Nokia’s declining fortunes show the weakness of closed systems

By June 22, 2010 5 Comments


Nokia warned last week that its second quarter results would come in below guidance and as the FT reported their shares fell 10% as a result.  Many analysts are saying that Nokia’s disappointing results are here to stay.

Their problem is that they are losing market share in the smartphone market which is both the highest growth and highest margin part of the mobile phone business.  They are of course losing out to the iPhone and to Android.

I would posit that Nokia is losing the smartphone battle because it operates a very closed system and seeks to mine too much value from every part of the ecosystem they touch.  As a result they have stifled innovation both internally and amongst their partners.  Two examples, firstly Symbian hasn’t delivered on its potential as a mobile operating system and secondly Ovi is a fraction of the App stores on the iPhone or Android. 

In a small example of their failure to innovate, despite spending $8bn to buy global mapping giant Navteq in 2007 they still don’t have a decent maps app on their smartphones.  My wife recently bought a Nokia E52 and finds it easier to use Google Maps on her phone than the native maps app (Blackberry suffers from a similar problem btw).

Whilst I often take potshots at Apple for their anti-ecosystem behaviour their app store is an awful lot more open than Nokia and so far they are reaping the benefits.  Whether they will continue to reap the benefits down the line or whether history repeats itself and just as Apple took share from Nokia by making the ecosystem more open Android or another platform will do the same to them is of course the big question here.

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