Go, Nokia, Go!

You have nothing to fear and everything to gain!

The mobile internet is becoming mainstream, so the smartphone market is booming. Nokia occupy the strongest position in the smartphone market, has loyal customers and a reputation for phones that, relative to other mainstream phones, are user friendly.

So what is happening?

This means that Nokia has one of the biggest opportunity in its history. Yet it is not clear that they see it like that.

The Nokia World 09 conference was very upbeat but tinged throughout with the sense that it is trying to emerge from a period of shock: we “need a good plan and a charismatic leader, at least we have a good plan!” And now, Nokia is suing Apple for patent infringement; which has some merits but sends some other signals too.

Overall, Nokia seems to be in some kind of retaliatory mode. Why? What do they have to fear?

Sorry, what did you say? “i” what?

Oh, “iPhone”! Who?

“Apple”, you say! Nokia is worried about Apple?!

Why? I just don’t get it.

Nokia should be very happy about the success of Apple’s iPhone.

The broad picture

Let us get some scene setting out of the way …

Many people want to be in contact while on the move; the success of the Blackberry demonstrated that. In fact, mobile phones, themselves, had already demonstrated that; and then the widespread use of text messaging confirmed it.

Now, after various partial solutions, it is fairly obvious that large numbers of people want full internet access while on the move; and the continually increasing availability and bandwidth of connections and the increasing power of smartphones is enabling this to happen.

So pocket computing is upon us, and the numbers of devices is set to outnumber personal computers, in the same way as the number of personal computers outnumbered mini computers and, before that, minis outnumbered mainframes. It is “tornado time” again in the computer hardware market.

There will be many similarities and many differences between pocket computing and personal computing, with the differences being driven by factors such as more challenging user interfacing and the lower availability and reliability of connectivity and power supply; but, that is all part of the fun!

Broadly, that seems to be how it is rolling along.

So what?

What do we expect to happen? Well, as expected, many new products are being offered. We see new players entering the market with new products with a range of levels of sophistication and price. Existing players are seeing increased demand for existing high-end products, rapidly increasing demand and opportunities for new products and, most of all, a sharp increase in the pace of change.

The capability and the price of the products are increasing, while the price per performance is falling, as the technology and the infrastructure improve. This fuels customer spending on mobile products as they become more useful and replace other mobile and non-mobile products. So, the size of the market is increasingly rapidly, as many people and organizations spend more on mobile products; and there is plenty of opportunity for existing and new vendors.


And, another major issue is that, at this stage of its development, a market also becomes more diverse. In any mainstream market, there are a wide range of product performances and prices and a variety of categories of product.

In personal computers: a high-end notebook is not a low-end desktop; all computers are not the same.

In cars: a top of the range Mercedes is not a Fiat 500; all cars are not the same!

In pocket computing: all mobile devices will not be the same!

So, with this rapid development of the market, it is to be expected that there is a rapid increase in not only the number of products, but also the number of categories of products. Also, since the majority of new features are added to high end products first, it is to be expected that the rapid increases in size of the market will occur first at the high end.

So it is expected that there is a bulge which starts of the high end and moves down through the market. This is not really a wave, not even a soliton and is not quite the same as a tsunami. It is more like a bore, if you have ever seen one; a step change propagates through.

Now this can be more complex to follow in a market where the product features are themselves also developing rapidly, because the features which initially appear on a low volume high-end product are added quickly to products which sell in higher volumes further down the market. As this occurs and further new features are added to the high end products; it can be more difficult to distinguish the categories of product in the market.

Overall, what does this imply? Let us look at from the point of view of Apple and of Nokia.

So what about Apple?

I hear you say:  Apple are dominating the smartphone market with the iPhone; and they are outperforming Nokia!

Well, it is true that Apple have entered the market with a very successful product which is more advanced in some areas, notably its ease of use, than other phones. The ease of use improvements to the user interface are particularly important on a device where user interfacing is a significant challenge, as is its built in iPod in cooperation with iTunes and, importantly, that it allows a wide choice of third party applications to be bought and installed easily through the AppStore.

By the way, the iPhone is not more advanced in all ways, despite what Apple might imply. You cannot run multiple third party applications simultaneously on the iPhone, whereas this has been done for years on the Symbian operating system and also Nokia now have the more advanced Maemo (on the N900) too.

One of the reasons that Apple has an advantage is that they understand the business model of hardware being bought to run software which is developed by third party developers and, therefore, the importance of working very effectively with those developers.

But, and this is crucial: Apple is not capable of dominating the majority market at this stage and possibly ever, and there are two main reasons.

Firstly,  Apple does not wish to dominate the majority market. To do so, it would need to relinquish its position as a designer of ground-breaking products, because it cannot have it both ways. To provide for the majority in a market, a vendor needs to cater for a wide range of interoperability and backward compatibility issues in a multitude of different contexts; this detracts from the ability to introduce new features rapidly. Unsurprisingly, Apple has never shown any inclination to shine in this area; it simply does not fit with its ethos. The majority market don’t want “insanely great” products; they want products which do their everyday job for them. The majortiy market does not want a Porsche Boxster Spyder to take the children to school. The children might! But, the parents want a mid-priced five- or seven-seat vehicle which accommodates several children.

Apples lack of desire to dominate the majority market is clearly described in the superb post by Mike Elgan.

Secondly, it is not possible for any vendor to dominate both the leading-edge and the majority market at this stage; it might be possible when the market has matured and the vendors have stabilised (think: Hewlett-Packard and printers) but not in a rapidly developing market,.  To develop products for the mass market requires a fundamentally different mindset from the vision and design required to create those “insanely great” products.

For the same reasons, Apple has not dominated the personal computer market either, and that market would need to mature even further before anyone could do that again. Currently the only personal computer sectors where Apple dominates are those where the market is homogeneous: media production and education, for the reasons above.

So what for Nokia?

For Nokia, this a gravy train!

Nokia can almost guarantee that the mid-market for smartphones will increase dramatically. What features should they add? The risk of making the wrong choices is very low; the high-end phones, like the iPhone, are showing them lots of new features some of which work very well, others of which turn out not to work or require further development.

All they need to do is watch the high-end phone market and incorporate the features that turn out to be valuable. As a minimum, they can engineering those features that have been shown to be successful on the high-end phones into their own phones. Further to that they can, of course, develop and extend the experience of using their products as they incorporate these features into them. Finally, they can add aspects to the experience through new features that support it in ways that are specific to mid-market users.

The main point is they need have no fear that Apple is about the invade their market; it is likely that there will be other players who will try to do that!

Copyright 2009 John W Lewis






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