Actionable Insights into the World of Indian Startups

Motorola is a classic American company founded in 1928 with a history of working with Radio technology.  It started manufacturing car radios and slowly started manufacturing walkie-talkies (2-way radios), cellular communications infrastructure and Wireless Phones.  As a pioneer of radio technologies in the US, the largest customer of Motorola was the US government who procured radio communications equipment for the military.  Even NASA used Motorola’s technology in all the human space travel and the first words spoken from the moon by Neil Armstrong was through a Motorola Radio.   Motorola is also credited with many industry firsts including the launch of the first Commercial Cellular phone the DynaTAC,  microprocessors that powered the early Apple, Atari and Commodore computers, the invention of the Six Sigma Process, creation of the first digital cellular system and phones in 1991 and enjoyed the title of the leading manufacturer of Cellular technology in the world until 1998.  When I arrived in the US in 1994, the rich lawyers, salesmen and doctors  had Motorola car phones.   The form factor of the cellular phone was not compact enough to be carried around in a purse or your pocket.    By 1995/96 Motorola had introduced a series of cellular phones which were not quite compact but were portable enough (Pictured here).  They were very sought after in those days and the very wealthy people in the US owned them (very similar to the early days of the mobile phones in the Indian market when the phones and the service were expensive).

When I started working at Oracle in 1995/1996, AT&T launched the Nokia 61xx series phone on its AMPS network and offered the phone for about US$200 with a 2 year corporate plan and I was the recipient of one of these phones.  The phone was really small and well built and was eye candy for those days when the state of the art was the ugly Motorola phone pictured above.   Nokia understood a few important buying behaviors which included nice form factor, build quality, design, easy to use user interface, packaging, price etc and just out executed the big daddy Motorola.  Very soon I started to notice that many in the corporate circles who owned cell phones were soon flashing their Nokia phones and Motorola’s started to dissapear.   In 1998, Nokia became the poster boy of the Mobile industry by overtaking Motorola as the leading manufacturer of cellular phones in the world.

The reason I am narrating this story is that consumers tend to adopt products that meet their needs very quickly.   Motorola got out-innovated by a startup from Espoo, Finland called Nokia and started its march towards the deadpool.  Fast forward a decade and Nokia the small startup from Finland in the early 90′s now faces a similar situation as Motorola in the late 90′s.   Apple and Google (not quite small startups) seem to have out-innovated Nokia.   While Nokia was lost in its own glory and thought innovation in mobile phone technology was all about fashion and that mobile phones were nothing but fashion accessories, Apple and Google were working hard on what they do best – build awesome technology that will change people’s lives.

I equate the launch of the Apple iPhone in the summer of 2007 to the launch of the Nokia 61xx phones in the US in the mid 90′s.   The iPhone introduced many firsts in the mobile phone industry, no keypad, capacitive touch screen, multi-touch, accelerometer , gps, ambient light sensor, proximity sensor,  a built-in music player, rich internet browser and the list goes on.   It is now well over 2 years from the launch of the first iPhone and Nokia still seems to be scrambling trying to build a phone that can measure up.   The Nokia PR machinery keeps digging itself a bigger hole every time they talk up the next N series phone as the iPhone killer and then watch the abysmal market launch with dismay.  They just can’t seem to get it together.

Whenever I discuss these issues with Nokia employee’s they keep saying “but we sell the most phones in the world even today… we have phones for as little as US$25 in India and China”.    India is Nokia’s largest market for the last couple of years.   So, I decided to see if this trend was continuing.   In India people buy mobile phones from their neighborhood mobile retail store and I visited 5 of these stores in my neighborhood.   Every single store that I visited basically said that there was a huge drop in the sales of Nokia phones (even the low end phones) and that Samsung seems to be the new Mobile phone leader in India.   I asked them why they thought this was happening.   Every single store owner believed that Nokia has not updated its model lineup with compelling phones and that Samsung was delivering better phones at a much lower cost.   The Samsung Star line which is a poor man’s iPhone (touch screen and all) and lists for between Rs. 9000 -11000 (US$200 – 250) seemed to be a real hit with the price conscious who want a touch screen phone but cannot afford the iPhone which costs about Rs. 35,000 (US$850) in India.   There were two retail stores next to each other, one was a exclusive authorized  Nokia outlet and the other a multi-brand mobile retail store.   The Nokia store wore a deserted look.  I decided to check it out and on the shelves about 60% of the phones were non-Nokia.   The multi-brand store on the other hand was filled with customers and were doing brisk business.

I think there is a trend emerging and it seems like the Chinese, Korean and Taiwanese handset manufacturers seem to be the next wave of handset manufacturers that will become poster boys of the mobile phone industry.   Samsung and LG will continue to grab market-share away from Nokia in the mass market segment while HTC which has an impressive lineup of smart phones will capture the smartphone market.   Apple will have to figure out how to counter the rise of the Asian handset manufacturers and build cheaper phones or face the fate of the Apple Mac which is a premium product targeted at the single digit marketshare numbers.  Google will standby and watch as the Asian manufacturers who were not competitive so far as they did not have great Phone OSes will become the leaders as they now have free access to Android which will power most of their devices.   Android is the only OS that can help the Asian manufacturers compete effectively with the iPhone.  The Windows Mobile Strategy is still flawed and the OS delivered by Microsoft is still not competitive with Android or the iPhone and Microsoft wants to charge the OEM for it.   It is going to be really fun to watch how all this plays out.

PS: I am writing this post on 10/11/2009 which is a Historic day for Nokia who launched the 1011 model (their first GSM model) on this day in 1992.