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Today’s episode is not about a flashy tech startup from Silicon Valley or San Francisco
that was going to become a unicorn and failed.
Nokia is a Finnish multinational corporation that goes all the way back to the nineteenth
century and started with wood mills that produced mainly paper.
If you’re older than 20, you most definitely know Nokia for leading the telecommunications
market back in the early years of cellular phones paving the way for the rise of companies
like BlackBerry or Motorola.
So, despite still being alive, Nokia as a phone brand is not even the shadow of what
it once was and the kingdom they built when they put cell phones in everyone’s hands,
is just gone for good.
This is the Nokia story.
Nokia was born in Finland, in 1865.
Yes, it was during the final years of the industrial revolution when Nokia was created
by Frederik Idestam and Leo Mechelin.
The two businessmen decided to partner up and created a shared good, named the Nokia
Company.
They decided to step into the electricity generation business but just then came the
first World War.
By the end of it in 1918, Nokia was struggling to survive.
No surprise there...
But then it formed a partnership with the Finnish Rubber Works and the Cable Factory.
Fast forward to 1967, the three companies merged into what we know as the Nokia Corporation,
after having been manufacturing electronics from cables to radio communicators, computers,
and many other products like rubber boots or respirators.
In the following years they acquired a series of companies, including several of the main
television manufacturers from Finland, Sweden, and Germany, turning into the third-largest
TV maker company.
One of the companies they acquired was Mobira, an early cellular phone manufacturer that
ended up being the foundation of Nokia’s future business in telephony.
In 1981, Mobira launched the Nordic Mobile Telephone or NMT, as a solution to the increasing
demand and saturation of the old manual phone networks, and it was the first one to allow
international roaming.
But it was the Mobira Cityman 900 that really started Nokia’s race for fully mobile phones.
Nokia had been winning from Finland’s open trade with Russia, and the Cityman 900 phone
model became iconic after the Soviet Union president Mikhail Gorbachev used it to make
a call from Helsinki to Moscow during a press conference in October 1987.
Yes, with the Cold War at its peak, Nokia is reported to have managed successful business
with both Russians and Americans.
That’s how big it was.
The amount of phone models in Nokia’s catalog over the years is ridiculous and there are
many series and models that were successful.
They also experimented with all-in-one type models that may have very well been the first
approach to smart devices.
The Nokia 900 Communicator from 1996 was a mini-laptop looking device that could do fax,
email, spreadsheets and some other stuff.
That first Communicator seems to have been the one that brought Microsoft’s attention
in.
Nokia executives at that time tell that a Microsoft recon team brought Bill Gates himself
to see the device and have a demo of it, in a big tech conference in Las Vegas.
Later in 1998, came yet another commercial hit and the first to successfully introduce
the idea of gaming on a phone.
Yes, the first one to feature the Snake game in it: the Nokia 6100.
Nokia entered the 21st century still as the undisputed king of cell phones, having surpassed
the 100th million manufactured phones in 1998.
In that year alone, they had a sales revenue of $20 billion making $2.6 billion profit.
By 2000 it employed over 55,000 people around 140 countries and had a market share of 30%
in the mobile phone market, almost twice as large as its nearest competitor, Motorola.
We already made a video about that.
But just then, the first decade of the new millennium brought a real game-changer: the
iPhone was released to the world, quickly setting a new industry standard.
The iPhone almost instantly dethroned Nokia and any other runner-ups.
he director of user experience management at Nokia during that time has reported himself
to have been explicitly tasked with creating an “iPhone killer” for the next year.
Yeah, imagine being charged with that…
The iPhone may have been the straw that broke the camel’s back.
Several former Nokia executives have shared their thoughts on the overwhelming transformation
that the company went through with the overflowing success of their phones.
There are many testimonials of this and even one curious story to illustrate it.
Whenever they had a problem or needed to solve a complex issue, management would climb up
the top of their building to meet, just not in your regular meeting room but in saunas,
surrounded by a spectacular rooftop view that helped ideas flow.
It sounds extravagant, but if you think about it, it’s a very personal approach to problem-solving,
maybe a little too personal.
With the outrageous growth came a new lineage of executives and managers that didn’t have
time for any of that, as the company seemed to have become a monster hungry for more success
and more money at all costs.
The internal competition within the teams and divisions became ferocious and different
management styles were confronted in what former employees have called a madhouse.
Also, the killer competition didn’t stop with the iPhone.
In 2008, the Google recently acquired Android mobile OS, was featured for the first time
commercially in the HTC Dream phone.
Android became the main mobile operating system on virtually every phone that is not an iPhone.
Big manufacturers like Samsung or even Huawei raised through Android and claimed their rightful
place in the Market.
Cut to - the end of 2013, Microsoft announces the acquisition of all Nokia phone operations
for more than 5B euros.
It was Microsoft’s move to take part in the mobile market after having underestimated
it and focused mainly only on its PC business.
By the time the deal was closed, some financials had of course changed and Nokia ended up receiving
something around the 7B euros.
Nokia also had to remain in charge of operations in Korea and India, due to tax-related legal
constraints, but they would manufacture for Microsoft and all phones would now be Microsoft
branded.
It was just the beginning of the massive puzzle that Microsoft had got itself into.
For a reference, by 2013, Nokia sold nearly 251 million handsets, a mixture of feature
phones and smartphones.
The Lumia lineup of Windows Phones only accounted for 30 million and Microsoft had to plan how
to handle the other 220 million other devices that Nokia produced not on Windows Phone.
It was a big worldwide business in which Nokia was in second place behind Samsung, as the
top mobile phone manufacturers.
With the hardware muscle now, some argue that Microsoft’s right move should have been
to make the Windows OS free in all their smartphones.
Of course, that’s easier said than done and ultimately, Microsoft wasn’t successful
in figuring out the licensing puzzle or inserting itself as a phone brand.
But just thinking about it, free adoption of Windows Phone would’ve definitely placed
more direct competition on Android.
It would’ve given them the chance to control their own app store, push its own cloud-based
services, and many other possibilities.
But instead, the firm’s efforts to elbow into first-party hardware received a massive
setback.
Long story short, in 2015 Microsoft writes off $7.6 billion as a consequence of the Nokia
acquisition and lays off 7,800 employees and a roughly $800 million restructuring charge,
writing down the vast majority of the phone business purchase price.
In 2016, Microsoft Mobile announced the sale of its feature phone business to the Finnish
HMD Global and FIH Mobile.
The total sale to both HMD Global and FIH Mobile amounted to US$350 million.
In this new stage, back again in Finnish hands, Nokia seems to have been recovering some of
its roots and it now produces straight forward devices for the mid-lower end of the market.
However, it’s been diminished to almost being unknown for the new generations.
So, that’s how a company that once was reigned over the mobile phone industry became a runner-up
and ended up maneuvering just to keep its head up.
Now, if we learned something today, is that when a company reaches the global magnitude
that Nokia reached, it’s virtually impossible for it to go down to the point of disappearing.
Just think of something equivalent nowadays, like Samsung or Apple going out of business…
it’s just hard to imagine.
But remember, we also learned that success can sometimes hit hard and shake a company’s
foundations just as much as a failure.
Having a solid base and principles to stick to can end up being critical for a company’s
endurance over time, regardless of its size.
Here’s your challenge for today: if you still have a Nokia phone on a drawer, we’ll
trade you a photo of that phone for a T-shirt.
That’s right.
The first 10 people to share a photo of their actual Nokia phone in the comments, we’ll
ship you a free Slidebean T-shirt.
For a lot more content on failed companies, hit that Subscribe button and we’ll see
you next week.