Nokia Myopia

“We didn’t do anything wrong, but, somehow, we lost.” – Stephen Elop, Nokia CEO, 2013. What do you think about when you hear this quote? Do you feel sympathy, pity or indifference? What if you were a shareholder or customer of Nokia’s prior to 2013? Would you feel angry, disappointed, frustrated, or duped? What if I told you that Nokia lost 9/10ths of their market cap between 2007 and 2013, negatively impacting your retirement or institutional accounts? As you can see, the deeper I dig into Nokia’s cellular business the less credence we can give to Mr. Elop’s emotionally charged statement. Marketing myopia and a host of strategic failures are to blame for this failure in leadership as well as Nokia’s decline post Great Recession of 2008.

Nokia suffered from all types of marketing neglect and exemplifies the four conditions of Levitt’s self-deceiving cycle; “1. The belief that growth is assured by an expanding and more affluent population; 2. The belief that there is no competitive substitute for the industry’s major product; 3. Too much faith in mass production and in the advantages of rapidly declining unit costs as output rises; 4. Preoccupation with a product that lends itself to carefully controlled scientific experimentation, improvement, and manufacturing cost reduction.” (Levitt, 1960)  At the height of Nokia’s mobile phone reign, 468 million units were sold in 2008 and they thought they could not be touched. They thought their future was assured by previous sales and growing mobile phone usage in more affluent emerging markets. They did not believe they could be displaced by newer touch-screen technology from Apple, Samsung and Android phones. Nokia failed to see the value of software over hardware, relying solely on their brand. Meanwhile, Apple, Samsung and Android started changing the game and the field. (Baassiri, 2018) Nokia produced massive quantities of phones before and after the 2008 recession to achieve scale but did not realize their sales did not keep up with changing customer needs. This was to blame for the losses in stock price index and market cap the ensuing years. Finally, they became preoccupied with a Symbian app store enabled product without any experience in marketing it or even software platform experience, unlike Apple and Android. (Shaughnessy, 2013)

However, Apple, Samsung and Google are not the reasons Nokia failed. “Between 2001 and 2005, a number of decisions were made to attempt to rekindle Nokia’s earlier drive and energy but, far from reinvigorating Nokia, they actually set up the beginning of the decline… the reallocation of important leadership roles and the poorly implemented 2004 reorganization into a matrix structure. This led to the departure of vital members of the executive team, which led to the deterioration of strategic thinking.” (Doz, 2017) Even Levitt realized organizations are doomed to fail without strategic, innovative, visionary leaders at the helm in 1960! This was an organization destined to fail and a new entrant with better innovation was the nail in their coffin.

What Nokia did not expect was the unexpected. None of Nokia’s direct competitors at the time had touch screen technology and software supported phones. “But they (Apple and Google) were making adjacency moves of a very radical nature - and at that time no company in their right mind made big adjacency moves likes this into totally new markets, like from ads to mobile and computing to mobile.”(Shaughnessy, 2013) This is disruption as we know it today and what will be the giant killers of tomorrow. Nokia was the proverbial Cyclops of giants focused solely on phones and not communications. They somehow survived this onslaught to ask Microsoft for what they sorely lacked; platform expertise and OS capability. Ultimately, Microsoft ended up buying Nokia’s mobile business in 2013, taking it for a ride and selling it off to HMD Global in 2016. Nokia lost its hermit kingdom of convenient, reliable phones and became a serf in Microsoft’s kingdom of software-as-a-service. Now, it is safe to say Nokia is a slave in HMD Global’s smart banana phone republic with no prospect of regaining its former Finnish glory. What is for sure is Nokia executives did not read Marketing Myopia by Theodore Levitt.

References

Baassiri, R. (2018, Oct 10). Complacency Will Be the Death of You. Retrieved from Forbes: https://www.forbes.com/sites/forbesbooksauthors/2018/10/10/complacency-will-be-the-death-of-you/#1421a5586778

Doz, Y. (2017, Nov 23). The Strategic Decisions That Caused Nokia's Failure. Retrieved from Insead.edu: https://knowledge.insead.edu/strategy/the-strategic-decisions-that-caused-nokias-failure-7766

Drath, K. (2016, Nov 28). We didn’t do anything wrong, but somehow, we lost. Retrieved from Leadership Choices: https://www.leadership-choices.com/de/thinkabout/article/we-didnt-do-anything-wrong-but-somehow-we-lost.html

Levitt, T. (1960). Marketing Myopia. Harvard Business Review, 138-149.

Shaughnessy, H. (2013, Mar 8). Apple's Rise and Nokia's Fall Highlight Platform Strategy Essentials. Retrieved from Forbes: https://www.forbes.com/sites/haydnshaughnessy/2013/03/08/apples-rise-and-nokias-fall-highlight-platform-strategy-essentials/#704aa3b66e9a

Steinbock, D. (2013, Sep 17). Nokia's failure: No flexibility in US, emerging markets. Retrieved from CNBC.com: https://www.cnbc.com/2013/09/17/nokias-failure-no-flexibility-in-us-emerging-markets.html