IE Focus | By Ricardo Perez, Professor at IE Business School

Nokia is still a leader in terms of sales, but the crown of innovation has now passed to Apple. In order to get it back, Nokia needs to reinvent itself as a mobile services company that offers multiple benefits to its partners. At the last world mobiles congress in Barcelona, Nokia and Intel revealed their plans for the joint development of software for all kinds of devices to compete with Apple and Google. Nokia takes another step forward in its strategy of creating a technological platform that returns it to a position that will enable it to take the initiative in the most interesting market at the present time, i.e. smart phones like the iPhone, and in new markets, such as the one created recently by the iPad. Don´t worry, I won’t go on about the iPad; what I want to speak about is Nokia and its position in today´s market. It is a story of what can happen to a leading company if it comes up with the wrong definition of the business game it is playing. The loss of leadership this causes has happened to others: it has happened to Sony with its music players and its video consoles over the last two years. Nokia had worked hard to create the different technological platforms it believed would enable it to win in the mobile market. Symbian, its key product, has also seen defeat. Allow me to explain.

Nokia established the rules for the top-of-the-range telephone market before iPhone. It created an alliance to produce the base software (operating system) with which telephones worked (Symbian, theoretically neutral and owned by many companies on the market). It also made sure that what users saw on the telephone when they used the menus (user interface) was the development and property of each of Symbian´s partners, which meant it could not enter the market as a competitor. The rules were clear and benefited Nokia in a market that competed in terms of the electronics and “additional utilities” of the telephone (best camera, GPS, etc.).However, the market has changed then. Fast. And the arrival of the iPhone has made the change happen even more quickly: now there is competition for integrating the user interface with the telephone´s functions. What´s more, the third-party applications add value to the phone and are seen as the preferred way of personalizing it. This was the only aspect Nokia couldn´t control because Symbian was an independent business. Many things have changed since the end of 2008. Symbian was bought by Nokia and turned into a foundation. The alliance with Intel was announced. They looked for support from the development communities with the idea that the new system could be a good ally in their aim to reach a large number of devices at the same time. However, reality is stubborn and the results are still not there. Meanwhile, in the field of smart phones, they have still not found the formula and they still need to attract the customer´s imagination.

And now, Nokia has announced that it wants to compete with the iPad. Once again, Apple has changed the way we relate to computers. It has created a new category and is forcing the industry to change. Nokia has taken the right steps. If it manages to create a competitive platform with its MeeGo software and a device that really does change the rules of usability, it still has time to get its act back together. In Europe and Asia, it is still leader and its phone sales are in the millions. Let´s hope it performs better than with the mini-laptop it launched a few months ago, which offered almost nothing new for a very high price and operator agreements that were not very attractive.

The balance of power in the mobile devices industry has changed. Nokia will still be sales leader in the world, but it has lost its crown as the company to copy. Now they have to become what they announced two years ago but have not yet achieved: they have to be a mobile services company that offers multiple benefits to its partners and leads innovation in its customers´ online lives. And we have not yet mentioned the third player in the game: Google, which does not seek to earn money directly with Android, its operating system for mobiles and similar, but rather to extend the use of the mobile Internet and the seamless integration of its applications. Google is a formidable enemy with growing revenue and a large number of incentives for promoting its platform, which is completely neutral, open and free. But then again, that tends to complicate things.