Why Nokia Failed? What happened to Nokia In A Nutshell

Nokia is a Finnish telecommunications, consumer electronics, and information technology company founded in 1865 which by 1998, had overtaken Motorola to become the world’s largest mobile phone brand. The Nokia brand is now controlled by HMD Global – a company founded by former Nokia employees that released a line of smartphones in 2017. The company’s failure to keep up with software-based iOS and Android operating systems made it lose its market leader position.

Aspect	Description
Founding and Early Success	Nokia, founded in 1865 in Finland, began as a pulp mill and evolved into a diverse conglomerate with interests in various industries. However, it gained global recognition for its foray into mobile phones and telecommunications equipment in the late 20th century. Nokia became the world’s leading mobile phone manufacturer, known for its durability and innovation.
Dominance in Mobile Phones	During the late 1990s and early 2000s, Nokia dominated the mobile phone market, capturing a substantial market share. Iconic phones like the Nokia 3310 became cultural symbols of the era, known for their reliability and long battery life.
Challenges from Competitors	Nokia faced increasing competition from companies like Apple and Samsung, which introduced smartphones with touchscreens and advanced operating systems. Nokia initially struggled to adapt to the rapidly changing mobile landscape.
Strategic Partnership with Microsoft	In 2011, Nokia announced a strategic partnership with Microsoft to use the Windows Phone operating system in its smartphones, effectively discontinuing its Symbian platform. This move aimed to revive Nokia’s smartphone business by leveraging Microsoft’s software expertise.
Decline in Market Share	Despite the partnership, Nokia continued to lose market share to competitors, particularly Android-based smartphones and iPhones. The transition to Windows Phone faced challenges, and the ecosystem struggled to gain traction.
Acquisition by Microsoft	In 2014, Microsoft acquired Nokia’s Devices and Services division, effectively bringing an end to Nokia’s reign as a standalone mobile phone manufacturer. The acquisition aimed to integrate Nokia’s hardware with Microsoft’s software to create a more competitive smartphone ecosystem.
Nokia’s Focus on Networks and Technologies	Following the acquisition, Nokia shifted its focus to its other businesses, including network infrastructure and patent licensing. It became a major player in the telecommunications equipment industry, supplying infrastructure for 5G networks and beyond. Additionally, Nokia continued to generate revenue by licensing its extensive patent portfolio.
Return to Mobile Phones	Nokia made a return to the mobile phone market by licensing its brand to HMD Global in 2016. HMD Global produced Nokia-branded smartphones and feature phones, leveraging the nostalgia associated with the Nokia name. These phones ran on Android, marking a departure from the Windows Phone era.
Ongoing Innovation	Nokia remained active in network technology innovation, including 5G and beyond. It also continued to explore emerging technologies such as Internet of Things (IoT) and cloud networking.
Legacy and Impact	Nokia’s legacy in the mobile phone industry endures through its historic dominance, iconic devices, and contributions to mobile technology. While it faced challenges in the smartphone era, Nokia’s focus on other business segments allowed it to maintain a presence in the technology sector.

Background

Nokia is a Finnish telecommunications, consumer electronics, and information technology company founded in 1865 by Fredrik Idestam, Leo Mechelin, and Eduard Polón.

Nokia is perhaps best known for its mobile phones which dominated the industry before the invention of the smartphone. Not only were Nokia products built to last with long battery life, they were also a fashion statement.

In 1998, Nokia overtook Motorola to become the world’s largest mobile phone brand. Nine years later, it amassed a staggering 51% of the total global market share.

As is often the case, however, a meteoric rise is followed by a similarly meteoric fall.

So what happened to Nokia?

Hardware focus

Nokia was great at building device hardware, but a device built on software was the way of the future.

When the company realized this fact, Apple and Android had already developed their own app-based software and were years ahead.

Nokia would forever remain trapped by its unwieldy, device-centric operating system called Symbian. With each new Nokia mobile phone, there were release delays as code had to be developed and then tested. By 2009, the company was using 57 different and incompatible versions of its archaic operating system.

And indeed, in its falling history, Nokia also counted one of the worst selling phones. The idea was pretty good (combining gaming with phones), but the UX and the timing not as good:

Operating system resistance

When Google entered the smartphone market in 2008, peers such as Samsung, Huawei, and Motorola switched to the Android operating system to remain competitive.

Nokia remained reluctant to do the same until 2011 when it partnered with Microsoft to secure Windows Phone as its primary OS. Unfortunately, Android can now be found in 80% of all smartphones while Windows Phone no longer exists.

Nokia belatedly switched to Android in 2014, but the damage had been done.

Mismanagement and poor culture

In a paper titled Distributed Attention and Shared Emotions in the Innovation Process: How Nokia Lost the Smartphone Battle, researchers published the results of 76 interviews with Nokia management staff.

Among the revelations were that:

Nokia suffered from organizational fear with temperamental leaders and frightened middle managers being the status quo.
Some management staff intimidated their subordinates by accusing them of not being ambitious enough. Others lacked technical competence which influenced their assessment of technological limitations during goal-setting. In comparison, similar positions at Apple were all held by competent engineers.
Senior leadership was afraid of not meeting quarterly targets.
Executives were also afraid to publicly acknowledge or comment on the inferiority of Symbian.
Top executives were wary of admitting inferiority to Apple for fear of losing investors, suppliers, or customers.

Aside from the poor culture, the decision to move from an organizational structure to a matrix structure in 2004 also harmed Nokia. Power struggles ensued with many key personnel departing the company soon after.

Nokia today

Unlike many other companies, Nokia’s failure to innovate did not lead to bankruptcy or acquisition.

Today, Nokia appears to have left mobile phone development in the past. The Nokia brand is now controlled by HMD Global – a company founded by former Nokia employees that released a line of smartphones in 2017.

The company still manufactures hardware and is involved in the roll-out of the 5G wireless network, among other things.

It also earns a considerable income from the hundreds of patents it owns and licenses to mobile phone vendors.

Key takeaways:

Nokia is a Finnish telecommunications, consumer technology, and information technology company founded in 1865. It enjoyed 51% of the global market share for mobile phones in 1998.
Nokia’s device-based hardware system was cumbersome and outdated, but the company persisted with it while competitors developed the software-based iOS and Android operating systems. By the time Nokia phones offered Android, the company had been left behind.
Corporate mismanagement within Nokia was rife and culture suffered as a result. Internally and externally, the company failed to acknowledge its diminishing relevance and market share.

Timeline

Nokia’s Rise to Dominance: Founded in 1865, Nokia became the world’s largest mobile phone brand by 1998, overtaking Motorola, and secured 51% of the global market share.
Failure to Embrace Software: Nokia excelled in hardware but failed to keep up with the software-based iOS and Android operating systems, which became the future of the mobile industry.
Struggles with Symbian OS: Nokia remained trapped by its unwieldy operating system called Symbian, leading to release delays and the use of multiple incompatible versions.
Reluctance to Adopt Android: While competitors embraced Android, Nokia was hesitant and only partnered with Microsoft for Windows Phone in 2011, which proved less successful.
Mismanagement and Organizational Issues: Nokia suffered from mismanagement, a poor corporate culture, and resistance to acknowledge weaknesses, hindering innovation.
Transition and Brand Control: Nokia’s failure to innovate did not lead to bankruptcy; instead, the brand is now controlled by HMD Global, founded by former Nokia employees, releasing smartphones in 2017.
Focus on Patents and 5G: Nokia shifted its focus away from mobile phones and remains involved in manufacturing hardware and deploying the 5G wireless network. It earns income from its extensive patent portfolio licensed to other mobile phone vendors.

Year	Event	Description
1865	Nokia founded as a pulp mill in Finland.	Nokia, originally a pulp mill founded by Fredrik Idestam, Leo Mechelin, and Eduard Polón, transitions into a diverse conglomerate with interests in various industries.
1998	Nokia becomes the world’s largest mobile phone brand, overtaking Motorola.	Nokia achieves global recognition in the mobile phone industry, surpassing Motorola to secure the position as the world’s largest mobile phone brand with a substantial market share.
Late 1990s	Nokia dominates the mobile phone market, known for iconic devices like the Nokia 3310.	Nokia experiences significant success in the mobile phone market, capturing a substantial market share and becoming synonymous with durable, reliable devices like the Nokia 3310.
2000s	Increasing competition from smartphones with touchscreens and advanced operating systems.	Nokia faces growing competition from companies like Apple and Samsung, which introduce smartphones with touchscreens and advanced operating systems, challenging Nokia’s dominance.
2011	Nokia announces a strategic partnership with Microsoft to use Windows Phone OS.	Nokia partners with Microsoft to adopt the Windows Phone operating system, discontinuing its Symbian platform, in an effort to revive its smartphone business and leverage Microsoft’s software expertise.
2014	Microsoft acquires Nokia’s Devices and Services division.	Microsoft acquires Nokia’s Devices and Services division, marking the end of Nokia’s standalone mobile phone manufacturing business as it integrates Nokia’s hardware with Microsoft’s software.
2016	Nokia licenses its brand to HMD Global for smartphone production.	Nokia licenses its brand to HMD Global, a company founded by former Nokia employees, to produce Nokia-branded smartphones, marking a return to the mobile phone market after the Microsoft acquisition.
Ongoing	Nokia shifts focus to network infrastructure and patent licensing.	Following the Microsoft acquisition, Nokia focuses on network infrastructure and patent licensing, becoming a major player in the telecommunications equipment industry and generating revenue from its patent portfolio.