Nokia’s declining fortunes show the weakness of closed systems

By June 22, 2010Apple, Mobile


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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  • Easier? Not really. It might be easier in the sense that the tools are better, but the actual publishing process is more heavy-handed with Apple. The Ovi Store is a mess (again, a technical kind of problem — but not open/closed), but it does have fewer restrictions, and you can publish your applications anywhere else too.

    This is my own vocal take on Nokia’s problems, which might be interesting for you. Written a couple of weeks back:

  • While I've often agreed with your posts, I'm not so sure about this one. Perhaps you should explain what your definition of 'open' is, because to me Apple seems a lot more closed than Nokia, which has traditionally allowed any applications to be installed on their phones, and for those phones to access any external service they want.

    The problems with Nokia are, to me, more about the baggage of their old OS products (Symbian) and of a very device-led philosophy that hasn't recently been able to innovate in the software and services areas. There is an apparent lack of vision and tight leadership at Nokia. One which would keep the teams tightly together, keep innovation high, and remove cruft from the company.

  • Thanks Kristoffer – unless I'm mistaken it is much easier to publish apps to Apple devices than to Nokia?

    To be fair that is in large part because Nokia chose to play within the rules that operators defined.

    Nokia has other problems too though, as you say, but I think they stem in part from living within a closed ecosystem.

  • Blake

    On the maps issue: Nokia's move to acquire Navteq has created some incredible value for Nokia users, perhaps just not well marketed yet… Nokia Maps are Much more powerful than Google Maps because they are downloadable by region world wide and don't require a data connection, just a sat signal, and offer FREE turn-by-turn guidance anywhere in the world. I recently traveled all around asia and south america and was able to have incredibly detailed maps of almost every place I went, including step by step driving and walking directions, without using any costly DATA connections.

    It is true that the first version of Nokia Maps had some issues, but they have largely been corrected in the new version. You should really play around with the newest version of Nokia Maps, and try it out while traveling, or locally, it offers a complete navigation service – Turn by Turn – with audio guidance. And almost every good Nokia phone comes standard with this service, FREE, for life. That is great value if you ask me. No more need for GPS gadgets in the car, etc.

    In terms of Apps, yes, Symbian suffers massively. Despite being the most common OS in the world with the most number of users (as far as I remember from recent data). Possibly my only complaint about Nokia products is this- the lack of access to applications. Phones as hardware remain some of the highest quality out there.

  • Very interesting, thanks. And I will take another look at maps.

    Do you think nokia's heritage as a closed hardware business has
    hindered their app development and attempts to co-operate with third
    party app developers? It seems to me that usability is a common issue
    that might be a function of their background.