Nokia's North American troubles continue

Barely 12 hours since i posted my article on North Amercia (NA) being the Achilles Heal for Nokia, my observations stand vindicated by Fortune the magazine. Here are the excerpts:

http://money.cnn.com/2009/01/12/technology/hempel_nokia.fortune/index.htm?postversion=2009011209

To revise the first lot of observations:

1. Over the last 2 years, Nokia has conceeded 50% of its market share in NA to competition. A fall from 15% to 8% to the Blackberry's and iPhones of the world says it all. To cut it short: Nokia has not been able to get its act together in the NA market.

2. Nokia's hopes of being recognized as a technology leader would underfall if it is not able to place the right bets in the NA market. Afterall the NA is the world's fastest growing smartphone market. Moreover, by being a marginal player in this market, it is loosing the attention of software and application developers.

3. Nokia's venture across the Atlantic had a false start in terms of getting the design element right which is where Razr stole the show.

4. Nokia's pre disposition of being directly in touch and controlling its consumers doesnot go well with the NA market dynamics where operatos bundle device with services and lead the launch. Thus operators dont carry any of the Nokia smart phones in North America even though N 95 and E 71 are one of the smartest devices these days.

5. Presently Nokia seems to be missing the technology bus where i Phone and Blackberry are driving off smartly. A latecomer to the "touch technology", even after 1.5 years of iPhone Nokia doesnot boast of a multitouch phone (The 5800 is not a multi touch phone)

The N 97 as a device and Ovi as a service looks to break the NA jinx and this is one front that could well decide Nokia's future. If Nokia's products in NA fail in 2009, it should probably focus on the developing markets more and cream them as a mass player instead of playing as a technology player.

How Nokia Blinked in America: The classic Sun Tzu (Part I)

The second statistic up there is the more relevant one to the point. Worldover Smartphone sales jumped 11.5% 07 to 08 and yet Nokia lost 3.1% in the race. Thats a swing of 15% that Nokia will not be too happy about.

Nokia enjoys 38% of the global mobiles market and for the 2008 calendar year, it sold a combined total of Samsung and Motorola and Sony Ericsson sales. Thats big by any yard stick. Thats enviable and thats some leverage, they have there. However, Nokia's market dominance has been more pronounced in Developing countries in Asia, Africa, Middle East, Asia Pacific and China. To be precise it is its total dominance in India and High market shares in China, that Nokia is able to garner its 38% of the global pie.

However, the story in North America is distinctly different. In essence, Nokia has not been good in developed markets and operator strong economies. Its not as if the it lacks the technology edge: N 95 and E 71 are one amongst the favourite smart phones around the globe. However, Blackberry and i Phone and from the looks of it Google Android have made greater impacts in the operator markets.

An analysis of the Nokia weaknesses from the Sun Tzu perspectives (from Sun Tzu: Art of war)

1. Nokia straddles all segments in the market and is present all across the 6 continents. Thats some size and some leverage. However, as the industry multiplies and proliferates, it could become the fatal flaw as well. In the NA (North American) context, there were segments of the population which needed more specialized services. Something that Nokia missed and other capitalised upon.

2. Sun Tzu emphasizes knowledge of the battlefield/terrain/other conditions. Thats Nokia's first undoing in NA, where the technology preference is CDMA and not GSM which is where Nokia is at home. Inadequacy in technology had a very important role to play in the sense that it did not allow Nokia to get a foothold in NA.

3. Sun Tzu emphasizes alliances. Sadly, while Nokia phones are fielded by most of the major operators in NA, the alliances are mostly very loosely transaction, product bundle based. Operators in NA believe in working with the OEMs in terms of product development from the scratch before putting the steam behind those products through their network.

4. Sun Tzu emphasizes Moral Influence: This sounds strange in the NA context, but there is a inclination to the RIM Blackberry and the Apple iPhone because of their Americaness. Controversial? Yeah Right. You need to look at the previous best: Motorola to understand how the Americans probably favour Americans.

5. Sun Tzu emphasizes Flexibility: Back in 2006 Motorola was whipping Nokia in the market with a single product called the Razr. It went to become one of the most cherished line of phones (After which Moto could not keep with the market). Nokia was selling candybars and kept selling candibars and still kept selling candibars 1.5 years after Steve Jobs came with the ground breaking IPhone. In retrospect the inability to flex their product lines to keep up with consumer choices gave Nokia the Grand dad image.

Has Nokia got its CWM strategy wrong?

http://uk.gizmodo.com/2009/01/06/nokia_comes_with_music_not_sha.html#comments

This discussion is about Nokia's Comes with Music. It follows the above given web clip on the "Nokia CWM not shaping up as expected".I have always believed Nokia CWM initiative to be flawed. But Can Nokia make such a monumental mistake or is there something bigger at hand.

Original report: www.theregister.co.uk/2007/12/05/nokia_free_music_analysis/ (5th December 2007); www.reghardware.co.uk/2007/12/04/nokia_comes_with_music (4th December 2007)

Six months back, i had read up a lot about Nokia and its CWM (Comes with Music) strategy. Essentially, it was an attempt by Nokia to boost its standings in the Music space. Well, if you are thinking, what has Nokia got anything to do with Music, its time to think again. Over the last 2 years or so, Mobiles have become the primary convergence device and Nokia has significant stakes in the mobile handset space which it needs to hold on to. Towards this objective Nokia has emerged strongly into the convergence space making its high end devices more internet friendly, with the ability to carry more music, videos and multimedia content. In doing so, it challenged Apple which had a very elaborate music download portal in its portfolio, where in consumer could buy their music and keep it on thier iPods and iPhones. ( At a later date, Apple was to subvert the mobile industry rules of the game by releasing its iPhones).

Back to Nokia for now, Nokia had tied up with Universal and Sony BMG to offer tracks under these banner to its users. Its users could download the tracks from the Music store (A part of the Ovi services platform). CWM came later. Its USP was that it provided free music to the user of certain mobile handsets for an year. The cost of this was factored into the $100+ premium charged over the price of the phone. The devices so long carrying CWM are 5310, N 95 and N 96. Users could opt to pay the extra money and download as much music as they could for an year. The constraint was that the music could not be shared and its usage was limited to the Nokia phone and a computer of choice.


Pretty neat on the surface untill you got into the mathematics. It was reported that the premium for the CWM service for the consumers was $129.95 (at the time of purchase). While Nokia didnot make public its deal details with Universal and Sony, it was assumed that the price per download that Nokia had to pay to the music labels was around 90 cents. Apple it seems pays the same for a single track download. Assuming some hard ball bargaining, this floor price of such a deal would be 70 cents. Thus the consumer using the service was paying for 129.95/.70 = 185 track downloads! And more, Nokia would be paying 70 cents to the music labels for every 186th and onwards track downloaded in a calendar year. Did the Finns leave their brains around somewhere? Nokia was doing a Hoover!
www.theregister.co.uk/2008/04/17/nokia_comes_with_music
www.theregister.co.uk/2008/05/01/nokia_defends_music_giveaway/
www.theregister.co.uk/2008/04/28/nokia_comes_with_hoover/

In providing the consumer unlimited music of his choice, did Nokia goof up on the break even canculations. How could that be? (Apple had a pay per song as you download charge to the consumers)

There was speculation about the profits. It was assumed that such a liberal promotion could really eat into the operating profits of the Finn gaint! Apparently, there was also a lot of dissatisfaction with the operators as well, who were not at all figured in this deal. It would be understandable if Operators and Nokia would have done this in a partnership with the operator making money out of the downloads through their channel.


It was difficult to understand why Nokia would be a part of such a deal apart from its desperation to get into the music space as a serious challenger to Apple iTunes. Even that wouldnot have warranted these losses. It was on a discussion with a higher up at Nokia, that i understood the rationale of this strategy. Nokia had it seems worked on an insight that only one out of every five people availing the CWM would actually use it in terms of heavy downloads.


Well, this did not sound to me to be quite a reason. Basically, it is undoing of the base idea, which is to get maximum people hooked onto the CWM. However, the pricing and the break even is a math that is confounding.


However, over some time now, Nokia has not actively promoted this idea with marketing money. This leads me to think:

Is this really a mistake that Nokia doesnot want to support and hence the silence?

Or is there a bigger strategy (probably Ovi led) which will unfold in the future?


That i think, only time will tell though i think the Finns have stepped on this without adequate coordinates on what they should be doing and how to go about doing it.

Nokia Oyj: Why would a market leader follow?

Originally published on October 29th 2008, i had taken this blog off because of some professional reasons. I am happy to be able to re publish it yet again.)

Nokia Corporation is the 5th most valuable brand in the world with a brand value of $ 36 billion (sales of $50 billion and more) and has been consistent in the ratings for over 6 years now in the Interbarnd survey. In fact it is one of the very few European Brands in a list that reads excessive US Brands. Yet everything is far from Hunky Dory with this Telecom giant which sits at 40% of the world market pie. Its stock price hasnot been buzzing for some time now and as with all market leaders it is the favourite passtime of analysts over the world to point out to whats-not-right sort of thing with Nokia. It is trading with a P/E ratio close to 1 in the stock markets which is very average compared to Google, Apple, RIM. It is much better than Motorola though.It had over an year back made certain allusions about a fundamental move in its thinking towards services and internet with its fledgeling brand, Ovi. This was a forward looking step towards a world of convergence! There was a organizational restructuring that happened soon after. The stock markets applauded the efforts as being forward looking. There also have been pro active steps with acquisition of Navteq and Symbian, which indicate that the company is securing its end to end business structure. This is again positive.Yet there are seeds of doubt... RIM is gaining ground in the eMail space as is Apple with its breakthrough I Phone. Google is muscling its way into the Mobile space with its Android. Then there are other more competitors like Samsung and HTC which have been more innovative. Bottomline: Nokia seems to have lost a bit on its innovation leadership position to its nimbler competitors.I am not debating whether Nokia has lost of any of that bit or not... it definitely has. It has not created a wow in the market for some time. There was N 95 and there was E 71 and thats about it for almost 2 full years. To me, E 71 and 5800 Tube are just improvements over a market standard. Hence these are not what i would call innovations. There has been some buzz with the Ovi, but it has not been significant.

The strength @ Nokia is its diversified portfolio. However, straddling over so many segments with such a large portfolio can also be a fatal flaw. While Nokia is a world leader in Mobiles, especially in Asian and African markets, it has hedged itself on Music, e-mail, gaming, Navigation, Internet space, other market services and more. This adds a huge layer of complexity to the structure which is good in terms of all round consumer facedness and bad in terms of diffusedness of the focus. Lately, there is a thought running thru the leadership of the corporation, where in they are selling off functions not immediately relevant to its future. Case in point is, Nokia letting go development of its business mobility solutions which it can primarily source from the market. Another aspect, where Nokia and Google have been playing similar strategies is the development of Open Source architecture (something that Microsoft and Apple do not have). Thus the point i am trying to make in here is that, Nokia has a large offering base within different portals, which makes it less dynamic. However, there is a move within the organization to integrate critical business structures (NAVTEQ and SYMBIAN) while offloading non critical structures (development of Business Mobility solutions).

Before i proceed further, there are two charts that i would like to revisit. One being the age old SWOT analysis (Exhibit 1) and the second one being the Competitive context (Exhibit 2:havent used Porter here).Each of the Portals is a investment game where you need to develop the market and create the demand. Most of these portals have gestation periods and the early birds with deep pockets would survive gestations. Given that Nokia chiefly works on its ability to massify platforms, it makes sense that it waits for the any other organization (innovator, ex. Apple for Touch phones) to first create the market and then moves in quickly to massify the platform ( Tube 5800). The ability to massify comes from its end to end business models, supply chain integration, direct presence in markets, economies of scale which lead to cost leadership. So while Apple could skim the market with its $700 I Phone, its Nokia 5800 Tube which takes the Touch technology deeper into the masses with attractive price points like $395.It may well be that markets such as America and Japan which are technically advanced have a different view of this approach, but Finns are known to place safe bets and raise the moolah.

That probably makes them lag at the early game, but with their might and bulk they are able to cpitaulate on opportunities mid game onwards. Only Recently i heard Olli Pekka, Nokia CEO admit that Nokia has been late to wake up to the "Touch Trend". However, from looks of it, Nokia will play catch up and massifywith its 5800 codenamed the Tube and then mid next year, you can expect that N 97, which could redefine tech leadership in the mobile phone space!

Nokia Oyj: Why would a market leader follow?

Originally published in early November, i am re releasing this post , which serves as an addendum to the first part on Nokia Oyj.

I shared my thoughts on the SWOT analysis of Nokia, which has been featured in my earlier blog with a friend of mine. His additions to the list of weaknesses are as follows:1. Understanding of business models is a threat -- Nokia thinks of monetizing first, Google builds scale first and then monetizes . Web 2.0 is all about mostly free services2. Being device lead is a threat in itself3. There is no culture of innovation - and there is no localization. Google creates nimble products for each market4. Current implementation of EMS is not a strength.I would agree wholly to Points 2,3 and 4. There are weaknesses in the system that do not enable Nokia to be a swift and nimble entity. Instead there are organizational layers. What ever and how ever one sees it, points 2,3,4 are somewhat beyond question in terms of weaknesses.As far as the business models (point 1) is concerned, i think it is debatable.

Corporate Website 1.0 is dead. Long Live Corporate Website 2.0: Consumer Co Creation

http://windchimesindia.wordpress.com/2008/11/22/corporatewebsite/#comment-322
Social media is an interesting and yet very lucid context that exalts the power of networking forums to promote ideas , communicate and debate. Happened to browse through Nimesh Shah's blog on Corporate Website 2.0 as a interactive social medium to promote the brand, company and products. Original link as given in the beginniing. This is my extension of the Corporate website 2.0 concept into something that i call consumer co creation.


Hi
As promised Nimesh, i would like to add onto Corporate Website 2.0 idea. I would call this “Co Creating with the Consumer”.
Technology is evolving fast and (if not for the Recessionary mood), PE and other moneys are available for ideas that deliver better solutions at a lower cost to consumers. This has a far reaching effect in terms of Technology ROI. For any organization to milk revenues out of a technology investment, it takes time. However with the redundancy rates of technology it becomes difficult to forecast when a disrutive technology would make an existing one a thing of the past. Thus Organizations need to build stickiness around their products/services. This would also help them beat the fragmentation economics in the market and get a premium over others.This is where a Corporate website 2.0 idea can be extended to something that is called the “consumer co creation”. Every product / service has a base element and a Value added part to it. Normally product/business managers work out the best fit product/solution which they think works best in the market. However the corporate website can be engineered that they provide the “base” and allow the consumer to choose his “value added” services. For the value adds their would be a premium charge. At the end of the day the consumer is satisfied because the product is order made according to his needs. The example in question is Dell which makes computers that have been oredered by the consumers. I am privy to many companies that make a product with a long luandry lists of “firsts” and “bests” and yet the consumer buying them only uses 10% of the “full monty”. The conusmer thus pays money for stuff he doesnot want and may or may not get the stuff he wants in the product hes paid a fortune for.Increasingly companies identify this but there is not enough that has been done to make this idea see the light of the day…

What is the biggest challenge Telcos currently face?

This was amswered as a part of a discussion in LinkedIn. http://www.linkedin.com/answers?viewQuestion=&questionID=373970&askerID=20831362&browseIdx=10&sik=1227942408141&goback=%2Easr_2_1227942408141&report%2Esuccess=vfLh7ZiQxNtkwQoO3efsNN1zAgQ8WXmCT24lKBBmlHq_pfcN7JydQUoVP_zdv4b8

The Biggest challenges faced by Telcos primarily are two in nature:

Faster technology cycles impacting corresponding business ROIs adversely
Creating stickiness thru personalization of products

New technologies enable users to do more at lesser price commoditizing the older technology. Earlier it was voice, text and some data that one was primarily dealing with. With the advent of 3G, 3.5G, Web 2.0 technologies voice and text have seen rapid commoditization. Not only are we talking of more advanced technology within the vertical, but we also have competing medium, most notably internet which is democratizing a lot of services.

In this kind of rapid technology cycle, Telcos face stand offs on the kind of technology that they would invest in and how much returns in future terms would they be expecting out of the those investments. Such calculations tend to go haywire when ever another disruptive technology takes over. Telcos may fail to make the returns they expected from a particular technology / product. In that kind of a scenario you would often find a large Telco suddenly becoming irrelevant because the business models are based on revenues and profits not technology cycles. Smaller and nimbler competitors bring in the new technology, create the market and gain dominance. Sometimes these new players get acquired by the market leader which provides them a suitable platform into the new technology.
Thus Technological obsolescence may impact RoIs adversely.

Content, Context and Services are the next big stories. Cumulatively we could call them personalization. Telcos that master these would be able to make business out of web 2.0, 3.0 and the others. However, that is easier said than done. It is difficult to ascertain consumer price elasticity for these services. It is difficult to understand the nature of revenue flows and the market potential and then there always is consumer inertia to move into these services. However with the eminent fragmentation of the market and commoditization of businesses, this is the essential piece of the jigsaw which will create the stickiness in consumption. Google, RIM Blackberry and Apple have made the first splash in this aspect and competition in here is set to amplify with Nokia and other following suit.