2007 Nokia's internal analysis after the iPhone launch
StrateGeek #03 - Exploring the field of Strategy 🧭
Here are all my highlights from the slide deck that i recently discovered via prof. Nicolai J. Foss.
I usually highlight interesting phrasings or fresh insights that i discover in specific materials like this one.
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Nicolai’s intro post on LinkedIn
“How did Nokia react to the launch of the iPhone in 2007?
Here is a fascinating internal Nokia presentation (dated only a day after Jobs' 9th January Iphone launch at MacWorld).
In many ways, it is remarkably precise and prescient in terms of understanding the iPhone's disruptive implications.
Excellent for class discussions in competitive strategy and technology management classes.”
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Executive Summary
“Apple iPhone is a serious high-end contender
Conclusions → Details → Nokia’s Implications
1. iPhone touch screen UI may set a new standard of state-of-art
New UI paradigm that has a promise of unparalleled ease-of-use
Cool, seamlessly integrated internet applications on top of OS X
→ User interface has been a big strength for Nokia – consumer research indicates this is in decline. Urgent action needed to prevent further erosion of this position
→ Nokia needs to develop touch UI to fight back. S60 should be focus, but Maemo platform can be a critical strength due to openness
2. iPhone may initially change the very high-end of market
Expect Apple to launch lower-price point models quite soon
→ iPhone may stimulate high-end demand in general
→ NSeries is challenged in internet experiences and usability.
→ Hit for MP will come if and when Apple makes “mini” version of iPhone.
3. The market share impact will be felt in 2008
The US launch – June 2007. European launch – Q4 2007. Asian launch – 2008. 2008 mkt share target 1% (10 M units)
→ The 1% volume share target could translate into 4% value share, taking ~ 30% share of the >300 € price band
→ iPhone may help US entry for N-Series via T-Mobile. Assign team to work collaboratively with T-Mobile – ‘help them help us’
Instead of launching MVNO, exclusivity with Cingular
There is a multi-year exclusive agreement with Cingular in US
iPhone will be sold both in Apple stores and Cingular stores
→ Other US operators need to respond to Cingular and Apple. Work very closely with T-Mobile to develop counter offer using e.g. N-Series including N800
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Eric Schmidt (Google CEO), Jerry Yang (Yahoo co-founder and Chief) and Stan Sigman (Cingular CEO) joined the stage with Steve to tell about the availability of their services in iPhone
Apple declared the end of PC era
"Today we've added to the Mac and iPod Apple TV and iPhone.
The Mac is the only one you really think of as a computer".
So Apple is going to drop "Computer" from their name.
Apple is now "Apple Inc." …
Quoting Wayne Gretsky: "I skate to where the puck is going to be, not where it has been.”
Is this a direct challenge to M's Multimedia Computer positioning?
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Details
iPhone touch screen UI may set a new standard of state-of-art
Apple may emerge to be in a good position with its announced +200 patents
User interface has been a big strength for Nokia, so the UI may be the biggest threat that iPhone presents
OS X is the new kid in the block, it does hit the appeal of Series 60 (and Microsoft Windows for Mobile)
However, it is not likely that Apple would be selling its OS platform to others any time soon
Also unclear if 3rd party applications are allowed, i.e. if the SW is in practise proprietary
No mention either of Java support, unusual user input method may be the reason. Lack of Java would shut out a big mass of existing SW.
Nokia needs a Chief UI architect to re-energize Nokia’s UI innovation across platforms and businesses.
iPhone may initially change the very high-end of market
iPhone will capture the coolness in US media, there is not
much coolness left for Motorola
A price war may emerge by Motorola trying to push their new models
iPhone will also hurt SonyEricsson’s momentum and coherent music strategy
N-Series and SEMC Walkman probably need to clearly undercut iPhone pricing to succeed in the market
Expect RIM and Palm to suffer – their stock prices have been most badly beaten
All the high-end devices attract the enterprise segment – expect that also for iPhone
iPhone is not a super feature pack
iPhone has quad-band GSM-EDGE, WLAN and Bluetooth, but
no 3G nor HSDPA
(only) 2MB camera
Apple changes is specs frequently though, no room for complacency
Expect Apple to launch lower-price point models
Anyway, scaling the user experience to lower HW specs may be challenging. iPhone mini may be closer to iPod UI
NSeries is challenged in internet experiences and usability.
Hit for MP will come if and when Apple makes “mini” version of iPhone.
The market share impact will be felt in 2008
If Apple succeeds in this target at the announced price point, it will create a new high-end market
iPhone may stimulate high-end demand in general, helping everybody to grow volumes in the high price band
It is very challenging, though, for Apple to achieve their target with current price levels and only one phone model (stated by Richard Windsor from Nomura, among others)
Similar price range as Nokia N95
Apple’s potential position in the handset, smartphone, and mobile platforms markets based on highly speculative iPhone sales of 6.5 million during 2007 and 14 million during 2008
Apple has the potential to be a Top Ten global handset player by 2008
Apple could be the number two smartphone vendor (if the iPhone is classified as a smartphone.)
Instead of launching MVNO, exclusivity with Cingular
Cingular got multi-year exclusivity to iPhone. In exchange it gave
up to Apple in many respects
Cingular has allowed Apple to launch a device with WLAN and inbuilt
services
The Yahoo and Google experiences are built in to the Apple phone
iTunes synch is done in cradle, no OTA
The multi-year exclusivity of the Cingular – Apple arrangement makes one ask if Apple gets a share of data revenues or Cingular iTunes revenues?
This may be a start for the whole market to change
This is a marriage of convenience built on mutual distrust and
recognition that each has assets the other needs
Other US operators need desperately something against Cingular and Apple. Work very closely especially with T-Mobile.
iPhone has the biggest impact on the definition of coolness
Nokia impact minimal in terms of financials, but may impede US penetration or success
Distribution limitations may restrict impact of Apple iPhone, but device continues to have significant disruptive potential.
Will pure touch input appeal to more mass market consumers?
How will consumers perceive product durability/reliability?
Apple got a stock price boost from the launch
At launch RIM and PALM were worst hit, being heavily US leveraged, and seeing their consumer growth expectations dampened
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Summary of recommended Nokia actions
Work very closely with T-Mobile
Prioritize touch UI development, simplifying basic functionality and PC suite development very high.
Nokia needs a Chief UI designer.
Evaluate new innovative input methods such as Zi's Qix like approach, to be first and make a splash
Leverage N800 with its touch screen - it competes nearly in the same arena
Introduce a cellular maemo device to position that even closer to iPhone
Analyse what could be Apple’s next release of “iPhone mini” to mass market price points and plan counter-measures for it
Kill market for such an expensive device by filling mid-range with own/Google/Yahoo experiences
Accelerate Nokia's own free push e-mail project and make it less hidden within the company
Investigate and play hard in possible IPR infringements
Drive key partnerships to highlight Nokia's superior strength in the market, keeping things in perspective
Lock in local partnerships where Nokia is very strong (India, China, ME, other Asian markets, E Europe, W Europe).
Evaluate the partnership with Microsoft (the enemy of your enemy...)
Evaluate iPhone’s potential in Asia where touchscreen UI has the most practical direct implications
Highlight potential weaknesses of the iPhone
There was little mention of security on the iPhone. Perhaps it lacks VPN, secure e-mail.
No mention of being able to install apps or upgrade the device or even change the battery
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What Nokia must do:
How to position the N800+ vs the iPhone? Potential?
Form factor wise, the two devices are similar.
The iPhone might excite the market for this exact form factor.
iPhone look copy (i.e. black with silver on the perimeter) version might “steal” some of Apple’s coolness.
N800 price is lower, even sans subsidies
Key apps exist for N800 that do not for S60 (ie Gtalk, Skype)
Can N800 be packaged with Nokia 3G handsets for an operator offering?
Cellular development of the maemo platform and the politics surrounding it?
More memory, other hardware upgrades probably needed.
Developer community potential is great
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iPhone more in detail
Disruptive Elements:
Innovative UI (running on OS X): Oriented around contacts and rich internet communications enabled by finger touch input
Seamless integration with PC, Mac & Internet
Intelligent user experience: proximity & orientation sensors provide intelligence and enhanced power management”
StrateGeek is a series of notes and reflections while exploring the field of Strategy 🧭
Written by Bülent Duagi, strategy adviser for CEOs in Tech.