Learning from Nokia’s Mistakes

Microsoft owned Nokia has been changing quite a bit in the last few months, but the Fox can’t help remember this original post from July 23, 2012 when I think about how far they have to go to make Microsoft a strong player in the mobile space. The Fox truly wishes them the best.

Nokia – the former largest cell phone maker on the planet – spent $40 billion on research and development in the last decade, nearly 4 times what Apple spent in the same period. Seven years before Apple released the iPhone, Nokia had designs of color touch-screen phones with the internet and e-mail. But consumers never saw any of these devices. Nokia’s market share has dropped from 40.4% in 2007 (when the iPhone was released) to 21% in the first quarter of 2012.

The Wall Street Journal just released an article looking at the internal culture and fumbled processes that have kept Nokia from maintaining their lead in mobile technology. Let’s take a gander shall we?

In late 2004, U.S. manufacturer Motorola scored a world-wide hit with its thin Razr flip-phones. Nokia weathered criticism from investors that it was expending too much effort on high-end smartphones while its rival ate into its lucrative business selling expensive “dumb” phones to upwardly mobile people around the world.

After Olli-Pekka Kallasvuo, Nokia’s former chief financial officer, took the helm from Mr. Ollila in 2006, he merged Nokia’s smartphone and basic-phone operations. The result, said several former executives, was that the more profitable basic phone business started calling the shots.

I believe this strategy is called “selling the future to cling to the past.” Surely this recipe will work for someone, someday.

Nokia engineers’ “tear-down” reports, according to people who saw them, emphasized that the iPhone was expensive to manufacture and only worked on second-generation networks—primitive compared with Nokia’s 3G technology. One report noted that the iPhone didn’t come close to passing Nokia’s rigorous “drop test,” in which a phone is dropped five feet onto concrete from a variety of angles.

The mobile world had just changed 180 degrees, but Nokia was still using its same old measuring stick. Sounds eerily similar to RIM’s insistence that a physical keyboard would always be the most important feature on a phone.

One team tried to revamp Symbian, the aging operating system that ran most Nokia smartphones. Another effort, eventually dubbed MeeGo, tried to build a new system from the ground up.
People involved with both efforts say the two teams competed with each other for support within the company and the attention of top executives—a problem that plagued Nokia’s R&D operations.

Attacking the problem from two fronts? Good idea. Making the teams fight for executive support and funding? Well, that idea falls somewhere short of good now doesn’t it.

In 2010, for instance, Nokia was hashing out some details of software that would make it easier for outside programmers to write applications that could work on any Nokia smartphone.

At some companies, such decisions might be made around a conference table. In Nokia’s case, the meeting involved gathering about 100 engineers and product managers from offices as far-flung as Massachusetts and China in a hotel ballroom in Mainz, Germany, two people who attended the meeting recall.

“What struck me when we started working with Nokia back in 2008 was how Nokia spent much more time than other device makers just strategizing,” Qualcomm Chief Executive Paul Jacobs said. “We would present Nokia with a new technology that to us would seem as a big opportunity. Instead of just diving into this opportunity, Nokia would spend a long time, maybe six to nine months, just assessing the opportunity. And by that time the opportunity often just went away.”

Cornering the market on bureaucracy never seems to be a good idea.

Fox Tip: Great ideas, exceptional talent, and more money than you can count won’t overcome an unhealthy organizational culture.

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