Recently, in a shocking analysis of Nokia, the company's new CEO Stephen Elop told employees that Apple's iPhone and Google's Android phones have left his company in the dust. Nokia, still the world's largest phone manufacturer by volume, has seen its smart phone market share eroded over the past few years by rising stars such as the iPhone and the Android army. The leaked memo he stated "the first iPhone shipped in 2007, and we still do not have a product that is close to that experience.
Android came on the scene just over two years ago, and this week they took our leadership position in smart phone volumes. Unbelievable."
The Nokia CEO recognized Apple's iPhone was a game changer: "Apple demonstrated that if designed well, consumers would buy a high-priced phone with a great experience and developers would build applications. They changed the game, and today, Apple owns the high-end range." He added that "Android came in at the high-end, they are now winning the mid-range, and quickly they are going downstream to phones under $135. Google has become a gravitational force, drawing much of the industry's innovation to its core."
Elop identified lack of innovation and the absence of the will to fight as the main causes for Nokia’s market share loss in the smart phone segment. Earlier this week Elop announced Nokia’s new strategy which is composed of four key elements; a broad strategic partnership with Microsoft to build a new global mobile ecosystem; Windows Phone would serve as Nokia's primary smart phone platform, renewed approach to capturing volume and value growth to connect "the next billion" to the Internet, focusing investments in next-generation disruptive technologies and finally a new leadership team and organizational structure with a clear focus on speed, results and accountability.“With Nokia's planned move to Windows Phone as its primary smart phone platform, Symbian becomes a franchise platform” the company said in a press release. This meant that Nokia had effectively surrendered the battle of platforms in the hope that Microsoft would prove a good gamble.
Investors were not impressed by the new strategy, Nokia's stock closed down a staggering 14.22 percent at $9.48 after the strategy announcement. "Nokia no longer defines its own destiny and that's a loss," said Sascha Segan, a lead analyst for PCMag Mobile. For first time, Nokia's success is very dependent on how often someone else puts out their software platform."
It is interesting that the game changers in the smart phone segment (Apple and Google) both come from outside the industry altogether. This tells us that there is no such thing as “established” market leaders. What is happening to Nokia can happen to any company that takes its eyes off the ball and chooses to believe its own self serving hype.