Nokia Had A Choice

A piece on Forbes tries to outline why Nokia “had to choose Windows”, the argument being that choosing Android wouldn’t allow them to be a leader or differentiate themselves enough. What worries me, though, is that I’m not sure the author really understands the mobile space. The author closes their piece by implying that Windows 8 should help Nokia with their phones, even though Windows 8 isn’t meant for phones. Microsoft has made it clear how the two operating systems are to be used: Windows Phone 7 is for phones and phone-like devices, Windows 8 is for desktops, servers, notebooks and tablets. If Nokia has a Windows 8 product coming, it will be a tablet. Microsoft doesn’t want Windows 8 on phones.

Did Nokia Have A Choice?

I find the argument that Nokia chose Windows Phone because it made it easier for them to stand out, and be a leader in the mobile computing space, a specious one. It also doesn’t tell the whole story: Microsoft gave Nokia tremendous incentives to choose Windows Phone. Microsoft provided them with a lot of help with the porting efforts. They apparently helped with marketing, and they are rumoured to have included some kind of financial incentive in the deal. This wasn’t Nokia choosing Windows Phone purely on technology, marketing or branding grounds. They had other incentives worth a lot of money to the company.

But does the “we can more easily be a leader” make sense? Would they have been lost in the crowd of Android phones? I would say that Samsung, HTC and Motorola would disagree with that assessment. Samsung in particular has done an amazing job of being the premiere provider of Android phones. They used to play second-fiddle to Nokia in the mobile space, but the rise of smartphones have allowed them to supplant Nokia, almost entirely. Android gave HTC a standard platform that came with a rich ecosystem of apps and content, allowing HTC to be the value player in the equation. Motorola became relevant again, specifically because of Android.

There is no reason Nokia couldn’t have adopted Android, and could have had their first devices out a full year before their Windows Phone products. They had tremendous brand recognition in smartphones outside North America. That recognition, along with the influence they had with carriers, could have allowed them to be the top-dog in Android. Instead, that brand recognition and leadership position disappeared, largely gone by the end of 2011.

They Chose Poorly

By choosing Windows Phone, Nokia put themselves on a path that really didn’t look promising. Despite the hype surrounding Windows Phone, and its eventual release in 2010, there wasn’t this tremendous sales burst when it finally hit the market. It managed to supplant its predecessor, Windows Mobile, but it didn’t gain Microsoft any new marketshare in the mobile computing space. None. Instead, it has seen a steady decline from their peak sales of about 6% of the global market, down to around 2-3% as of last quarter. The arrival of the much-touted Nokia Lumia devices (the first arriving in November of 2011, the rest in April 2012) did nothing to improve Windows Phone’s fortunes in the marketplace.

What didn’t help Nokia was that they were basically absent from the market for the better part of a year. Between the February partnership announcement and the November release of the Lumia 800 and 710, Nokia disappeared from the conversation. All they had were their moribund and unwanted Symbian phones on the market. Some people will have bought them, mainly because they were incredibly cheap, but the Windows Phone announcement effectively shut down sales of Nokia smartphones for nearly 10 months.

While Nokia was off in the weeds, the smartphone market exploded. iOS and Android went from around half of the smartphone market to owning more than 80% combined globally. WebOS came and went. RIM lost the enterprise to iOS, and dwindled dramatically. App store inventories for Apple and Google increased by 100% or more. Smartphones went from being 1/5th of all mobile phones to 1/3rd, and in the US were tracking to be nearly 50% of all mobile phones by year’s end. iPhone and the Androids were taking over the market, so by the time Nokia finally got a product out, the story was already written.

History Worked Against Them

Unfortunately for Nokia, their history as a handset manufacturer, and the cultural mindset that came with it, worked against them. That, plus financial incentives, made their Windows Phone decision unsurprising and unimaginative. How so? In handsets, differentiation is key. You want to stand out. It isn’t about compatibility. It’s about building a device that locks you into their platform, and that makes getting out hard. Only Apple has managed to truly succeed at this approach. But in handsets, you don’t succeed by simply doing what everyone else is doing. You have to do more, and you have to do “different”, and using a common platform shared with your competitors works against this philosophy.

Not that choosing Windows Phone meant that Nokia was exclusive to the platform. But it appeared that their “special relationship” with Microsoft might give them some control over the platform. Certainly not as much as they had with Symbian (since it was theirs and they owned it). But it might give them more influence than choosing an open-source platform. Of course, it would take wilful ignorance to overlook that Microsoft doesn’t give 3rd-party manufacturers any meaningful control over their technology. It may have looked like a partnership, but in reality, it would be a rather unidirectional conversation.

But Windows Phone would be “different” and “different” is how you had to get ahead in handsets. Of course, that doesn’t work in general purpose computing. In PC’s, you differentiate on hardware features, design, service and price. Ultimately, choosing a marginal platform that let them “stand out” has worked against Nokia. Sure, Nokia’s voice would have been one of many in the Android conversation, but they could have had a louder voice (much like Samsung, HTC and Motorola), and had some impact on the technology’s direction. Culturally, Nokia simply wasn’t set up to think that way. Samsung and HTC overcame their handset-oriented roots to some extent, so we know it is possible.

Ultimately, if Nokia “had to choose Windows Phone”, it was because they simply didn’t have the imagination or courage to try anything else. Unfortunately for them, Windows Phone has been less of a life raft and more of a boat anchor. Barring a miracle, Nokia is in some trouble, and they are paying a price because they didn’t make the right call, and one that didn’t have to be. Android was already rising fast as 2010 wound down, and what should have been a 3-horse race (iPhone, Blackberry, Android) had quickly turned into a 2-horse race, even by the end of 2010. There is little on the horizon to believe that the curent 2-party competition between Apple and Google will allow the addition of a 3rd participant. Whatever clout Nokia might have had in the mobile space disappeared in 2011, when they disappeared from the smartphone space. There is little to indicate that is going to change for Nokia.