Here We Go: A November to Remember for Nokia+MSFT?
We are just a week away from the planned, and much-anticipated, re-launch and rollout of Nokia, centered on its new Windows Phone 7-based architecture.
As has been well-chronicled, Nokia faced tremendous doubt from industry analysts (including Saugatuck to some extent) and investors as it made one of the most difficult decisions a technology leader has ever had to make: Scrapping its entire technology architecture and strategy and building a new one based on technologies developed outside of the firm’s own legacy talent and IP.
The fact is (and was) that Nokia was positioned to fail in mobile markets. While it maintained massive-but-shrinking market share in traditional, feature phones, Nokia was unable to compete directly and effectively in the high-margin smartphone business. It did not have the right technologies or the right internal mind set and management to do so. Its organizational, cultural and financial difficulties meant the company had problems selling even its most high-margin devices at a profit.
Thus Nokia faced tremendous pressure, doubt, even ridicule for its decision to rip-and-replace its technology core.
Fast-forward to October 2011, with Nokia about to roll out its new Windows Phone 7 line, likely on time, and even more impressively, on top of a rebuilt sales and financial organization that just increased sales volume by 20% - and delivered a profit on device sales while slashing average sales price across its line by 17% over the past year. That speaks volumes in support of a realigned, strong organizational foundation, especially given that the sales volume was accomplished at profitable levels while selling devices that buyers knew were last-generation. According to some analysts, Nokia was able to deliver this slim profit while selling at an average sales price that is one-third of Sony Ericsson’s break-even level. And Nokia’s most recent quarterly sales included nearly as many smartphones (17 million) as Apple sold in the same quarter.
Saugatuck’s position on all this? Though it continues to lose money overall right now, Nokia has done a solid job of rethinking and repositioning in one of the most competitive tech markets known. Unlike most firms in similar positions, Nokia management has implemented both business and technological change in order to reposition the company. Nokia’s moves are still a huge gamble; in a notoriously fickle mobile device marketplace that sees a new “killer phone” every several weeks, nothing is certain. And to have a decent chance of long-term success, the company still needs to build an apps/developer ecosystem well in excess of what Microsoft has already accomplished for Windows Phone 7.
There is always uncertainty when any tech firm has to re-invent itself. What is certain is that Nokia was positioned to lose; now it is positioned to gain. That’s good management.