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January 31, 2011

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enyi

Another mighty thesis ? Seriously, Tomi, how is the weather up there in Mars?. Pity us please, we just cant keep up with the volume :o).

Keep it coming.

E.Casais

I am afraid you underestimate the difficulty of developing superlative handsets and ensuring that they constitute "the absolute super-showcase of the very best a phone could be".

I can provide a different perspective on the unpopularity of Communicators in Finland, even within Nokia itself (I was there).

I do not really know about the very last couple of models (E90, 9300i), but, since its inception, these terminals were notoriously unreliable, at least compared to phones. They would hang -- frequently enough that the routine "take out battery; wait; replace battery; reboot" would discourage my manager colleagues who needed a robust tool that could be used intensively throughout the workday. In the end, they would give up their "flagship device" and switch to a classical, smaller, cheaper, zero-problem Nokia phone. Another one of my colleagues (project leader) got a Communicator and was compelled to set up a little utility to record every bug he would encounter as he used it. Yet another user (system manager) was positive about the wealth of tools available on Communicators (allowing nerdy engineering things like telnet), but clearly stated that these devices were not dependable enough for his tasks.

Nokia is currently in a difficult transition phase regarding Symbian; I am not sure that it could master the construction a terminal beefed up with an overkill of software features just as the underlying operating system and its user interface framework undergo a thorough overhaul. The result might well be the kind of embarrassment that Nokia just can no longer afford.

brad

Tom,

I'm sorry, I don't believe you get it. This whole blog is pretty much about hardware. Nokia has done pretty well there. Nokia's problems and issues are largely about software.

Brad

Guillaume B

Tomi, the Nokia you described is a beautiful dream. Shame they won't listen. I'd invest in a Nokia like that in a heartbeat.

@ Brad: Nokia's failure is only about software if Nokia lets it be a software race, as they do right now. Their strength is in hardware, so their interest is in having Apple, Samsung, Motorola, RIM and others compete with them on hardware. And as Tomi points out, currently they are simply aping the hardware from other manufacturers and not using their real strength. They are fighting one-armed, and it's not their dominant one.

The software right now is not "the" best, but it's fit for purpose. And they wouldn't need "the" best software if they were so far ahead in hardware that their competitors' phones looked like cheap toys. That's the point.

Arild

Hi Tomi, quite a piece here, obviously a labour of love.

Now... I find myself oddly drawn to follow the smartphone business, it must provide some soap opera type experience for me :-). And I find it fascinating that so many people have so many strong opinions on this matter.. I guess our forefathers were equally fanatical discussing the correct shape of a flint axe :-)

Well, here's my 2p, as a software developer (at times) and sociologist (at other times) and smartphone user (almost all the time). I have used several Nokia highend phones (the N900 was the last one) and also Palm Treos and now Android, but are not wedded to any OS/manufacturer, except not wanting to use an iPhone due to too tight control over what I can do. However, that is my stubbornness, I can still see that it is a very nice smartphone and I happily bought it for my daughter.

First of all, @Brad is right, software is a key issue here. Engineers may not understand marketing, but they are equally lost with regards to software. I have worked with hardware engineers several times on developing GUI frontends, and they simply think that a button or a menu is the height of UI sophistication. This we saw very well on the N97, it had huge, ugly, clunky menus, and somehow this was user friendly? So to make up this huge dream list that Tomi has created here, of phones that will fulfill all kinds of marketing requirements, is simply not going to cut it until Nokia really gets software. And please, please, please, don't list all the "first" of Nokia, living in the past does not help, the only thing that matters is that at the point of sale, the user has a great experience. I have tried out the N97 and N8, and I just did not get that experience. Not because I dislike Nokia, I think that is a weird attitude, the experience was simply too sharp in the edges (not literally) and sluggish.

Remember that the user experience is *relational*, not absolute. I.e. when most phones are NOT smartphones, then any smartphone will seem great. But once there are many competitors, some who are experts in UI design, well then what seemed fantastic a few months ago will not cut it. So I felt my Nokia 9210 was great to use in the early 2000s, but now I cannot go back to it, I would feel to irritated with the size and weight, the big buttons required to interact with it, etc. So this is where Nokia has stumbled badly, and most people don;t care that Symbian is "better" in terms of resource usage if it feels clunky.

Secondly, when you discuss "sister phones", i.e. segmentation to make the phone fit different needs, and the notion of waking from the dead the changeable covers, I feel there is a clash here between your somewhat negative take on app stores and the (obviously correct) idea that customisation is important. Basically this is a key role of app stores, not merely to buy a game, but to make it work the way *you* want to. For example, my Galaxy S has the silly feature of beeping loudly when fully charged, this will of course be in the middle of the night, thus waking me up. (Definitely some engineer who thought of that feature!). So I find a piece of software which automatically turn the phone on silent during the night. And another one which let me sync files from my phone to my Linux laptop which the phone does not support out of the box. And so on, and so on. Basically wallpapers and lock screens (i.e. software) have replaced covers when it comes to customisation. Covers may still have some role, but I doubt it will change the game much... Also, we have gotten accustomed to having slim phones, easier to carry around, and changeable covers would add to the size.

Thirdly (yep, that's a word), it seems you totally overlook what smartphones are used more and more for, media consumption. Yes, SMS is important, but everyone I know with a modern smartphone use it for video watching, book reading and of course music listening. Again software is important, not only the facility to do these things, but to easily switch between the activities, interact with and organise the media (between PC and smartphone or direct from Internet). Again a software issue in terms of speed an interaction.

In the end all the marketing ideas do not work if the product is not good enough. And currently more and more people feel that this is the case, as your discussion re customer loyalty to Nokia has highlighted. As an example, last year I recommended someone I worked with as a freelancer to get Nokia E72 for picking up email on the go. It has a nice keyboard etc, and I used the E71 for a year so I thought it would be a good choice. This guy was a programmer way back in the 60s, he was CEO of several companies and he is not stupid. But he was unable to find out how to pick up email using the native email app and leave the email on the server and not delete it when getting it on the phone. This is a basic requirement when you use a phone, you will want the email also on your desktop PC. Between the two of us it took 10 minutes to wade through endless messy options just to find that it was not possible for this to be done. And when a friend bought a Nokia 5230 touch screen phone the scrolling was very counter intuitive and uncomfortable with the wrong option frequently being selected by mistake. These are just simple isolated examples of what is wrong here, and which many Nokia supporters seem to be in denial of: Right now (I am not saying forever), the user experience for most people, which is primarily software based, is at best adequate on a *few* Nokia smartphones, and mainly irritating on most. If you make people feel stupid, well then you lose a customer. No-one likes to be made to feel that way, and Apple is the expert on avoiding this, often by cutting out a lot of features.

Unless/until this is dealt with in a root and branch change to Nokia phone software I am not sure any segmentation or other marketing skills will make much different, you are basically just segmenting mediocrity!

Finally, and a bit off topic: I (as a European) am not so sure that this idea that is put forward by many readers of this blog, that US bloggers bash Nokia unfairly is so true. In the US there is a culture of demanding a lot as a customer in terms of customer service and user friendliness which anyone who have been there will experience in terms of relentless "have a good day" greetings :-) and the multitude of choices (even water has so many varieties I fall asleep before I have heard the whole list in a cafe). Apart from silly comments by 12year olds who like to troll on websites I think the criticism is fair for the smartphone part of Nokia. The many facts that are often marshalled to support Nokia (they were first with this, they have a faster that) just does not cut it, Nokia has fallen behind in user satisfaction, and the only way they can recover it will be through good software where everything that is included "just works" as a certain company likes to put it. Until then, forget dreams of segmentation and phones that are twice the price of an iPhone.

Here's to Nokia, if they can do it, so much the better for all smartphone users. But let us not hold our breath :-)

Hoi

Software is important, but not as important as some people make out. Tomi is right, that hardware is very important and customisation/segmentation is key. To optimise sales, segmentation drives deep into the data and understands how to configure for that group. Yes software should be at the just works part, but we should separate that from the "software ecosystem" part of the equation.

Most people who bought smartphones in the previous couple of years can be considered early adopters or "power users". They are the ones who are likely driven to smartphones for the software. However, this does not mean the next wave (the mass market) will be driven to smartphones because of apps. It is more likely that the price of smrtphones becomes cheap enough and the availability is so high that people have NO ALTERNATIVE but to upgrade their phones to a smartphone even if they have no intention of using the software to its full capability, even if they have no intention of downloading apps.

For this mass market segment customisation/built-in features are key. That means apps pre-installed could be the driver in terms of absolute user experience which is easier and has less hurdles.

1) Buying a smartphone, create an app store account, search for facebook, download app, use facebook
or
2) Buy a smartphone with facebook pre-installed, use facebook.

Sure, there are benefits to app stores, but not everyone wants to use an app store and this in itself is a large segment. Even Forrester has identified that 2011 will be the year of dumb smartphone users :- http://blogs.forrester.com/thomas_husson/11-01-25-2011_mobile_trends
A good example is Hong Kong.. so many smartphones, yet such a low penetrations of 3G contracts relative to smartphone ownership. Sure, you can use wifi, but there are many people who own smartphones who do not download apps and have no intention to download apps and have no intention of using data, they use their smartphone like a dumbphone.

This is part of the segmentation Nokia needs to address. This is not Apple's focus, it is one segment of Nokia's market, and this is where they can excel. Data in aggregate is pretty much useless, once you segment you gain more insights which lead to optimisations that can help you refine your product portfolio and address the pains of that niche.

ryzvonusef

Amazing article Tomi, you ought to charge Nokia for this :p

I remember one of the biggest benefits of buying a Nokia, replaceable covers!

In most countries, second hand sets is a big market.

So what people would do is, buy a Nokia, pop out the original covers, pop in a chinese cheap one,run the phone to hell and back.

And when selling, format cellphone to factory settings, remove the crappy chinese cover, use a cotton swab and clean off any dust, pop in original one, and voila! You have a brand new set!

The things that got the most abuse a cellphone got was the keypad and the covers, and if those were replaced, you had a good as new cellphone. The only thing that might need replacing was the Nokia battery and usually that wasn't that necessary either.

You got a very good resale price, and second hand buyers also preferred Nokia devices, since effectively it would be in mint condition.

Nobody could look at your Nokia cellphone and deduce it was a second hand set unless you told them, since never carried the tell-tale war-and-tear signs. This was a big ego boost to people with less resources.

People actually loved Nokia for this. Nokia let away this simple yet massive advantage for no good reason.

Baron95

Ouch - I'm exhausted reading it :)

I can't disagree with any of the comments on the devices mistakes and solutions - spot on.

B U T

I take it that you must D I S A G R E E with S. Elop. Your entire blog was about how to "fix" the devices.

S. Elop just told the world that it is NO LONGER a battle of devices but a war of ecosystem. You did not offer ANY solution as to how Nokia can build the best, largest ecosystem.

And what is an Ecosystem?

1 - A compelling platform/OS with an exciting/engaging user experience. There is no credible evidence that Nokia can EVER pull that off.

2 - Development relations, tools, support, enabling a vibrant and ever increasing set of applications and content. Again, there is NO evidence that Nokia can pull that off. As a matter of fact, the constant change in direction has poisoned developers against Nokia.

3 - Companion/Related mobile devices - tablets, music players, running the same platform/apps - to add scale to the mobile phone ecosystem. Again, Nokia is no-where to be seen there.

4 - A carrier-independent credit-card backed, secure, store that is pre-loaded, intuitive, effective for both end users and developers. Nokia is finally making some moves there, but still no indication they can catch up to the other ecosystems.

5 - Engaging physical stores. Apple has incredibly appealing and highly profitable marquis stores. They also have dedicated stores withing a store at retailers such as best buy. Customers can walk in and get service for their devices on the spot.

6 - Accessories. Who cares that the N8 comes in multiple colors. Because of the single form factor, every street vendor has a gizillion color/texture covers for the iPhone. Every upscale hotel room in the world has an iphone/ipod compatiple plug or alarm-clock. Every upscale car in the world comes with an iPhone/iPod adapter. That is a *HUGE* part of the ecosystem.

7 - Apps, Magazines, Books, Movies, etc, etc, etc. Enough said. Nokia may make 200 devices at one time. Apple customers have 350,000 factorial different devices. They personalize their devices by the different set of apps each downloads. They are proud of them. They can't wait to show their peers their latest "addition to their phone".

8 - Market perception, coolness, must-have status, etc. You simply have it, or you don't. Facebook wasn't that much better than MySpace. As you said, the iPhone 2G wasn't that much "better" than the N93/N95. But it was cool, fresh, in. The iPHone is premium. Price is irrelevant. A Ferrari or Lamborghini is premium, primal, desirable. So is a high-end mega yacht or a Mediterranean Vila. However, less than 0.1% of the population can afford the most premium cars or the most premium boats or the most premium residences. But way more than 10% of the population can afford the most premium of phones, the most premium of music players, the most premium of tablets. Once you get there, your example of undercutting the iPhone by $100 or $25 is completely meaningless. 50% of the soda buyers can probably afford the "premium colas"- Pepsi or Coke - trying to compete with Pepsi or Coke on price is complete lunacy is advanced markets (though it may work in Africa, I suppose).

In short - you did what you accused Nokia of doing - focused on the device. Yes, you did it in a much, much better way, focusing on marketing, segmentation, value selling, positioning, etc, instead of engineering features.

But where is the ecosystem? Would the best of Porsche and BMW sell if they didn't have an ecosystem of dealers and financing and spare parts, and if they ran only on hydrogen? Nope. They could be the most beautiful cars, and fastest. But if you could not find fuel for them or a dealer to buy/service them or any bank to finance them, they'd be dead.

That is where Nokia is in the US and Japan and soon many more advanced markets. The mobile world is gelling around gas/petrol (iOS) and diesel (Android) with a few science experiments - biofuel (RIM, Bada) and electric (WP7).

Nokia is trying to compete, now entirely alone with coal-fired steam (Symbian) and clean nuclear (Meego).

GOod luck with that.

Peter

That business card scanner-tripod-thingie sound very old-fashioned to me. The people who refuse to use electronic business cards are those people who don't have the latest cellphones either.

Better to invent a standard for electronic business cards with full integration to all other phone functions (e-mail, contacts, whatever) that can be exchanged with bumping phones together (NFC).

Baudrillard

I seriously hope Nokia listen to your advice. There are many points in here that I've thought of myself like the youth brand. I see what Samsung and LG have done with the Lollypop and Cookie brands and the KPop crossovers. Nokia needs to be there yesterday!!! Intel just brought in SNSD and Will.I.Am. Nokia should bring in a sexy KPop group to push their youth brand, music videos and the whole shebang!

bishoph

Very long article so only some remarks.

As a developer I've to state: Developers don't like fragmentation. Make it easy for developers. Remember: Write once, run everywhere. Provide great documentation and tools (currently a mess!). Make it easy to develop, spread and to reach customers and users.

As a user the most important issue IMHO is: Fix the "Internet" on Nokia devices as fast as possible (read: Browser, Mail Client, RSS Reader, you name it). Use the latest and greatest WebKit browser and provide the best standard software for day-by-day usage. Make it lightning fast. Be standard conform to leverage what is currently available and what gets developed right now e.g. Web pages, HTML5 apps, Services like Twitter or FB, ...

If you want to boil it down: Make our life easier.

David Doherty

Great post, as per usual...

The "cable not included" comment made me laugh. At Nokia World in London all the developers were given a precommercial SW N8. As soon as I opened the box the first thing I looked for was that HDMI out cable (I'm working with a client developing an app that uses the phone as a controller and TV as screen) so I went back to the desk thinking it was just a simple packaging mix up. Blank looks all around - what type of weirdo are you that you want one of those?

I was amazed when I saw that the product then later shipped without one included. Amazed because I have yet to see any NorMob who isn't completely blown away when I start showing photos/presentations/Big Screen.

ddd

@Tomi

I have to agree with some of the posters here about the importance of software part and the user experience. I spend considerable time reading smartphone enthusiast forums and technology blogs. These are the places where the "thought leaders" congregate. They are the ones who decide what's hot and what's not. They have tremendous influence on what mainstream media reports, thus shaping the perception on the macro level while also being the ones people go to for recommendation on what to buy. And these people are increasingly turning their backs on Nokia and when they do, others follow.

I cannot offer you cold, hard numbers but I can offer you a view from the "trenches", something only numbers can't tell. Mind you, people who are disappointed with Nokia are VERY vocal about what they think is wrong and why they are switching to something else, and a few reasons come up very consistently.

1) User experience

Nokia's smartphones just can't match the rivals in either ease of use, fluidity or aesthetics. I have a hard time finding a review of N8 that doesn't conclude that "build quality and camera are top notch, it has a lot of great features, but the UX is outdated and that's the why we can't recommend it". Gizmodo, one of the major tech blogs flat out refused to review it because the UX wasn't modern enough. This is the absolute number one complaint people have about Nokia smartphones. Nokia promised TWO YEARS ago that a a complete UI overhaul(UI and application suite completely redesigned and written in Qt) is coming to both Symbian and Maemo(now MeeGo) in the future and they still haven't delivered that. Needless to say that two years in "smartphone years" is an eternity and even the most loyal Nokia fans are tired of waiting especially when competitors have been offering a modern and constantly improving UX for the whole two years.

2) Upgrades and support

You'd be surprised how many times I've seen people refer to their smartphone purchase not as "buying something" but "making an investment". The thought leaders want to live on the edge, constantly try new things and have the latest and greatest. For them just buying something and being done with it doesn't cut it. They want to see their "investment" bet better over time with new capabilities, features and UX improvements delivered by software upgrades. Apple opened the Pandora's box with this, Google followed and people are now so passionate about upgrades to their existing equipment that they're willing to file a class action lawsuit about not getting an OS upgrade(US Samsung Galaxy S not getting upgraded to new point version of Android). Obviously there's no regulation forcing manufacturers/carriers to offer these, but it's something people now expect. And they get very pissed off if they can't have that.

3) Ecosystem and applications

While application development may not be the goldmine for the vast majority of application developers or brands, it's a goldmine for the thought leaders. As said on the point 2, they want to try out new things, find new uses for their device or just try and amaze their peers with something cool. Their "investment" is not just an utility, it's a constant source of entertainment and amazement. A previous commenter put it in a way I hadn't thought of before, it is today's customization or personalization.

There are other reasons too, like Nokia's lack of top-specced monsterphones and bad experiences with recent flagships (for example N96, N97) but those three are the most commonly cited reasons on why someone chose something else over Nokia. Not lack of micro-sd slots or removable batteries. It seems they've recognized these and are responding but the change is awfully slow.

I'm mostly talking about smartphones here, because that's what the thought leaders use and see. They shape the opinion about brands and that reflects to the mid and low end too.

I only glanced through your text, I'll read it thoroughly later. It just seemed so absolutely fixated on hardware features and form factors that I couldn't help but offer my anecdotal evidence to try and explain why I think that's not the mindset of this decade. I'm not saying hardware is important, I'm saying they have to fix the software side FIRST.

Guillaume B

@ ddd : The thing with tech enthusiasts, those you call the "thought leaders", is that they really aren't.

They are the kind of people that thought Bada would be a failure. It's a huge success. They are the ones convinced that Microsoft's Kinect would be a failure. It wasn't. They are the one that thought Windows Phone 7 would be a success. It certainly isn't yet.

They have a terrible track record of predicting the mass market. Sometimes, companies make moves that baffle tech enthusiasts, but they're proven right in hindsight.

Nokia's market share is still the best proof of it. While this share is currently plumetting, you have to realise it's a share of current sales, not a share of the installed base. Which means that at this very moment, assuming Tomi is right and Canalys is wrong, there are still more people that buy a phone with Symbian than a phone with Android.

The Nokia 5800. Personally, I don't think I'd have wanted one back when it came out. Tech enthusiasts thought it was a weak phone, with little to redeem it. It was also a smashing success. The C3. It and the Ovi Store numbers were the bright spots in Nokia's otherwise depressing quarter report. And it's far from the kind of phone that gets tech enthusiasts excited; it's a mid-end featurephone.

So there you are. Tech enthusiasts like you and I, and those you call "thought leaders". We're very vocal, we're also very few and we're often very wrong.

Antonio

Tomi, superb article and I think you should be Nokia's CEO. You gave recipes about hardware segmentation while many of the comments here point to software as the main weapon to get more customers. I don't think that software is more important than hardware or vice versa, I think they are both important. However, more important thant hardware and software is marketing and Nokia has the worst of all mobile manufacturers, while Apple has the best one. Is really Iphone 4 better gadget (talking about hardware) than Nokia N8? No, but they constantly say it is and so the reviewers do (I question the impartiality of many reviewers, they probably get paid to say wrong facts).
But, here are my tips for Nokia: in hardware you said almost everything. In software, Nokia should consider customizing the OS asking for the type of user (beginner, intermediate or advanced) because the users have different needs (a kind of software segmentation all in one OS). For example, a user named "Loved Symbian" needs to work directly with file systems (create, copy, move or delete files and folders) and to send pictures or other media by bluetooth or wireless (advanced user), while other user named "Lost Calls" doesn't need it (begginer users like many fruit eaters haha). So some functions are enabled or disabled depending on the type of user.
Ok, that's it for now. Thak you again for the article and please continue writing about this story.

Bob Shaw

Tomi – I completely agree about market segmentation and customization. The ability to segment the market and identify unique customer needs followed by offering new value propositions that better meets those needs than available existing alternatives is the best way to proceed for Nokia. Your point about SMS and keyboard is very important and it is very shocking that it did not get the required attention. Also the point you made using the example of dual SIM phone about focusing on the end user as well rather than just the carrier customer and striking a balance between their contradicting needs at times is very important.

I can think of one another reason why market segmentation could be very important for Nokia. If one follows all the chatter on the web, one gets the impression that the major use of all smart phones is for web browsing. However, AT&T recently reported that 98% of its smart phone customers (mostly iphone customers) used less than 2 GB of data a month and 2% of its smart phone customers were responsible for more than 40% of the total data (bandwith) use. Could it be possible that majority of time, the use of the smart phone is overlapping with the use of a feature or dumb phone?

cmk011

Tomi,

First off let me state that this was a post worth reading. There is much I agree with, some I fundamentally disagree with and much I think you overlook. But Kudos for the solid work.

That being said, I would like to address three points:
1) Yes, sms is addicitve and it should be a gold standard. The problem is, the way to develop a gold standard is not only through HW. Having a pleasurable, appealing and usable experience using sms is important also - and that is accomplished through SW. Unfortunately, the SW talent and SW management at Nokia are stuck in the 80's. They feel that giving consumers a utilitarian expereince versus a fun and aspirational experience is the way to go. And the marketplace has voted against them. Apple and Android have moved the bar forward quite a bit as it relates to sms. Nokia seems stuck and refuses to advance. A refresh of engineering and SW talent is badly needed at Nokia.

2) Given that Nokia's SW talent and SW management is weak, they are incapable of supporting many device variants. One of the reasons Nokia is in the position it is, is because they turned their back on SW quality and attention to detail. Back when they were developing 100+ program per year, they did not have the capacity or capability to maintain decent SW... churning out that many variants. So, the SW base eroded and got to a point where most of the time was spent fixing bugs versus adding new features. So, the decision to reduce program numbers was necessary to compete in a world where SW stability, feature integration and end user experience are now becoming baseline necessities. Nokia is still struggling to get their MCL to a point where they can adequately address issues of UI weakness. So, your desire to have them blitz the market with 200, 300 programs a year isn't possible. Heck, the SW talent and management is so weak they can barely churn out 4 high end devices in 12 months. Again, a refresh of engineering and SW talent is badly needed at Nokia.

3) Finally, the biggest challenge has been (as you point out) execution. Nokia long subsribed to the philosophy that they would take good general managers and put them into various roles to "round out their experiences". The problem is, as the indsutry has grown more competitive and more difficult... Nokia has found itself with the wrong people in the wrong jobs. What does a Lawyer know about running a technology company? How does a PhD in RF plan to lead a team focused on Entertainment? How does a former head of Marketing (with no real Marketing background other then a textbook) plan to have his brand compete globally? What does a Consumer Goods marketer know about smartphones and SW management? All in all, as the marketplace became truly competitive... Nokia found itself with a stable of Sr managers that can't compete with their industry counterparts. Luckily, Nokia has begun to bring in talent such as Elop, Martin, Skillman, DeVard, Greene, etc. People who truly are best in their fields. Now let's hope that type of talent renewal can happen at all levels.

ddd

@guillaume

Actually I hate the word(s) thought leader, just couldn't figure out a better word to describe the groups of people who influence the choices of others either directly or indirectly.

I wholeheartedly agree with you about them being wrong about a lot of things, but this wasn't a case of right or wrong.

I listed things long time Nokia fans switching to other platforms cite as the reason. Most have been loyal for a long time and waiting for Nokia to fix these. They still haven't, and people just can't justify staying with Nokia when they've watched long enough what they're missing on that others have. And when their loyalty is only rewarded by basically forcing them to switch to other brands to get what they want they get really bitter. This is very visible in conversations around the web, a lot of people are downright hostile towards Nokia. And these are the people that influence the choices of their less techy peers and they sure won't recommend Nokia to anyone. What I was trying to say in my original post is that unless Nokia can rectify these they're not going to turn the word of mouth to their favour again and right now the word of mouth is advising against Nokia.

Again, if Nokia can't deliver on these they're not going to get any positive coverage in the media. Right now to the tech press they're the "sinking ship", the "dinosaur", "doomed". They're basically the laughing stock right now, and everyone loves to dwell on their misery. And the UX overhaul is the number one thing everyone's expecting of them and unless they succesfully deliver on that front they just won't turn the tech press' frown upside down.

As I said, it's not about right or wrong but turning around the prolonged negative attention they're getting to positive attention. Their strong brand from the glory days has acted as an incredible buffer against competitors but it's wearing down and they need to be better than competitors again.

Again, I'm talking about smartphones because they shape the perception of the brand which affects the mid and low end too.

Jonathan

@Tomi

You do have some valid points where Nokia has failed, but also some less valid points. Just a few thoughts:

1. You say that "Apple cannot afford to release 20 different phone models per year". That is mathematically wrong. Apple's iPhone revenue for the Xmas quarter was nearly equal to Nokia's "phones and services" revenue. Apple's margins are something Nokia can only dream of, so Apple would definitely *afford* to do so, they *choose* not to. Because they do not want to fragment the platform any more than necessary and obviously developing, marketing 10 times the phones costs much more than what they are currently doing, which would lead to less profit. More choice is not always a good thing (See Barry Schwartz' Paradox of Choice)

Nokia perhaps could have 300 different models, as you state, and be profitable, but it surely is not the optimum strategy. Nokia would *only* lose from increasing from say 100 models to 300 models. Developing these models, marketing and producing them would cost significantly more per sold phone, less profit. Not to mention the troubles for marketing these phones and how it splinters the platform the developers see.

Obviously Apple's 1-2 models per year is not optimal either (at least for anyone other than Apple) but it does not mean 300 is anywhere near the optimal. Less models, better quality is what Nokia should do, at least in the smart phones, I have no idea how feature phone market work.

2. I'll reiterate what others have already commented. Hardware is not everything. You write long passages about how Nokia should mock the iPhone and how their top of the line model N8 is like iPhone.

Nokia mocking the iPhone would be funny, at the moment they do not have anything comparable to offer, the N900 comes closest. Superficially the N8 does look like an iPhone, as did 5800 XM and some of it's descendants. But when you really use it, it is nothing of the like.

The user experience of N8 is worse than that of the original iPhone (I have used both as my main phone during the past 6 months, currently using N8). Quality of the software that ships with it (mail, SMS, Browser, Youtube, etc.) varies from bad to horrible. Scrolling the lists is slow, lists sometimes have scroll bars, sometimes not, most things are poorly designed, visually there are several generations of UI there, nothing that could be called consistent. It is a very strange mix of old Symbian UI and software with some new elements. The networking troubles are still there, text input is a joke compared to iPhone, Android and WP7, the browser is slow and horrible to use, I have had some "out of memory, please close apps"-messages lately. Unforgiveable.

The only exception to the very sluggish experience is the album art view of the music app, it is how *everything* should be, direct manipulation, designed to be used with fingers, smooth animation (high fps, with GPU acceleration). This is what Apple showed in January 2007, when iPhone was introduced. I thought Steve Jobs was full of shit when he told the software is 5 years ahead of the competition. Turns out he was not. 4 years later, judging by the software and experience, N8 is still nowhere near yet.

An interesting hardware fact: N8 has the same generation CPU (arm11) as the original iPhone had. Since that the world has moved on iPhone 3GS (and 4), N900 and all modern over $300 Androids have a next generation CPU (Cortex-A8). There is no excuse of putting 4 year old CPU in today's "top model", just a horrible decision, that will hold the Symbian platform back for years to come. N8 is the reference model of the new generation Symbian platform, it states the low end that will be supported. Platforms rarely grow up, they should be on the top when introduced and trickle down to lower price points. S^3 and the device trio failed to do this.

Victor Szulc

SMS has to save Nokia?!? Really? Your advice seems to be stuck in the 90ies...

Most operators in Europe include SMS for free, or bundle them in packages of hundreds (0-199 200-499 etc) So nope, SMS isn't a huge cashcow anymore.

Besides, most people use SMS on their phones, but do you have any proof or studies that show that they let the SMSing influence their choice of phone? I strongly doubt it. Notice that none of the mobile companies that grew strongly last year has made any special SMS-phones.

Hantu13

Tomi,

An interesting and entertaining read, as always. A couple of quick points-

Your fallacy of the idiotic managers is very commonplace in the technology space, and like most myths, does contain a shard of truth- sometimes companies just have poor management. To say, however, that Nokia doesn't "understand" marketing is just ridiculous.

Nokia was (and is) one of the great companies of the world as recently as 3 years ago. All of their marketers didn't suddenly resign or commit seppuku in response to the iphone. They understand segmentation and marketing theory just fine.

The problem Nokia faced is that the iphone's user interface was a fundamentally disruptive technology shift. Anyone who has seen intelligent adults fumble around with the feature set of a high end Nokia, Window Mobile or RIM phone compared to a 1.5 year old smoothly navigating around a 1st generation iphone intuitively grasps this.

Features don't matter if users can't easily, enjoyably and intuitively use them- A friend of mine (from Japan) said that using the iphone was like wearing glasses for the first time. Multi-touch, the smoothness and responsiveness of the interface, and the design logic of the UI all contribute to this. This is something even high end Android phones still haven't caught up with 4 years later. Though Microsoft has done a surprisingly good job with WP7...

Secondly- the iphone web browser was ridiculously good for the time. This isn't to say that others haven't included web browsers, but again, the combination of multi-touch and extremely responsive screen, and quick software made web browsing an absolute pleasure, despite omitting Flash.

Remember the (supposed) comment by Henry Ford- "If I'd my customers what they wanted, they'd have said a faster horse..." They key here isn't that one shouldn't listen to customers, but that you need a deeper understanding of the problem they're hiring you to solve.

There's also a lesson here about SMS. Customers want an ability to communicate non-intrusively, universally (without knowing whether the receiving party has a particular app installed on their phone), and in near real-time. SMS is the best way to do that today, mainly because it's universal. As smartphone penetration reaches very high levels (by some estimates, the US and parts of Europe are rapidly headed to 50%+), this may no longer be true.

You're going to point out studies that show that people still SMS addictively even when using smartphones. I'd posit that high rates of market penetration of data-enable smartphones with modern UIs is a different market altogether.

Nonetheless, SMS capabilities are a highly commoditized, easily replicable feature set. This is not the basis on which to build a $50B business.

Camera integration is a better idea- Nokia's cameras are, by far, the best in the world. Still, there's a user problem here. For serious photographers, the space afforded by modern cell phones for lenses and imaging chips simply isn't enough to compete with a good compact like the Canon S95 and its peers from Panasonic, Nikkon and Sony. Serious photographers are still likely to use a dedicated device for important pictures.

For "non-serious" (apologies for the term) users, the convenience of getting rid of one device is likely worth the image quality trade offs with using smaller lenses and sensors. However, at this end of the market, is this another commoditized feature? Surely Samsung knows how to build a good camera? Apple's new iphone delivers very good quality images, even in low light, despite using only a 5MP sensor.

Now, Nokia can compete very effectively at the low end of the market for dumbphones and smartphones. Their manufacturing, supply chain management and channel management (fickle though these relationships are) are considerable strengths. The problem here is the cash flows from this business don't justify a $75B market cap

Nelson

Very well Tomi! Great article (I only read 1/4, but I promise tomorrow morning I'll read the rest first thing). I know you don't like to talk about valuation, so I won't, but I must say that I choose to own Nokia stock because they we're really down. And why was that? Just because more info I got about the company, the more I was convinced about it's competitive advantages, or gems how Mr. Elop calls them. Now I'm a finance guy with a deep love for strategic management and marketing (not usual by the way, finance guys like to crunch numbers, don't even try to see the soul of any company). What I loved more about Nokia was its gems, unbelievably great gems: market share, distribution network, reach, segmentation, ability to understand locally, engineering...
However as you point out there's the marketing problem. Most people think marketing is about opening somebody's mouth a stuff it with undesirable products. Now this is far from truth. Marketing is about making some marketable (sorry for being redundant), for example is about interacting with R&D and steering R&D to develop marketable products, it's about knowing what consumers want, know what consumers don't know that they want, and envolve the entire organization into this vision.
I agree with you, although I'm a Portuguese watcher, I can tell that Nokia lost the marketing focus. Anssi Vanjoki was perhaps the last man standing, with his love for cameraphones and superphones, but now he's also gone. So how is it going to be? I don't know, but let's hope that Jerri De Vard can bring this change, and let's hope that Anssi's roadmap can illuminate the road and buy Nokia some time. Or perhaps meego really fulfills its profecy and becomes the leading OS.

Michael

Smartphone market today is a copy of PC market in the 80's. You have Apple, Microsoft is joined by Google, while IBM is replaced by Nokia.

Nokia has probably been analysed by every person owning PC last year, but the bottom line is : People are not buying IT.

Nokia's business practices placed quantity over quality. They were more concerned over selling millions of cheap dumbphones than investing.

Nokia had N-gage platform in 2002, bought Intellisync in 2006, had touchscreen proto 7700 in 2003, had Maemo tablet 770 in 2005, ruled premium segment with 8xxx series, bought Navteq in 2007, introduced OVI in 2008. And out of all this N97 comes out, and N900 - who in the world markets dev phone!!!! Talk about shooting yourself in the foot.

Forget all the studies about texting, market segmentation and other marketing mumbo-jumbo Nokia is a company which for better part of 21st century lived in parallel world. They were selling one thing while dreaming up concepts and technologies. And now somebody else made sure that those concepts and technologies come to the market.

So no Jedi here. Nokia has lost it's technological edge and is on its way to 20% marketshare of questionable platform mix.

E.Casais

It seems most commentators here agree: segmentation is necessary, but the big, unavoidable, paramount issue is software.

Let me one last time try to drive the point home: as an example, consider the article "Ten things Nokia need to fix in their smartphone software in 2011" from www.allaboutsymbian.com -- so from people who are and have always been pro-Nokia.

Superlative camera terminals? "8. Completely replace the Camera interface".

Perfect messaging devices? "3. Nokia Messaging ('Email') needs fixing"; "7. Completely replace the klunky ABCDEFG quick matching code when picking a Contact."

A phone line for youngsters? "4. Nokia Social also needs a big fix-up"; "5. [..] Homescreens".

Multimedia consumption handset? "9. For once and for all, sort out the handling of album art"; "10. Finally, [...] bring back Podcasting (or build in and help fix up Podcatcher) and Nokia Internet Radio".

Ultimate internet terminal? "2. This one needs no introduction really - and Nokia are well aware of it. The current Symbian web browser needs work".

The very best a phone could be? "1. Fix the memory and processor leaks"; "6. Updates. A word that no doubt instills fear into the hearts of the Ovi Store development team."

In other words, every single angle of attack that Tomi is proposing regarding segmentation requires tackling software first.

The iPhone proved that one can skimp on features, provided that the user-interface and basic software have perfect ergonomy and that there is a rich ecosystem of downloadable applications. Android devices have demonstrated that one can offer average hardware specifications, provided the operating system and built-in utilities are powerful, well-integrated and work smoothly. Software is the big challenge for Nokia, not segmentation. And, as the history of the Communicator shows, this has been a sore point for a long time.

Arild

In view of Tomi's focus on SMS as a saviour for Nokia, these figures from Vodafone are interesting, they now earn more money on data than on texting:
http://www.theregister.co.uk/2011/02/03/vodafone_q3_statement/

This is not to say that SMS is not serious money, but I wonder if we are not seeing in this post a view of how to succeed in the past decade rather than the future decade...

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