Failure 08 · Business failures
The phone giant that read the touchscreen era too late
Nokia sold more mobile phones than anyone for over a decade, but it was slow to answer the iPhone and Android, and in 2013 it agreed to sell its phone business to Microsoft.
- Nokia
- Espoo, Finland
- 2013
- 3 min read
On this page
Before you readWhat would you do?
Your shop's website sells well, but younger customers now ask questions through a chat assistant on rival sites and buy there. Your team says your site is faster and cheaper to run, so nothing needs to change. What should you do?
Pick an answer now. The file tells you whether you were right.
01The file in one minute
1The leader
Nokia was the world's biggest maker of mobile phones from the late 1990s, with tough, cheap handsets sold everywhere.
2The new rules
The iPhone in 2007 and Android in 2008 made software and apps the heart of the phone, where Nokia was weaker.
3The end of an era
In September 2013 Microsoft agreed to buy Nokia's devices business and license its patents for about EUR 5.44 billion.
4The lesson for AI
When customers start judging by new measures, old strengths can hide how fast you are falling behind.
02Timeline
2007
Apple launches the iPhone.
2008
The first Android phone goes on sale.
February 2011
Nokia's CEO sends the "burning platform" memo and picks Windows Phone for its smartphones.
2012
Samsung passes Nokia as the world's top phone seller.
3 September 2013
Microsoft announces it will buy Nokia's devices business.
03What happened
From the late 1990s, Nokia was the world's biggest maker of mobile phones. Its handsets were tough, cheap to run and everywhere, including in Vietnam, where a Nokia was many people's first phone.
Apple launched the iPhone in 2007 and Google's Android followed in 2008. They made the touchscreen, the app store and the software the center of the phone. Nokia kept selling huge numbers of handsets for a few more years, but its Symbian software was hard for app developers to work with, and its own replacement plans moved slowly.
In February 2011 its new chief executive, Stephen Elop, sent staff a memo comparing Nokia to a man standing on a burning oil platform, and the company switched its smartphones to Microsoft's Windows Phone. Sales kept falling, and Samsung passed Nokia as the top phone seller in 2012. On 3 September 2013 Microsoft announced it would buy Nokia's devices business and license its patents for about EUR 5.44 billion.
04Why it failed
Nokia's strengths were hardware, supply chains and scale. The market moved to a contest about software and the apps other people built for it, and Nokia's size and its success with basic phones made changing direction slow. By the time it picked a new platform, developers and buyers had already settled on two others.
The AI angle: when the rules of a market change, past success can hide the change. Products that are "good enough" by last decade's measures can lose quickly once customers start judging by new ones, as many businesses are finding with AI features today.
The idea behind this caseLesson: How to keep up without burning out →
05Lessons for anyone deploying AI
- Ask regularly what your customers are starting to judge you on, and whether your old strengths still answer it.
- Treat a rival's new product as a signal about what buyers want, even when its first version looks weak.
- Make big platform choices before the market settles, while you still have money and customers to spend.
- Listen to the people building on top of your product, such as partners and developers, because they leave first.
07 — Sources
- Microsoft to acquire Nokia's devices & services business, license Nokia's patents and mapping services · Microsoft News · 2013-09-03
- Nokia · Wikipedia · 2024