Why Nokia Failed? What happened to Nokia In A Nutshell

Nokia is a Finnish telecommunications, consumer electronics, and information technology company founded in 1865 which by 1998, had overtaken Motorola to become the world’s largest mobile phone brand. The Nokia brand is now controlled by HMD Global – a company founded by former Nokia employees that released a line of smartphones in 2017. The company’s failure to keep up with software-based iOS and Android operating systems made it lose its market leader position.

Background

Nokia is a Finnish telecommunications, consumer electronics, and information technology company founded in 1865 by Fredrik Idestam, Leo Mechelin, and Eduard Polón.

Nokia is perhaps best known for its mobile phones which dominated the industry before the invention of the smartphone. Not only were Nokia products built to last with long battery life, they were also a fashion statement.

In 1998, Nokia overtook Motorola to become the world’s largest mobile phone brand. Nine years later, it amassed a staggering 51% of the total global market share.

As is often the case, however, a meteoric rise is followed by a similarly meteoric fall. 

So what happened to Nokia?

Hardware focus

Nokia was great at building device hardware, but a device built on software was the way of the future.

When the company realized this fact, Apple and Android had already developed their own app-based software and were years ahead.

Nokia would forever remain trapped by its unwieldy, device-centric operating system called Symbian. With each new Nokia mobile phone, there were release delays as code had to be developed and then tested. By 2009, the company was using 57 different and incompatible versions of its archaic operating system.

And indeed, in its falling history, Nokia also counted one of the worst selling phones. The idea was pretty good (combining gaming with phones), but the UX and the timing not as good:

Operating system resistance

When Google entered the smartphone market in 2008, peers such as Samsung, Huawei, and Motorola switched to the Android operating system to remain competitive.

Nokia remained reluctant to do the same until 2011 when it partnered with Microsoft to secure Windows Phone as its primary OS. Unfortunately, Android can now be found in 80% of all smartphones while Windows Phone no longer exists.

Nokia belatedly switched to Android in 2014, but the damage had been done.

Mismanagement and poor culture

In a paper titled Distributed Attention and Shared Emotions in the Innovation Process: How Nokia Lost the Smartphone Battle, researchers published the results of 76 interviews with Nokia management staff.

Among the revelations were that:

  • Nokia suffered from organizational fear with temperamental leaders and frightened middle managers being the status quo.
  • Some management staff intimidated their subordinates by accusing them of not being ambitious enough. Others lacked technical competence which influenced their assessment of technological limitations during goal-setting. In comparison, similar positions at Apple were all held by competent engineers.
  • Senior leadership was afraid of not meeting quarterly targets.
  • Executives were also afraid to publicly acknowledge or comment on the inferiority of Symbian.
  • Top executives were wary of admitting inferiority to Apple for fear of losing investors, suppliers, or customers.

Aside from the poor culture, the decision to move from an organizational structure to a matrix structure in 2004 also harmed Nokia. Power struggles ensued with many key personnel departing the company soon after.

Nokia today

Unlike many other companies, Nokia’s failure to innovate did not lead to bankruptcy or acquisition.

Today, Nokia appears to have left mobile phone development in the past. The Nokia brand is now controlled by HMD Global – a company founded by former Nokia employees that released a line of smartphones in 2017. 

The company still manufactures hardware and is involved in the roll-out of the 5G wireless network, among other things. 

It also earns a considerable income from the hundreds of patents it owns and licenses to mobile phone vendors.

Key takeaways:

  • Nokia is a Finnish telecommunications, consumer technology, and information technology company founded in 1865. It enjoyed 51% of the global market share for mobile phones in 1998.
  • Nokia’s device-based hardware system was cumbersome and outdated, but the company persisted with it while competitors developed the software-based iOS and Android operating systems. By the time Nokia phones offered Android, the company had been left behind.
  • Corporate mismanagement within Nokia was rife and culture suffered as a result. Internally and externally, the company failed to acknowledge its diminishing relevance and market share.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"