before we start, I want to thank our sponsor Kyndryl, who runs and
reimagines the technology systems that drive advantage for the world's
leading businesses with unique blend of AI powered consulting built on
unmatched managed service capability.
Kyndryl helps leaders harness the power of technology for smarter decisions, faster
innovation and a lasting competitive edge.
You can find Kyndryl at K-Y-N-D-Y-L Kyndryl.com.
Imagine speaking to the person who presented to the leadership team about
the threat of the iPhone and what it felt like and how the leadership
reacted because we have that person.
I found the document, it appeared on the web about three years ago, the iPhone
document that a team of strategists and market intelligence researchers inside
Nokia presented to leadership team.
And we're joined today by a strategy professor from Adelphi
University just outside New York.
Timo Partenen.
Welcome to the show.
Thank You.
Aidan I am happy to be here.
It's great to have you with us, and thanks for agreeing to do this.
I know you're friends and you've listened to the rest of the show with Timo and Quy.
Maybe let's share the context of what you're doing now and
what you were doing back then.
Before we start to explore the document,
Well, as you said, currently I'm a professor in Adelphi University,
just outside New York City.
But before that, and the reason why I'm here is that I worked for Nokia
in their strategy, in their market intelligence organization in different
roles, approximately 2001, 2009.
So during the period when iPhone was launched.
let's share a little bit about how it felt for you as well.
I mean, Nokia was doing so well.
What was bubbling?
What was happening?
What was changing at the time when the iPhone came out, because also,
you were starting to see the decline of companies like Blackberry, , but
it didn't appear all of a sudden.
So I'd love to really get inside the atmosphere inside the organization
because so many people who are in that position in the company don't
realize it when it's upon them.
And I'd love you to share the kind of conversations that was happening, the kind
of temperature inside the organization and just what people were talking about.
as in your previous shows, it has become obvious, many people had a
very different perception there.
So iPhone didn't come out of blue.
We had had a signs that Apple is preparing iPhone, so.
They had acquired, was it 2005 a company that developed a multitask interfaces that
was Finger Works or something like that?
They had been recruiting wireless engineers for several years.
So putting all this together, it was pretty easy to see that.
Yeah, they are coming to our domain we got pieces of information
from there and there and there.
So we had been communicating to top management of Nokia or Nokia's
different product divisions about the threat of Apple for several years.
So as such, the announcement of the iPhone, the slides said that we
are probably going to talk to today more wasn't the big news as such.
It was very much expected.
Something like this is coming out one day.
At the same time, there were other trends as you names and for example,
the usability of Nokia phones that had been of our competitive advantages,
say earlier five years before that had been eroding quite badly.
That was a constant message that we were getting from customers
from market research and so on.
And it was well recognized.
It was well observed that the, touch screen devices not only phones but also
other kind of devices like MP three players and so on are coming to market and
they are user friendly and people at them.
We had, for example, in the last in the couple of earlier years,
flat top that screen as our first competitive issue the coming years.
We had that sort of the list that what keeps us awake during the night.
And touch screen had been like 2005, 2006.
The top issue for that.
So when the iPhone was launched the device itself didn't surprise us.
What surprised us was the ecosystem that Apple was able to build around
it, especially Cingular the American operator currently known as AT&T
they were collaborating with Apple very closely with that.
And I think you, that's the point with Nokia's issue with American
operators in the previous podcasts.
We had not been able to get into American operators with our smartphones, and
then they suddenly go all in with Apple.
That was a surprise.
That was a bit of the surprise there, as well as how I think that Google and Yahoo.
We're on board with that in, so they really came up as a big coalition
rather than a single product launch.
So that ecosystem perspective was something that took us by surprise.
I love that you're sharing this, and it's so interesting.
I, I was reading recently and we've a episode coming soon in the show.
It's about Steve Jobs NeXT years.
It's a book by Geoffrey Cain and it talks about how he failed in a way to
build an ecosystem around app developers.
, and what you kind of see is it was almost like the lessons he learned that
he paid forward and brought to Apple when he came back the second time.
And you can see it there with stuff like the ecosystem
it's actually interesting to notice this there, that initially
iPhone was closed ecosystem.
The apple Store was not open for the outside developers at the beginning,
but very soon they realized they need that developer ecosystem there.
And then as you mentioned his previous experience and
connections played well there.
I'm sure somebody reminded 'em.
I mean, the, the, the whole idea of history is written by the victors is
very annoying for somebody who was there.
And I wondered about that, that some of the myths you hear
and have heard over the years.
I'm sure it hurts sometimes when people talked about Nokia as a failure
and, oh, they didn't see it coming.
And many, many people make that mistake.
And that's why it's so great to talk to somebody who was there because, I have
a huge amount of empathy for you and your colleagues at the time because of
things like the Cingular surprise that.
You tried to do these things before and the carriers were pushing
back all the time, so it wasn't as if you didn't think about it,
you thought about so many things.
nokia's working mentality at that time was very much about the hardware,
hardware specifications and so on, and also in the intelligence functions.
Primarily our job was to try to scout that, what kind of the features
our competitor devices will have, what kind of the competencies
they are building and so on.
So while we saw those things and while we didn't come, we maybe not surprised about
the hardware of iPhone and probably we can talk about that in a second bit more.
we didn't necessarily understand that well or the size, a business side of
the aspects that they were developing, their partnerships, their collaboration
agreements and so on, and that that was a blind spot for us in the intelligence.
And when you tried to do those things, was there a resistance?
Because you mentioned about how it took Nokia a long time to
break into America in a way.
And I read that it, we covered a book called Losing the Signal
about Blackberry a few weeks ago, and it talked about how Blackberry
basically fooled Nokia with Blackberry Connect for a long period of time.
And there was a lot of resources wasted with that partnership.
And it kind of, in a way marked Nokia where you had this bad experience and
it was difficult to break America.
I'm not an expert of all the discussions that were going on
at that time with the operators.
And indeed that might have been one of the challenge for Nokia, that we were
a very European focused company and we didn't have a big enough presence
in America, actually was trying to relocate some top management and so on
to America Exactly for that purpose.
But generally my understanding is that at that point of time when internet
was still relatively young thing and mobile internet was non existing.
everyone was trying to think how to strategically position that they
can control the mobile internet.
And American telcos were relatively bigger in the technology industry
at those days than they are now.
they wanted to be in control.
And Nokia being the world leader in cell phones was seen as a
threat that if they let Nokia in.
Nokia is going to take over, is going to provide different kind
of the mobile internet services.
While they're working with relatively smaller companies in that domain, like
Blackberry or probably what they assumed about the Apple was seen as their way
of bringing in these smaller partners that they can use to fight Nokia.
I don't, I haven't done research that I don't have kind of the evidence.
I haven't been talking to the boards of the American telcos in those days,
but that's my assumption how it went.
before we get into the document, the famous document, and I don't want to
be bringing up old pains in any way, I wondered about the Symbian investment.
So had it started at this stage, so this is the operating system for those
people that don't know what Symbian is.
Had it started before Apple or was it triggered by Apple and the whole
that whole period of time, because.
From the three part series we did with Quy Huy and Timo Vuori What you see is that
people didn't want to talk about it not being very good and they knew it wasn't
very good and you in market intelligence must have known compared to competitors.
It wasn't where it needed to be, and I just wondered what the atmosphere
was about that inside Nokia.
Good question.
So first about the intelligence function, that we are usually looking outside, we
are looking the external information.
I've been wondering afterwards should we have had kind of the
internal intelligence, someone who would been the kind of the truth
teller about our own competencies.
So yes, we were telling that the competitors are coming with
a certain kind of innovations.
They are recruiting certain kind of de competencies and so on.
We had some sort of vision that what they might be doing.
We didn't actively benchmark that against our own development.
So while we are presenting that, say touchscreen is important, and
it seems that we are not currently in very good position with that.
If somebody from the organization who is responsible about say, touch,
touch screen UI development, comes and says that we will fix this.
We have plans for it.
We didn't challenge that.
That's really interesting.
, That's the thing that comes across most from the research on emotions is
that it wasn't safe to be that person.
It wasn't safe to be the truth teller, and you suffered from
the shoot, the messenger bias.
Is there anything you'd like to share about that?
Because it sounds to me like you were that type of character , especially if you're
doing strategic work, that you knew these things, but if you shared them, it was
almost like a black mark on your resume.
Now let's think about my previous role where I was heading our
long term market forecasting.
So I go a little bit back from the iPhone era now.
There were product categories that Nokia was trying to pursue in the market, and
our long-term forecasting team didn't see really future server that sort of
the specific products in the market.
And I, we in the long-term market forecast, 10 forecasted if not a
declining or vanishing market, but at least significantly less growth
than those business units wanted.
And that created quite a bit of conflicts with the heads of those business
units whose business we were ruining with our two pessimistic forecasts.
So yeah, there was that kind of the using black mark in my CV in those
days, but that was worth a quantitative market forecasting, which then
leads to the planning that how much we will be able to sell and so on.
So when I moved to head the market intelligence function, which is
more qualitative in that sense we became easier to ignore.
So if you are telling messages that don't resonate with the managers,
yeah, they listen to us 'cause we are institutionalized bearer of that
messages, but they don't act on those.
So there was some parts of the organization which perhaps ignored,
but I think the top management mostly listened what we said and
mostly took things quite seriously.
it seemed to me again, and, and it's, it's, it's very, it's, it's great
to talk to you because there's parts of the documentation where there,
there're people who shared their experiences with Timo and Quy, but you
still don't know what that was like.
So say for example, you're presenting to the, to the board,
to the senior leadership team about these oncoming threats.
Okay.
They think they've made the message clear to the product managers to actually
do something about it, but the product managers aren't doing something about it.
It seemed to be, get stuck in the translation of the order to, we,
we need to do this as priority.
And people were frozen by fear of, oh, well we're not gonna do that
because we control the resources.
Or was it, we think that's the wrong thing to do.
Where did it get stuck in the middle?
That I do not know, but reflecting what you just said and what you have
been talking earlier with Timo and Quy is that our communication was
very much targeted to the business unit boards or corporate boards.
We were target, we were mostly communicating up when we were
communicating on the sideways to the say product planners or product
feature, road mapping teams and so on.
Wasn't maybe that kind of the strategic message that we need to do big changes.
That was very kind of the operational checking, are the mega pixels in
our cameras aligned with what we expect competitor roadmaps to be?
While we perhaps created that external fear.
To the upper management.
We didn't do that to the middle management.
So there was no urgency because they didn't feel it.
I, I think that what's come true also from the earlier the other research
that you have been talking, I, I, I
haven't researched that myself, so I do
not know what, what
exactly they felt, but that's my impression.
At least we didn't push that information, act actively enough to that direction.
that's why it's so useful to share these messages to help other people
because it's often in your position, you wouldn't think that was necessary.
But you, what we see more and more when you study this work is you
see how important it is to listen down and message down and make sure
all those messages are aligned.
Because you can think you're very, very clear at the top of the organization,
but the rest of the organization having a clue what we're doing.
They're just showing up and doing their work every day because
that's what they're measured on.
And i'm not looking here for blame.
I'm actually trying, , I'm trying to avoid blame in any way and actually trying to
go, how can we take lessons from this?
'cause that's what I find so interesting about Nokia is that I, I like when
I was, I was a professional rugby player for 10 years, and at the end of
my career I started to follow Nokia.
I was like, this is an amazing company.
And it was two, it was November, 2007, and the stock was like up here.
And I was like, this is amazing company.
And then it just dwindled.
I was like, what happened?
So I have huge empathy and respect for what happened in Noki.
So I don't want to, I'm not like that with my work.
I don't want to go, oh, idiots.
It's the opposite.
I think the main learnings from the intelligence era for me is
that in that sort of function.
You need to try to find a fine balance, that you are not just
a yes man telling the news that top management wants to hear.
But on the other hand, you cannot go all in challenging
that everything you do is wrong.
then you are ignored.
So you need to find a way to communicate there.
Then another thing is that you need to have institutional support for your
messages, and I think that came very well what you discussed in the earlier
episodes about the period around 2012 where Nokia changed the management
mode so that it was more data driven.
And what I referred to my market forecasting period, which was
quantitative, became the market forecast for the future and we.
were part of the institutionalized process of planning our finances,
our production and so on.
But the market intelligence function where we try to wave the flag that,
hey, apple is coming, APPLE is going to hit us badly if is just a PowerPoint
presentation presented in the management team meetings that is not doing the work.
It has to somehow get into the operational process where people are making those
often quite low level decisions.
But that is a link we didn't build well enough in those days.
Then in this strategic aspect I'm not sure sure, how to how companies
could themselves for that sort of the massive disruption that this caused.
I think they need lot of flag waivers coming with the news.
They need the challengers, they need to hear that from the
customer, suppliers and so on.
But seeing kind of the fundamental idea of the top level management that, hey, what
we are, what we should do, what we should focus on, takes definitely much more
than just the in intelligence function.
That's fantastic.
It speaks to, we did a series, a long form series with Joe Bower who was the
thesis advisor for Clayton Christensen.
And you're probably familiar with his work of resource allocation process.
And for me, what you're saying there speaks to the resource allocation
process because he, he gives a great example about Intel that when they
moved from DRAM to semiconductors, they did it 18 months after the
organization did it at the lower levels.
'cause they saw the value of moving there and then they announced it as a strategy.
And people down the levels are kinda like we did that ages ago.
So it can actually lag the other way.
And to your point, if you don't get inside the heads of those middle managers, you
don't change the future of the company.
And I think that's the.
Why I wanted to, to bring you on and through your lens now as a lecturer
and, and a strategy professor, is it's, it's easier in a way to see
it in retrospect than it's in the moment because there's a great saying.
It's hard to read the label when you're inside the jar.
Oh yeah, yeah,
When it's you and you're, you're stuck and you're doing the work
and you're rewarded on the present.
It's very, very difficult to to see yourself in the moment.
And then comes another angle.
'cause if you, if you will now look the document, finally what
we've been talking, you will notice that it goes to quite a detailed
hardware specifications and so on.
There's, and actually this is a short version.
There was a much longer verse and distributed as well.
But point is that there are lot of data points and when somebody in
the middle management reads it they probably read it through tail lens.
And Nokia being hardware focused company, of the middle management
threat that documented, okay, iPhone's hardware is not that great.
We are doing well here.
They pick the message, they want to hear from that.
I love that, that's so, so key.
So let's share it now.
So let's share it and you take us through it.
I'll, I'll, I'll navigate, I'll, I'll drive it for us and I'd
love you just to comment on it.
So, where.
Was this, where were you in the meeting?
Like who were you talking to?
If you can, whatever you can share.
I know there's gonna be some confidential stuff
But this was,
I
who was it to?
So first of all, recalling something exactly what happened almost 10
years ago be be challenging here.
So as you see already from this, Nokia was organized quite much in silos.
So all these abbreviations after our names indicate the different
corporate units we were working on.
And this was a document that was put together from the white
Intelligence organization.
And that is actually one thing that perhaps was a challenge that the
different, managers in different parts of the organizations got different messages.
All right, so this was a document that was prepared right after iPhone was launched.
And this is a document that, if I remember was distributed quite
widely also beyond the Nokia's board.
So this is perhaps bit sanitized version of all the analysis we have done.
This doesn't include references, for example, to our future products.
It doesn't include speculative information that we couldn't
been confirming that, but we were communicating perhaps in other sessions.
Okay, so I'll, I'll flick onto the next page.
And so here we go.
Executive summary.
So again, were you a presenter of this knowledge to, to the team?
I, there was so much detail here that you had Right?
That's what I find so fascinating.
It's not like you didn't know.
It's like you knew very, very well.
You had brilliant market intelligence.
Yeah.
So we had, as, as I said, we had been following Apple for several
years at that point of time.
So there was not that many big surprises.
This was conclusion that, okay, what information was confirmed?
What information was me?
And we had had quite a bit of time to think about the implications well.
And don't think any of the proposals we make here would be controversial.
So when I presented this, I don't think anyone in the management disagreed
with the proposals that we are making.
They may prioritize them differently.
may think that something is maybe not that urgent urgent, and so on.
But overall, I, I think everyone was nodding here at this point
of time in the top management.
And if I recall some discussions were around how we could
use the other US operators.
Point four.
How could we collaborate with them?
Is our coming portfolio strong enough to work with them?
Can we get them on board with the products?
So you're asking all the right questions like I'm, I'm asking our audience
here, business people to put themselves in your shoes and go, you had the
information, you, you thought you were taking action on that information,
and the, the question you always go is, did you have the capabilities to
carry the strategy through anyway?
Or had Apple because they were a computer company and the game had
moved from a mobile phone to actually a smartphone had they just got such
a headstart that it was so difficult to catch up Anyway, if you wanted to.
Yeah.
So Nokia was often a quick second in its actions.
So at that point of time, Nokia was a still leader in smartphones.
The market was small.
And our Symbian phones now retrospectively, were not that
competitive, but overall, the feeling was that yes, this is again, some trend
where we might be a little bit late.
We are not going to touch screens to the same volume as early as Apple, but if
they become successful, we will flood the market with the different kind of
the touch screen phones to different price points, different consumer
segments, different product categories.
That's what we did with the earlier products that we had missed.
If you remember, for example, before iPhone, there was a big hype around
Motorola Razr, the very thin phone.
and Nokia was, Nokia had identified also their, the miniaturisation trend,
but we had a misinterpreted it so that people want smaller phones while the
thin phone became the absolute winner.
And yes.
Then when we noticed we missed that trend.
We created a portfolio of thin phones across the different price point.
We had a very cheap thin phone.
We had a very fashionable thin phone.
We had the business focused thin phone and so on.
Pretty much killed the Razr with that.
And when we were talking about this, I don't remember, was it in the
management boards or some more informal meetings or some other occasions?
The atmosphere was very much, okay, we might be late with this kind of
the product, but we have something in our pipeline that will have touch
screen, that will come with the music.
That will be a great experience.
We are able to use our scale, our distribution, and
apple will not be growing as fast as predicted.
about this slide that you are now showing probably the third bullet point.
There was something that had most comments among the higher level of management that
getting really, the Cingular CEO Google, CEO Jerry Yang from Yahoo on the stage.
That ecosystem that Steve Jobs was building around, was something
that we didn't understand.
What are they planning altogether?
And the last question there, Timo on the page as well.
Is this a direct challenge to em's, multimedia, computer positioning?
What's that in reference to?
M was our multimedia product division that was responsible for the different kind
of the higher end smartphones and that we were at that point of time positioning I,
I think maybe in the next slide we will talk about was it that N700 and N800?
N 800 which was kind of the multimedia computer product, which we saw, in
principle, targeting to very similar market, but it was not doing well.
It was not that good product to be honest, and operators didn't support it that much.
But I think at that reference in the slide, kind of the refer
that, is this kind of the product positioning going to work?
Or is Apple going to take over this part of the market?
There, there's a couple of things that just came to mind where when I studied
this over the years, the Nokia story, and it's got, it's got much richer
obviously with conversations like this.
And I think that's one of the pities about this is that people make a jo a a decision
based on a tiny piece of information.
Like you said, even within Nokia, everybody saw it based on where
they were inside the organization.
There's a law called Miles's Law, which is where you stand, depends on
where you sit in the organization.
So marketing sees it different than r and d, sees it different
than finance, et cetera.
And a couple of things came to mind where some of the stories you hear
are.Well, Nokia had developed a touchscreen phone way before Apple did.
That's one.
The other was Nokia also developed an iPad way before Apple ever had an iPad.
And then the other is that you also had an app store before
Apple ever even had an app store.
And that they were ideas that came from within Nokia, but were
rejected or leadership said, no, we're making progress with this.
This is where we're gonna focus.
And I won.
If you can share or comment on that, I wonder what your thoughts were.
let's start with the app store part, for example.
That was something that from my perspective was identified that,
hey, we have here the app store, which is not working great.
And Symbian was really bad from the developer point of view.
And idea of having the external applications in our phone, building that
sort of platform strategy was there.
Execution?
Yet again the resource allocation Nokia, being hardware company.
Probably all the software initiatives didn't get as much
emphasis as they should have had.
I remember telling, prior iPhone that the, some sort of the benchmark results,
some sort of the market research results about the usability of our app
store both from the user perspective and from the developer perspective.
And these issues were flagged.
And when some senior vice president or vice president, I don't remember, says
that they, we will take action on this.
From my perspective, I can take the intelligent studies done
and I don't know if anyone ever then followed up that issue.
Nokia's Innovations Nokia came up with actually quite a lot
of innovations in those years.
So, for example, one of the response strategies for iPhone was that looking
out, launch the music phone, or actually range of the music phones.
'cause we thought that the music is going to be the killer application in iPhone.
They had the iPod before.
So we launch, launched, express Music series.
And then I think half a year, year later, than iPhone was launched.
We launched the service comes with music, which provided basically
that when you buy a Nokia phone, you get a free music for a year.
At that point of time, it was not streaming music, it was downloadable
Mp3s, but you can download all the MP3s from Nokia Music Store.
So kind of, you can think about that as Spotifys were some 20 years
ago, and you get that subscription free for a year with Nokias.
several things.
why it didn't succeed,
inertia of incumbency.
Our biggest customers, operators didn't want us to go that way.
We didn't have enough resources to execute that strategy correctly.
We didn't have, enough, probably capabilities to do it correctly and so on.
So plenty of thinking.
But I think a lot of the issues then come back that Nokia didn't think
beyond these devices, for example, for that Nokia didn't think that
this could be potentially a Spotify type of service that would be
independent from the other services.
We saw it as a tool to sell our phones 'cause that's where we got our money.
and it's very hard not to, I mean, even it's very useful
now on having the language.
It's one of the reasons I love doing this work and speaking to people
like yourself is you put a language on how to think about these things.
And you see that many times when a, an executive team struggle with the future,
they don't have a way to think about it.
So they don't have a lens to see what's actually happening here.
Some of the things you were saying there.
We had Paul Nunes on the show before he, he was the head of research for Accenture.
Brilliant guy.
And he talked about the hidden S-Curve.
So there's the scur of the product, there's the scur of the industry, but
there's also the capability S-Curve and the capability S curve starts to
fail as well when it's a jump to a new curve where you jump from hardware
to software or ecosystem thinking, which, how could you have that when
you have been a hardware company.
And then one of the ones I just wanted to ask you about there, you,
you touched on it briefly, was what's called premium customer captivity.
So your customers actually dictate where your resources go in the future.
And your customers didn't want the music thing, so you didn't do the music thing
'cause they were the ones with the power.
And I wondered just what your thoughts were particularly on that
one, that how much a customer can dictate where you go in the future.
They definitely dictate a lot because you need to listen to your best customers, and
especially in this kind of the industry where in many markets you had only a
few key distributors, the operators, you don't want to take any initiatives
that would harm your position with them.
So that is often a situation where outside disruptor can come to the
market and create something that an incumbent firm couldn't do, Apple
did it for us here, very obviously.
Yeah, because they don't have anything to lose.
I think that's such an important thing that you have.
You have so much to lose.
The incumbency problem, the endowment effect it's called in biases, is that
one of the things Paul Nuno has told me about Nokia, and I'm, I would love
to qualify it, is that you had massive mortgages on, on investments in factories
in China to develop the dumb phone, essentially the normal phone versus
no skills to develop the smartphone.
And because you had made that investment, it was very difficult to pivot when
you had that hanging it over you.
That's why internally Nokia was split in the divisions.
So we had the mobile phone division, which was taken care of, the low end
part, and we were trying to develop the cheapest possible phone in the world.
And then we had other organizations that were both physically and
mentally far away from the old business, which were trying to develop
multimedia products, enterprise products, gaming products, music products and so on.
So we did recognize this, that the investments we have made to become the
worldly leader in the low end phones.
May harm our capability to be innovative at the same time.
'cause it goes very much to the back to the basic exploration versus
exploitation paradigm the organizations.
That if you want to be efficient or if you wanna be innovative of the
new need to separate these things.
Because one of the other things.
That from the outside.
So I've spoken to Gary Hamel, Rita McGrath lots of, lots of consultants
who worked with you and you had access to the best consultants in the world,
the best thought leaders in the world.
And again, there's a, a notion that there was arrogance in inside Nokia.
And it, it doesn't appear to me from talking to people who work there, that
it's not so much individual arrogance.
It's we're, this is working, we're making profits, the strategy's working.
It's a strategic arrogance and it's a different thing.
Yeah, yeah, probably very right with that.
Nokia talked to a lot of outsiders.
We heard lot of comments.
We try to apply the best knowledge we can find everywhere, both for
the product development, managing the organization, and so on.
But yes when you are one of the most valuable companies, one
of the most respected brands, you are having great profits.
Your CEO is named the CEO of the year for several years and so on.
It's hard avoiding becoming somewhat arrogant because everything
seems to be working pretty well.
And that, and that's why we're doing this series is just to see.
It's hard to read the label when you're inside the jar maybe.
We'll, we're, we're on page four of the iPhone now, I think you,
back to it.
Yeah.
you mentioned actually at the, the touchscreen ui
Hmm.
and you mentioned that you could see the strategic M&A that was happening
inside Apple, that they were buying companies to piece together capabilities
that they'd build the future.
And you were watching this closely.
Yeah, I think it was probably 2005.
I think I just had started in my intelligence role when Apple announced the
acquisition of FingerWorks, which was a multitask UI company that had developed, I
believe some products, some these devices.
Sorry, I don't recall now all the details, but yeah, it had been on the
radar and we had seen that happening.
We had seen both phones and other devices getting that screens, if I recall
correctly, the iPod had a simple, that screen at that point of time and so on.
So yet again, we saw that coming yet again.
We heard the messages that, that out, touch screen with our interface is
being developed and in the products we launched next year, we are going to
have S 60 that screen user interface.
And, well, you have heard the story, why we didn't have it then?
it's interesting where you said you were also used to being a second mover
or being a fast second mover, and the second mouse gets the cheese sometimes,
but here, the second move, you never caught up just really because you didn't
have the capabilities to do so I can see why you thought, oh, it'll be fine,
because we've been here before and we've caught up and actually we've killed that
person, like with the Razr you told us.
So you can see why I can, you know, when you share these conversations,
you can start to get inside your head.
Here's a typical model you talk about here , of hardware is to
start at the high end and then make cheaper and cheaper versions.
And again, you call that out here because that is what happened
initially with the iPhone.
Yeah.
And here our expectations was then that mobile phones division, which
is our mainstream phone division that make those phones that cost 100 euros,
$100 that will get hit the future.
But at that point of time, we didn't see an immediate threat for that
when we expected that Apple will launch a mini version of the iPhone
later, and we had plans to that to with the product that turned out
to be then Nokia 5,800 and, here.
You see also the point that Nokia's mental model was very much about the hardware.
So, Otto, in the first point, we highlighted here the user interfaces,
but there comes this kind of the discussion, the, hey, this is not
any super product from the hardware perspective, we can do better.
and you totally get it.
I mean, it's like, people talk about Kodak and Kodak,
Mm-hmm.
model was selling film.
Your mental model was selling hardware.
And it's a totally different skill.
It's a totally different mindset.
It's like even we saw in the press industry where they
went from analog to digital.
Hmm.
It's a totally different mindset and a lot of it's given away your content.
And people who sold content could not understand that.
So you can see why the mental model shift is, is such an
important aspect of all this.
, And I'm happy to share this, we're on page six.
For anybody who wants to just get in touch with the show and
we'll share this document and I'll put a link on our substack.
But here you predicted how the market share would play out, and I
wondered how you felt it was versus actually what happened and when
it didn't go as you'd predicted.
How did that feel and how, how did they react inside Nokia?
now I have to say that I don't recall by heart.
Did they reach that 1% market share in 2008 or did they
already get higher at that point?
I think it was 1% and they weren't a threat in the early days, and then
all of a sudden you were like, oh.
Because they just took out the market all of a sudden.
the initial target was quite modest in that sense.
So this perhaps gave us kind of the false impression that we have
time and eventually we didn't have them enough time to catch up.
But if you would have had a product in the mid rains by the end of 2008, that
would have silenced iPhone, this would have been perfectly doable for us.
So one and a half year from the launch, we could come up in the old
world, we could have come up with a competitive product that we distribute
more widely price a lower price point, and we kill the competitor.
So we saw that, hitting the top end of the market.
So we mentioned here 30% share of the phones more than 300 euros.
So we saw that in that particular market segment, it is going to be
a killer product that it's scale down to the lower price point.
So price point is perhaps wrong here 'cause it was sold to operators it
was often given for either free or for very low price to consumers who
then committed for two years, three years contract with the operator.
while we had seen of that in America, that's how the Americans
cell phone market works.
We had seen that we perhaps beat underestimate that how well
Apple is going to sell this model or going to sell iPhones to.
Consumers who at that point of time were spending say $200, 200 euros
for their phones, that they were suddenly willing to upgrade a home
that is in the ballpark of 500, $600.
And you can see why it's a, it's an entire ecosystem shift.
It included magnificent marketing and included the, I think
this is one thing people miss.
It included the cannibalization of the iPod
because the iPod became the phone and people were like, kind of
rationalized it and went, oh, well I'm actually just buying a new iPod
that happens to be a phone here.
And they rationalize it then.
But also the business model was a, was a big shift where , as you said,
the mobile phone market worked where you got a device and it locked you in
and it still, it works that way, but it hadn't, that hadn't come across
Europe at that stage that, that model.
That,
So that was another big shift.
yeah.
In Europe, that was a somewhat new thing.
Yeah.
It wa it was in America.
It was in a few other markets, but the European America,
wa, wa was Nokia's home turf.
That was something we didn't expect to happen that quickly.
So I'm gonna skip past a couple of slides.
'cause you go deep into the phone analysis, which is all so so accurate.
I mean, you, you were so tight on all this potential position in the handset market.
You were really, really tight with that.
And the exclusivity thing here, you call out that because that
was a huge blow really, because this was the big shift I felt.
And also even Blackberry were struck by this because.
You'd both tried to do things like this before Nokia and Blackberry had tried to
do things where you could sell essentially through the phone as an ecosystem, but
that was controlled by the carriers.
And then people think people miss that because that took everybody's by surprise.
The incumbents by surprise.
it took, and I would love to hear comments from the Cingular
management at that point of time.
Did they think that will happen?
'cause were afraid of becoming a bit pipes that they don't control anything.
They are just transferring data that's what they have become nowadays.
And this was the move that killed the operators
potential in the mobile internet application space.
You didn't need any more similar applications.
T-Mobile, Vodafone applications you could call with Apple and Google.
It's so true.
'cause I remember buying ringtones on my Nokia, remember the, the
Imperial march, the death March.
I remember buying the, and.
You, you bought, actually bought it from the carrier on the phone.
And then of course it's a computer, a smartphone's, a computer.
So you don't need to do that anymore.
And there's so many back doors to get content on your phone, et cetera.
So, and, and you think about these moves that you wonder
sometimes the people regret it.
And where somebody, it's like in the newspapers allowing Google and
Facebook to crawl their content
versus create actually coming together and going, going, no,
you're not getting access to this.
And, and really it was a lack of understanding of what, what floodgates
it would open in the future.
We'll keep, we'll keep going on the document.
So.
You talked about the marketing here, it was a cool product to have and you were
defined by the product just like you were actually with like a Blackberry as
a business person before you talked about the stock price getting a boost from it.
So I, thought we'd conclude with this, which is the summary
of recommended Nokia actions.
So what you recommended versus what happened, and even some of the
recommendations when you read them, you're kind of going, you were so right with
these recommendations, but it just had, it was such a different context for Nokia.
It was a different world that you were entered into here that it was difficult
even to compete even if you followed all these actions comprehensively.
Yeah, very true.
So there were some accents where we thought that we would have
competencies where we could definitely take these accents let's say point
number four, for example, that I mentioned, how we counter the iPhone
Mini, what we expect it to come.
Yes, we generally thought that we have a competencies to respond to that.
While then some other points that we mentioned here, which are more on
this software development UI thing, like the number two, we aware, aware
of our lack of de competencies, we.
Had communicated that message for a long time.
I'm not in the position to say we didn't see enough action happening on that.
I think you had discussed that in the previous conversations points like six and
eight developing new software solutions, developing partnership networks.
They were borderline our capabilities.
We were taking actions on this, but probably we didn't have enough resources.
We didn't have enough world class capabilities.
When I now retrospectively look this list, would there have been anything
else I would have recommended?
Let me ask you, would you have recommended anything else to this list
in those days or now retrospectively.
Great, great question.
I, I, I've thought a lot about this and.
It's why I wanted to have you on the show.
It's why I wanted to do a deep dive on Nokia.
I'm not finished, by the way, there's other books like Ringtone
and Risto's book as well.
There's lots of books in Nokia.
I think there was so much you were doing that was right and it's so hard
to predict the way a market will go, particularly when it the internet
was such a form factor change.
Like, it, it wasn't, it wasn't what you were producing on the outside.
It was, it was behind the phone
I just see that as so hard to understand when it wasn't your DNA
and that you needed really to listen to people and maybe back ideas.
And when you knew there was an iPhone coming, maybe develop it.
Develop it at that time and go kind of develop products knowing
that most of 'em are gonna fail.
I mean, that's the only thing, like you said, exploit explore.
But it's so much easier to say it in retrospect, and it's so much easier to
say it, when you weren't the leadership team, when you didn't have a stock price,
when you didn't have market investors looking at you kind of going, why are
you wasting our money on these toys?
And you're kinda going, 'cause those toys could be our future.
So I see the difficulties.
Yeah.
So looking down retrospectively, what should have been recommended is.
S finding a bigger partner that comes with the muscles, whether
it is Google or Microsoft already at this point of the time
compensate our lack of the software development skills,
our operating system status.
So if you would have, say, been able to partner with Google to develop
Android and be the first one to work on Android to replace our Symbian,
well, the question at that time, a few years later was that, okay, if
they go to Android, are we going to be able to compete with Samsung?
And now conclusion was no.
Could we have made Android or Windows Mobile Nokia exclusive
at that point of time?
Probably not because those software players were also thinking from
the ecosystem perspective and wouldn't want to commit to Nokia.
But, most of these actions, what we call here, are quite tactical in nature.
So bigger strategic moves probably started to emerge only few years
later when we started to see that we are not able to do this by ourselves.
Which is always the way Timo, it's, it's, so you have to let it emerge
a little bit, understand a little bit more, and particularly when
it's not your core competence.
So I think that's the, that's the difficulty here.
There's a book we're covering.
I'm just gonna grab it from the show.
So next up on the show is this book Split the Pie.
It's by Barry Nalebuff.
And the reason I'm sharing it is he talks about a partnership like
you and, Google coming together maybe to create a phone together.
It's not about, it's difficult to see, they're gonna cannibalize us.
But you think about, what's the kind of third part that creates from you
two coming together and you split that?
That's why the idea of split the pie is the excess that's
created by a partnership.
comes probably partly from the Silicon Valley culture where a lot of the
companies are working close to each other, they are talking to each other, and they
have learned the way of doing things.
Then coming from the back woods of North Europe, a company that is pretty
much there alone didn't develop that sort of the things that mental culture
that we need to really collaborate with our competitors or constantly be
figuring out what could we do together and how could we save this together.
Yeah.
And, and it, again, easy to say in retrospect, and, and Barry's actually
earlier book is called Co-Opetition, which is this idea of being a frenemy
that you compete, but you together create something new, just like you
said, where Google announced that they'd put their, and Yahoo, that they'd put
their products onto the iPhone and that was a shock to people in Nokia.
And you get that, 'cause culturally that wasn't the way you did it
and you were very protective of your secrets, et cetera.
Yep.
The last thing I, I just wanna.
To ask was one, one thing that really annoys you, that people
say on the outside, that you just go, that isn't true.
So there's always one of those that you just go, that just never
happened, that people say it or throw away comment or just an irritation.
You're kind of going, oh, we were doing that because you, you know, often an
innovator, a head of innovation will a, a consultant will come in and tell the
board, oh, you should be doing this.
And the board are all listening and they're going, oh, that's great.
And then the, the head of innovation's there.
I've been telling these guys this for years.
Yeah.
Probably in those days I was, not so much irritated by outsiders coming
to tell that Nokia didn't see this.
Nokia should have done this.
Nokia was arrogant ignorant and whatever.
I wouldn't so much irritated about that.
And irritation is probably wrong word, but frustration.
Frustration internally, why things don't happen.
Why I thought four years ago about the importance of a touch screen, I thought
three years ago about the importance of the App store, why I don't seem to
drive any action with these things.
That was probably the frustration, but my frustration talk about the feeling.
So my feeling towards the end of my Nokia era was frustrated
and it was coming internally.
Why , I've been trying to push things, but I don't see anything happening.
What is blocking that am I communicating something wrong?
Am I sending wrong message says, I do, I just don't have enough muscles
being 30 something, mid-level manager.
And so on.
one of the biggest frustrations of so many people who listen to this show Timo,
you're not, and it hasn't gone away, man.
It hasn't gone away.
and I see it in my current job as well, the academic industry is going through
massive disruption in the coming years.
And Lot of the universities are going to have the same experience than what
Nokia or other failed companies have had.
and if they're lucky, they'll be able to resurrect and become a
networks business like Nokia did.
They had to resurface in some other form of the higher education experience.
Exactly.
And we look forward to that coming down the line.
Speaking of which, if people wanna reach out to you, where's the best place?
Or will I just share your LinkedIn profile maybe in the show notes?
Share my LinkedIn profile, that's the easiest way of connecting me.
It's been an absolute pleasure, professor of strategy at Adelphi
University just north of New York.
If you wanna get in touch with Timo, brilliant thinker, brilliant
strategist, and brilliant guest on the innovation show.
It's been an absolute pleasure, Timo Partenen thank you for joining us.
Thank you Aidan, it's been my pleasure.
Thanks again to our sponsor, Kyndryl and the Kyndryl Institute, where you can find
a plethora of brilliant thinkers from all over the world, including many of the
guests we've had on the innovation show.
With a unique blend of AI powered consulting, built on unmatched
managed service capability.
Kyndryl helps leaders harness the power of technology for smarter decisions, faster
innovation, and lasting competitive edge.
You can find KYNDRYL at K-Y-N-D-R-Y-L Kyndryl.com.