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Article
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Customer Experience
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Why Nokia’s Collapse
Should Scare Apple
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Nokia’s inability to field a credible response to the launch of
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the iPhone in 2007 and Google’s Android operating system in
2008 has precipitated a freefall in its share price. Today, Apple
is riding high, making this the perfect time for it — and every
successful company — to reflect on Nokia’s fall and ensure […]
by Patrick Barwise and Seán Meehan
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HBR / Digital Article / Why Nokia’s Collapse Should Scare Apple
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Why Nokia’s Collapse Should
Scare Apple
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Nokia’s inability to field a credible response to the launch of the iPhone
in 2007 and Google’s Android operating system in 2008 has precipitated
a freefall in its share price. Today, Apple is riding high, making this the
perfect time for it — and every successful company — to reflect on
Nokia’s fall and ensure […] by Patrick Barwise and Seán Meehan
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Published on HBR.org / April 25, 2011 / Reprint H0075D
Nokia’s inability to field a credible response to the launch of the iPhone
in 2007 and Google’s Android operating system in 2008 has precipitated
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a freefall in its share price. Today, Apple is riding high, making this
the perfect time for it — and every successful company — to reflect on
Nokia’s fall and ensure that they don’t suffer the same fate.
Not so long ago, Nokia was the disrupter. In 1994, the dominant global
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provider of mobile handsets was Motorola: its shares were trading at
an all-time high and it was seen as an outstanding innovator and
even described by a senior consultant at A. T. Kearney as “the best-
managed company in the world” — not so different from Apple today.
By 2000, Motorola’s global market share had collapsed from 45% to
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15%, while Nokia’s had grown to a market-leading 31%. Nokia had won
by promising, communicating, consistently delivering, and relentlessly
improving straightforward, relevant customer benefits, in line with its
easily understood brand promise, “connecting people”.
Although Nokia introduced few radical new products, in the 1990s
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it was a bold, innovative company in broader business terms —
more than most people realise. Previously a straggling and struggling
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HBR / Digital Article / Why Nokia’s Collapse Should Scare Apple
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conglomerate, it bravely focused 100% on mobile communications, was
an early adopter and driver of 2G technology, and quickly became a
recognised world leader in both supply chain management and brand-
building. It was the first handset manufacturer to target the bottom
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two-thirds of the global income pyramid as well as the top one-third and
among the first to understand the importance of ease of use, aesthetic
product design, and that handsets were as much lifestyle as technology
products.
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Motorola missed most of these market trends, was slow to invest
in digital (it was a classic victim of the innovator’s dilemma), and
dissipated its efforts on a bewildering array of technologies, product
designs, and brand messages. As the failures piled up, so did the stories
of mounting bureaucracy, back-stabbing, and top management “living
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in a different world”. Effective execution became harder and harder,
creating a vicious cycle of falling behind in the market, losing money,
cancelling projects and shedding staff, all of which further damaged
its ability to execute. Motorola is finally attempting a comeback with
handsets using Google’s Android operating system, but is now only a
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minor player.
Over time and with success, Nokia too lost some of its ability to stay
in touch with, and adapt early to, market trends. In particular, just as
Motorola missed the switch to digital, Nokia failed to see that the long-
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heralded mobile internet was now, at last, a practical option. In 2004,
three years before the iPhone, it rejected a proposal to develop a Nokia
online applications store.
Finally, after a wholesale change of top management, Nokia is now
responding vigorously to Apple’s and Google’s challenge. It is phasing
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out investment in its own Symbian operating system and collaborating
with Microsoft to try to create a powerful “third force” in smartphones.
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[email protected] or 617.783.7860
HBR / Digital Article / Why Nokia’s Collapse Should Scare Apple
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Making this work will be hard, not only for technology and marketing
reasons — although the challenges here are huge — but also because of
the disparity in size and culture between Nokia and Microsoft.
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Why should Nokia’s problems scare Apple, the world’s most admired
company with a stellar record of product innovation, design, branding,
customer satisfaction, and business performance ever since Steve Jobs
rejoined it in 1997?
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The immediate answer — of which Apple is well aware — is that a host
of handset manufacturers using Google’s Android operating system are
outpacing it in the smartphone market, threatening to make Android
the dominant standard for application developers, network operators,
and consumers.
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Less obviously, Apple’s success may have left it less open, less sensitive,
less flexible, and less responsive. The signs are there. When iPhone
4 users complained of poor signal strength, a normally highly tuned-
in Steve Jobs responded in a manner many regarded as ungracious,
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advising customers to hold the device properly and offering a very non-
Apple ‘patch’ (a form of a rubber band) to anyone who asked for one.
There was also widespread shock and disappointment when Jobs
announced that Apple would take a whopping 30% cut of content
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owners’ sales through the iStore (Google takes 10%). Apple also insisted
that the iStore must be able to offer any deal publishers offer elsewhere.
Further, Apple will not share customer data with content providers
(Google does share these data). Such is Apple’s market power that, for
now, most publishers have accepted its terms, but they are not happy
and will continue to search for a better alternative.
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[email protected] or 617.783.7860
HBR / Digital Article / Why Nokia’s Collapse Should Scare Apple
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Part of Apple’s brand appeal has always been that it was a
plucky challenger, first against IBM, then against Microsoft. But in
smartphones, the challenger was Google and — maybe — Apple is the
new Nokia. If so, this could be the start of a bigger change in terms of
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whose platform will dominate the wider internet. Apple should indeed
be scared. As Intel’s Andy Grove famously noted, only the paranoid
survive.
Patrick Barwise is emeritus professor of management and marketing at
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London Business School. Seán Meehan is the Martin Hilti Professor of
Marketing and Change Management at IMD, Lausanne, Switzerland.
The authors’ new book Beyond the Familiar: Long-Term Growth through
Customer Focus and Innovation has just been published by Jossey-Bass.
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This article was originally published online on April 25, 2011.
Patrick Barwise is emeritus professor of management and marketing
PB
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at London Business School. Seán Meehan is the Martin Hilti
Professor of Marketing and Change Management at IMD, Lausanne,
Switzerland. The authors’ new book Beyond the Familiar: Long-Term
Growth through Customer Focus and Innovation has just been
published by Jossey-Bass.
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This document is authorized for educator review use only by Sajjad MAHESAR, Institute of Business Administration - Sukkur until Jun 2023. Copying or posting is an infringement of copyright.
[email protected] or 617.783.7860
