It sounds like
Nokia’s classic ringtone just got a few octaves lower and sadder. Friday, Strategy Analytics revealed the Finnish phone-maker had been ousted from its lofty position at the top of the cellphone food chain.
Samsung just became the leading shipper of mobile phone handsets in the world. How did this happen? The same way a runner in any race pushes to the front: He speeds up, or the other guy slows down. Sometimes both happen at once.
There’s a kind of morbid fascination involved in watching a formerly great goliath stumble: we’ve seen it over the past few years in the mobile space with RIM and Palm (and then HP), but seeing
Nokia trip over itself has been akin to witnessing a revered grandfather fall down the stairs.
Nokia practically created the mobile phone industry; until recently its brand name was unassailable in most parts of the world, with the curious exception of the United States.
The nature of their missteps has been well-documented, but suffice to say that
Nokia CEO Stephen Elop made some difficult choices. He made these choices rather publicly in his “burning platform” memo of February 2011, which, depending on who you ask, either told some hard truths or needlessly eviscerated Symbian sales at a critical point in the company’s history. Whichever view one takes, the fact remains that
Nokia didn’t start shipping devices built on its new OS of choice, Windows Phone, until much later in 2011. Perhaps it was unavoidable, but that delay cost them dearly.
As is usually the case with platform wars, the data isn’t exactly clear regarding all the factors surrounding
Nokia’s decline. It’s true that the Windows Phone platform has been slow to gain traction, but
Nokia was also woefully behind in developing a replacement for Symbian -or even in realizing that a replacement for Symbian was needed- before Elop showed up. To anyone paying attention, the decline seemed inevitable, given the company’s lack of agility.
Seeing
Nokia reinvent itself, with the accompanying beautiful design work coming from its hardware division, has been truly incredible; speaking personally as a consumer, the N9 and its derivatives are the reason I started noticing
Nokia. But beautiful design and the most interesting innovations, while an indicator of potential greatness, are lousy at arresting downward momentum. A fall from grace was overdue, and it’s finally materialized. After watching storm clouds gathering on the horizon for months, a massive 24% decline in handsets shipped year-over-year is
Nokia’s barometer finally crashing into the basement.
So it was only a matter of time before
Nokia lost the number-one spot. But the king who loses the crown is only half the story. What steps did the new guy take to snatch it from his head?
Samsung’s current lead over
Nokia is in part a byproduct of its war with Apple. In an editorial a while back, I talked about the voracious appetite of second-place companies. There, the conversation was
smartphone mind-share, and the leader was Apple, but the second place contender was still
Samsung:
“… Marketing head Younghee Lee recently said, ‘Especially in
U.S., people are obsessed with Apple … It’s time to change people’s attention.’ One need only look at the recent patent and advertising war between the two giants to confirm it:
Samsung covets Apple’s leading mindshare position in that special way that only a second-place contender can. They’ve got their eye on the prize, and they’re fighting for it.”
Samsung’s approach to satiate that hunger for success has been unexpectedly multifaceted: instead of focusing its efforts on innovation, marketing, or emulation, it’s done all three.
Look at what
Samsung has released in just the past year and a half. The
Galaxy Note, initially considered a novelty item or a target of mockery by many (myself included), sold 5 million units in five months. It carved out a new “phablet” category not just for itself, but for a host of imitators. “Note”worthy indeed, and not bad for a device many thought was DOA.
The company brought the same zeal to the second coming of its popular
Galaxy S smartphone series, once again blasting carrier after carrier with premium versions and midrange derivatives. Where the original Galaxy S devices still suffered a tad of stigma from “regular” consumers associating it with an iPhone knockoff, the growing brand prestige of
Samsung had eliminated any such comparisons by the time the Galaxy S II line debuted.
Apple, much more potent a competitor than
Nokia but equally as sluggish, refused to incorporate larger AMOLED displays, giving Samsung some purchase for easy visual differentiation. Once buyers’ eyes were attracted by the larger devices, they were drawn in further by the promise of the Android ecosystem and the more advanced capabilities of the
Samsung devices, further reinforcing the
Samsung brand perception.
At the same time, that brand was being heavily pushed by an aggressive marketing approach.
Samsung was taking jabs at — and in some cases openly insulting — iPhone users, a controversial tactic it continues even today with its “The Next Galaxy” teaser. The company isn’t afraid to ruffle some feathers in the name of increased mindshare, and judging by its new title, it hasn’t hurt them much.
Even the “bad press” seems to be working in
Samsung’s favor. I’ve talked before about my lack of enthusiasm for some of Samsung’s “me-too” products; sometimes it seems like they’re brazenly copying the competition. Some elements of the competition seem to think so too, as
Samsung’s been the target of numerous lawsuits recently. But all the accompanying exposure in the media is doing something invaluable: it’s keeping their brand name on people’s screens and in their minds. Ironically, the alleged untrustworthy conduct (copying) is working in concert with its impressive product portfolio to cement the
Samsung’s brand name as a trusted one, at least when it comes to mobile phones.
These massive upheavals don’t happen often. They’re the result of years and years of hard work and determination on the part of one company, and stagnation or mismanagement on the part of another. The last time the number-one spot on mobile handset vendors list changed was 1998, when
Nokia dethroned Motorola. Fourteen years is an impressive run.
That’s not to say this change is permanent; it’s a volatile and unpredictable market. Nokia and
Samsung are very different companies who couldn’t possibly be taking more disparate routes to success. And at the moment, the results they’re seeing are very different, as well. But the fact that
Samsung is now the market leader shouldn’t be perverted into a reason to condemn
Nokia’s new strategy; Nokia’s midstream shift was violent, and will take a long time to recover.
The longer it takes, though, the more opportunity
Samsung has to continue leveraging its considerable advantages to stay on top. Given the uncertainty surrounding
Nokia, it’s anyone’s guess when or if we’ll see it on top again. But judging by past performance and looking at who’s sneaking up behind
Nokia (a certain Cupertino company), we may see a shift in the second- and third-place slots before we see another change in the first.
