The One That Got Away: Nokia and Blackberry Lose a Market

As the New Year falls upon us, there are two companies – Nokia (NASDAQ: NOK) and Research in Motion (RIM)(NASDAQ: BBRY), producer of the Blackberry cell phones – that could have easily been anticipating another year of great growth.  Instead, they are fighting for survival.  RIM looks like a good bet for the marketing cemetery.

It could have been all so different, as Anton Troianovski and Sven Grundberg report in the 18 July 2013 issue of the Wall Street Journal.  The article “Nokia’s Bad Call on Smartphones” documents what could be considered one of the greatest marketing mistakes in history.  The article tells that seven years before Apple, Inc. (AAPL) launched its blockbuster iPhone and iPad, the Nokia team created essentially the same products with the touch screens, and let the potential profits slip between its fingers.

The Wall Street Journal article reports that Frank Nuovo, former chief designer for Nokia said when looking through his old slides: “Oh my God.  We had it completely nailed.”  He was referring to two Nokia developments: (1) a phone with a color touch screen set above a single button.  The device was shown locating a restaurant, ordering lipstick, and in another application, playing a racing game.  (2) A tablet computer with a touch screen as well as a wireless connection.

Troianovski and  Grunberg further report that “Consumers never saw either device.  The gadgets were casualties of a corporate culture that lavished funds on research but squandered opportunities to bring the innovations it produced to market.”

Moreover, it’s important to note that Nokia led the wireless industry in the 1990s, and looked forward to being the smart-phone leader.  The company is now imploding.  It ended 14 years as the world’s largest cell phone manufacturer, replaced in the top slot by Samsung Electronics Corp.  Its market share fell to 21% down from 27% a year ago.  In the first quarter of 2012 Nokia lost $1.1 billion, and it continues to shrink its workforce with steady layoffs.

Here’s another unbelievable statistic uncovered by the Wall Street Journal team: Nokia spent $40 billion in research and development in the last decade.  The Wall Street Journal reports: “Nokia clearly saw where the industry it dominated was heading.  But its research effort was fragmented by internal rivalries and disconnected from the operations that actually brought the phones to market.”

What did they do wrong?  Instead of developing the disruptive innovations and bringing them to market, Nokia preferred to focus on its cash cows, its soon-to-become obsolete wide line of mobile phones.  While Apple was introducing two new stars to the market, Nokia was laboring with its cash cows, waiting complacently for them to become dogs.

Then there is the Blackberry story.  Here is a product that owned the business cellphone market.  There was no executive who didn’t have his/her Blackberry phone at his/her side.  But Blackberry refused to innovate.  They stuck their heads in the sand, like ostriches, and let Apple and Samsung take their business away from them.  RIM has lost 90% of its market value and now is in the midst of what the Wall Street Journal calls its “death spiral.”

For years I have been telling Wiglaf readers that the successful company works as hard as it can to make its successful products obsolete before its competitors can do it.  Once you become king of the hill you have to fight tooth and nail to maintain your position.  If not, somebody will knock you off, and you’ll never come back.