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Although the Nokia brand is iconic and well-known, most people are unaware of the disruption story behind that name.
In 2007, Nokia held 50 percent market share in mobile phone handsets. The company was considered a national pride for Finland, having been founded 150 years ago in 1865.
By 2013, Nokia’s handset market share decreased to less than 5 percent with 40,000 employees reported in 2012. At that time, the company also faced the near-certain likelihood of bankruptcy. In 2013, Microsoft bought Nokia in an ill-fated deal to save the Windows phone. By 2014, Nokia revenue had dropped to $6.3 billion. Eventually, Microsoft restructured its smartphone business and took a write-down of more than $8 billion.
The following chart shows Nokia’s handset market share from 2007-2012:
Nokia handset market share 2007-2013
In sharp contrast to this history, Nokia today has 103,000 employees with revenue of $29 billion. Interestingly, less than one percent of current employees worked for the old Nokia and the company’s primary business today is supplying network infrastructure around the world. For example, the company recently announced a €2 billion deal with Chinese telecom carriers.
Nokia presents a classic case in market disruption that can be summed up in one word: Apple. In 2007, Apple introduced the iPhone, starting the modern smartphone era.
The following graph shows the growth of Apple market share compared to that of Nokia. Once the iPhone picked up traction in the market, Nokia’s handset business was doomed:
Noka / Apple handset revenue 2010-2012
The decline and resurrection of Nokia is a classic story of corporate disruption. The story is complex, involving factors such as:
Corporate leadership did not respond sufficiently rapidly to changing consumer demandsLegacy distribution and business model, selling handsets through telecom carriers, which forced Nokia technology to remain cumbersome and difficult to use, even as the iPhone created a new form of user experienceOutmoded leadership culture that slowed decision-making
The survival and re-shaping of Nokia — from dominant handset maker to near-bankruptcy to successful supplier of network infrastructure to the telecom industry — is a story of strategy and transformation.