Three insiders reveal how Nokia became a victim of its own success

Three of Nokia's former managers have spilled the beans on how complacency led to the demise of Nokia's empire. The 145 year old company, which started as a paper mill business, has risen to become the world's largest producer of cell phones - gadgets that are always at the forefront of technological innovation.

Despite maintaining about 40% of the market share for the last decade, Nokia's profit margins shrank to a frightening minimum since the introduction of the iPhone, and the onset of the financial crisis in 2007. The company has always been an R&D leader with numerous patents under its belt. It's gotten ahead of its times in more than a few instances - with the 770 Internet Tablet, for example, which appeared on sale in 2005.

So how did Nokia got to the crisis situation it is now? Old school simple - the empire became a victim of its own success. A fairly closed culture, the company has always been run by Finns, and is the largest private employer in the Scandinavian country. Due to its enormous profits and lion's share of the market, management rarely envisioned a threat from outside.

It has been mainly engaged in petty fights for power, rather than focusing on fast-tracking any innovative ideas its labs have produced to fight competition. A few insider tales are very revealing what was going on until the Canadian-born Stephen Elop took the helm recently, and Anssi Vanjoki stepped down as a sign of protest he's been passed by for promotion.

Perhaps the biggest chance to ride the superphone wave was missed in 2004. Ari Hakkarainen, a marketing manager for Series 60 at the time, gave a presentation that year on a new touchscreen phone prototype, that has been a result of a decade research in touch sensitive screens internally. In 2003, Nokia introduced the first touch-enabled handsets - the Nokia 6108 and 3108 - and wanted to gauge the interest of its business partners with the 2004 presentation.

The same year, another insider says, saw the idea for a Symbian application store killed by management. The third whistleblower, Juhani Risku, who has worked on the Symbian interface, shared that there have been more than 500 proposals by its team for UI enhancements in the period 2001-2009, including a 3-D interface way back in 2002. The result - none of them was approved by the management committees. Disappointed by the communism-style bureaucracy, he has left the company to pursue other design venues.

All these innovations were deemed irrelevant to influence Nokia's already huge market share, or costly to implement. The cost of the 3-D interface per handset - $2.50. Still, Nokia is at the forefront of smartphone technologies that are yet to become mass market, like NFC-enabled phones for the upcoming mobile payments revolution.

Nokia is also coming up with ideas to improve even the best mobile services out there, and has caught up on the smartphone hardware front. We only hope that the first outsiders to head Nokia since its creation, will take it out of its ivory tower, and manage to monetize the huge R&D potential of one of the world's most famous brands.

source: NYT