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The Real Reason Nokia Failed Spectacularly


Once the world‘s dominant and most valuable mobile phone maker, Nokia failed to adapt with the rapid pace of technological change in the late 2000s smartphone revolution. Its fall from grace stands as a stark reminder of the critical importance of continual innovation for even the most successful brands. This article charts Nokia‘s rollercoaster journey to global mobile supremacy and examines the many missteps and market changes leading to its epic downfall.

From Paper Mill to Mobile Phone Dominance

Nokia‘s story begins back in 1865 when Fredrick Idestam established a paper mill in southwestern Finland, founding the earliest roots of what would become the Nokia Corporation. Over several decades, the company grew into a major player in paper, rubber, and cable manufacturing through a series of mergers with other Finnish companies.

By the late 1970s, Nokia made its first forays into telecommunications in a joint venture with Finnish television maker Salora. Together they launched Mobira Oy, releasing the Mobira Senator car phone in 1982 – weighing in at a hefty 22 pounds! Despite its bulkiness, the Senator phone pioneered mobile communications for the company.

Through the 1980s, Nokia rapidly developed more compact and portable phone models, including the 1980s Mobira Cityman – one of the first handheld mobile phones made. While far from sleek by today‘s smartphone standards, these bulky brick-shaped Nokia phones were revolutionary at the time, letting people communicate on-the-go.

GSM Domination in the 1990s

In the 1990s, Nokia struck mobile technology gold by adopting the global GSM (Global System for Mobile Communications) standard for its new digital mobile phones. Unlike rival phone makers still utilizing older analog systems, Nokia‘s GSM system phones enabled enhanced call quality, text messaging, voicemail, fax mail, data transmission capacity and international roaming access across providers. This early access to digital gave Nokia phones a tremendous advantage in features and functionality.

Capitalizing on these network advantages, Nokia released several iconic GSM phone models through the 1990s:

1992 – Nokia 1011 – First commercially available GSM phone

  • Weighed 475g
  • Talk time of 2-3 hours
  • Named "European Mobile Phone of the Year"

1994 – Nokia 2100 series – First phone with iconic Nokia ringtone

  • 84 MHz processor
  • Weighed 475g
  • Monochrome display
  • Up to 260 hours standby time
  • Sold 20 million units

1996 – Nokia 8110 "Matrix" – Featured in sci-fi action film

  • Curved slider form
  • 99 MHz processor

1999 – Nokia 3210 – Highly successful model

  • Weighed 151g
  • Talk time up to 3 hours
  • Nokia‘s first phone with internal antenna
  • Over 160 million units sold worldwide

With these revolutionary GSM phones, Nokia soon dominated the digital mobile phone market. By 1998, Nokia commanded 38% global mobile device market share – more than Ericsson, Motorola, and Siemens combined. Just five years later, Nokia‘s peak market share topped 50% – more than double that of its nearest competitor.

Global Leader in the Early 2000s

For approximately 15 consecutive years spanning the late 1990s through late 2000s, Nokia enjoyed a sustained run as the top mobile phone seller worldwide. In 2002 alone, Nokia sold over 120 million mobile phones – nearly 3x as many phones as 2nd place Motorola. From 2003 to 2006, BusinessWeek ranked Nokia as one of most valuable brands surpassing companies like Disney, HP, and Louis Vuitton. By 2006, over 1.5 billion people worldwide were using Nokia mobile devices as the company reigned over the competitive mobile landscape. It was a dominant force to be reckoned with. And with no true competitor in sight, it seemed almost unfathomable for Nokia to lose this leading position.

Year Nokia Market Share #2 Competitor + Market Share
1998 38% Motorola 16%
2003 35% Samsung 12%
2006 36% Motorola 22%
2007 50% Samsung 13%

competition Emerges: iOS and Android

However, starting in 2007, the mobile phone industry experienced massive upheaval from exciting new hardware and software entrants. Most threateningly, Apple Inc. blindsided incumbents by revolutionizing phone design conventions with its first iPhone model in June 2007.

Featuring a slick glass capacitive touchscreen interface with motion-sensing multi-touch technology, the iPhone introduced novel usability never before seen in mobile devices. Combined with desktop-class web browsing, media capabilities, app ecosystem and sophisticated operating system, the iPhone made everything else on the market look positively archaic. Where once Nokia execs required styluses to navigate their phone interfaces, now fingers could easily swipe, tap, drag and pinch.

This torchbearer device for multi-touch kickstarted the modern smartphone era as consumers were instantly captivated by the sci-fi magic of interacting with their phone in a whole new way. While the high price limited mass adoption initially, Apple gradually reduced costs in later models touching more price points – expanding their beachhead.

Moreover, Google‘s introduction of its ambitious open-source Android operating system in 2008 provided hardware manufacturers an alternative platform to build next-generation connected mobile devices on. Based on Linux, Android deliveredcompatibility with touchscreen systems, mobile internet services, high quality media experiences and an app marketplace later matching that of the iPhone. Handset makers could now lean on Google‘s software expertise to create compelling iOS competitors.

Practically overnight, Nokia‘s comfortable global leadership status was under siege from fresh competition unlike anything seen before in mobile. iOS in particular brought an existential threat Nokia could have scarcely prepared for as the ground suddenly shifted across the entire mobile phone landscape.

Nokia‘s Fatal Mistakes

Yet leadership inside Nokia was tragically slow to grasp the monumental consumer shift the touchscreen smartphone wave represented. They arrogantly believed they still understood consumer needs best, doubling down on minor incremental updates to Nokia‘s aging Symbian operating system relying heavily on physical keypads.

Outmoded Nokia phones like the 2010 Nokia N97 with resistive touch technology utterly failed to match the smooth, visually appealing experience of capacitive touchscreens that attracted droves of early smartphone buyers. Where Apple innovated sleek unibody phone constructions, Nokia churned out chunky plastic bricks still sporting antenna bands like it was 1999.

Nor could Nokia match the app ecosystems fostered on iOS and Android attracting exponential numbers of third party developers. Increasingly, Nokia found itself squeezed from both the high and low-end of phone pricing. Premium consumers opted for prestigious iPhones or Samsung Galaxy phones housing the latest amenities and blazing processors. Meanwhile, masses of emerging market consumers chose ridiculously cheap Android phones produced at economies of scale Nokia couldn‘t dream of matching.

Financial results revealed Nokia hemorrhaging market share quarter after quarter to its hungrier, more innovative rivals….

Microsoft Partnership Flops

Content continues covering Microsoft alliance, sale of mobile division, aftereffects, lessons learned from Nokia‘s epic rise and fall in mobile industry…