Market Orientation: Nokia is NOT Market Driven nor Market Driving

Hola Todos!

As I always said in class, it is much easier to find non-market orientated firms than market orientated ones.  The other day when reading The Wall Street Journal, I found 2012’s exemplar firm on how to be non-market orientated.

For a quick review, market oriented firms have three main characteristics: (1) an incredibly strong external orientation towards customers, (2) an incredibly strong external orientation towards competition, and (3) incredibly strong internal communication within the firm.  Most firms do #1 and #2 well.  These two orientations are relatively easy.  Its #3 is where most firms do not do well (or at all).  Too many companies have functional silos (e.g., divisions, SBUs, offices, etc. that are relatively independent and do not talk/plan/coordinate together).  Non-market orientated firms have mostly an internal orientation for items #1 & #2 and item #3 is non-existent.  Companies that have mostly internal power struggles and are dominated by politics are mostly non market-orientated.  For more detail market orientation along with the two main types, market driven and marketing driving, click here.

In “Nokia’s Bad Call on Smartphones” journalists Anton Troianovski and Sven Grundberg detail many of Nokia’s non-market orientated missteps in the smartphone marketplace.  What follows are some select quotes from the article and then my commentary afterwards.

This year, Nokia ended a 14-year-run as the world’s largest maker of mobile phones, as rival Samsung took the top spot and makers of cheaper phones ate into Nokia’s sales volumes. Nokia’s share of mobile phone sales fell to 21% in the first quarter from 27% a year earlier, according to market data from IDC. Its share peaked at 40.4% at the end of 2007.”   – - Notice Nokia’s peak was the same year the iPhone hit the market and one year before Android.

More than seven years before Apple Inc., rolled out the iPhone, the Nokia team showed a phone with a color touch screen set above a single button. The device was shown locating a restaurant, playing a racing game and ordering lipstick. In the late 1990s, Nokia secretly developed another alluring product: a tablet computer with a wireless connection and touch screen—all features today of the hot-selling Apple iPad. Consumers never saw either device. The gadgets were casualties of a corporate culture that lavished funds on research but squandered opportunities to bring the innovations it produced to market.”  Ouch – the next set of quotes emphasizes the lack of interfirm communication component of market orientation.

Nokia is losing ground despite spending $40 billion on research and development over the past decade—nearly four times what Apple spent in the same period. And Nokia clearly saw where the industry it dominated was heading. But its research effort was fragmented by internal rivalries and disconnected from the operations that actually brought phones to market.”  Politics and functional silos KILL market orientation.  R & D didn’t work with marketing who didn’t work with operations – let’s not forget about senior leadership.

In 1996, the company unveiled its first smartphone, the Nokia 9000, and called it the first mobile device that could email, fax and surf the Web. It weighed slightly under a pound. “We had exactly the right view of what it was all about,” says Mr. Ollila, who stepped down as chief executive in 2006 and retired as chairman in May. “We were about five years ahead.” The phone, also called the Communicator, made an appearance in the movie “The Saint” and drew a dedicated following among certain business users, but never commanded a mass audience. Nokia’s smartphones had hit the market too early, before consumers or wireless networks were ready to make use of them. And when the iPhone emerged, Nokia failed to recognize the threat.”  Here – we have a clear failure of the 2nd part of market orientation – an incredibly strong external orientation towards competition.  Plus senior leadership at Nokia failed to look forward and see where the market was headed.

One team tried to revamp Symbian, the aging operating system that ran most Nokia smartphones. Another effort, eventually dubbed MeeGo, tried to build a new system from the ground up.  People involved with both efforts say the two teams competed with each other for support within the company and the attention of top executives—a problem that plagued Nokia’s R&D operations. “You were spending more time fighting politics than doing design,” said Alastair Curtis, Nokia’s chief designer from 2006 to 2009. The organizational structure was so convoluted he added, “it was hard for the team to drive through a coherent, consistent, beautiful experience.“  Wow – no interfirm communication or coordination – more like creating a competitor within you own company? What make this all worse is senior managers in the C-suite supported this strategy, then was divided as some supported Symbian and others backed MeeGo.  Much time, money and resources were spent on Symbian and MeeGo in internal battles and competitors Apple and Android took advantage of opportunity by the distracted #1 player.

The irony of this whole Nokia story is that after all that time, money and resources were spent on Symbian and MeeGo, BOTH were scrapped as Nokia took Microsoft’s cash and switched over to Windows mobile.  OUCH!

In closing, just about everything in the Nokia story above (except the cameo part in a movie) was mirrored by the 2011 exemplar for non-market orientation: RIM and their Blackberry smartphones.

 

Something to think about today…

 

Best regards,

Dr. Dan-o

 

Daniel M. Ladik, PhD

Associate Professor of Marketing

Stillman School of Business

Seton Hall University

 

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  1. [...] articles.  Either way, I just see them almost everywhere I read.  Last week it was Nokia (click here).  This week, its Best [...]

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