Microsoft Buying Nokia Reminds Us That Dominant Tech Companies Can Disappear Quickly

from the bye-bye dept

So, yes, everyone in the tech world is talking about Microsoft finally buying up the key parts of Nokia for $7+ billion a couple years after Nokia basically wed itself to Microsoft anyway. There’s all sorts of good analysis about why Microsoft is doing this and plenty of snark as well about two also-ran companies trying to come together to revitalize damaged brands (including some folks pointing back to the infamous “two turkeys do not make an eagle” quote once uttered by a Nokia exec).

But here’s the thing that I find most fascinating about this: it’s a reminder of just how quickly and completely a “dominant” tech firm can almost disappear off the face of the earth. Go back to 2007 (also known as The Time Before The iPhone) and Nokia absolutely and totally dominated the mobile phone market. In fact, I remember making a joke around 2005 or so mocking another company for suggesting that it could pass Nokia in the market (I can’t remember which company, but it may have been Samsung) and a telco analyst much wiser than myself scolded me, reminding me how quickly the market can change — and he was totally correct. Two quick images tell the story. The first, put together by the Guardian using Gartner data, shows how Nokia (via Symbian) basically owned the smartphone market for quite some time. And then its lead disappeared:

Or, if you look at it from a profit share realm by vendor, as Asymco did last year, you get an even more dramatic story, where Nokia’s ability to profit from mobile phones went away. Even its overall lead in selling all kinds of phones (going beyond the smartphones and into cheaper phones around the globe, a market that it absolutely dominated) was lost a bit ago to Samsung. Just a few weeks ago, Mobile Unlocked put together an astounding interactive chart showing overall mobile phone sales quarter by quarter going way back. This static image below doesn’t do it justice. Check out the full thing: No matter how you slice the data, it’s undeniable that Nokia absolutely and totally dominated the market. Plenty of people (as noted, myself included) thought that lead was more or less insurmountable. While many may argue otherwise today, at the time it was very, very difficult (unless you were that prescient analyst I talked to) to envision a world in which there was such a major market shift that would take Nokia off its game so totally. And then, along came the iPhone. And Android. And the world changed. And Nokia clearly wasn’t ready for it, didn’t recognize where the world was heading and was unable to respond in a timely fashion. It tried to shift much later in the game, but it was way, way, way too late.

In fact, it could be argued that its own success was part of the problem. Nokia was heavily invested in Symbian and had committed to following that path. This is actually something that’s not uncommon with dominant players. In some ways, they’re a victim of being there first. When a disruptive innovation comes along, they can’t shift on a dime, and the innovations effectively leapfrog right over them. Yes, you can ride out cash cows for a long time — and Nokia has done so (as, it appears, has Microsoft…) but eventually the music stops.

I bring this up because we seem to go through this quite often — with people fretting about certain “dominant” tech firms, and how something has to be done to stop them or they’ll have too much power. But, as we see time and time again, it often seems that “something” is done in the form of regular competition and innovation from others, who can come out of nowhere and completely take down a giant in a very, very short period of time.

Filed Under: competition, disruptive innovation, dominant firms, innovation, mobile phones
Companies: microsoft, nokia