Thursday, July 19, 2012

Nokia Had The Vision

Image representing Nokia as depicted in CrunchBase
Image via CrunchBase
More than seven years before Apple Inc. rolled out the iPhone, the Nokia team showed a phone with a color touch screen set above a single button. The device was shown locating a restaurant, playing a racing game and ordering lipstick. In the late 1990s, Nokia secretly developed another alluring product: a tablet computer with a wireless connection and touch screen—all features today of the hot-selling Apple iPad..... The gadgets were casualties of a corporate culture that lavished funds on research but squandered opportunities to bring the innovations it produced to market..... This year, Nokia ended a 14-year-run as the world's largest maker of mobile phones..... Nokia is losing ground despite spending $40 billion on research and development over the past decade—nearly four times what Apple spent in the same period...... its research effort was fragmented by internal rivalries and disconnected from the operations that actually brought phones to market....... Research In Motion Ltd. RIMM +1.01% had a dominant position thanks to its BlackBerry email device, but it hasn't been able to come up with a solution to the iPhone either...... As a result, the company has lost about 90% of its market value in the past five years, and its CEO is trying to convince investors the company isn't in a "death spiral." ....... "When people say the iPhone as a concept, a piece of hardware, is unique, that upsets me." ..... grew complacent because of its market dominance. ..... On Sunday, Nokia cut the U.S. price of the phones in half, to $50...... The company started out in 1865 as a lumber mill. Over the years, it diversified into electricity production and rubber products. ...... At the end of the 1980s, the Soviet Union's collapse and recession in Europe caused demand for Nokia's diverse slate of products to dry up, leaving the company in crisis. Jorma Ollila, a former Citibank banker, took over as CEO in 1992 and focused Nokia on cellphones....... Nokia factories eventually sprang up from Germany to China, part of a logistics machine so well-oiled that Nokia could feed the world's demand for cellphones faster than any other manufacturer in the world. Profits soared, and the company's share price followed, giving Nokia a market value of €303 billion at its peak in 2000......... Early on, the CEO started laying the groundwork for the company's next reinvention. Nokia executives predicted that the business of producing cellphones that do little but make calls would lose its profitability by 2000. So the company started spending billions of dollars to research mobile email, touch screens and faster wireless networks....... 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. ..... Nokia's smartphones had hit the market too early, before consumers or wireless networks were ready to make use of them. And when the iPhone emerged, Nokia failed to recognize the threat. ....... "You were spending more time fighting politics than doing design," said Alastair Curtis, Nokia's chief designer from 2006 to 2009. The organizational structure was so convoluted, he added, that "it was hard for the team to drive through a coherent, consistent, beautiful experience." ....... "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." ...... When Mr. Elop took over as CEO in 2010 Nokia was spending €5 billion a year on R&D—30% of the mobile phone industry's total, according to Bernstein research. Yet it remained far from launching a legitimate competitor to the iPhone.
How do you explain something like this? I guess the long term beats the short term. That is the take home lesson. But then Netflix did think long term to bet on streaming. I guess it is also about timing and execution.

The wisdom is Nokia should have adopted Android, and Microsoft should have gone for Samsung. With Android on, a $50 smartphone would sell like crazy.

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