Nokia is a world renowned telecommunications corporation that connects over 1. 3 billion people. Nokia’s mission is simple: Connecting People. Their goal is to build great mobile products that enable billions of people worldwide to enjoy more of what life has to offer. The company started out producing wood pulp and paper, the most influential communication technology in history, in Finland in 1865. By the 1960’s Nokia is a booming business with large production of rubber, cable, forestry, electronics, and power generation, and by the late 1980’s the company was among the very largest T. V. producers in Europe.
Nokia launched the mobile phone era in the 80’s by introducing the first international cellular network and started production of the first vehicle cellular phone. Over the next couple of decades Nokia’s market share was huge and dominated the cellular device market. As the new millennium approached, everything about the market changed. The internet went mobile and consumers wanted phones with all new capabilities.
Phones are no longer just for calls, and with these changes came an increasingly dynamic and competitive environment. With this intensified competition the development of the Smartphone is born. Nokia’s position in the mobile phone segment is now being challenged by the iphone and android devices. For the first time Nokia is not in control of the market, and as smartphones progressed, Nokia found a declining market share. There was a clear and obvious need for strategy adaptation, but what would the best path be?
The change would be the end of an era for Nokia. Prior to February 2011, Nokia’s smartphone strategy was to use the Symbian and MeeGo platforms. These are linked by a common developer environment (Qt) and service layer (Ovi). Nokia would use MeeGo in the highest end devices and Symbian in everything else. But the termination of the Symbian platform was made part of the strategic plan, as MeeGo would gradually erode Symbian away. In the past Nokia had a “go at it alone” attitude that was a driving force in their smartphone strategy.
The company wanted to control both the hardware and software areas of production. But as the company learned, the market is too complex for this approach. Elop, Nokia’s CEO, stated that “Nokia has failed to keep pace with market disruptions from its rivals and is therefore lacking in competitiveness, that the battle of devices has been superseded by a battle of ecosystems, and that Nokia has lacked accountability and leadership to drive the company through changing times”.
The ecosystem he is referring to not only includes the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications, and many other things. The presence of these ecosystems becomes extremely important in analyzing the strategic options Nokia has for its future. Which path would give Nokia the best chance of building a sustainable and viable ecosystem around their products? In examining their options Nokia developed three different decisions they could make.
First option would be to continue with Symbian and MeeGo. Obviously they weren’t very successful with these platforms at the time but they were not fully developed yet, and instead of completely changing operating systems, they could build upon the already developed platforms and proceed with next generations of these originals. It was apparent that MeeGo was not ready to take on the role it was envisioned for but it could possibly be by the time another ecosystem was developed. They would also have to consider if these platforms had been tarnish or already discredited by their overtaking competitors.
The company would probably have to make a visible change to disassociate with these failures. But more importantly a major change is needed to accumulate a viable ecosystem for Nokia. No single company can build an entire ecosystem on its own, so Nokia cannot provide itself with opportunities to win this battle between their rivals with this option. Neither of their biggest two competitors operate completely within and it is unrealistic to think Nokia could compete with companies that have so much more accumulated assets.
So this first option is not very promising. Second option would be to release an Android device. The biggest advantage to this option would be that Android already has an existing ecosystem. A massive downfall would be that Nokia would be at the mercy of Google. Nokia is a company that has strived on being self-sufficient and this would not be ideal. Google would control too much of the value and differentiation ability, especially in services and advertising. Nokia does not want to join an ecosystem, rather help build one.
The company believes they can still differentiate its devices from its rivals and would much rather have the value sharing associated with building a new ecosystem than of just joining one. Also, Android is having difficulties of their own’ and implementing this plan would not make a good long-term decision. This option just does not make very good business logic for Nokia. The third option would be to enter into a partnership with Microsoft and develop a new ecosystem that is mutually beneficial for the two corporations.
This is the option that Nokia actually chose to implement. There are many reasons why this was the best decision for Nokia but considering the impracticality of the first two options it was the only realistic one. Obviously Nokia will provide the hardware while Microsoft will provide the software. The most common criticism with Symbian was an inadequate UI/UX, and the design language of Metro, Microsoft’s UI, completely fixes that problem. But also, Microsoft will depend on Nokia’s expertise as it continues development of the Windows Phone.
The partnership sees Nokia adopting the new Windows 7 operating system, with the Symbian platform gradually being sidelined. To create a viable ecosystem Nokia and Microsoft are also combining services assets to drive innovation. Nokia Maps, for example, will soon be at the heart of key Microsoft assets such as Bing and AdCenter, and Nokia’s application and content store will be integrated into Microsoft Marketplace. Similarly, Microsoft will provide developer tools, making it easier for application developers to leverage Nokia’s global scale.
The Nokia/Microsoft partnership simply just makes sense. The companies are complimentary of one another with very little overlap excluding the Windows Phone. Each company contains valuable assets the other can greatly benefit from making a mutual and equal relationship. While there is still much work needed to be done within the partnership in developing a smartphone that can effectively compete in the market, Nokia has positioned itself in a way that success is much more attainable. Since the partnership, Nokia has launched the Lumia 800 and Lumia 710, both with Windows 7.