Assessing Nokia’s Competitive Response

When the iPhone was announced in January 2007 I tried to envision the competitive response from Nokia. The method involved some knowledge of the product development cycle that I was faintly aware of.

Here is what I predicted:

  • 2007.There would be no response within the first year, meaning there would be no perceived threat of any kind. No process change, No roadmap changes and no business review. Apple is not considered a competitor.
  • 2008.There would be plans made to respond with press releases, dismissing the challenge as a non-threatening “positive” for the industry. No process changes, no product plan changes, no business model changes. Apple would not be considered a competitor except in “high end multimedia” (invisible in any of the segments Nokia uses to define markets).
  • 2009.In the third year, product development teams would be asked to begin roadmapping some of the hardware features that would keep Nokia ostensibly competitive (unfortunately for Nokia, hardware is not what sells iPhones). Results from these efforts would emerge in 18 to 24 months. Apple not considered a competitor except in “high end converged devices” (i.e. a few consumer segments/categories are considered vulnerable).
  • 2010.Realization that iPhone is a threat from new dimensions (user experience). Planning begins on reshaping the software base as a market-driven (not technology-driven) asset (5 year cycle). Apple begins to be evaluated as a competitor in devices and services, although still not compliant with current market definitions.
  • 2011.The realization that the iPhone competes as a platform. Planning begins on repositioning Symbian/Ovi. Products planned in 2009 begin shipping–this means first capacitive touch screens but crude, almost unusable software.
  • 2012.The realization that the iPhone is an integrated product and that integration is a key to competitiveness enters management consciousness. Planning begins on organizational change and a realignment of incentives to account for this new threat. Crude shuffling of internal assets and management musical chairs begins. Organizational change amounts to mostly new names for old departments. Touch screen phones with slightly better software begin shipping (similar in feel to Blackberry Storm from 2008). Incentives are added for employees (in across-the-board performance objectives) to hit user experience targets.
  • 2013.Management begins planning a new organization structure that takes into consideration the fundamental causes of iPhone’s success: integration, software, user experience over the objections of sales and markets org that depends on shipping plastic to distributor. Another reorganization that is slightly more rational and aligned with the market is initiated. The plan is to have the assets in place by 2019 to compete effectively as a platform.
  • 2014.First products that are roughly comparable with iPhone version 1 begin shipping. The required software redesign started in 2010 is coupled with the integration efforts. Nokia’s response to the iPhone has begun.

I tried to revisit the prediction to update it with anecdotal evidence but so far there has been little activity that has affected the trajectory.

  1. Note 1: Whether an iPhone v1.0 shipping in 2014 would be competitive is left as an exercise to the reader.
  2. Note 2: The N97 shipping in 2009 is the result of work begun in 2007, it has had no influence at all from the iPhone.
  3. Note 3: The Microsoft response cycle is slightly shorter (perhaps 5 years vs. 7) but they lose a year in efforts to integrate with licensees. As neither MSFT nor GOOG are able to integrate products, they will never be able to actually deliver a competitive product. In this regard, Nokia has an advantage.
  4. Note 4: The key takeaway from this analysis is that the industry standard product cycle for an integrated, platform based product is 5 to 8 years and if one competitor can achieve a 2 to 3 year cycle, then the more nimble competitor can “turn inside” the industry and, within two cycles, dominate it. Although smaller competitors are able to turn product faster, they are usually unable to sustain the platform heavy lifting (which takes an order of magnitude more effort/assets).

  • M

    I doubt Nokia will be around (as is) in 2014, or even 2013, 2012.

  • John

    It's great to revisit past predictions. There was at least one team in Nokia that viewed Apple as Nokia's biggest threat. We were the team who developed the 6300 and had developed 3 phones to bring simplicity back to Nokia that included an rework of the Symbian UI. This was in 2007 and it was presented to the Mobile Phones leadership team in November. By January 2008 we had overwhelming consumer feedback, but were not surprised that everything was on hold due to the new reorg. Nokia was a unified company and would be "more like and internet company". It was shocking that in February 2008 the program was canceled, but we were used to this (6300 was close to being canceled twice). We moved the program to Oulu and pitched it again. June 2008 it was killed, buried and gone.

    • asymco

      From where I was sitting (ES competitive intelligence and market analysis) there was no interest in observing Apple in 2007. Some people in Multimedia were following Apple as a "music service" competitor.

    • When I was an engineer (with freshly minted MBA) at Nokia in 2006, I interviewed for a corp strategy position from the internal job market. I was asked "What do you think should be Nokia's strategy?"

      I replied that although our products were feature-packed, we had great channels, superior production and supply chain — they were virtually impossible to use. Setting up a WiFi connection or pairing a bluetooth device was a hit and miss experience with settings buried deep inside the OS. I also made the point that the latency of S60 was very slow and needed to be improved. In short, user experience needed to be improved.

      Eyes rolled on the other side of the table, I didn't get the job.

      I think lots of people in the company were smart enough to see this coming, they just weren't in a position to have impact.

  • Adrian

    Very interesting seeing how these predictions act out. Do you think now that perhaps Nokia started responding to the iPhone (as opposed to predicted 2014 response) with recent unveilings regarding OS's (they have just now announced the N9 with MeeGo following the line of Maemo on the N900). Weird strategy Nokia has adopted- jumping the boat with WP7 but also supporting development pf MeeGo with spearhead devices running it coming out before WP7 ones.

    • asymco

      The N9 is meaningless. It may also be pointless. I have yet to identify any point. The response to the iPhone has indeed begun. Given a few years they might be competitive but the N9 is not part of that plan.

  • plist

    The N9 is a solid response. So they did in 4 years what Horace predicted would take 7. Credit to Nokia for that. No one expected Meego to look so polished, too bad they are ditching it. Just one poor decision after another.

    • I liked the N900 very much (it is still my backup phone) and thought it augured well for the future.

    • asymco

      I would not agree. Since writing the original post, I came to believe that a complete response is not one where the product is comparable. To be competitive requires more than device attributes. It requires a comparable set of priorities. It includes, for example, removing the dependence on operators as primary focus of requirements and business model.

  • First Nokia WP product 'Sea Ray' running Mango + long video of Elop

    (It actually looks pretty good…)

    • asymco

      Sadly, the Mango pitch is a canned Microsoft PR demo. They give the same word-for-word screen-shot pitch to corporate clients. The N9 hardware is the only Nokia-unique part of the video.