Apple's Rise and Nokia's Fall Highlight Platform Strategy Essentials

The theory of disruptive innovation says smaller players get to spot disruptive opportunities, and
new value chains, before their bigger brothers. Entrenched companies by way of contrast look
to protect the cash they enjoy from their dominant position. Here’s why I think that is wrong and
how we need to rethink disruption (and innovation!).

First let’s rephrase the theory – big companies are comfortable with smaller players taking a
small bite out of their breakfast. What they fail to realize is that the nutrition gained at the outset
will prime that small critter to take a chunk of their lunch and then to push them out of the way at
dinner.

Often, and more and more often, this is not what happens.  Nokia is a case study in modern
disruption. Let’s go back to 2006 to review the essentials of why. Apple was about to launch a
phone that nobody in the mobile world thought they had much. The company was just being too
ambitious. They were calling it the iPhone and it was due soon.

Nokia sold phones in the hundreds of millions, controlled supply chains and had the tightest
relationships with carriers. Customers meanwhile had to do mobile computing on a screen the
size of their thumb.

While Apple was designing the iPhone and Nokia was selling half a billion phones each year,
Google bought a company called Android and announced an Open Handset Alliance, a
grouping of industry players who would come together to build an open source OS for
smartphones. Nokia was invited to join but refused to demean itself.

Soon after Apple launched an Apps Store that began to take off, attracting tens of thousands of
developers, and then customers.

Within two years of these events Nokia was already in crisis. In 2007, Nokia had a market
capitalization of €110 billion; by May 2012 this had fallen to €14.8 billion. Those figures illustrate
the extent of the decline over 5 years, years in which Apple and Android came to dominate
smartphones.

So what are the lessons here for innovation? The first is that neither Apple nor Google were
small players. They were hardly start-ups. They are both highly accomplished.

But they were making adjacency moves of a very radical nature – and at that time no company
in their right mind made big adjacency moves likes this into totally new markets, like from ads to
mobile and computing to mobile.

With the iPhone and Android, a new kind of adjacency was born, one I have called elsewhere
radical adjacency. But so too was a new kind of platform business.

Apple had no inkling that its Apps Store would be so successful but it had experience of scaling
a platform, with iTunes. That content platform already had the major ingredients for success for
all types of platform businesses – intellectual property protection, seamless commerce, great
content ingest, high scalability, and attraction.
Google too had a platform, with Android, and has evolved it over time into Play. Apple had gone
from devices to platforms and ecosystems and Google arrived at the same place, by way of its
dominance in search and advertising and a punt on mobile open source.

Nokia’s response is where the innovation case study becomes very interesting.

Nokia open sourced its own operating system Symbian – or at least it tried to. In effect it tried to
do an Android, grouping together major players like Texas Instruments, Motorola and Samsung
in an open source project to develop the Symbian OS as a mutual, open asset.

There were problems – an unwieldy governance structure that left decision making opaque, if
you were a developer. A sense that these structures were great for big companies but that as a
developer you were in the cold.

Nokia/Symbian also launched an Apps Store, Horizon, now happily forgotten, and after six
months it had the sum total of 60 apps in it.

And Nokia launched its own Apps and Content store – Ovi, in 2009. But Nokia had no real
platform experience to compare with Apple’s. The platform was shaky and it tried to launch
simultaneously in 35 countries – because that’s what dominant players do. It was a disaster and
the tech press called it out as such. Nokia was faced with a gale of criticism for the first time.

Within two years they closed down the Symbian open source project. Symbian had been rushed
into the public domain months ahead of schedule. But so what? It didn’t have support. It was
soon gone and Nokia went looking for a new alternative (even though it had one in its labs). Of
course, we now know, it chose windows.

Soalan

1. Huraikan punca Nokia gagal di pasaran? Apakah tindakan yang sewajarnya perlu
dilakukan oleh Nokia?
2. Bincangkan pengajaran kepada syarikat lain di atas kegagalan Nokia.
3. Anda sebagai penasihat syarikat, dengan menggunakan kaedah brainstorming dan mind
mapping bincangkan cadangan yang boleh dilakukan oleh Nokia untuk memajukan
perniagaannya.