There were plenty of players in the mobile market who were potential rivals of Nokia, the world's biggest maker of mobile handsets. Research in Motion (RIM) suggested that though Nokia was the global leader in the fast-growing market of smart-phones at that time, perplexingly enough, its devices were losing ground to Apple's iPhone and to the BlackBerry.
Especially in America, where Apple and RIM ruled the smart-phone market, many already had seen Nokia as back-dated. The mobile device market, connected to data centre services, was the fastest growing market. So no player was ready to give up the fight as long as they had the resources to invest. Gradually the mobile phone market was developing and more consumers were opting for smart-phones. According to a research conducted by Gartner, 2013 was the year when for the first time total smart-phone sales surpassed the sales of feature phones, indicating that the market was very much in support of the next-generation devices.
Developers were rushing to write programs for the iPhone and for Android. On the other hand, Nokia's efforts in mobile services, mostly under its Ovi brand, had been struggling to make a headline. Furthermore, Google took a step into the market with the launch of the Nexus One which runs Android. It was a handset made by HTC of Taiwan that the internet giant Google sold directly to consumers along with Google's operating system for smart-phones. According to Gartner Inc figures Nokia's smart-phone market share fell three percentage points to 39.3 per cent in the third quarter, as Google drove into mobile handsets with its Android software. Martin Garner, a London-based analyst remarked about Nokia: "They're in a race with Google to get lots of users onto their service as social networking creates new business models, Google linked its maps to advertising and advertising can only come if you have a lot of users."
Nokia's struggle
Nokia Chief Executive Olli-Pekka Kallasvuo aimed to build the world's biggest mobile Internet services platform to protect market share and create new revenue streams. The company was trying different payment models including bundling with consumer handsets and pay-packages. On the other side, Google also had a diversified services business model, with most of its revenue coming from advertising.
To Nokia's credit, it anticipated the shift to software and services much earlier than other handset-makers. It launched Ovi in 2007, almost a year before Apple opened its highly successful App Store. Nokia, the world's biggest maker of mobile phones, was offering easy navigation by using Maps service free. Nokia bought Chicago-based 'Navteq' in 2008 for a whopping €5.7 billion (then $8.1 billion), to be able to offer better location-based services. Thus acquiring a maps database Nokia wanted to compete with Google's maps as well as with navigation device companies such as TomTom NV and Garmin Ltd. Shortly thereafter, Nokia launched an innovative pairing of a handset with a digital-music subscription. Other smart-phones using Google Inc Software were facing the challenge. In this regard, executive vice president of marketing at the Finland-based company Espoo, Anssi Vanjoki said in a telephone interview: "This will help us defend our selling price for products that contain global positioning system technology."
Nokia with its high morale
Nokia beat Apple in annual sales ($57 billion versus $37 billion) and market share in smart-phones (39 per cent versus 17 per cent), but it was much less profitable. In fact, Nokia's share of industry profits fell from 64 per cent in 2007 to 32 per cent in 2009. According to an analyst with Deutsche Bank, Brian Modoff, Nokia's share of industry profit was not much more than Apple's and less than RIM's. And surprisingly Nokia's market capitalisation is barely a quarter of Apple's.
In spite of all financial downfalls, in Nokia's headquarters morale was far better than one might expect. Though there were problems, executives believed that those could be overcome. When board members met financial analysts in December, they made some bold predictions. The analyst, Olli-Pekka Kallasvuo promised that within a year, the ageing Symbian software would be vastly improved, to enable Nokia to offer "magic devices". Nokia expected a whopping 300 million users by the end of 2011. A surprised Ben Wood of CCS Insight, a long-time Nokia watcher remarked: "I've rarely heard such explicit statements."
Nokia had overcome many crises in the past. In 1995 poor logistics caused it to stumble. It responded by developing one of the world's most efficient supply chains, which could deliver 1.2m handsets a day. A decade later Nokia failed to anticipate the demand for "clamshell"-type handsets, but bounced back quickly to restore its market share in handsets to 40 per cent and started ruling the industry again. To address these concerns the firm was working at bundling a selection of them into a neat package that was easily accessible from its handsets. Nokia was trying to place better offers which would attract the customers than popular social media, such as Facebook, Apple's iTunes store and Google Maps. Furthermore, telecoms operators, who wanted to offer services directly to consumers just like Nokia planned, were reluctant to let Nokia to make such offer. N97, first version of Nokia's flagship smart-phone was a huge failure. Carolina Milanesi of Gartner, a market-research firm, commented: "Its software, based on Symbian, makes them almost impossible to use. It is like having a Ferrari body with a Fiat Cinquecento engine inside."
Nokia's management adopted a "transformation project" to address all these concerns. Nokia's chief strategist, Mary McDowell explained: "We needed to move faster. We needed to improve our execution. And we needed a tighter coupling of devices and services." The firm then introduced a new internal structure which included smaller smart-phone portfolio, more stable services and more Ovi's appeal to developers which allowed them to integrate Nokia's services into their own applications. Nokia not only gave Symbian a makeover but also pushed a new operating system for the grandest, computer-like smart-phones, called Maemo.
Nokia's latest initiatives
Recently the smart-phone market expanded by 42.3 per cent and Samsung sold almost 300 million smart-phones, resulting in a 31 per cent market share. Apple (AAPL) also managed to pull off a decent figure, selling 150 million and accounting for 15.6 per cent of the entire market. However, Nokia was nowhere in the picture. To improve its situation in the mobile market, Nokia decided to change strategies and made up some strong plans to support the turnaround. It announced two new handsets - Lumia 630 and Lumia 635 both of which were powered by Windows Phone 8.1. The burning question was Do the handsets have what the consumers looking for?
The verdict
Lumia 630 and Lumia 635 had basically the same built. The only point of difference was that Lumia 630 was a 3G device while Lumia 635 came with LTE. The handsets came with a 5-megapixel camera with LED flash and offered 720p video recording. But, the most tempting point about the handsets was the price tag. Both Lumia 630 and 635 were sub-$200 devices, manufactured keeping in mind the price-sensitive emerging markets. The worldwide smartphone market was expanding and the prime reason was the huge influx of the low-cost smartphones produced by reputed manufacturers such as Samsung, HTC and many more, as well as from cheaper Chinese manufacturers. The price point of the handsets clearly signified that Nokia had understood how crucial it was to attract the budget-conscious customers, especially in the emerging markets.
Nokia faced stiff competition
Nokia was not the only player that understands the importance of low-cost handsets. Rather, it was among one of those manufacturers who took time to realise the importance of the point. Player's such as Samsung and Google (GOOG) realised the criticality of the situation way back and that enabled them to grow at such monstrous speed.
In the market situation at that time the handset that could give the Lumia 630 and 635 a very stiff competition was Google's Android-powered 'Moto G.' The handset had been selling exceptionally well in major emerging markets and the overall response from the customers was fantastic. Technically speaking, Moto G had almost everything the Nokia handsets had and on top of those it sported a better display with 1280 x 720 pixel resolution with 326ppi as against Nokia's 854 x 480 pixel resolution with 214ppi. As a result the display on Moto G was much more vivid and crisp - something that was very important to the target audience.
Talking about performance, Moto G again had the advantage. Its 1GB RAM, made it much more responsive and nimble to use. On the other hand, the major drawback of the Lumia handsets was the amount of RAM it provided. Taking into consideration the usage levels, 512MB of RAM might fail to satisfy its users.
The one point where Moto G fell short of the Lumia was the storage capacity. While Moto G came with 8GB and 16GB storage options, the Lumia handsets not only had just 8GB of storage, but also they had the expandable storage option which was absent in Moto G. So, while Moto G scored on display and performance speed, it fell short in terms of storage - another aspect very important to the target audience. However, the trump card for Moto G was undoubtedly the operating system it sported - Android 4.4 KitKat.
Nokia's new strategies
Here, Nokia's mapping division, acquired Desti, an app built around natural language-processing and artificial intelligence. Desti can help the mapping service field user requests and answer them with location-based results. Now, Here has bought the predictive analytics start-up Medio Systems. Here is clearly trying to build out a robust mapping program. Here is hoping to gain market share from other mapping companies, including Google. It's currently available as a Windows Phone app and built into car dashboard systems. It also has licensing deals with large companies, including Amazon and Microsoft. It seems like a natural step for Here to become available as a stand-alone app on mobile operating systems other than Windows, which pales in market share compared to Android and iOS.
Nokia wants to create personalised maps:
BI Intelligence talked with Here's VP of search and discovery, Don Zereski. The purpose of the Medio acquisition, he said, is to "generate personal maps," or maps custom-tailored to an individual's preferences and habits. Medio is able to analyse the types of locations a user likes, as well as other contextual information, and provide recommendations. For instance, it will know if there's a traffic jam and give an alternate route (much like Google Maps and its Waze-powered features). But, Zereski explained, "It will also know personal information - for instance, if I like local coffee shops it will recommend those as opposed to large chains."
What Nokia can adapt
Powermat, a company which sells cheap external adapters that can be plugged into phones in order for them to charge at the stations. It uses a wireless charging standard called Rezence that, through magnetic technology, allows compatible devices to lay on the surface and charge. Many devices, however, won't work with the Rezence magnetic charging stations. Phones actually need to have special hardware in order to work with the platforms. The Rezence charging standard competes directly with another called Qi. Rezence and Qi have been competing for the past year trying to get manufacturers to preinstall their charging technology in phones. Qi currently leads when it comes to devices with its technology preinstalled - these include the LG G3 and the Nexus 5. This Starbucks announcement is a major win for Rezence.
The solution to short battery life
might be simple - two batteries:
Battery life is the bane of mobile users' existence. Researchers have been working for decades on inventing longer-lasting batteries. This includes tweaking hardware to be more energy-efficient as well as tinkering with battery chemistry. But batteries have advanced at a very slow pace as compared with other technologies. One idea showcased by Microsoft researcher Ranveer Chandra is two smaller lithium batteries in lieu of one big one. MIT Technology Review writes, "One would be optimized to efficiently provide a large supply of current ... The other would be designed to trickle out smaller currents." This could potentially increase a mobile device's life up to 50 per cent. Of course, all of this is still in the research stages with no word on when and how it could be released commercially. Once a company comes up with a truly revolutionary answer to the battery life problem, it could give them a definite edge over competitors in the smartphone market.
Conclusion
Despite all, it is an entirely different question whether Nokia will manage to dominate the mobile industry once more - not just by handset volumes, but by innovation and profits. For example in the computer industry, there was sudden shift of focus from hardware firms to providers of software and services over two decades ago. Among all the industry giants, only IBM really made the shift successfully. Then again, Nokia has reinvented itself many times since its origin in 1865 as a paper mill. But along with remarkable willingness to embrace change and diversity, Nokia will need those traits in the years ahead.
With the rise of the smart-phone, however, software and services are becoming much more important. They require different skills. Development cycles are not counted in quarters and years, but in months or even weeks. New services do not have to be perfect, since they can be improved after their launch if consumers like them. Teams have to collaborate more closely, so that the same services and software can run on different handsets. Nokia also has to establish a direct relationship with its users like Apple's or Google's. But this time the problems go deeper. In more than one way, Nokia has to become a different company. Until now, it has excelled in making and distributing hardware. This has trained the organisation to focus on planning and logistics. Teams developing a new device also work in relative isolation and even competitively, to make each product more original. And although Nokia has always done a lot of market research and built phones for every conceivable type of customer, it sells most of its wares to telecoms operators and designs its products to meet their demands.
The writer has done her Masters in Management from the UK. Email: priyanka.strath@gmail.com
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