The failure of Nokia

Nokia was founded in 1865 in Espoo, Finland. Nokia is a company dedicated to global communications,
information technology and electronics. Nokia was the leading company in mobile phones in the
world. Nokia's operating profit went from $ 1 billion in 1995 to almost $ 4 billion by 1999. Nokia shows
us with its history how the fall of its empire was for the lack of innovation and its small criteria to open
its doors to a new business model and the importance of learning from competitors.

In less than 10 years Nokia went from being the most recognized brand in telecommunications to
being a company in defeat, its downward journey began in January 2007, when Steve Jobs introduced
the iPhone to the world and changed the course of the Finnish company forever.

Nokia's downfall was the combination of its closed innovation method and Apple's disruptive
innovation. Just at the time the market was growing in mobile telephony, Nokia could not sustain its
leadership for various reasons according to the CEO at the time. One of the most crucial reasons for
the downfall was the Symbian operating system, which was no match for the Microsoft and Apple
operating systems. Also, the company’s over-confidence in the brand was a decisive point. Nokia was
blind with ego, and it did not allow them to see they had to respond faster to their competition. Nokia
made and makes quality phones, but their focus was the hardware and not to update or deliver
software that was as good as Apple’s, Samsung’s or Blackberry’s software.

A paper published by the professors Mr Huy and Mr Vuori in 2015 Distributed attention and shared
emotions in the innovation process: How Nokia lost the smart phone battle,1 shows us that after
interviewing 76 former employees of the company the fall of the great ship was due to a fear of the
organization of losing its investors, poor middle management skills, fear of accepting its inferiority to
other programming systems, and how the decision of only meet short-term customer needs and not
focus on the future of the company.

One of the main mistakes was to focus on the linear science-push model modality; The reality is that
innovation is never a simple matter of push or pull but rather their interaction2. Nokia had already
formed its name. They were the founders of the telephony field worldwide; they had an excellent
research and development team to which according to the managers they were not motivated to keep
improving. The lack of morale among the employees marked a great concern in the company of fear
not to be able to improve or grow in their roles and it produced unhealthy internal competition.

Nokia was completely focused on just getting innovation from its employees that it did not consider
or observe the competition.

According to Prahalad and Hamel the importance of a strategic architecture is a road map of the future
that identifies which core competencies to build and their constituent technologies. 3 Nokia’s head
office management was lacking vision, they focused in delivering what the customer wanted in the
present without planning the future. The lack of visualization of their core competence made them
weak, they did not know how to create a business with the ability to create and maintain. They did
not have the ability to standardize and integrate their core product, their work team, their skills and
knowledge in making a foundation for their core competencies.
Another turning point in the fall of Nokia was the wrong internal analysis of the company. Eventually
they already had the loyalty of the market and their economical position in it. Internal weaknesses
according to the former employees were a big cause; they were totally unmotivated and did not have
the necessary supplies or the knowledge required to be able to improve and implement the re-
innovation of the system, they were not supported with enough monetary capital to be able to find
other alternatives, and not accepting the alliance with android operating system has been one of the
worse decisions taken by the company.

Nokia missed many growth opportunities as Mr Chesbrough wrote about closed innovation,
companies must generate their own ideas that they would then develop, manufacture, market,
distribute and service them-selves4. And by sticking to their model, they were not allowed to seek or
acquire information from external sources to improve their operating system. Therefore, we can see
that this innovation model did not work for them. They did not know how to cover all the requirements
and challenges of the closed innovation model to be able to perform well in the market.

Even when its engineers created innovative and original new products, they were not accepted by the
managers. Nokia engineers had already created a screen touch smart-phone 7 years before the iPhone
appeared on the market, but they did not know how to formulate a business model to be able to
launch it into the market. They fell into the Innovator's Dilemma, where they had the correct core
product but did not know how to choose the correct time to show their new technology. Instead, they
focused more on how the product looked and not the applications it could deliver to its users.

During its fall in 2010 one of the strongest blows they had was the arrival of Stephen Elop as a CEO, as
he made lethal decisions for the company. Elop streamlined manufacturing plans, reduced R&D
revenue to a minimum, and laid off more than 1,800 employees who sought opportunities at other
companies, many of those talents ending up working for the competition. As a result of these actions,
the competition began to have internal knowledge of Nokia which was used to create a stronger
structural model in their company and not fall into the same mistakes.

The former CEO of Nokia, Stephen Elop, is credited with the phrase: “We did nothing wrong, and
somehow we lost.” This only shows us the lack of connection that had between his senior staff and
his employees, he points out the lack of knowledge of their customers, what costumers were
requesting, and He did not take into consideration the competition’s knowledge and the disrupted
innovation they brought into the market.

Meanwhile, Apple and its innovation model took the technology world by surprise and launched the
iOS operating system, Apple changed the game. The iPhone created a new market for internet access
and eventually was able to challenge laptops as mainstream users ’device of choice for going online. 5
At that point Nokia lost its battle.

Finally, the lack of good marketing also hit the brand, they were based only on their reputation,
without investing in new techniques to be able to fight their competitors, and for that reason they
could not form a stronger bond with new consumers and even lose their current market. Nokia did
not know how to keep their brand up to date and their inconsistency drove their customers away.
Each of their advertisements were completely different and with different messages, which their
customers did not take it very well.

Just as the Nokia programming team did not evolve due to the lack of support, the same thing
happened in the marketing team. The lack of resources, research of its market and its messages all
over the place misled its public and made it more in tune with other brands of telephony industry.
Nokia, like all companies in defeat, learned from its mistakes, in 2016 it sold the mobile division to
Microsoft and then focused on other approaches to its company.

The big question is what could have been done better or what other different actions to take in order
not to lose its leadership.

First, it could have focused on moving its logistics to an open innovation model. Also, the power of
networking and trying to do some alliancing.

As Chesbrough quoted not all the smart people work for us so we must find and tap into the knowledge
and expertise of bright individuals outside our company.6 Companies can benefit from having an open
innovation model. Large companies do not always have the best in everything, when you have a
multimillion-dollar company like the one Nokia was, a solution to the research and development
problem is to bring external knowledge and implement it with your internal knowledge to create new
products or improve your core product. Requesting external knowledge does not show weakness in
the brand if not, on the contrary, you can fill your gaps for your team and thus make it stronger. In
this case it was to improve its Symbian operating system, which was discontinued in 2016. The reason
why this OS collapsed was due to the lack of applications and user interface. Leave aside the looks,
Nokia phones did not have a front camera, which makes it not even 3G enabled. So, Nokia’s latest
phone were featuring ready, but not future ready.7

Nokia could have put itself in the role of an innovation investor and through that role used R&D from
small independent companies or universities. They could have invested in these proposals to be able
to find a better operating system and thus be able to face their adversaries.

Another different approach to go from closed to an open innovation that could save Nokia is the
alliance with Android OP. They had all the technology to compete with iOS. At that moment that an
alliance could have been founded between the renown of Nokia with an Android OS, they had the
complete package, they had the Nokia market and its loyalty, the distribution of product in more than
100 countries and the manufacturing experience with Android’s technology that would have improved
by far their OS. Together, they could have had a change against Apple. Nokia knew the know-how and
Android OS had the information.

Other great benefits that would have resulted from this alliance is the low cost that Nokia would have
had to pay. The technology was already developed by Android, and it was only to implement it as its
OS. If we combine the monetary power that Nokia had at that time with the knowledge of Android
even, they could develop an operating system much better than Apple.

Also, the morale of his team was totally damaged and giving them different knowledge and the
opportunity of learning, could have prevented the internal collapse they suffered.

Smart firms have always recognized the importance of linkages and connection, getting close to
customers to understand their needs and working with suppliers and/or collaborators. Managing
networks and connections become the key requirement for Innovation.8 Nokia lacks one of the most
important points in any company and it was listening to their customers, delivering their demands.
The costumers are those who buy the products without their interest and an innovative product there
is no possibility of keeping you in the competitive field.

A network benefit that Nokia was undoubtedly lacking was a good marketing method which would
have been more confident and stable and would have helped them not to lose so much market and
through this keep the customer more engaged.
Nokia is an example of a cluster of wrong decisions continually. It teaches us how valuable it is to stay
up to date with new technology and marketing trends. The importance of the internal analysis of a
company and above all to observe our opponents, so we know what they are offering to the market
and how to exceed those expectations. Without costumers, there is not business.

References

1
Timo O. Vuori, Quy N. Huy. First Published September 18, 2015. Distributed Attention and Shared
Emotions in the Innovation Process: How Nokia Lost the Smartphone Battle.

2
Joe Tidd & John Bessant. 2021. Managing Innovation: Integrating Technological, Market and Organizational
Change, Seventh Edition, Wiley

3
C.K Prahalad and Gary Hamel, the core competence of the Corporation, Harvard Business Review
May- June 1990, HBR

4
Henry W. Chesbrough. Spring 2003. The era of open Innovation. MIT Sloan Management Review. Reprint
number 4435

5
Clayton M. Christensen, Michael E. Raynor, and Rory McDonald. December 2015. What is Disruptive
Innovation? Harvard Business Review.

6
Henry W. Chesbrough. Spring 2003. The era of open Innovation. MIT Sloan, Management Review. reprint
number 4435

7
Nayan Bhalodiya & Professor Nishit Sagotia. Issue: 03 2018. Reasons Behind the Failure of Nokia: A Case
study of Telecom Sector. International Journal of Management and Humanities. Research Script IJMH. Volume:
05

8
Joe Tidd & John Bessant. 2021. Managing Innovation: Integrating Technological, Market and
Organizational Change, Seventh Edition. Wiley.