Nokia's decline due to lack of focus and foresight

Global Times | August 16, 2011 00:45
    By Yu Qingjiao

Finnish cellphone maker Nokia was once seen as the most successful technology enterprise in Europe.

However, its decline began in 2007, when Apple brought out the iPhone.

Nokia first lost its grip on the North American market, with its position in Europe and China – the world's biggest cellphone market – also soon slipping. Its China sales for the second quarter of this year had fallen to 11.3 million units, down 41 percent year-on-year.

I would argue that Nokia's decline is mainly attributable to a lack of understanding of current and potential customer needs, and a lack of focus on its core business.

Nokia did a good job of sticking to its reputation for high-quality handsets, but it failed to respond to the increased demand for fashionable design and innovative functions that the launch of the iPhone heralded.

Ironically, Nokia developed touch-screen technology long before Apple released the iPhone, but an internal research report by Nokia concluded that its target consumers were not interested in the technology.

Nokia's new N9 is its first smartphone to utilize cutting-edge touchscreen technology. Although it's a significant technical achievement for Nokia, it comes years too late.

Nokia has also failed to make effective use of its massive research, development and expansion expenditure to improve its core advantages.

The company spent about $3.9 billion on R&D last year alone, around four times more than Apple and far more than its other competitors. However, Nokia still flounders. The problem is that much of this spending has been squandered on ventures outside its field of expertise.

Five years ago, Nokia's former CEO Olli-Pekka Kallasvuo vowed to change the company's business model from that of a traditional mobile phone maker to something "more like an Internet company."

Following this, Nokia has been rolling out Internet-oriented products and services such as the Ovi online photo sharing, mapping and mailing services, and has also acquired five other Internet companies, including Navteq, a mapping service provider, at a cost of $8.1 billion.

Nokia's new smartphone operating system, Meego – designed to rival iOS and Android – has seen huge delays, meaning it will find getting market share to be an uphill struggle.

If Nokia is to save itself, it needs to focus on understanding the evolving needs of consumers, and find the right way to position itself to make the most of its core advantages for long-term development.

The author is CEO of Itdcw.com. yqj@itdcw.com   www.itdcw.com