“”It is very true that we do not have the high-end ‘mind share’ product, as we speak, but of course we are working to get there,” said Olli-Pekka Kallasvuo, Nokia president and chief executive.
At its investor day late last year, Nokia hinted it would produce major new devices this year. Analysts reckon it is hard at work on a so-called ‘iPhone killer’.
But Kallasvuo said it is not just about one expensive handset. “We are going for the consumer market, we are going to the business market, we are going to the low end, we are going to the developing markets.”
Nokia has seen its commanding lead eroded by the likes of Apple, Blackberry maker RIM and devices sporting Google’s new Android software.”
The Guardian (15 February 2010)
Uh oh, Nokia – bad idea. Very bad idea.
Nokia’s boss, Olli-Pekka Kallasvuo, effectively said in a recent interview that he wants the company to be all things to all consumers. The mobile-phone giant, he says, intends to aim for high-end and low-end handset markets simultaneously. It wants to cater for the business market and the consumer market. It wants to dominate both advanced-economy and developing markets.
Whenever I hear a CEO spouting that kind of ambition, alarm bells start going off in my head. All my experience as a strategy advisor suggests a simple truth: the company that tries to be all things to all customers in all markets, fails.
Until quite recently, banks were all talking about the ‘supermarket’ approach to banking: the idea that customers want to satisfy all their financial needs – retail banking, investment banking, insurance and brokerage – in one, trusted, mega-institution. Citibank pioneered this approach ten or so years ago, and it became received wisdom for a while. Well, the credit crunch put paid to that idea. Now, both regulators and boards of directors are recognising the futility of the concept. Regulators have forced megabanks to break up into their consituent parts. And customers have voted with their feet.
Why so? The supermarket approach sees a company with a strong customer connection as a shopfloor, a channel into which many products can be stuffed. Unfortunately, the quality of products suffers. Customers soon realise they would get better insurance and brokerage advice from dedicated specialists, not from the one-size-for-all approach of the huge institution.
Another company tried the all-things-to-all-people approach. It is called Toyota. It lost the lower end to the Tatas and Hyundais, who can focus intensely on very-low-cost vehicles and have done so in key markets like China and India. Its forays into the upper end, via its Lexus brand, never really worked. The Lexus may have appealed to Toyota buyers looking for a status upgrade, but it never really enticed high-end buyers away from their Mercedes and BMWs.
Back to Nokia. I had a Nokia phone, and I was reasonably happy with it. Unfortunately, Nokia missed two important boats. It failed to appreciate the growing use of mobiles as e-mail devices – and Blackberry took that market. It also failed to see that the phone would become an all-in-one consumer gadget used from everything from video to music to navigation to gaming. Apple got that, and its iPhone stormed away with that market.
So when Nokia now talks about reclaiming the high-end smartphone market, I can only shake my head. That battle is being fought by others. Only a massive technological breakthrough would whack the current leaders.
The essential point is this: customers respond to products that match their specific needs. Competitive advantage is a devilishly difficult thing. Achieving it for one set of customers in one socioeconomic group is hard enough; achieving it for all is all but impossible.
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{ 7 comments… read them below or add one }
Hi Sunny
totally agree with your sentiments in this article, and i see some of those same contradictions in our own industry (ie. are we a TV station that caters for the low end mass market with local content or do we go for the high end market with international programming) you can either be one or the other but not both.
Talking about Nokia, the one thing i appreciate about their phones is that they are user friendly and simple to navigate. from years back and even as they have evolved and become more high end they still remain, in my opinion, the easiest and most convenient phones to operate.
i remember speaking to a Nokia employee some years ago and he told they have a department dedicated to testing and using a phones once they have been developed but before release and that department’s job is to find ways they can make the phone even simpler to use. i think there lies their opportunity. there is no way Nokia can touch the i phone and even if they did they would always be viewed as the copy cat, and the chinese models will always be cheaper but i think Nokia can still offer affordable, dependable and easy to use handsets.
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Sunny,
i dont know if product diversification is the case here, but i can concur that our friend mr. Kallasvuo is headed for the rocks. his sentiments may indeed mark the beginning of the end of Nokia’s seeming dominance on the mobile phone market – if he follows up on his sentiments. Nokia handsets have long been regarded highly because of the simplicity, stability and later on low pricing. i was a huge fan then.that was then when all needed was just plain old conventional communication – a phone call or just an sms. well, look now how this basic need has since been relegated to a near peripheral need!
two thing come out here Sunny.
first, a seeming lacking of understanding of the mobile phone market. we are in times when customers needs(and wants) have become not only dynamic but intricate – the shift from the economics of scale to the economics of choice have certainly compounded this fact. Nokia are probably just awakening to the age of the Internet, right? well, mr Kalasvuo should try, ‘the age of the customer’!
secondly, a keen focus on a defined market (well defined really) is one of the basic fundamentals of enterprise success. it nearly impossible to be all things to all customers, a classic recipe for failure! examples of these sorts of failures now abound in the market. as a business leader it is imperative that one constantly works to substitute planned progress in the place of ‘drifting’ – which i think is the case here for Nokia (judging by the CEOs sentiments).
lastly, Sunny, what do you think about all this hullabaloo of creating an iPhone killer handset?? i think its crazy and it certainly just helps propel Apple to greater heights of supremacy.
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Farai:
Good point, I don’t mean to imply that Nokia lacks competitive advantage. It obviously has it – but it lacks focus and does not seem to be understanding clearly what its advantage actually is.
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John:
Very true. Every time the words “iPhone killer” are uttered, Apple is elevated to new heights in public perception. Highly misguided. Apple itself has never introduced a ‘me-too’ product, and prides itself on originals.
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the obsession with beating the iphone while great is ultimately selfdefeating. If Nokia comes up with an i-phone killer today, tommorrow another company will develop a product that surpasses the i-phone and then it will be “kill that phone” too. Nokia’s “raison d’etre” will be reduced to just matching competitors products and not introducing its own innovations. not a great image to have!
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Indeed, Apple must laugh its collective head off at the daily publicity its rivals give it!
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Farai, John:
Some news:
“Nokia replaced its top mobile phone executive and said it will carve out a business unit focused on smartphones, part of a broader management shuffle as the cellphone maker battles fierce competition in the premium handset market.”
Given that the iPhone makes more profit than the whole of Nokia (from one-tenth the market share), I am not surprised…
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