Is nokia's decline due to a lack of market intelligence?

Simon Ligot
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August 28, 2024

The Nokia story

Founded in 1865, Nokia was a Finnish pulp and paper company before it became a phone brand. Later, Nokia diversified into rubber and cable. Then, thanks to a telecommunications contract won with the government during the Cold War, Nokia created the first cell phones. They were pioneers in this field. In 1992, Jorma Ollila, the new CEO, changed Nokia's strategy and decided to divest all activities not related to the telecommunications industry. From then until 2007 (when the 1st Iphone was released), Nokia was the market leader in cell phones.

The decline of Nokia

After years of dominating the cell phone market, Nokia finds itself facing a different kind of competition - the smartphone. However, as early as 2006, Nokia had already understood that the future would probably lie in the implementation of an operating system. Unfortunately, because of its arogance and market status, Nokia refused to implement Android and tried for years to create its own system with Symbian.

Nokia still launched its application late, but the ecosystem of 60 medium-quality applications never found its audience. In fact, Nokia was more focused on retaining market share than innovating.

Reasons for the decline

Lack of technological intelligence & the innovator's dilemma

Nokia was a latecomer to the new smartphone technologies of today. Touch (or non-touch) cell phones with a whole ecosystem of applications. But Nokia's problem lay not in ignorance of the smartphone revolution, but in the classic innovator's dilemma, as described by researcher Clayton Christensen. This dilemma explains the failure of disruptive innovation in terms of business model. Aware of the development of smartphones, Nokia failed to promote this new technology decisively for one simple reason: to protect its core business at the time, traditional cell phones.

The best proof of this is that Nokia was slow to abandon its Symbian operating system in favor of Android, preferring its own ecosystem despite its weaknesses. During the decline of its core business, Nokia tried to resist by increasing its promotional budgets and improving its traditional products to face the competition, notably Apple and Samsung.The failure of disruptive innovation is therefore the result of a conflict between the old and the new. Nokia's business model made the rapid adoption of smartphones and new operating systems unattractive. The old model provided the majority of resources, while the new, representing the future but with no guarantee of success, gained no support. The ability to innovate therefore depended on a resource allocation mechanism that could manage two business models simultaneously, the old and the new.

Lack of intelligence, lack of information?

Business intelligence would have provided Nokia with the tools it needed to navigate the innovator's dilemma more effectively. By feeding the company with daily information on innovations and dynamics in the telephony market, a dedicated and objective team could have helped Nokia integrate new technological paradigms while preserving its competitiveness. This would not only have kept Nokia at the forefront of the industry, but also enabled it to reinvent itself for future challenges.

Hydrogen parallel

The hydrogen sector is also a perfect illustration of the "terrible innovator's dilemma".

New carbon-free technologies, such as green hydrogen, are disrupting the market. Startups and new companies are focusing on these innovations, making rapid progress thanks to their agility and government incentives. By contrast, large energy companies, held back by their investments in obsolete technologies, are struggling to adopt these new solutions while maintaining their traditional activities. Although some large companies are starting to invest in green hydrogen, they have to manage the transition with the uncertainty of long-term returns and the cannibalization of their existing products. As a result, the hydrogen market is evolving rapidly, marked by intense competition between new entrants and incumbents.