The rise and fall of Nokia

Unless you have been living in a cave, chances are you would have used one of the above phones manufactured by Nokia.

Not so long ago, the 13-note ringtone of a Nokia handset was the de facto soundtrack of the mobile revolution. The world's largest cell phone maker for more than a decade, the company was a leading innovator in both design and technology that helped bring wireless life to the world.

Before it became a dominant player in mobile, Nokia was a shapeless conglomerate that had manufactured everything from paper pulp to rubber boots to cables. In the 1980s, its CEO decided to try and latch onto the boom in consumer electronics, including handsets, which led it to team up with a pair of Finnish telecoms on an undertaking that would change its fortunes, as well as the future of the cellular industry. 

That project was the first digital telecommunications network, known as the GSM. At the time, Europe was dominated by a balkanized mess of analog mobile networks that varied country to country. This setup presented a logistical nightmare for companies in the business of making phones, which would have to build different models to meet the specifications of each individual market. As far back as 1982, engineers had been trying unsuccessfully to unify the continent under a single system. Nokia and its partners managed to get the network up and running in Finland by 1991. That year, the country's prime minister used a Nokia phone to place the first ever call on a commercial GSM Network. 

GSM took off -- not only all over Europe but also in Asia, Latin America, and elsewhere.

All of this might just sound like neat history for tech nerds. But the change to digital had profound impact on phone technology. Perhaps most importantly: It enabled text messaging. Because Nokia had invested so much money and research into digital networks, it was ready to dominate markets where it was adopted. By 1998, Nokia was the leading handset maker in the world, with more than 22 percent of the global marketplace. It would peak at around 40 percent in 2008. 

Nokia won by offering customers phones that were more advanced and better dressed than their competition's. Unfortunately for them, they weren't ready to do the same when it came time for the next transformation of the mobile industry -- when Apple convinced customers they should all carry small computers in their pockets instead of boring handsets. 

It's tempting to try and characterize Nokia's failure as a classic instance  of the "innovators dilemma" -- the theory that path-breaking companies often focus so hard on protecting the market which made them successful that they miss the next big thing that will disrupt the market. And to some degree, Nokia was guilty of sitting on its laurels. For instance, it missed out on the flip phone trend that helped revive Motorola's fortune early in the aughts. But it wasn't late to the smart phone game. As early as 1998, the company was talking about "putting the internet in every pocket." And in 2007, the year Steve Jobs unleashed the iPhone on the world, Nokia fans lined up outside stores to buy the company's new N95 smart phone. 

The execution simply wasn't there. The design wasn't as appealing to shoppers. The operating system, Symbian, was clunky. Apple got the formula right, creating a phone that not only doubled as a fashion accessory, but also became the defining consumer item of its age. Samsung followed suit with its hot-selling Droid-powered models. Nokia, in turn, focused more and more on selling commoditized phones in developing countries, which increased their market share, but did little to improve their long-term outlook as more of the world embraced iPhone-style devices. 

Nokia's Lumia 900, which runs on Microsoft's Window's 7 mobile operating system, seems to have recaptured that combination of elegant function and design that once defined their best products. But sales have been slow, and it may not be enough to save the company from its immediate problems.

Can Nokia ever bounce back again? Some analysts believe yes.  Windows mobile operating system is projected to expand in market share more than any other. The Android system from Google is expected to decline the most. Samsung is reported to be looking at the Blackberry 10 from Research-in-Motion. Even with the manifold weakness of RIM, Samsung needs to look beyond the Android particularly after its recent loss in the Apple v  Samsung court case.

The table below lays out the findings from the research of the International Data Corporation

Worldwide Smartphone OS Market Data

Smartphone OS	2012 Market Share	2016 Market Share	2012 - 2016 CAGR
Android	61.0%	52.9%	9.5%
Windows Phone 7/Windows Mobile	5.2%	19.2%	46.2%
iOS	20.5%	19.0%	10.9%
BlackBerry OS	6.0%	5.9%	12.1%
Others	7.2%	3.0%	-5.4%
Total	100.0%	100.0%	12.7%

Secondly, Nokia still sells the second most mobile phones in the world.  Nokia feature phones sales are still very desirable in countries such as India and Indonesia.

Lastly, it is easier for companies at the lower levels of a sector to move up with new products than it is for the elite to begin to offer stripped-down versions at cheaper prices to the masses. The car industry demonstrates this: Toyota started off selling economical cars before introducing the Lexus. The same with Volkswagen. But efforts by BMW, Mercedes etc to sell cheaper models to a broader class of consumers have all flopped. It should be easier for Nokia to sell more advanced smartphones than it will be for Apple to market a low cost version of the iPhone, if it would even choose to go that route.

Will you ever buy a Nokia phone again? Who knows? Many mobile makers disappeared from the market as fast as they appeared. But Nokia stood the test of time. Nokia synonymous with popularity still stand a chance to stay afloat much longer.