The Decline of Nokia - What Happened?
Why Technology Strategists Rewatch This 11-Minute Nokia Dominance-to-Decline Case Study Nokia sold 472 million cell phones in 2008 capturing 38.6% market share—"over a third of all cell phones were made by Nokia"—while 2018's Samsung and Apple combined for only 32%. Seven of top ten best-selling cell phones ever were Nokia models. Yet by 2012 they dropped to number two spot, 2011 operating profits fell to negative $1 billion from 2007's $8 billion peak. The smartphone complacency trap at 06:43 exposes misaligned incentives: traditional cell phones "producing highest revenue at lowest cost" after decade of efficiency optimization, while "smartphones were new, more money needed for research and development, plus people didn't even seem to want them—typically bought for business use." When iPhone launched 2007, Nokia held 50% smartphone share versus Apple's 5%—"obviously putting some resources into making smartphones but many would argue wasn't nearly enough, just too comfortable in their position." The 2011 CEO memo at 08:33 reveals belated recognition: "First iPhone shipped in 2007 and we still don't have product close to their experience, Android came on scene just over two years ago and this week overtook our leadership position—unbelievable." Admitted Symbian operating system "proven to be non-competitive in leading markets like North America, proving increasingly difficult environment to develop, if we continue like before we will get further and further behind." The Microsoft acquisition catastrophe at 10:34 quantifies strategic failure: Microsoft purchased Nokia phone division for $7.2B in 2014, "only one year later wrote off $7.6 billion from deal and announced 7,800 job cuts," sold for $350M in 2016. Today Nokia has 1% smartphone market share. Strategic lesson: maximizing current profit streams while underinvesting in disruptive transitions creates irreversible competitive displacement—hardware excellence without software capability becomes worthless when platform economics shift. 5 Key Timestamps: [04:25] The Peak Dominance Metrics – "Best-selling cell phone of all time was made by Nokia but number two best-selling also made by Nokia—looking at top 10 list, Apple Samsung and Motorola each occupy one space while other seven all go to Nokia." 2008 peak: "Nokia sold 472 million cell phones, market share 38.6% meaning over a third of all cell phones were made by Nokia." Comparison: "2018 Samsung sold 295 million and Apple sold 209 million, Samsung held 19% market share while Apple's was 13.4%"—Nokia's goal was 40% they never hit [06:43] The Profitable Complacency Trap – "Cell phones we associate with Nokia were not smartphones but they were making them lot of money—public wanted them and Nokia was brand everyone wanted, plus had been making these similar phones for more than a decade to point where doing it very efficiently at very low cost." Smartphones conversely "were new, more money needed for research and development and production costs overall since far from perfected, plus people didn't even seem to want them—typically bought for business use, obviously putting some resources but many would argue wasn't nearly enough, just too comfortable in their position" [07:12] The Operating System Strategic Blindness – When iPhone launched 2007, "end of that year 5% of all smartphones sold by Apple and 50% were sold by Nokia—didn't really care." Nokia's "strengths were making hardware, actual phone rather than software that went into it." Symbian operating system "proving difficult, just took too long to produce phones that used it, led to rush products and operating systems that had bugs and weren't very pleasant to use—Nokia had good phones but bad operating systems and since that's what people cared about now, gravitating toward better ones" [08:33] The 2011 CEO Memo Belated Recognition – February 2011 internal memo outlined major issues: "First iPhone shipped in 2007 and we still don't have product that is close to their experience, Android came on scene just over two years ago and this week they overtook our leadership position in smartphone volumes—unbelievable." Admitted "we fell behind, we missed big trends and we lost time, at time we thought we were making right decisions but with benefit of hindsight we now find ourselves years behind." Symbian "proven to be non-competitive in leading markets like North America, proving to be increasingly difficult environment to develop, if we continue like before we will get further and further behind" [10:34] The Microsoft Acquisition Write-Off Disaster – "Days after memo Nokia announced they were going to shy away from Symbian to switch to Windows Phone 7 made by Microsoft, 2014 Microsoft purchased phone division of Nokia for $7.2 billion dollars." Result: "Most people view this as complete disaster—only one year later Microsoft wrote off $7.6 billion dollars from deal and announced 7,800 job cuts." Microsoft "sold it for $350 million in 2016, today they're trying to make comeback with one percent share, one percent in smartphone market"
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