It’s easy to look at Nokia over the last 18 months and forget that they were once the primary driver for so much phone and mobile software development for over two decades. In some countries of the world, low end Nokia phones are still the dominant brand. Yet it is in the high value, high profile smartphone market that Nokia has lost its mojo over the last few years.
Belated realization
When Stephen Elop first moved from Microsoft to Nokia, it raised eyebrows. When Elop issued his now infamous “burning platform” memo, many people assumed that he had been sent by Microsoft to prepare Nokia for takeover. What he actually did was make it clear that you could no longer compete in a global market by doing product development on a product by product basis and by not having a global product ecosystem around which you build your market.
Elop was, of course, correct. Nokia had started and owned the smartphone market with Symbian as the OS. At the time, it was competing with Palm and Microsoft who owned small operating systems and who were not able to boast anything like the number of mobile developers Nokia had. Nokia was also primarily a phone company whereas Microsoft and Palm were Personal Digital Assistant (PDA) vendors who were adding phone functionality to their devices.
Nokia was seen to be the player to beat and spent a lot of money looking at what else it could achieve in phone design. This meant creating a vast array of different phones for different types of users and markets as well as investing in mobile gaming and Internet tablets.
Unfortunately, this detracted from Nokia’s core business and it found itself supporting multiple operating systems, a large number of screen and device formats and a developer community that was being courted by other vendors such as Microsoft and Palm. Nokia’s often fractious relationship with the Symbian foundation and other users of the OS was glossed over when Nokia acquired control of Symbian but this didn’t solve Nokia’s problems.
More than a decade on and Nokia has finally realized that it needs to overhaul its operating systems and provide developers with a simpler and more consistent environment. Having lost a lot of its developers to Microsoft, Palm, Android and iOS, Nokia is also in need of new blood in its developer community. Without those developers, Nokia lacks the applications required to compete in the mobile phone market.
Ditching Symbian and opting for Windows Phone not only brings Nokia a large developer community but also aligns it with another vendor who has struggled to consolidate its early successes in the Smartphone market. Nokia has now shipped its first Smartphone, the Nokia Lumia, based on the Windows Phone platform.
The hoped for lifeline?
Will this save Nokia? Good question and one to which no-one will know the answer for several months to come. The first target will be the Christmas sales figures which we will see in January. At Mobile World Congress, Nokia will be unveiling a raft of new phones which will give a clearer indication of Nokia’s future product plans.
There are many things Nokia needs to do in order to be saved. The first is to create smartphones that people want, with good feature sets, easy synchronisation and good battery life. The next is a wide reaching applications market appealing to both the consumer and the business user.
For Nokia to achieve this, it will mean relying on a developer audience that it can no longer own. Gone are the days when being a fully paid up member of the Nokia Developer Community meant something. From now on, any application that runs on the new Nokia Lumia phone will also run on any Windows based Smartphone from other vendors. Nokia also has to decide if it wants to build its own apps market where it can take a percentage of the application sales, or if it will concede the apps market to Microsoft.
Put simply, as someone who used to be a member of Nokia’s developer community I see nothing here that would persuade me to rediscover my long forgotten love of developing for Nokia devices. Nokia could try using its test facilities to engage with developers but this won’t stop them deploying their applications onto other vendors’ phones.
So how will Nokia differentiate itself from the pack? It can’t be with built-in features as these are determined by the operating system. Nokia could choose to go down the application bundling route in the same way as laptop vendors but the applications need to be good enough to make a difference, not be seen as bloatware by buyers and be fully supported.
Nokia could also look at specific hardware elements such as more memory, higher quality phone, better battery life and accessories. Nokia has a history in all these areas but they all have an impact on the Bill of Materials when manufacturing the phone. That influences price and profitability and the phone market is already highly leveraged with the exception of Apple.
Nokia could also decide to target the premium device market which would allow it to charge more for the phone. This has worked for Apple but Nokia will have to do a lot of bridge building and marketing to convince users that it really is a premium brand again.
Opportunities not to be missed
One question that hasn’t been addressed is “will Nokia only support Microsoft and ignore Android and its existing Symbian users?”
Shortly after the Nokia and Microsoft agreement was announced, Elop told the press “This Windows phone ecosystem, more than anything else, must compete effectively with Android.” Elop also stated at a separate briefing, “our number one priority is to compete with Android.”
It is now public knowledge that as part of the relationship, Nokia agreed to replace Symbian with Windows Phone. It is also public knowledge that that Microsoft paid Nokia $1bn when the agreement was signed.
Nokia and Microsoft have also agreed to use their patents to attack existing Android users, something which has been brought into the public arena by Barnes and Noble who has made submissions to the AntiTrust Division of the US Department of Justice.
However, the door isn’t necessarily closed to other options. When the agreement with Microsoft was signed, Nokia said that the agreement to replace Symbian with Windows Phone 7 would see Windows Phone 7 at the core of its principal smartphone strategy. This is an important concession. Nokia is still the dominant mobile phone vendor for entry level devices and Windows Phone 7 will not run on these devices.
If Nokia has any sense, it will take the same pragmatic view as HTC, Samsung, Sony Ericsson and other handset vendors and target its devices at a wide range of users using the right mobile phone operating system and range of applications. If it doesn’t then it is a complete hostage to Microsoft’s fortunes in this market.
Heading off a sense of déjà vu
The quality of Microsoft’s phone software and update process is also questionable. The recent debacle of Microsoft’s Phone OS update is a pertinent example of this. Days of problems were followed by upset users, yards of negative comments in print, on the web, in blogs and on TV. Sadly Microsoft cannot guarantee that this will not happen again.
It begs the question as to what sense does it make for Nokia to tie itself to this sort of single point of failure? The company already has an unhealthy experience of this with its Symbian platform, a repeat strategy would seem somewhat foolhardy.
While Windows Phone developers have gained a new platform, it is far from clear if Nokia shareholders have been saved from drowning.