It is a story still to be told about what happened and why but in April of this year some of the last words were being written and signatures put on the sale agreement of one of the telecommunication industries biggest disruptors – Nokia. In essence the purchase of Nokia Devices by Microsoft in April of 2014 for $7.5 Billion really did spell the end and when preparing to write this article other brands quickly came to mind such as the demise of Atari post the rise of Sony and others or what has been happening to Blackberry after the rise of Apple.
Interestingly enough the prices for old Nokia Phones are now being tagged as “vintage” on eBay with some handsets going for more than $500 (I’m hanging on to my for museum value in the next decade just as I will be my Atari and Blackberry as my Samsung Galaxy sits comfortably next to me!).
That said, there are lessons we can all learn from the Nokia giant – both its rise and fall. In doing so let’s look at the beginning:
Nokia’s history actually goes right back to 1865 when it was founded in what used to be the Grand Duchy of Finland and then incorporated in 1871 by its two founders Fredrik Idestam and Leo Mechelin. Like all large companies from this era Nokia didn’t start in telecommunications (that was still a way off on the invention cycle) and so they had their beginnings in Rubber. The business took it’s name “Nokia” from the tiny town where its factories were based and the original concept was to basically compete with the Russians (back in the 1800’s European nations were competing with Russia in the same way as America and China now compete).
In the 1900’s the business expanded into electricity and that was followed by the founding of Finnish Cable Works which led to the establishment of Nokia’s cable and electronics business. Like all major European companies the business struggled as a result of World War 1. As time went on (and another World War) the business had undergone some structural change and then in 1967, the three companies (which had been jointly owned since 1922) were merged to create Nokia Corporation.
As all organisations grow and develop they go through the lifecycle of diversification. Nokia, for example, used to be in the business of paper products, producing car tyres and footwear as well as communications cables and televisions. In fact there are some correlations with the Microsoft of today as they began to diversify out of just software to hardware and smart devices (remember Zune and of course there is xBox). In the 1990’s Nokia began to restructure itself again when they exited the consumer electronics business (Nokian Tyres had been split off in 1988) and the footwear business (1990). The paper business had already been sold in 1989. The focus turned to its mobile telecommunications business.
Then, in 2003, Nokia hit pay dirt. The release of the Nokia 1100 handset became the best-selling mobile phone and consumer electronics product of all time bank rolling the business towards the heights of super stardom. The 1 Billionth Nokia phone sold was an 1100 in Nigeria in 2005. Designed in California by Dimitre Mehandjiysky, the phone set a new standard but, unfortunately for Nokia, it was also the end of the golden weather. Because, just as fast as they had risen they were about to fall when, just two years later on June 29th 2007, Apple would release the first iteration of the iPhone.
What a lot of people didn’t realise was that the 1100 was not designed for a mass global market but more so for developing countries. The thinking behind it was the need for a phone that could match the fact a developing country telecommunications network was not as advanced as developed nations. While that was a good sales tactic it was always only a matter of time before it would unravel.
In fact some would argue that Nokia misread the emerging market trends around the portability of networks and the rise of WIFI and internet based telecommunications across Asia (initially and then into Africa and South America). In fact, the World Bank and the IMF were all investing in telecommunications networks in the very countries Nokia was targeting meaning that it would be only a matter of time before the other market trend would take hold. What was that other market trend? The rise of phones (such as the iPhone) that enabled people to do more than just speak on the phone such as taking photos (the early Sony Ericsson models were an example of that) and enabling people to listen to music.
And this is what lay at the heart of Nokia’s problems – remaining relevant with an eye fixed firmly on what the market trends were leading to and how competitors were responding.
So what are some of the lessons IT start-ups in general can learn from the rise and demise of a once great brand?
Always keep your eyes open for emerging market trends: just because you think you have made it (however big or small) unless you keep your eyes on the market trends you will eventually fail.
Innovate constantly: always ensure your products or services innovate ahead of the market trend become solid – this gives you a forward advantage in your release cycle – something Apple learnt (and continues to learn) as it competed with Samsung.
Persistence and resilience should be endemic in your thinking: you will be tested many times, as Nokia had been. The key is to remain persistent and resilient as often as possible. This can be done by always being ahead of the eight ball in terms of market trends.
Be confident and not arrogant: be confident in what you know and why you know it because you have researched the market both supply and demand. You become arrogant when you think you know it – in other words the “don’t you know who I am?”
There is no reason why companies cannot last the test of time and indeed, Unilever’s Paul Polman is actually a great example where he continues to build a business that will last another 100 years. By have a longer term vision, rather than just short term opportunism, you can hold a market for decades to come because you have set yourself up to know what’s on the horizon. I call that the futurism equation – where entrepreneurship and futurism come together – but more on that later!
Finally, there is still hope for Nokia and there is always a chance that a brand can be resurrected….it just takes innovative thinking.
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