The Tragic Downfall Of Nokia: From A Giant To A Shadow [Case Study]
Today, if you ask any child about Nokia, the most common answer you will get is, “What’s a Nokia?” which speaks volumes about Nokia’s tragic downfall. The OGs remember what Nokia was and how big it was during its prime. The same company that held around 30% of the phone market share worldwide is now just a shell of its former self. It has faced a fate worse than failure, being forgotten, only to be remembered as a memory in many elders as their first phone. So, why was Nokia not able to create a dynasty that would last decades? What went wrong? This is the story of Nokia and how they lost it all.
The Humble Beginnings and Success
Before we discuss the decline of Nokia, you need to understand how big of a company Nokia was during its prime and its history. So, the story of Nokia starts as a Finnish paper mill in 1865 by Fredrik Idestam. Soon, they began to enter into the rubber products like boots and tires, cables, and TV sectors as they saw growth potential. 1922 was a year when Nokia cemented its name in the rubber industry as it partnered up with Finnish Rubber Works.
By 1967, Nokia knew what it wanted as it saw the immense potential of mobile communications and began manufacturing car phones by collaborating with companies like Salora. Just after that, they began to merge with various companies in Finland, like Finnish Rubber Works, to create Nokia Corporation. This merger then allowed them to operate in four sectors officially: forestry, cable, rubber, and electronics.
Soon, by the late 1970s, Nokia played a major role in the first commercially available mobile phone network in Finland, allowing them to create a strong foundation for their future success. It laid strong foundations because, by 1990, Nokia was in its golden period!
They had become a force to be reckoned with in the development of GSM standard (Global System for Mobile Communications, basically your mobile network protocols, aka 3G, 4G, 5G, and others) and focused on creating user-friendly phones, which led to the creation of Nokia 3310 and the Nokia Communicator; phones that are remembered for their durability and practicality (and nostalgia). With the help of early investments and strategic partnerships with networks, providers enabled Nokia to manufacture and sell their phones in countries like China, allowing them to grab hold of a staggering 30% market share by 2000!
The Beginning Of The End
Plenty of reasons played a part in the dethroning of Nokia as the greatest mobile manufacturer of all time. These reasons all play a major part in Nokia’s tragic story, so what made Nokia lose everything? Here are the major reasons behind Nokia’s fall.
1. Adapting To The New Gen
One of the biggest reasons Nokia lost its crown is that it did not adapt to the new generation of mobile phones. While Apple and Samsung started rolling out smartphones that used the iOS and Android operating systems, Nokia decided to stick to the QWERTY keyboard style as they thought that users wouldn’t accept touchscreen phones (that aged like fine wine) and didn’t want to adopt the Android OS.
After realizing their mistakes, Nokia created the Symbian OS, which they used in their smartphones, but it was a massive failure. The Symbian OS was not compatible with many of the apps, developer ecosystem, and usability issues and was not comparable to Android and iOS. The poor performance of their OS was one of the biggest reasons for Nokia’s downfall.
Nokia just couldn’t predict the shift in market trends and demand for smartphones, and when they did, they were late to the party. Apple and Samsung had already gained the majority of the market share, leading to Nokia’s fall.
2. Overestimation Of Their Name
Nokia made one major mistake other than adapting to the trends: they believed that their name would make their audience run to stores for their smartphones even if they were late. It did not work out that way, as customers had already got a taste of the superior Android and iOS; they just couldn’t move back to the buggy and clunky Symbian OS. The audience did not overlook the company’s mistakes while creating a smartphone and decided to buy the more affordable and less buggy Android smartphone. Nokia thought their brand name would help them escape trouble, but that didn’t happen either, leading to their fall.
3. Organizational Fear
Tim O. Vuori, assistant professor in strategic management at Aalto University, and Qui Huy, Professor of Strategy at INSEAD Singapore, conducted a study to find the reasons behind the rapid downfall of Nokia, and they found something really interesting: organizational fear. Things are about to get a bit confusing, so stay with us because things are about to get out of hand.
The middle management of Nokia was scared to tell the truth, as they were worried about losing their job, and the top management was worried about not meeting their quarterly targets. All this while, the executives were not ready to accept that the Symbian OS was inferior because they knew that Nokia would lose their investors. This then led the top management to intimidate the middle managers for not being ambitious enough to meet their targets, which in turn led the middle management to lie as they felt the truth was useless.
Also, the top management lacked technical competence while setting goals. In contrast, all the top managers at Apple were engineers who knew what technical difficulties and problems they could face while manufacturing the iPhone.
4. Poor Marketing Strategies
One of the main reasons why Nokia failed is its poor marketing strategies. With an unsuccessful umbrella branding strategy in place, Nokia failed to capitalize on it like Apple and Samsung, who were now creating flagship products like the iPhone and the Galaxy series, which helped both companies grow massively. The failed umbrella branding strategy was a major reason Nokia missed out on the opportunity to create a recognizable brand identity.
Nokia’s marketing strategies also took a hit when they struggled to maintain users’ trust in the company, as their poor selling and distribution methods made it difficult to reach their target audience. Their rivals gained customers’ trust and built a dynasty.
5. Constant Restructuring
Did you know that in over five years, Nokia replaced their CEO twice?! The reason for this is the new matrix structure that Nokia adopted to drive agility within the company. When Nokia adopted the matrix structure, many stakeholders and key staff members at the top management were unhappy with it. They decided to leave the company, leaving them out of the decision-making process. (Keep in mind that these key staff members were the ones behind Nokia’s rise to greatness)
The constant change of CEOs also led to instability in the upper management and prevented employees from getting used to the new leadership and their goals and visions. This led to dissatisfaction among many employees, and it also became challenging to align with different CEOs, causing a sense of disconnect in the entire organization.
6. The Deal Of Death
The deal with Microsoft in 2014 was the final nail in the coffin; the deal was what many call the biggest reason behind Nokia’s fall. The company’s sales were proving that Nokia could not support itself due to a lack of innovation and an inability to adapt to new trends. That is where Microsoft swooped in to save the mobile phone giant, but it didn’t go the way it had planned, even with the launch of great phones like the Nokia Lumia and the Asha series.
The partnership left Nokia dependent on Microsoft and the success of the Windows phones in the market. The Windows OS struggled in the mobile phone market, while Android and iOS ran away with most of the customers, affecting Nokia’s market share as they were using the Windows OS on their systems. This deal soon even hampered the brand name that they had built over the years as the general public started looking at Nokia as a company that couldn’t cope with change.
The End of A Legacy
With Nokia selling its mobile department to Microsoft, the tragic downfall was on full display to the general public. However, the legacy and influence that Nokia left behind remain undeniable and still highly regarded; their contributions to technologies like GSM have dictated how we connect now. Today, Nokia is more involved in developing telecommunications infrastructure, providing solutions for network operators, and developing technologies like 5G and beyond.
When you actually take a deep dive into the reasons for Nokia’s fall, you will come to realize what Stephen Elop (Ex-CEO of Nokia) said:
“We didn’t do anything wrong, but somehow, we lost.”
Proves why the giant has become a shadow of its former self. Elop’s words should stand as a testament and a reminder to everyone to adapt to this ever-changing world at a moment’s notice. The story of Nokia also teaches us never to expect that your name alone will help solve your problems. That is all from our side; if you enjoyed this case study on Nokia, you might also enjoy our other case study on how Airbnb unlocked the nomadic dream! Also, if you enjoyed the case study GIF we used above and want to look at other case study templates, you can check out our wide range of case study PowerPoint templates.
