to compete in the smartphone era.
Anticipate shifts in market trends:
Leaders should continually assess the market landscape and be proactive in anticipating shifts in consumer preferences and technological advancements.
Adapt quickly to change:
Nokia’s delayed response to the smartphone revolution demonstrated the importance of agility in adapting to evolving technologies.
Avoid complacency:
Leaders should guard against complacency and always be prepared to challenge existing business models to stay relevant.
Communicate why not what:
Learn to always communicate the why not the what and make sure you use A/B testing to measure how effective your communication is.
Nokia’s fall from grace serves as a poignant reminder that even industry leaders can falter if they fail to heed the warnings of technological disruption. The story of Nokia underscores the imperative for organisations to remain vigilant, agile, and forward-thinking to thrive in an era of rapid technological evolution. The story of Nokia invites leaders to learn from the past, adapt to the present, and shape the future of their organizations by learning to adapt to changing market conditions before it´s to late.
Let’s finish on a positive note – never give up!
Few know that Nokia is trying to re-enter into Mobile. In recent years, Nokia has discreetly made its way back into the mobile market, although with a modified approach. While not a household name in the smartphone arena, Nokia has been crafting a niche for itself by emphasizing aspects such as durability, reliability, and streamlined user experiences. While Nokia’s recent efforts to re-enter, the mobile market might not have garnered the attention of its past endeavours, the company’s strategic choices and focus on specific market segments suggest a calculated approach to redemption. However, to be successful Nokia will need to place much higher value on adaptation, addressing consumer needs, and embracing collaboration. Whether Nokia can regain a substantial foothold in the mobile market remains to be seen.
Disruption is everywhere and affects everyone.
The key to being successful is being able to adapt and change when circumstances do.
