Nokia's infamous downfall - A marketing myopia case study
You are probably reading this piece on your smartphone or another smart device, so it would be a little ironical to do this, but let’s go back in time when mobile phones weren’t as sophisticated, nor as commonly owned. A group of five American youngsters called the Backstreet Boys had released their first album, Titanic had just hit the movie screens, and Bill Clinton was elected for a 2nd Presidential term. Around the same time, in 1997, the world started taking notice of mobile phones, and Nokia entered this market to become a global leader almost immediately. What happened over the next 10 years is a success story unlike any other.
Between 1997 to 2007, Nokia’s market share surged from 25% to 50%, and the company was at least selling twice as many as mobiles as compared to its nearest competitor. It was a monopoly that only the likes of Coca-Cola, Airbus, and Microsoft may remember enjoying once. But Nokia’s decline was just as swift as its rise. The company went from being the market leader to a point of complete extinction in the next 8 years. By 2011, it lost half its market share, and by 2015, it was staring at a figure of just 1%. This catastrophic failure is now the stuff of B-School folklore and management case studies. And while Kodak, Xerox, and Yahoo served a similar fate because they failed to upgrade technologically, the roots of Nokia’s failure are also nestled in its organizational identity and culture, all tying back in various ways to marketing myopia.
I had written an entire blog on marketing myopia a while ago.
Marketing Myopia is simply a situation wherein the company has a microscopic view of the business world and can't foresee both distant opportunities and challenges.
They invest too much time, energy, and resources in fulfilling their current obligations that they fail to plan for the future. As a result, they either become obsolete, or simply get their market share eroded by innovative, fast moving competitors who are faster in spotting market trends. And as you proceed with this blog, you will notice that Nokia's decision making ticked almost every box.
When a company experiences a failure of such proportions, analysts are quick to point fingers in various directions. And truly, it is difficult to pin-point one single cause of failure. But several researches, memoirs of the company’s top executives, and in-depth interviews with the candidates have all provided solid evidence that Nokia’s culture, driven by a myopic view of the business world (ironically this was the brand that was once the leader), was at the helm of the company’s demise.
Let’s go inside a classroom at Henley Business School, UK, in September 2011. A Professor had posed a seemingly unsolvable question to a room full of bright candidates, and left all of them dumbfounded. But a student, who was an engineer with Nokia, walked up to the board and solved it, much to the surprise of everyone else. "If Nokia had such bright people, how did the company fail" wondered the Professor. The engineer proceeded to narrate an incident wherein he had prepared a pitch-deck about ‘touch screen technology’ and presented it to the CTO. Nokia had touch-screen development capability much before Apple did. But Nokia’s conservative business outlook prevented the top management from approving this project. They believed that the company was good as it was. The first classic mistake.
However, I must add that the case of Nokia can't be strictly bucketed under 'marketing myopia' although it qualifies in every way. This is because Nokia's Finnish culture was also partly responsible for the company's demise. The above was one of the several anecdotes that point towards the fact that the company was built on the fundamentals of conservatism, maintaining silence, and resisting change. The first two are also tenets of the Finnish culture, and Nokia was the crown jewel of Finland. Also, Finnish culture is in stark contrast to American or even the Indian culture – people are comfortable with silence during meetings. The same happened at Nokia. Despite the realization that the mobile phone market was changing, the employees preferred maintaining silence. Another classic marketing myopia mistake - not taking feedback.
Nokia's offices in Finland
Deeper examination reveals that Finland makes it impossible for its people to fail. It offers free college tuition, fixed working hours, health insurance etc., and makes people complacent. And if you are even slightly familiar with Finland, you will also know that Saunas are a big part of the their culture. Nokia went to the extent of installing luxury saunas in offices across even Afghanistan and Zimbabwe. The top management essentially started taking decisions whilst having meetings inside those sauna rooms, away from all the other employees.
I would like to bring in Kurt Lewin’s 3-step change model here. It has 3 phases – Unfreeze (acknowledge the need to change), Change (implement the desired changes), Refreeze (absorb and practice the desired changes). It nicely ties in to the concept of marketing myopia where a company is resistant to change due to various factors including a know-it-all attitude, too much focus on maintaining current market leadership by keeping the status-quo, and not taking customer feedback.
In the context of Nokia, the organization wasn’t even at ‘unfreeze’. Their unreadiness to acknowledge and embrace change caused the management to decide that the world was still not prepared for smartphones. In the last press conference by Nokia right before they were handing off their entire business to Microsoft, the CEO broke down and said this -
Again, a classic marketing myopia mistake. Unwilling to accept that the world moved too fast ahead and saw the emergence of a new class of competitors who were willing to provide the best smartphone experience to the customers. The company was fully capable of upgrading and had the best minds on their payroll. But the company never heard feedback either from internal or external customers, didn't invest in innovation, and kept basking in their old success until they realized the market share was plummeting beyond their control.
This blog was originally written by me for Prof. Ekin Yasin's class at the Communication Leadership program. It has been suitably modified and updated for my marketing blog.