In 2007 Nokia would have been proud to be referred to as the General Motors of mobile Phones. GM had long been a stalwart of the motor manufacturing industry, with a rich portfolio of consumer brands and a a highly respected brand in themselves.
Look forward to 2009 - GM went bankrupt, and are currently in the midst of radical restructuring, and the elimination of some of those respected brands.
While there are some critical differences between the financial status of GM and Nokia - GM had $179bn in debt, while Nokia is predominantly equity financed with $9bn in the bank, the product portfolios have similarities.
Nokia products today are great workhorse mobile phones. They are reliable, have the all the features you might want, although you might not be able to work out how to use those features, at least they are there. They are keenly priced, and available everywhere.
In short they are a reliable, workhorse of a product, not exciting, but good value. In a market where everybody needs a mobile phone (just as everyone needs a car) this is a great position to have.
The risk comes when people realise that they don't need a new mobile phone (just as people realised that if their new car had no significant advantages over their last car they didn't need to replace it).
With the feature set of current mobile phones this is increasingly likely - the features that have driven new device sales over the past few years
- a camera on your phone (Nokia 7650) (2002)
- megapixels on your phone camera (Nokia 7610) (2003)
- an MP3 player in your phone (Sony Ericsson Walkman) (2004)
- get a thin phone (Motorola Razr) (2005)
- get a thin, slide phone (Samsung D900) (2006)
- internet on your phone (Apple iPhone) (2007)
Innovation in the mobile phone space has changed - it's no longer focussed on innovation in hardware as it was up until 2007 - and now has shifted toward software on the phones.
Want to play music on your phone? Get a music application. Want to use location? Get a navigation application? Want to meet up with friends? Use a social networking application.
Nokia saw the trend here, and shifted their efforts to Ovi but that effort has not yet shown significant adoption by consumers. Comparing the popularity of Ovi, with twitter and facebook (both services that could adopt Nokia's tagline of "Connecting people")
We see that while Ovi is growing slowly, it's still an order of magnitude behind the leading internet services. With the distribution, marketing budgets and reach that Nokia has I expect better from them.
So Nokia seems to have stalled on innovation whether in devices, or in services. They still have the advantage of scale, and cost - and are driving growth in India and China but to avoid a slow decline they need to re-invigorate their core markets.
So what could they do?
Nokia have two great core platforms - Symbian, and S40 - both of these are proven volume platforms that ship on millions of existing devices.
Nokia have advantages of scale that everyone else in the industry would die to get. They have great marketing, and fantastic consumer awareness. Their production, distribution and supply chain are unmatched in the mobile industry - even at the scale that Nokia operate product shortages or surpluses are unheard of. Operationally they are a fantastically run business.
The secret ingredient they may be missing, is someone to beat - Nokia have spent so long at the top of the mobile phone market, that it's easy for people to convince themselves of their own invincibility. They miss the clear focus that enables discussions to happen promptly, and people to make hard, quick decisions driven by the need to win against a clear, external competitor.
Segmenting the market however and the competitors become clear. I see three directions where Nokia could focus, and innovate.
1. Text messaging devices
The competition here is RIM. Nokia have huge advantages in scale, and software platforms against RIM, particularly in the consumer segment. A focussed messaging communication device that does consumer communications better than RIM + Blackberry Internet Services has an opportunity to connect the internet savvy consumer mass market globally.
2. Web devices
The competition here is Apple. Apple have a formiddable pair of devices in the iPhone (for the post paid internet market) and iPod Touch (for the pre-paid phone market). The opportunity is for Nokia to create device that offers a superb web browsing experience - and can sell through the pre-paid market for under £150. The chief competition is the iPod Touch - but this is an iPod Touch device with a phone integrated already.
3. Mass market web services
The emerging markets of China, India and the emerging economies in the rest of the Asia Pacific basin are still connected to the web - though not often through personal PCs, but through internet cafes. The opportunity for really low cost internet service enabled devices that enable internet services to reach into new markets is just the growth opportunity that change the scope of Nokia's business into internet services.
With small teams, focussed, and with the freedom to drop more features than they add to platforms Nokia could bring new devices to market in volumes that other manufacturers could only aspire to in 2011. I'll watch with interest to see what they achieve.