What Nokia Should Do – an opinion

Stephanie Rieger posted this on MoMo London’s discussion group, after having received it via MoMo San Francisco.

I read it without knowing who penned the piece. I’d like you to do the same and see what you think. Here we go.

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What Nokia Should Do
September 16, 2009

Nokia is the world leader in mobile phones. They exceed 40% market share selling over 400 million cell phones each year out of a billion unit market. This results in Nokia generating over $70 billion in sales and having one of the most respected brands in the world. They have an excellent management and logistics team to pull this off. That’s the good news.

The bad news is that due to tremendous competition, Nokia is expected by Frost & Sullivan to see their global market share continue to decline from 44% today to around 36% in 2014 (for more information reference Frost & Sullivan recently released Market Insight 2009 North American Smartphones). And, when you consider just the SmartPhone segment, others like Apple, RIM and Google’s Android (& their OHA partners) may assume global leadership in SmartPhone market share.

In North America, Nokia is in a difficult position. Frost & Sullivan estimates Nokia has less then 5% market share, a small percentage of the share that they enjoy around the world. How in the world does such a great company have such poor results in such an important mobile market as North America? Some of the answers may surprise you.

Nokia has a particular way of developing and marketing their mobile phones. It must be working OK to have been able to lead the world in production year after year. But, the way they design their phones – down to the way in which keys are designed in their keyboards – is very ‘European’ that resonates well outside North America but does not resonate well with consumers in the North America.

I blame much of the poor performance in the US market on design principles. If you look carefully at Nokia phones, they all use the same font on the display – the same font used in marketing literature. I don’t know why but the font is not attractive to many people in the US (from talking with lots of users and other analysts). It gives you an uncomfortable feel when you look at it without necessarily knowing why.

They keys in Nokia’s phones (both 10-key numeric in feature phones and alphanumeric in SmartPhones) have a square shape and no raised domes. All SmartPhone in the US by other manufacturers have rounded keys with domes & inter-key spacing which gives the fingers a more positive tactile feedback.

The Symbian OS, while very good technically, has a user interface style that seems foreign to those in the US. The Ovi Store is Nokia’s Web portal to offer mobile consumers with content such as apps, videos, games, music which they can select and download to their phones.

Symbian is currently Nokia’s core OS for S60 phones. Symbian was a separate company for a number of years in which Nokia owned a majority interest. It then purchased the entire company and announced plans to put Symbian into an open source environment and provide it license free to partners much in the way that Google is marketing Android to handset manufacturers. Symbian is a very solid OS technically and works well with GPS and other device enhancements. But, the core design principles have a look and feel that is different from the iPhone, BlackBerry, Palm WebOS and Android environments work. Symbian phones can do the same things but the orientation and presentation to the user is ‘different’ and doesn’t seem intuitive.

At the recent Nokia World event, Nokia announced two new lines of mobile products: 1) a new line of high end SmartPhones based on their Maemo multi-tasking OS that is open-sourced and part of the Linux community and 2) a line of Windows-based netbooks under the brand Nokia Booklet 3G (see more below).

Nokia is making a concerted effort to succeed in the US. They have a strong management team and a mobile design center in San Diego in which has shifted focus from the pure CDMA to a product R&D center for Nokia’s North American mobile devices. Nokia seems to realize that they know they need to do things differently but are unsure how to go about it. For example, they have done a good engineering job on the development of the E71x for the (North American) enterprise market. The case and overall feel are good (it looks a bit like the Blackberry Bold), but when you hold it in your hand and use it, the E71x immediately feels ‘foreign’ and you get a sense that it is not going to be broadly adopted.

So, what should Nokia do? Here are the things that I feel that Nokia should do in order to become more successful in the US market:

Change the Identity – Use a more friendly font and have screens and keyboard designed to work in the US environment. The E71x that was designed in the US still confirmed to the Nokia European identity and style. Keys have to be rounded with domes and small separation from other keys. The entire look and feel needs to migrate into a set of design principles that are US centric.

Reorient the Ovi App Store – Migrate Ovi to be positioned as an on-device app store supported by a web portal instead of the other way around.

Use a Different Product Segmentation – Segment the market around user’s needs and price points instead of specific technical feature sets. Music should be on all phones with richer capabilities like stereo audio on higher end units. Video should be on all phones with more features on higher end models.

Develop a Maemo Line for the North American Market – Nokia could take their new multi-tasking Linux-based OS and design a line of handsets that would be well-received in the US market but it would have to make sure the design principles focus on US needs not European. They could integrate features and services that would make it differentiated in the US market.

Acquire Palm – This has some interesting implications for Nokia and the industry. Palm is on a comeback trail with the Palm Pre and the WebOS platform. Nokia might consider acquiring Palm and use WebOS for its high end SmartPhones as well as adapt WebOS to other Wireless Internet Devices (WID) and even to the Netbook. WebOS is very US-friendly and there are droves of Treo/Palm Pre advocates.

Nokia just announced a Windows based Netbook under the brand Nokia Booklet 3G. It has 3G wireless built in with a swappable SIM card as well as Wi-Fi. It will launch in October with Windows 7 with Ovi Suite and Social Hub that will assist users with social networking. The hardware specs include a 10.1”, 1280×720 display, Atom Z530 & 1.6 GHz processor, 1GB memory and 120GB 1.8” HDD. They will likely realize reasonable success with their new Netbook entry if they can get the price under $500.

Nokia has to be careful about entering this market as they do not have experience designing and selling computer products. They can certainly leverage their wireless communications experience with out-of-box wide area wireless & Wi-Fi offerings. Nokia will also have to greatly expand their distribution to all major computer retail & online stores.

Nokia is doing well in the low end of the market. Nokia will likely continue to maintain worldwide dominance in low cost feature phones on a global basis. No changes are needed there.

But, in the higher end of the market – characterized as SmartPhones with a rich mobile, keyboards and app stores – Nokia needs to make a new concerted effort. Nokia will get significant market pressure from Samsung, Motorola, LG, Apple, Palm, RIM and HTC. The race for market leadership in the SmartPhone sector five years from now is completely up for grabs. It’s going to be one heck of an exciting race.

If Nokia can make the changes I recommend above, then they will begin to increase their SmartPhone market share in North America. I believe that Nokia should apply their efforts with their new high end Maemo multi-tasking OS to create a line of SmartPhones specifically designed for the US market. Stay tuned.

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Now would you like to know the author?

It’s J. Gerry Purdy, Ph.D.

J is VP & Chief Analyst of the Mobile & Wireless section at Frost & Sullivan.

I kid ye not. Indeed, here is a screenshot from the original email.

So there we have it Nokia. You’ve got the keys ALL wrong and you should buy Palm…

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