Battling for the bronze medal: Nokia’s smartphone platform of choice, Windows, is battling with BlackBerry for third place in the market behind Apple’s iOS and Google’s Android.
Earlier this week I sat in a room while Nokia chief executive Stephen Elop talked about the new Lumia phones and the company’s ambition to establish Microsoft Windows as the third smartphone “eco-system”. All I could think was, “Oh, how the mighty have fallen.”
Nokia’s Lumia 920 and its smaller sidekick, the Lumia 820, are hitting the Australian market now after supply constraints late last year. The phones run Windows 8. The 920, which sells for more than $800 as an outright purchase, has high-end navigation and photography among its flagship features. I had the opportunity to test it over the weekend and it’s a nice phone – though it was striking how much bigger and heavier it than my last Nokia some years ago. Of course, increasing size is a trend with all smartphones. Remember the days when phones competed to be small?
When I started in technology journalism in the late 1990s, Nokia was king of the mobile phone market. At its peak, it had a market share of 40 per cent – that is, two out of every five mobile phones sold was a Nokia handset.
A lot has changed since then. The first iPhone debuted five years ago and disrupted the entire market. The open-source alternative, Android, started to take off two years later. Android was adopted by manufacturers around the world, notably Samsung and HTC, and is now the No. 1 smartphone operating system in terms of market penetration.
The Windows smartphone platform and BlackBerry are now fighting for third place. BlackBerry, which created the original smartphone, is equally determined to take the bronze prize, and last week the company announced its new BlackBerry 10 operating system and phones.
Elop doesn’t rate the competition. About BlackBerry, he says: “When a business person or a consumer is purchasing a smartphone today, what they are actually buying is much more than what you see in your hand. They’re certainly buying the hardware, they’re buying the operating system, but they’re also buying the full range of applications that may be available for the device. They’re buying all of the cloud-based services that are required to make this a complete experience. So mapping, navigation, music, entertainment, unified communications, office productivity, on and on and on and on.”
While BlackBerry offers the ability to port Android apps to the platform, Elop says this strategy doesn’t take you very far in practice because it covers only apps that align with a certain screen size and don’t connect to Google services.
Elop raised eyebrows when he joined Finland-based Nokia from Microsoft in 2010 and then abandoned the Symbian platform in favour of Windows for its high-end devices. (Nokia does support other platforms in the lower-price bands, such as Asha.)
Elop made the assessment that Nokia didn’t have the capacity to turn the Symbian into a third eco-system – phone, hardware, operating system, third-party apps and cloud-based services. The decision then boiled down to whether Nokia should go with Windows or Android. One problem with Android was that it required the adoption of Google Maps, which competes with Nokia’s intellectual property in mapping and satellite navigation systems. The other problem was whether Nokia could make up for lost time on Android.
“The opportunity for differentiation and also the importance that Microsoft attached to having major partner like ourselves go in the direction of Windows Phone, where everyone else had gone in the Android direction, made it possible to structure a relationship that we saw as advantageous to ourselves,” Elop told reporters in Sydney on Monday.
“On the Android side, we were very worried that, because we would be entering late relative to everyone else in the industry, that perhaps one vendor was well on the road to becoming the dominant Android vendor at the expense of everybody else.
“If you look back two years to when we made the decision, Samsung was big, HTC was pretty big, Motorola was pretty big. And of course what’s happened in the [past] two years, Samsung has captured the lion’s share but the others have been squeezed down to very small market share even though they started with much larger. So we were worried about exactly that pattern forming and whether we would be able to break through with that. We thought we had a much better chance with Windows Phone and we believe that will be proven to be true.”
All this may well be true, but it’s not a situation that Nokia should have been in the first place. It speaks to the opportunities that Nokia squandered before Elop’s time. It would take cultural renewal and more than a bit of luck to recover.
Elop thinks it’s possible, if the corporate culture ensures that staff are accountable for performance, move with urgency, and listen to consumers and operators.
“When I talked to employees and talk about the attitudes and behaviours that are important to be successful in the future I talk very much about maintaining a challenger mindset,” he says. “We have to operate as the challenger, not as the big strong one as the past, but as the challenger mindset.”
Elop has put in place measures to encourage innovation, such as a recent Hackathon that resulted in software that lets you print a cover for the Lumia 820 using a 3D printer.
“In the past there were similar programs but part of this as well, I think, comes from a tone at the top. So I’m an engineer and I love the products, I love working with the products. When I visit our various research facilities all around the world I’m right in the labs with the engineers poking, prodding, asking questions.”
If he is right, Nokia may well establish itself as the dominant player in the third most popular smartphone platform. The question is whether it can hope for anything more.
The story of Apple’s rise and fall and rise shows that the disruptors can come from anywhere. They are as likely to be long-term players that reinvent themselves as newcomers. It’s entirely possible that Nokia, or another existing player, could disrupt the still-emerging mobile market in the coming decade. But I wouldn’t put money on it. Would you?