When Microsoft cut a $1 billion deal with Nokia to bring out the Windows Phone, it was tying its mobile future to the former king of cellular phones. Likewise, Nokia was tying it’s future to the current but fading king of the PC. Both companies were taking a chance on a partner who had missed the first smartphone adoption wave and were in clear catch-up mode.
In the 1990’s this collaboration would have been seen as a juggernaut. Today it looks like a life raft with two passengers in turbulent seas better navigated by the ocean tankers of mobility: Apple, Google and Samsung.
Nokia in a Downward Spiral
Today Nokia announced that it will cut 10,000 jobs or approximately 20% of its workforce. Nokia is learning what BlackBerry Maker Research in Motion (RIM) already knows. When your mobile franchise starts to erode, it erodes very quickly.
Nokia acknowledged struggles in the United States market were due in part to front line sales people’s apparent reluctance to push the Windows Phone 7 Lumina over Android and Apple devices. When there isn’t a consumer stampede for a device, the next line of defense is having sales people in wireless stores be on your side. With the great installed base of Apple iOS and wide selection of capable smartphones that run on Google’s Android operating system, there appears to be no incentive for salespeople or consumers to flock to the Lumina despite its many favorable reviews. Microsoft is learning the hard way the lesson it taught Appple so well during the PC wars, your application ecosystem can be a key differentiator.
Microsoft also may not be helping the matter with all of the hype it is trying to create around Windows 8 and the companion mobile edition. The promise of this release is a common OS across your phone, tablet and PC (although common OS matters much less than it used to as outlined in a recent article: The OS Doesn’t Matter Anymore). Most phone purchases are of a minimum of a year, many are longer. Why would a use want to buy a Windows 7 phone when Microsoft is going to obsolete it later this year.
Similary, why would a consumer buy a Symbian phone which runs on an OS that will be discontinued soon. Nokia and Microsoft are producing a knot that consumers have no incentive to untie.
Nokia’s Fall is Android’s Rise
Of course Seth Weintraub predicted this a year ago in a Fortune Article. He saw the move as ceding the mid and low tier to Android as Microsoft and Nokia were working on their new phone, leading to a flight away from Nokia’s Symbian devices by consumers, a flight away from Microsoft by Nokia rivals HTC and Samsung, and an explosion of Android adoption. He was wrong on how quickly Microsoft and Nokia could bring a device to market, but everything else was on the money.
The Blame Game – who’s at fault
It seems like half of the opinion pieces on Nokia’s announcement blame it on Microsoft pulling the company down. The other half blame Nokia for jeopardizing Micrsoft’s chance for succes in mobile. The real sitution? Both companies are hurting the other. Each would have been beter off working with multiple partners. Then Nokia could focus on competing with its natural competitors such as HTC and Samsung. Microsoft could leverage all three device manufacturers to drive innovation and a broader base of support for its mobile OS.
Device Fashion will be no Savior
I have seen RIM suggest that mobile device market leadership is based on fickle customer fashion preferences. It cites the rise and fall of Motorola and Nokia phones in the past as a guide to how you can quickly turnaround falling market share. However, this seems different. It’s not just that Apple and Samsung products are more fashionable than the Nokia Lumina and BlackBerry Bold. They are also better overall devices. They have more features and most importantly have more capabilities delivered by 100’s of thousands of apps.
In March, Microsoft claimed to have 70,000 apps. It doesn’t really matter that it achieved its first 10,000 app count faster than Apple. It has 5 times fewer apps than available for iOS. What are now called feature phones (everything before iOS and Android devices) were undifferentiated when Motorola released the StarTAC in 1996. In that kind of market, fashion can be a catalyst. Today fashion is a driver, but only if the phone meets basic user criteria and the consumer doesn’t feel like they will be missing out on new releases of popular social apps like Instagram or Words with Friends. Today, fashion may be less about the hardware and more about the apps. The Windows Phone 7 Metro interface has received great critical acclaim and is the closest thing we have to a solid fashion statement in mobile user interface, but it doesn’t seem to be enough when you look at the market demand.
Impact for the Enterprise
How should the enteprise digest Nokia’s announcement? Ignore Nokia and think Microsoft. Some enterprises are hopeful that Windows 8 will be a panacea returning us to the days of a single OS for all of our devices. It will simplify IT support since technicians will only have to learn one OS. Well, the Windows 8 phone OS release date hasn’t been announced. There is still another Windows Phone 7 release, Tango, that is expected to come before Windows Phone 8. Nokia’s trouble poses a serious problem for Microsoft and may require a complete reset of its device manufacturer strategy. It needs to drive more market share in order not to be marginalized in mobile.
Microsoft has proven to be a great company that can come from behind. It was successful entering the browser, gaming console, server and database markets well after competitors had established defensible market share. In each case it went from zero to a market leadership position. If you look at Windows 8 and the Metro UI, you can see the same sort of innovative zeal in mobile OS that could make it a player. Don’t count them out….over the long term. In the near term, get used to shifting from BlackBerry to either Android or iOS.