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Why Nokia Refuses to Pee in its Pants

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A debate that had been brewing for years was suddenly brought to international fame when none lesser than Anssi Vanjoki himself commented that using Android as a mobile software solution is like “peeing in your pants” for short term warmth. His words could not have been less explicit, and the flame wars it started on blogs all across the internet could not have been less heated. “Nokia just doesn’t get software,” claimed one. “True, it doesn’t ‘get’ software, because it is doing pretty well by making its own,” countered another.

Nokia’s recent history would make for a more interesting Sunday read than the most sensationalist tabloid could ever manage. Loss of market share in North America, loss of mind share in the rest of the world (at least for bloggers) and growing criticism over its stubbornness to not move to Android. All this interspersed with the replacement of its CEO and the resignation of two more high profile executives (Anssi and Ari Jaaski), while another other high profile personality jumped on board. It’s honestly surprising it managed to announce 3 new smartphones with a new OS (Symbian^3) and has already started to ship the fourth of the family, the N8.

But there’s a leaf to be taken out of Nokia’s book here. A positive point that too many people fail to see. While Nokia is, seemingly (and the key word here is seemingly), hurting itself in the short run, it only has huge profits lined up for it in the longer run. Nokia is like a marathoner, who goes slow but can manage to cover humongous lengths, rather than a sprinter.

iOS, Android, WP7, Blackberry OS… and Symbian

Projected Global Market Share of Mobile OSes – (Image Source)

Let’s get one thing straight, Symbian’s threat is not iOS. iOS is not much of a threat to anyone. Apple’s decision to market its entire line-up as luxury products means that all of its devices become niche products. That is why it will never sell more laptops than HP. That is why Mac OS will never overtake Windows OS. And that is also why the iPhone will never outsell a cheaper Nokia smartphone. Android, while rapidly gaining ground, has still to gain popular adoption outside the US. Besides, it has still not worked its way down to the cheap $150 device range, where Symbian totally blows away the competition. Same is the case with Blackberry OS. WP7? Well, that’s yet to launch, and it’s already suffering from low expectations.

The misunderstood war

People misunderstand the war that Nokia is fighting. It is not fighting only to sell the most number of mobile phones today. It is fighting to spreads its OSes enough so that it can sell mobile phones for years to come. Tomi Ahonen, a very well-respected market analyst writes on his blog how the battle in the smartphone arena is not one of phones, but of platforms.

Why else would the arguably smartest companies in the world – Apple, HP, Google, Microsoft, Samsung, RIM and Nokia – all have their own mobile OSes? They all realize that in the longer run, it’s not about the number of devices they manage to sell today. Get this – Google has valued its Android platform at $20 billion by the end of 2020. That is $20 billion in Google’s pockets. HTC, Sony Ericsson and Motorola, all of which so faithfully manufacture and sell Google’s Android branded phones will not get a cut of that $20 billion. They will only make their money from the hardware. And this $20 billion valuation is by having less than 20 million active Android users at the time of valuation. Symbian has around 300 million users. One would shudder to think of its worth even today.

So would Nokia, or any other company in its right mind, give up on developing an OS that is going to be worth not millions, not a couple of billions, but more than, and I am under-playing the valuation because I am no analyst, $40 billion? Sony Ericsson and Samsung can give up on Symbian whenever they want, and jump back on board whenever they want. Nokia cannot, since they are the biggest influence on the development and distribution of the OS.

Branding

(Image Source)

The Nokia tune…It is one of the most widely recognized tune in the world. Yet Nokia has never used it in its advertisements. The ‘connecting people’ animation/image is also one of the most well known. What Nokia has achieved for itself over the years is branding. Ask a marketer, any marketer, and you will learn that branding one’s products to the point where a sound or a sight instinctively reminds one of the company is no cake walk. Using Symbian is just another step in the branding exercise. The Symbian UI is similar to the UI is uses on many dumb-phones as well, so that those who upgrade get the same Nokia experience that they always did. The Nokia brand has come to be known for quality and endurance. People walking into a retail store and seeing the familiar face of Symbian, no matter how ugly bloggers might say it looks, feel secure in the fact that they are buying reliable phone.

So where did it go wrong? And how will it correct itself?

Time to get one more thing straight – Nokia hasn’t been losing market share, it has been gaining market share. The only place where it has failed is North America, specifically the US.

Nokia’s failure in the US can be attributed only to a certain extent to bad hardware and a clumsy UI. What really caused its downfall is that it, correctly, refused to bow to the commands of carriers when it asked them to subsidize it phones. Nokia never loved the American carriers. The carriers which demanded that they be allowed to load Nokia’s phone with unnecessary bloatware, while restricting certain other features like video calling and tethering. Selling its devices unlocked in the US allowed Nokia to retain its full set of features without having any added software on their phones. But it also meant that people found their phones ‘more expensive’. This is a problem that Nokia still faces. One that it still hasn’t addressed with the N8, E7, C7 or C6. And one that it will continue to face till at least 2014, when the networks in US upgrade to LTE 4G to a greater extent.

In the meantime, Nokia will try to enter the US market with Meego. When it comes to smartphone OSes, Meego is as smart as it gets. Many would even claim that it is the true mid-device between a smartphone and a laptop.

How does the future for Nokia look?

(Image Source)

In spite of all the criticism it has faced recently, Nokia is looking good with positive reviews all across for the N8. The upcoming E7 seems to be a fairly popular device as well. The real mass-market products, however, will be the C6 and the C7, both of which will outsell the N8 and E7 by millions. People all over the world, including in the US, are already eagerly waiting for the Meego-loaded N9 (leaked?), which is saying quite a lot for Nokia.

It seems quite certain that Nokia is set to regain its position as market leader. Not in terms of market share, where it already leads, but in terms of mind share.

Few companies know as well as Nokia how to keep themselves warm without peeing in their pants, wouldn’t you agree?

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