Why Nokia failed: The role of Data Analytics

The fall of Nokia has been a controversial topic, the story of how this company that was the top in its field tumbled down to the point of extinction is really an interesting topic.

In 2011, Nokia was dominating the smartphone industry. Premium smartphones like iPhone, Samsung, and HTC dominated about 60% of the smartphone market while Nokia dominated the other 40%. 

Considering their dominance in the smartphone network, it is a shock that Nokia only has about 11.5 % market share in 2014

First of all, let’s look at the downline of Nokia’s market record and how it lost the competition and also the role data analytics played in this downfall.

The storyline

Nokia ventured into mobile phone production in 1980 and attained market lead in 1998 with control of over 30- 50% of the market share. They kept leading the market and also increasing in their market dominance until 2007 when Apple introduced a new smartphone they called iPhone and an operating system called IOS. The next year Google, which has been a reputable search engine, developed the Android operating system. 

Nokia belittled this iPhone and never paid attention to the threat it posed for them in the market lead competition because the iPhone ran on 2G while Nokia ran on 3G, they also ignored the significance of the Android operating system.

What is the difference between iPhone(IOS)/ Android and Nokia (MeeGo, Symbian)?

Nokia was using MeeGo and Symbian as their major operating system which was good as an open-source OS but is not compatible with a lot of applications. iPhone on the other hand had a myriad of applications in its apple store which gave it an edge over Nokia’s Ovi store.

Nokia Symbian touch screen phone

Android operating system was an open system that supported hundreds of apps which was why it was easy for other mobile phone companies to adopt the operating system within a short period.

The difficulties in responding to these new competing companies became obvious in 2010. Nokia’s market share dropped drastically and their profit rate reduced.

In 2011, Stephen Elop was appointed as the CEO and in the same year, he started a layoff to some major components of the Nokia empire. To keep up with their competitors, Nokia abandoned their operating system ( Symbian, MeeGo) and incorporated the use of Windows as their new operating system. Windows for a lot of reasons was not a good choice of mobile phone operating system for Nokia at this time because of lots of shortcomings. At this time people liked that they could share applications and files from one phone to another and it was really convenient for a lot of mobile phone users but Windows is a closed operating system which allows connection with only windows products, this means it can only send files and applications to only windows products. 

Nokia windows phone

Also, there was still this application problem, this operating system still has few applications while iPhone has a lot of them and Android allows for a lot more applications than Windows.

In 2014, Nokia was struggling to retain a 1% share in the mobile phone market and was close to being bankrupt, so it was not a surprise when they sold off their mobile phone division to Microsoft for $ 7.2 billion

Over the years people have written so much about why a company with such a success rate will fail this much and some of the reasons written was ;

 1. They lacked a visionary leader

 2. There was a problem in their management department

 3. Nokia was technological oriented, they only knew about hardware production and were not ready for software innovation

 4. They could not compete with Apple’s capability of combining software innovation, user experience and hardware production, hence why they lost the competition.

 5. Nokia was arrogant and refused to listen to statistical advice

The role of Data Analytics in their downfall

In 2011 the CEO of Nokia, Stephen Elop Said ” We didn’t do anything wrong, but somehow, we lost”. Well if they failed then they didn’t get everything right. And the fact that they couldn’t figure it out even when they’ve failed already says a lot about their data analysis. 

Now how did data analytics contribute to their failure?

Surprising Nokia believed and adopted the use of careful data analysis for their decision making so why did they fail

Wrong prediction –

 Former Nokia mobile phone president Matti Alahuhta, in his recent book, wrote that he was happy with the process of decision-making in Nokia which was to  “collects all available 

relevant information uses it to build a perspective, and then relies on contemplation” 

Nokia predicted that they could get the best real-time synopsis of the company’s condition through operation monitoring systems and finance. And this seems to be working for a while because financial outcomes were great until 2010. This gathering convinced Nokia that there was no need for a change in strategy and that they were competitive enough with their product capacity at the time.

Though this analysis seems to be working, it turns out to be a short-term performance analysis, which failed in the long run because it did not consider the changes happening in the market. Data analytics should involve a thorough gathering of data from different sources to help in decision-making. Nokia failed here because they were not thorough in their analysis, which caused them to make wrong predictions.

Management does not listen to Data analysts –

While the data analytics department did a poor job in their analysis, the management usually does not accept their analysis.

 The bureaucratic nature of the organization made it difficult for the analyst to pass their judgment without prejudice. They are afraid of the top tier executives and sometimes they conform to what those top tier executives want. This made it difficult for a sincere data analysis. 

Also, the management system created the misconception that the risk has been taken care of. Though the management’s experience was able to challenge the dominance of the analytical – logical information in the company which caused a lot of damage.

For a company as big as Nokia, with determined competitors, data analysis should have been the foundation of decision-making. They should have taken their data analysts seriously, they should have been thorough in their analysis.

The decision to invest more in Windows without paying any attention to the other operating software they have ( Symbian & MeeGo) entails a failed data analysis. 

Considering the chunk of important things they missed, it’s not a surprise that they failed

While Nokia strived towards the market lead, they failed in the core part of a business or company – data analytics.