What Nokia Can Teach You About Resilience

Hi, my name is Nabila Marci. I'm fascinated with business stories and today I want to talk to you about a company that has gone through extreme highs and extreme lows. This company is Nokia. I read in an article the other day that the former Nokia CEO got fired from Microsoft. For those of you who need a refresher, Nokia was the most successful phone manufacturer in the 90s and early 2000 2000s later on, Nokia sold its mobile division to Microsoft. In 2014. The leaving of the former CEO and some other really important Nokia leaders is a really strong sign that this acquisition wasn't successful. So what happened? I digged into Nokia's past and here's what I found. Nokia was born in Finland. It started actually as a pulp mill that transformed wood into paper. The river that Nokia was established next to generated power to make the malfunction. So initially Nokia generated its own power, but later on, you know, it figured out that others might need it as well. So it started supplying electricity for surrounding businesses. This was a resource driven business model. Nokia worked pretty closely with two other businesses. One was a rubber company and the other one was a cable manufacturing company. They were really close because they actually had synergies in their business model. So they joined together and they eventually used those synergies as advantages. The three businesses expanded and Nokia became a company that produced anything from tires, TVs, generators, etc. Nokia started producing radio transmission equipment. That was its first step into the telecom business in which it was going to be leader later on. Thanks to acquisitions and R and D, Nokia established its position as an industry pioneer. But at this point, managing so many different businesses at the same time was really hard for Nokia. It had to focus on its core business to succeed. Nokia had actually forecasted the high growth of telecommunications. So it decided to make this its core business and stay in that area. It divested the other business and Nokia was the first company to eventually mass produce the bulky GSM phones. As some of you might remember, over the years the cell phones became thinner, cheaper, they had more and more features. Nokia was on top of its game. In 2007, four phones out of 10 in the world were manufactured by Nokia. Now you probably don't expect this to be the end of story because Nokia is about to enter the less funky chapter of its life. As Nokia worked on more and more sophisticated devices, they introduced a high end phone with a more complex software and a suite of productivity tools. It was a smartphone and the software layer was called Symbiote. But such sophisticated phones were really expensive to produce and they were only selling in low volumes. At this point, experimenting with new concepts was risky. Nokia was producing millions of phones and couldn't really make any mistake. So the smartphones stayed a niche product, and Nokia focused on what was selling well, what was working, the feature phones. And this made sense because feature phones represented 90% of phones in 2007 against only 10% of smartphones. Within that niche, though, Nokia was still a dominant player and had 50% of the market share. But here is a situation in which Nokia landed five years later. In 2012, smartphones were selling like hotcakes and they accounted for 44% of the global phone sales. But on the smartphone market, Nokia went from a strong 50% market share to 3% market share. The crucial question is, how do you go from being a market leader to a lagger? There are plenty of reasons to explain this decline, but a main one is that Nokia was too slow. Symbian was a great software initially, but it required a lot of changes to offer a great experience. Even though Nokia had the resources and the talent to fix Symbian, it was extremely slow at upgrading its platform. Bureaucracy, slow decision making and aversion to risk became real obstacles to innovation. Nokia was great at executing on a proven business model, but it didn't prepare to transition to new trends into the future of its business model model. Things got worse when Apple and Google came in. These two platforms were much better than Symbian to start with. They were user friendly, they had many apps. They were built for a touchscreen experience. They quickly became really hard to compete with because they succeeded in capturing two resources that are really hard to copy. The first resource is a large pool of developers that build apps, and the second one is a loyal audience of customers. Google and Apple weren't really building hardware or software. They built ecosystems of hardware, software and developers at the same time in which customers were actually locked in. If you own an iPhone or if you own an Android phone today, think about it. How easy is it for you to give up on all your apps and switch to another phone? It's very likely that you're stuck in Nokia's CEO, the one I mentioned at the very beginning of this video, realized that Nokia was on what it's called called a burning platform. So they ditched Symbian and they switched to Windows Phone to catch up. Windows Phone was really an improvement actually compared to Sibian, but it hardly competed with Google and Apple's ecosystems. Google's vice president described Nokia teaming up with Microsoft as two turkeys don't make an eagle. Ouch. But the truth is, things didn't really go well for Nokia after this. Microsoft acquired Nokia's mobile division, but today it doesn't seem like anything good came out of it. So what's left for Nokia now? The company still operates in telecom space. It sells network equipment. It also licenses the patent that it still owns. It is the leading maker of navigation maps for connected objects and cars. Last week though, Nokia's CEO made a really surprising announcement by saying that Nokia would be back in the mobile business by 2016. Some might think that Nokia executives are crazy, but I'd keep an eye on what the company can do. This year, Nokia turns 150 years old and it has proved in the past that it could reinvent itself over and over. So let's see if the lesson was learned in the meantime. That's all on Nokia. Thank you so much for watching and if you've learned a thing or two, feel free to share this with a friend. Bye.