Saturday, 10 July 2010

What Nokia must do to stay relevant in mobile

Nokia is losing market share fast, which is being discussed in many places. Nokia's CEO Anssi Vanjoki also expressed his view on this topic.

The number of mistakes, that Nokia currently does, is huge, let's take a few:

* Focus on OS technology instead of customer-centric parameters. As Anssi puts it: "The current phase of MeeGo development is looking awesome."

* Believing that the window of opportunity for game-changing devices is still open. Anssi still believes that Nokia can outsmart Apple and Google, creating killer phones and market-changing mobile computers.

* Totally cutting off the pad/tablet form factor, as Anssi puts it: "the computers of the future will not be tied to a desk or even a lap – they will fit in your pocket"

* Putting the bets on multiple platforms (Symbian doesn't seem entirely dead, yet, from a product perspective)

* Demonstrating bad products. At the Open Source Days in Copenhagen, Nokia demonstrated their Maemo based phone, which enables you to have a long conversation with the Nokia representative while it is starting the maps application.

Nokia still delivers most phones, and in some countries they are absolutely huge, delivering a lot of value for a low price. However, almost all early adopters of smartphones in Europe and USA seem to have moved towards Android and iPhone, and statistics shows, that Nokia smartphone users aren't using the internet part of their smartphones nearly as much as Android and iPhone users. In other words, if the phone market would be segmented by amount of internet use, so that smartphones are the phones on which the users have heavy internet use, Nokia would be almost a non-player in the smartphone market.

However, all is not lost. Nokia can produce and deliver real smartphones to their existing and loyal customer base, and if a significant part of these switch to Nokia smartphones, Nokia's market share will jump to very high levels.

However, Nokia needs to start doing a few things right:

* Realize, that if a large organization like Nokia cannot learn quickly enough during the last 4 years, they will also be slow during the next 4 years. Nokia is big. Instead, buy other companies, and let their technology become the new big thing, instead of doing everything in-house. Normally, the largest player in a market wouldn't do this, but if they don't, they won't be the larges player in the future.

* Realize that women will want a small stylish phone and a 4-8" screen in their purse.

* Understand that the consumer doesn't care about operating systems. To the consumer, Android is not about Linux, it's about the Android Market. By promoting Maemo and Meego with an empty app store, Nokia doesn't build up momentum, it's actually destroying the value of the Maemo and Meego brands. Every time a consumer asks a friend for advice about Maemo and Meego, the answer is: "Don't touch it, that's not where the apps are". These advices are remembered for many years, and ads don't change that.

* Realize that functionality is the key to buying a phone, and that it takes years to build a good app market. A facebook app is not enough, you also need the Tour de France apps, the local bus company's app, the university campus apps etc. Developer mindshare is important, and that is probably what Nokia has been losing at the fastest pace.

* Realize, that the real innovation done by Apple, is to make the touch user interface for mobile phones. Even the original Palm Pilot had apps and a similar application chooser. This innovation has started a chain of innovations that just continues in the fiercest competitive environment that the world has seen for a long time, with whole value chains competing for innovation on all levels. Nokia has no chance to outperform this competitive environment significantly, and will have a very hard time to create a killer phone or a game-changing product, if not impossible.

* Realize, that online services are the key to apps. All mobile devices can do games, but the real value to a phone comes, when an online service is available as an app, providing device sensor integration, a good touch UI, offline / bad network capabilities, app/share integration etc. Nokia tries to deliver their own maps product, their own e-mail system etc., but in order to become the biggest map provider, they also need to compete on the computer desktop for the user's attention - being only a map provider on the phone is a losing strategy. But Google is a very large enemy here.

* Realize, that it makes sense to be a huge company that does everything from producing hardware to software, in the mobile industry of the 1990s. But in the 2010s, the business model doesn't favor that. It is similar to the steel industry - they needed to be huge once, when capital costs were huge, but when the cost structure changed towards variable costs, the biggest steel industries got serious competition from very small players that they could not compete against. Nokia should look into the steel industry and learn from that. Quickly.

8 comments:

Yogi Yang said...

I don't know much about your country but in my country what rules the market is features at a throw away price. Imagine having a iPhone clone for just US $92. It has everything that comes in iPhone except motion sensors.

What is killing Nokia is not just lack of innovations. The price is also a killing factor. In my country Nokia mobiles are costly compared to local manufacturers mobile. Imagine being able to own a Mobile which has touch screen, supports two GSM SIM cards where both are working at same time and one can also do live conferencing between them, and much much more for just US $110.

I hope you got my point.

LDS said...

"Realize, that the real innovation done by Apple, is to make the touch user interface for mobile phones"
Are you kidding? I had my first touch user interface smartphone in 2002, an Handspring Treo, PalmOS based, far before Apple ever dreamed to make phones.
It was Handspring, later re-buyed by Palm, to innovate. But it wasn't a sexy company like Apple, and bloggers didn't notice.

"Realize you need a large base of dumb user that will believe it is sexy what bloggers and ads says them it is, and buy it blindly. That's the real key to stay relevant in mobile"

Lars D said...

LDS: I agree about Palm. Apple made it big.

Mike said...

The Ipod touch/ iPhone changed the view to the phone. It was the first phone that is no longer a phone only.

People used Word and Powerpoint because MS shipped ready made content. The Apple store is very much the same for the mobiles.

You are right - the only thing people want is that their buying decision turns out correct and does not leave a bad taste.

Mike said...

@LDS. I would not call people that choose a working alternative dumb.

In the end consumer buy products blind, me too. Maybe they ask someone - does you mobile work - I take the "same".

The masses will go for it when the price fits and the products are compareable - in general all are very much the same.

In one point I do not agree totally with Lars. It is still time left for Nokia but they cannot apply their rules. This is more the market that evolved from home entertainment. For sure without something like Nokia store Mobiles will be hard to sell.

When deciding for a Linux installed Ubuntu because they have a funny webpage and they sent CDs. And as long as it works no need to change. The pure Debian of a FreeBSD is something different. SUSE made first easy to use Linux installer and provided German translations - where are they now?

LDS said...

Many people buys iPhones because it's the sexy gadget of the moment, ignoring the consumer-unfriendly Apple commercial practices. The whole AppStore idea and its mad user/SDK license are something we will paid dearly in the future, if antitrust and customer rigths protection organizations won't stop that folly.
Is iOS better? Maybe, although there's a lot I do not like about it - its home screen is as much infomative as Windows 3.1 Program Manager. But all those colorful icons are cool and eye-catching, aren't they?
Apple got a lot of "free ads" that went far beyond any technical merit. It's the "feel good factor", the implied "buy this product, whatever it is, and you will feel above your peers". Apple is the IT company that knows better how it works. That's why they build just one model, while Nokia builds everything from the $29 phone to the $799 one. That's why Apple doesn't build servers (but a small office one), because you can't show off your server room. If Apple knows something very well, it's the consumer mind. And how man like to show off since they wore the first colorful stone or shell, now an iPhone.
And are you sure the iPhone is successulf because of Apple ideas, or many believes Apple ideas are successful just because the iPhone was?

Lars D said...

Apple's position in the market is currently to dominate it. It gets attention for free, and can sell substandard phones because of the brand. This is a classic scenario in all marketing books - you can discuss technicalities about what got them there, but I don't believe that Nokia can pull out a killer phone that takes away the power from Apple.

Google, however, managed to become number 2 quickly, and may soon be the dominator in many markets. Their strength, however, is neither the hardware or the software, it's about services and apps. Google Maps is a very, very important part of Android phones, for instance, and Nokia doesn't seem to realize how important such apps and services are, and while Apple's iPhone is tightly integrated with iTunes etc., and Google is tying together the desktop, the cloud and the phone using cloud-to-phone technologies and Chrome plugins, Nokia still thinks that the consumer choice is only about the phone... this might get them far in some countries, but if Nokia loses Europe and USA, they have a problem.

ERIC KOTONYA said...

Something slowed Nokia down in the last 2-3 years.

Samsung is testing projector mobile screens and thinking 3-D screens. Apple is shipping HTML5 mobile browsers and thinking solar panels under the touch screen. Microsoft has built a brand new mobile user interface for mobile devices and now thinking cloud for mobile.

Nokia is missing out on all the fun.