How many of you use an iPhone or an Android device?

When Stephen Elop asked this question, just a few raised their hands. “That upsets me -he continued- not because some of you are using iPhones, but because only a small number of people are using iPhones. I’d rather people have the intellectual curiosity to understand what we’re up against.

Stephen Elop is a canadian executive who is now in charge of Nokia, the world’s largest manufacturer of mobile phones. They sell millions of phones per day, but the models they sell are low cost devices, sold for the most part in developing countries. In the past few years, Nokia’s share of the smartphone market plummeted form 49% to 25% due to the overwhelming growth of both Android and the iPhone.

Now, at Nokia, they are facing the worst crisis they’ve ever dealt with. They lost 75% of their market value and will be forced to let a lot of their best engineers go…

But where does this crisis come from? It originates in 2007; the year Apple gave birth to the iPhone.

Everyone, especially Nokia, underestimated it. Its touchscreen was deemed uninteresting. The lack of MMS, the poor reception, and poor audio quality meant there was nothing to fear.

But even as iPhone sales took off and Google started giving away the Android OS to every rival of Nokia, no countermeasures were taken. And it was soon too late. The lead Apple and Google had taken was far too wide. It was time for a radical change.

Symbian was already 10 years old at the time, and when Nokia started trying to give it iPhone-like features it became hopelessly unreliable and buggy. The OS was blamed for Nokia’s failure and it was set aside. Now Elop had three choices: continue developing MeeGo, or sign a deal with either Google or Microsoft.

MeeGo would have been the most obvious choice. It was being developed inside Nokia and the whole company regarded it as their new hope. But it had a major flaw. At its current pace, Nokia would have been able to produce only three MeeGo smartphones before 2014. That simply wasn’t enough to compete.

Android was their second choice. Everyone else was already mounting Google’s OS on their devices; it was logical for Nokia to try and sign a deal with them. But nothing went as planned. Google refused to allow any modification of Android (remember this when you’re told that Android is “open”), and, moreover, they didn’t want to disadvantage the other phone makers with whom they had already signed deals.

Microsoft, on the other hand, proved more than accommodating. Not only did they agree to let Nokia modify and innovate WP7, but they committed to using Nokia’s technology as the foundation for their mobile OS. So, a one billion dollar deal was signed for the benefit of both companies. Was this move right? Consumers will be the ones to decide.

The big mistake that Nokia made in the beginning was to treat software as just nother “component” of the phone that enabled hardware developers to create new models.

Personally, I think they failed in understanding that the most important part is the experience. The experience you get from using an iPhone transcends hardware and software, and that’s why Apple has always made, and maybe always will, make the best devices.

[BusinessWeek]

  • Eric

    Nice article!

    • Francesco

      Thanks!

      • Francesco

        You’re welcome!

  • Ins0mnihack

    Excellent article. The Windows app store just passed the magic 25,000 mark, so WP7 does appear to be gaining momentum. However WP7 sales still pale in comparison to Android and iOS . I wonder if Nokia’s beautiful hardware design will be what gives WP7 the push it sorely needs to appeal to more consumers (and likewise it’ll be interesting to see if people warm to Windows on Nokia devices).

    Personally I think they’ve got a real chance at being a third big player in the mobile arena. I really hope for their sake and for ours that the joint venture is a success. Nokia make some beautiful hardware that has been crippled by awful software, so I’d like to see the WP7 OS running on some slick Nokia handsets. I’m not likely to buy one, given my love for iOS, but more competition in the market means more innovation = better products, services, software and prices for consumers, so its a win for everybody if they succeed.

    • You are right, WP7 badly needs some good hardware support and nokia needs some decent OS on their phones so in my opinion this deal will be win win for both companies, but we just need to wait and see how much this will appeal to people

    • Francesco

      Totally agree with you. Nokia surely does know how to make great hardware, and WP7 has a lot of potential. Given my total and hopeless love for Apple, I just hope Microsoft doesn’t screw everything up… It would be nice to have some competition. Look at how much iOS has improved because of Android’s growth! Apple was basically forced to implement new features in iOS 5.

    • BoardDWorld

      Do you know what made me side step Nokia? “Chrome” that simple… During my era I was buying the SP1, 2 & 3, the S710 & Touch while at the same time watching friends pricey (Not that mine weren’t) Nokia’s chrome rub off in a matter of months which left an ugly yellow plastic. Call me fussy but I don’t want to splash out large on a mobile phone to have it looking like it was years old in a short time. My iPhone 2G sold for more than I paid for it & my almost 1 year old iPhone 4 still looks brand new. As was the case with my HTC devices.

      Since leaving a windows devices I will never go back. Nokia should have taken the chance & ran with MeeGo. That’s the first Nokia to get me looking in their direction, & it did appeal.

      I have followed Microsoft for years & they continuously fail to innovate in the consumer market. The last let down from them was Deep Fish & they still haven’t got browser zooming right…

  • Candice

    Well written.

  • iAmine

    no i don’t think so… windows phone os sucks

    • Ins0mnihack

      Sucks? How so? Used it after the Mango update have you? And on which handset? Hardly insightful feedback and I better you’ve never tried it for yourself. I recently spent a couple of days with a WP7 LG Omnia handset, and I can say that it’s slowly, but surely maturing into a very nice mobile OS. It’s got a long way to go before its as good as iOS overall, but it’s only been out for less than
      12 months and it already does some things a lot better (live tiles, facebook integration, over the air updates are just a few). It may not be for you and that’s fine, but that doesn’t mean it “sucks”. I think we’re going to see a lot of innovation from Nokia and MS over the coming months

  • Ashfaq

    Apple should think of manufacturing a lower end iphone if they want to rule to Phone market, currently i see only Samsung and Nokia in the low and mid segments.