The Decline of Nokia...What Happened?

[Music] i have had an overwhelming amount of comments saying that i should make a video that talks about what happened to nokia and you're all right nokia is a great subject here let me try this just sit down empty your head and try to picture a cell phone from 10 or 20 years ago not a smartphone or a flip phone i'm talking about a bar phone you got the screen on top and the number pad on the bottom now whatever you're picturing is probably something that's made by nokia let me know in the comments if i'm right about that but i would bet that if you're over 30 years old you have owned a nokia cell phone at some point in your life it was probably your first phone the number one best-selling cell phone of all time to this day was made by nokia yet today where are they i'll take that bet one step further and guess that today no matter what your age is you do not own a nokia cell phone i mean maybe have one in a drawer somewhere from 12 years ago but that's not the one you use nokia is a strange company to me i think of it like this you know how when someone dies and they're fairly young and at the height of their popularity maybe someone like kurt cobain or john f kennedy they never get the chance to grow older or decline in any way our image of them is sort of frozen in that moment in time well with nokia it's not like they were young or killed suddenly but for me anyway my image of them is frozen in time now i don't want to misrepresent anything there's more to this company than the nokia brick they did make it to the smartphone age they were even the number one smartphone provider for a while well ahead of apple plus nokia still exists today they're not as big as they were but still pretty big they just don't make cell phones anymore they deal with mobile networks and the infrastructure behind them things that i don't really understand and the public normally doesn't see and nokia phones still exist today they're made by this company called hmd global which is actually ran by former nokia executives but i hope we can all agree there's been a decline here it's not a good sign when we all associate them with an 18 year old phone so what happened how did they go from the number one cell phone provider in the world to well let's just say not the number one cell phone provider in the world nokia is a finnish company quite possibly the most well-known company from finland where at one time anyway the name nokia is actually the name of a small town in finland where it all started and the date it all started is much further back than you would expect 1865. what we all know today is a cell phone company started over 150 years ago now of course they weren't making cell phones back then they were actually making paper that was the core of their business for the next 100 years in the 1960s they diversified their business when they merged with a rubber company and a cable company and they continued this course of expanding into new industries mostly by acquisitions they first entered the mobile phone market in 1981 when they acquired a finnish mobile phone company by the late 80s nokia was all over the place they were making these cell phones but then they were making paper and rubber and consumer electronics they had a power division they were very unfocused as a result of running all these different businesses they'd become a large company with high sales but they weren't very profitable they were like a student in college attempting to take 22 credit hours but failing to keep their grades up so the obvious answer here was to drop a few classes so you can give the proper focus to each one that's what nokia did they spent the later part of the 80s in the early 90s divesting all of this other stuff cutting down their consumer electronics business dropping their rubber business completely and gradually increasing their focus on cell phones they predicted the popularity of the market and spent a bunch of money on research and development it led to a bunch of innovative new phones with cool designs that were able to attract the public's attention from 1991 to 1995 everything exploded their sales more than doubled they were turning profits now and their market value grew 10 times larger by 1998 they were the best-selling mobile phone brand in the world the way i would describe nokia in the cell phone market for the next decade is absolutely dominant let me try to express this dominance in any way i know how i said that the best-selling cell phone of all time was made by nokia but what i didn't mention was the number two best-selling cell phone was also made by nokia and in fact looking at the top 10 list apple samsung and motorola each occupy one space while the other seven all go to nokia in terms of unit sales and market share 2008 was their best year that year nokia sold 472 million cell phones for comparison purposes in 2018 samsung sold 295 million and apple sold 209 million back to 2008 nokia's market share was 38. 6 meaning over a third of all cell phones were made by nokia to compare it in 2018 samsung held a 19 market share while apple's was 13.

4 throughout that time nokia's goal was to reach 40 which they never actually hit and i feel pretty safe in saying that they never will but think about that they were just barely missing their goal of 40 while today the two biggest brands are combining for 32 percent financially their best year was the year before 2007 bringing in sales of 51 billion euros and 8 billion in operating profits so by these measures and probably most other measures you want to look at this was the peak for nokia now let me extend these graphs a little bit back to market share it was falling since 2008 and in 2012 they dropped down to the number two spot their sales graph follows a very similar trend and their operating profit fell into the negative in 2011. in a five-year span they went from making 8 billion euros in a year to losing 1 billion now this is a complex industry with a million factors to consider when trying to identify reasons for this decline but let's try to simplify it smartphones these cell phones that we associate with nokia were not smartphones but they were making them a lot of money for one obviously in 2007 that's what the public wanted and nokia was the brand that everyone wanted and for two they had been making these similar phones for more than a decade to a point where they were doing it very efficiently and what i would assume to be a very low cost so to recap these phones were producing the highest revenue at the lowest cost so it makes sense that they were turning high profits smartphones on the other end those were new more money was needed for research and development and just production costs overall since they were far from perfected plus people didn't even seem to want them smartphones weren't seen as something intended for everyone they were typically bought for business use apple launched the first iphone in 2007 which today we look back on as a monumental event but i don't think nokia really cared at the end of that year 5 of all smartphones were sold by apple and 50 were sold by nokia they were obviously putting some resources into making smartphones but many would argue it wasn't nearly enough they were just too comfortable in their position in the market and failed to invest in the way of the future that first iphone didn't really sell too well but the next one sold much better and the next one sold even better than that a big reason people were repelling away from the nokia smartphones was their operating system just so we're all on the same page the operating system is what makes the stuff on the screen look the way it does with smartphones the operating system is more important than ever before with all these older phones you're making calls and maybe listening to a few songs so the operating system wasn't nearly as important but with all the stuff you're doing on smartphones well you better have a good operating system nokia's strengths were making the hardware the actual phone rather than the software that went into it the operating system they typically used was called symbian but with the sudden push to produce software for these new smartphones it was proving to be difficult nokia said that it just took too long to produce phones that used it i suppose this led to rush products and operating systems that had some bugs and just weren't very pleasant to use nokia had good phones but bad operating systems and since that's what people cared about now they were gravitating toward the better ones in february of 2011 it was pretty clear the way things were headed and the ceo of nokia put out what was meant to be an internal memo that outlined some of their major issues i'll show a few parts of it the first iphone shipped in 2007 and we still don't have a product that is close to their experience android came on the scene just over two years ago and this week they overtook our leadership position in smartphone volumes unbelievable apple demonstrated that if designed well consumers would buy a high priced phone with a great experience and developers would build applications they changed the game and today apple owns the high-end range we fell behind we missed big trends and we lost time at the time we thought we were making right decisions but with the benefit of hindsight we now find ourselves years behind and then this one's talking about their operating system it has proven to be non-competitive in leading markets like north america additionally symbian is proving to be an increasingly difficult environment in which to develop to meet the continuously expanding consumer requirements leading to slowness and product development and also creating a disadvantage when we seek to take advantage of new hardware platforms as a result if we continue like before we will get further and further behind while our competitors advance further and further ahead i think that identifies some clear issues and shows what was going through their minds at the time days after this memo nokia announced that they were going to shy away from symbian to switch to windows phone 7 made by microsoft as their main operating system later that year they introduced lumia a nokia phone that used windows phone 7. in 2014 microsoft decided to purchase the phone division of nokia which was most of nokia for 7.

2 billion dollars most people view this as a complete disaster only one year later microsoft wrote off 7.