Nokia today announced that the Finnish cellphone company is choosing Windows 7 Phone as the operating system for its future smart phones. It’s not a surprising move given that Nokia CEO Stephen Elop came from Microsoft and it’s not even that risky a move given that the alternative was a slow but certain death for Nokia smart phones running Symbian and Meego. Sure Nokia could have gone with Android, but Google has less at risk than Microsoft so Redmond had much more to offer. The only real question here is whether Nokia can make the new strategy a success? I think they can, but there is only one way to do it — by rushing the net.
I’m no tennis player, but my understanding of this tactic (rushing the net) is that you hit deep into your opponent’s territory using a lot of topspin to make the ball harder to return then run right up to the net and attempt to slam his return shot into the forecourt while your opponent is still in the backcourt and unable to reach the ball. The Nokia version of this tactic would be to introduce the best-ever Windows 7 Phone (faster processor, better screen, expanded services, competitive price) then simultaneously introduce another line of Windows 7 phones that have 80 percent of that capability for 20 percent of the price.
Nokia has already lost the elites but they have to make a credible showing toward the top of the market to stay in the game at all. This is one of those instances, though, where the company really can make it up in volume. They have to essentially cannibalize their own feature phone business to save the smart phone business.
Think about it. The life expectancy of a mobile phone is 18 months, meaning phone users are literally forced to change on a regular basis, often switching platforms in the process. Even buying another phone from the same vendor is a decision because the phones change so much in that time. That’s what makes the mobile handset business such a bloodbath where Motorola can be on top one minute with its Razr then a dog the next with the same phone. Phones are getting ever more powerful, too, thanks to Moore’s Law and the many cloud services coming online. So a Nokia decision to lean-into smart phones at the expense of feature phones is really just a decision to accelerate the inevitable.
Feature phones have one generation left to live. Three years from now every mobile phone will be a smart phone.
To embrace this, however, means going aggressively down-market. Apple has done this with the $49 iPhone 3GS. Nokia needs to do the same thing only even more aggressively. They need a $29 smart phone.
Here is the transition we are likely to see. Cheaper smart phones are coming. There was a story just this week about Apple announcing a cheaper smart phone this summer. I can see it now: at the WWDC in June Apple will announce the expected multi-core, 4G, international-ready, whiter-then-white, 1.2-GHz iPhone 5, but the “one more thing” will be a repackaged, smaller form-factor, $29 iPhone 3GS. Nokia has to not only have a response to this move by Apple, they must preempt it with an earlier announcement of their own.
Nokia (and Microsoft’s) survival in the phone market is dependent on staking out the lower end of the market where people buy on price as much as features and brand loyalty is less of an issue. Apple is heading there and Android is there already. Only by rushing the net — by following the time-honored Microsoft technique of throwing bodies and staggering amounts of money at a problem in a market-changing way — can these companies remain relevant in the mobile space.
But they have only one chance to make it work and they’ll have to take that chance before June.