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Lessons from Nokia

By JAMES COAKES Published 10th May 2016
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What's the most effective way for a tech company to become irrelevant? Simple - miss a development cycle, and watch as another company launches the next big thing. This is more or less what happened to Nokia's mobile phone division, once king of the hill in the mobile industry, and now a barely-there division of Microsoft.

Nokia is a Finnish IT and communications multinational that provides a wide range of digital and internet services and products - one of the Fortune Global 500, with yearly revenue of €12.7 billion as of 2014. Even the biggest and the best make mistakes, however, and some of the most significant were made in Nokia's mobile phone division.

At the Forefront of Mobile Telecommunications
The company became involved in telecommunications in the 1970s, and in conjunction with Salora Oy, another Finnish company, began developing vehicular and public mobile phone systems for the Nordic Mobile Telephony network. In 1984 Nokia bought Salora Oy, incorporating the company into its telecommunications division. The Mobira Talkman in 1984, and the Mobira Cityman, in 1987, were some of the world's first mobile phones, with the Cityman weighing in at “just” 800 grams - a lightweight compared to the hefty 5kg Talkman.

After a period of growth and diversification in the 1980s, the Nokia of the 1990s moved in the opposite direction - streamlining management and selling off its PC and TV divisions to concentrate on telecommunications, and furthermore, beginning to focus on sales in Asia and the Americas. Thanks to its newly-tightened focus, and its early research in telecommunications development, in 1998 Nokia finally nudged its main competitor, Motorola, out of the top spot, to become the world's biggest manufacturer of mobile phones.

In the first few years of the new millennium Nokia went from strength to strength, releasing the Nokia 3310 in 2000, and the 1100 handset in 2003, which remain two of the most popular consumer electronics products of all time. Nokia remained at the forefront of the mobile phone industry for several years, but by the start of the next decade, trouble was brewing.

The Slide
Even while Nokia was developing some incredibly popular products, it was undergoing significant changes - the opening of a factory in Hungary, moving another production site from Germany to Romania, and a steady stream of layoffs and restructuring that contributed to increasing criticism of the company in its home country, Finland.

And then, in 2007, Apple launched the iPhone. Nokia phones continued to outsell Apple's new mobile product for quite some time, and Nokia did produce its own smartphone models. However, Nokia made the mistake of allying with Microsoft to use the Windows Phone operating system for its new mobile products. Windows Phone's market share is dismal in most parts of the world - 3.9% in the US, 0.8% in China, and 9.9% in Great Britain.

Apple finally overtook the company as the world's biggest smartphone seller in 2011; in 2012, Nokia's CEO admitted that the company had dropped the ball in failing to take advantage of the rapid changes in the mobile communications industry. Meanwhile, Nokia had laid off nearly 25,000 employees by the end of 2013, and in September of that year, Microsoft announced that it would acquire Nokia's mobile division and license its patents, for €5.44 billion. Finally, in July 2014, Microsoft announced a further 12,500 layoffs of Nokia employees, along with plans to cease development of Nokia's new feature phone lines, to focus on the Windows Phone. With that, Nokia is, for all intents and purposes, no longer part of the mobile phone industry. A popular internet meme is the idea of Nokia phones as indestructible, but as it turns out, the division that produced them was not so fortunate.

What Next for Nokia?

It would be all to easy to write Nokia off as a business lesson but the brand still exists, focusing on large-scale telecommunications infrastructures and development. It employs more that 60,000 people in 120 countries and remains in the Fortune Global 500. In January 2016 Nokia acquired the well known French communications company Alcatel-Lucent to grow their innovation, network equipment and wireless technology offerings. Nokia remains a well known and, for many, much loved brand and their story seems to be far from over.

 

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