By Alok Saboo on September 23rd, 2010
If you have been on the Internet, chances that you would have heard the recent comments of Nokia’s outgoing EVP Anssi Vanjoki that embracing Android would be like Finnish boys “peeing in their pants” for warmth during cold winter months. This comment was Vanjoki’s response to growing pressure on Nokia to adopt Android for it’s smartphones.
Nokia hasn’t fared too well in the smartphone space and is struggling to get its act together in the changing mobile landscape. The company’s recent (and much hyped) launches have received lukewarm response from consumers (and developers). Vanjoki’s argument is that adopting Android may be comforting initially, but in the long run it would relegate Nokia to being exclusively a hardware manufacturer. Further, he argues that loosing software control and relying on Android will “permanently lower profitability” for Nokia as users will fail to distinguish between different brands offering similar experience.
While the “peeing in pants” analogy is very compelling, I am not sure if it holds in case of Nokia. Let’s look at Vanjoki’s statements little closely. While Vanjoki does not state explicitly, the underlying assumptions behind Vanjoki’s statements are:
- Mobile OS is a source of competitive advantage and Nokia can use its OS (Meego, Symbian) to generate value for consumers.
- Consumers do not distinguish between different Android handsets.
- Finally, being a pure hardware manufacturer is a bad thing for Nokia.
Let us look at each of the above assumptions in detail.
Mobile OS – A source of competitive advantage or not?
Resource based view of firm argues that a resource is a source of competitive advantage only if the resource is distinctive and/or superior relative to those of rivals (Peteraf 1999). Among the current crop of mobile OS, it does not seem that any one OS is clearly superior to others. The popular verdict seems to be that Apple iOS and Google Android lead the pack, followed by others, including Blackberry, Windows Mobile, WebOS, Meego, Symbian, among others. If anything, Nokia’s mobile OS are lagging behind all the others in the smartphone arena.
So, (taken to its extreme) in some sense Symbian/Meego are a source of competitive disadvantage for Nokia. There does not seem to be any incentive for users to go for a Symbian or Meego based smart phones and that does not seem to change unless Nokia has some tricks up its sleeves. This seems to be reflected in the lukewarm response to Nokia’s recent handset launches.
Most consumers do not buy phones based on the OS installed on them. They invest in smart phones to derive certain utility out of them and this utility is tied to the hardware, carrier, apps, and finally and most importantly by being part of a group. Even for the iPhone, the iOS contributes only a fraction of value to the end consumer. Mobile OS is only a means to an end. Consumers will not value Nokia just because it has its own OS, but they will certainly devalue Nokia if it cannot deliver the value that consumers are seeking from their phones.
There is no doubt in my mind that Nokia is one of the most competent mobile handset manufacturers (more on that later). Combine the hardware competency of Nokia with the Android and you get the magic formula. Suddenly Nokia phones can deliver on all the fronts – hardware, multiple carriers, apps, and being part of the Android community.
Android devices – Are the all the same?
Vanjoki assumes that consumers (and may be even carriers) treat all the Android devices as substitutes and hence Nokia will have to compete more fiercely if were to Android.
This cannot be farther from truth. This argument, basically questions the efficacy of Nokia’s marketing team. If Nokia cannot differentiate it’s devices from others, it will not survive no matter what OS these devices run. There are countless examples where marketing, product development, and customer service can meaningfully differentiate products from competitors. Take a look at the computer industry. Despite using similar components, computer manufacturers are treated differently by consumers. Similar examples can be found in other industries. As I discussed in my earlier point, consumers do not think in terms of the OS that is running on their devices. In fact, using Android only helps Nokia by reducing the purchase uncertainty in the minds of consumer.
For a moment, even if we assume that consumers treat Android devices similarly. Even in that case, the absolute number of units that Nokia will be able to sell will be much higher than otherwise.
Hardware or Software or Both?
Finally, the assumption that by adopting Android, Nokia will relinquish software control and be relegated to a pure hardware manufacturer, thereby “permanently lowering its profitability” seems to be completely unfounded.
By spending resources on both software and hardware, Nokia may be spreading itself too thin, given its current financial condition. Nokia needs to prioritize its resource allocation. Unless it has concrete strategy in mind, there does not seem to be a compelling argument for Nokia to continue developing Symbian/Meego.
Nokia needs to identify its core competency and develop its strategies around that. In my mind, Nokia’s strength has been its stellar hardware and there is no harm in being a pure hardware manufacturer. None of the computer manufacturers develop their own software, but they are doing great.
Granted that by using Android, Nokia will loose software control. But, how is this any different than the idea of outsourcing. Any activity that is not contributing to the customer value proposition can (and should) be outsourced to experts, unless you can do a better job in-house. Following our earlier discussion, mobile OS is not the core value proposition for a smartphone and nor is Nokia seemingly doing a great job at it and hence can be legitimately outsourced. Given Google’s strengths and objective behind Android, there is no credible threat from Google changing Android usage policy in the future. Thus, the argument that the profitability will be lowered by adopting Android seems weak, at best.
In fact, Google will be very happy if it can bring Nokia into Android fold. If Nokia decides to adopt Android, it will be the most preferred manufacturer by the consumers. Nokia can use this fact to obtain preferential treatment from Google.
In summary, at least in my mind, Android is the way to go for Nokia, unless it is happy to relinquish the smartphone market. Nokia can (and certainly should) create meaningful apps on top of Android to meaningfully differentiate itself from the competition.
I would like to clarify that the above opinions are based on the limited information available to me from public sources. Clearly, Nokia has great resources, information, and technology to develop better strategies. However, the way things are going, it does not seem to be the case. The recent change in the top executives may be a harbinger of change at Nokia. I am hoping that rather than being stuck with what they are doing, Nokia evaluates the options in front of them objectively and decide the best course of option.