Here is a chart that shows the 5 year drop in value for Nokia  from a high of $150B in 2008 to hovering around $15B :

RIMM is a similar story whose market cap dropped from about $80B in 2008 to $7B now.

The biggest lessons to learn for startups from these companies are:

1.  Great Product and User Experience is everything

2. Innovation today = design + technology + great execution + people

3. Never get comfortable with your position in the market.   your competitor may be a new entrant you were least expecting to be able to disrupt the market you play in – typically other startups or in this case manufacturers of Computers (Apple) or the worlds leader in Search (Google)

Related Reading:

1.  Looking into the Crystal Ball – Will Nokia be able to survive?

2.  The musical chairs at Nokia

3.  RIP Nokia N-Gage

4. Nokia – The story of an awesomely innovative company getting out-innovated

5.  Apple iPhone profitability surpasses Nokia

When I left India in 1994 to the US, I was exposed for the first time to a world that was “consumerized” which means that people had a lot of choice.  A single aisle with breakfast cereals in a grocery store is likely to have more than 100 varieties.  When there is so much choice, the customer is usually the king.  The manufacturers of these products, have to spend huge amounts of marketing $$ to educate their customers about the subtle nuances of each product to get them to try it, and then provide them phenomenal customer service to ensure that they don’t switch to a competitors product.  For example, every box of cereal in the US carries a toll free number that one can call if they are not satisfied with the product.  Rising competition means that a manufacturer, seller or service provider (supplier) has to work really hard to keep their customers from switching to a competitor due to poor product/service experience faced by the customer.  This led to the emergence of the human powered call centers to handle customer complaints/issues over the phone, typically to keep customers from switching to a competitor.

Fast forward to the era of the Internet…… The Internet has truly flattened the world.   It has leveled big and small, collapsed physical distances, hugely improved distribution (mostly by eliminating middle men and location dependencies), sucked out inefficiencies that existed in the past and taken competition to another level by making more choices available (the world of the long tail) targeting specific needs of users.  The Internet also became a channel for customers to engage with suppliers for service issues and this led to the evolution of call centers to contact centers.  Contact centers are essentially human powered support centers that handle calls and Internet channels like email/online support.

The emergence of social tools and networks have also brought in two significant challenges / opportunities (which ever way you choose to look at it) to manufacturers, sellers and service providers (suppliers of the world).

1.  customers can now engage directly with manufacturers, sellers and service providers very easily which will lead to the creation of people to business networks and customer communities and interest groups

2. customers now have large megaphones to tell the world about their experience (good or bad) in dealing with specific suppliers.  In the social era, the customer really has huge amount of power over suppliers.    It is an era where a customer who is dissatisfied with a product or a service is not just switching to a competitor but will tell everyone about it.  Social Networks are designed to amplify the voice of the users and when such voice finds mass appeal,  can impact a companies ability to do business significantly.

A classic case study of this phenomenon is the now famous “United Breaks Guitar” case where a musician who flew United Airlines dealt with the airline’s callous attitude by creating a song that was posted on Youtube and went viral (500K views in 4 days) causing a PR nightmare and an estimated stock price impact of  2 – 10%.

The era of the customer can be quickly summarized as follows:

1.  Customers now have huge amounts of choice in all aspects of their lives primarily due to globalization and increasing levels of access (due to the proliferation of the Internet and Mobile).

2.  Customer Service is becoming the key driver and differentiator of successful companies. (example: Amazon,  Costco, Zappos, Southwest Airlines)

3. Customers now wield heavy weapons (facebook, twitter, youtube) to counter companies who #fail to delight their customers.

4. The companies that will survive this era are ones that will build a bridge with their customers and work hard to delight them.

So, this brings us to the “how and why is this relevant to Indian businesses?”.    After being spoilt with great customer experience in the US for a decade my return to India in 2006 brought me face to face with this aspect of our life where we have to face the callous attitude of suppliers everyday.    Consumer protection laws are broken and the process of dealing with consumer forums and consumer courts is mired in red tape like the rest of India.

However, in the past two years Internet adoption in India seems to be accelerating.   As of November 2011, the Internet population in India has for the first time breached the 100M subscribers mark .   E-commerce growth in the country is also surging with a new e-commerce startup launching almost every day ( I read about a vegetable and fruits e-commerce startup in South India yesterday – hmm, reminded me of webvan).     This is great news for customers as they can shop from the convenience of their couches and get the best deals as the frenzy of e-commerce startups consumes India.   However, once the market reaches its tipping point the ones that will be left standing will be the ones that crack the secret code of “e-commerce success” which boils down to 1. having the biggest catalog of products and inventory  2.  being able to fulfill the orders reliably and in a timely manner and 3. being able to delight their customers with great customer service.

Let me narrate a small customer service incident that I recently faced that reminded me of why my online store of choice is Amazon.com.   My Amazon kindle was starting to act up (after about a year) –   frequent lockups and screen freezes.   Frustrated, I went to amazon’s kindle site and looked for options on how I could get support.    The forum discussions revealed that there were several customers facing similar issues mainly caused by the leather cover (an amazon accessory for the kindle ).  Armed with this information I contacted Kindle support via online chat as I am in India now and did not want to make an expensive International call to the Amazon support number in the US.   After 15 minutes a helpful agent jumped on the chat session and got some basic details from me about my problem.  She then transferred my chat session to a senior agent who had full context of my earlier chat and spent some time trying to diagnose the issue further.  He then asked me if I was using an Amazon Leather cover for the Kindle and then went on to explain that some leather covers were defective and were causing the Kindle’s to act up.  He then asked me to go to Amazon and order a new cover for myself as a replacement and that Amazon would waive all the charges for this.   The cover was $29 and with International shipping and handling the total was $66.   As soon as I finished ordering the cover, the amount was promptly waived by Amazon as promised by the agent.  Three days later the Kindle cover was delivered by DHL in India.   This type of experience is what keeps me going back to Amazon every single time I think of ordering something online.   They have turned me from just a “customer” to a “customer for life”. “Customers for Life” is a very interesting area of marketing where companies need to look at the lifetime potential of doing business with a customer.   For most commodity businesses the cost of acquiring customers is significant and typically the first transaction with the customer is not  profitable considering what the company had to pay to acquire the customer.   Businesses have to then rely on cross-selling and up-selling to their customer base to create a funnel of transactions from the existing customer base.   This means that to generate healthy profits a business needs to be able to churn its existing customer base for revenue while adding new customers constantly.    To do this, the business needs to ensure that customers do not leave their service (churn away from their service) before the lifetime potential of the customer has been realized.  The only way to make this happen is to delight the customer with great products or service and be there when the customer faces an issue to help them overcome the issue or in other words delight them.

If you are building a product or service oriented startup in India, start thinking about delightful customer service that you can offer to your customers and start designing the experience into your product or service.  Think of the following:

1.   How do I make my customer reach out to me easily if they face a problem instead of going to twitter and ranting?

2.  How do I deal with the customer if they have an issue?

3.  How do I turn the customer who faced an issue into a fan who will keep using my products/services?

4.  What are the processes I need to create to effectively manage customer issues?

5. What type of people should I hire to respond to customer issues?

Last but not least, if you haven’t read Tony Hsieh’s “Delivering Happiness: A path to profits, passion and purpose“, now is a great time to add it to your reading list.

Here is a direct quote from the Minister of Economy of Chile J. A. Fontaine

“Instead of changing the world through revolution, we can change the world through #innovation”

This one statement sums up the attitude of the Chilean Government to promote the Startup culture and set them on a course of development and economic progress.

What is interesting about this program?

1. Partnership with Silicon Valley –  The board of the program is comprised of folks from Silicon Valley and Stanford.  The government realized that they need to have Silicon Valley mentors to make this program successful.    Most of the Indian startup programs are filled with folks from the services industry or execs from the Indian industry who do not have any context to IP/tech based wealth creation.
2. Open to the world –   The program allows anyone from the world who wants to start a company to apply for the program – note it is not just limited to Chileans, to come and setup shop in Chile.   Here is where I think the Indian government can do a lot more.   I know two young very dynamic european founders in Pune who decided to make India their home and setup their services startup.  However the Indian government has dished out nothing but red tape and bureaucracy to these founders instead of embracing them and providing them all the support they need to succeed.   These two young founders have setup a company that grew to 30 employees (all Indians) in just a year and are bringing in significant $$ from mostly european customers.   These young entrepreneurs have faced all kinds of government redtape all the way from having to pay bribes to immigration issues.
3. Provides tangible support –  The program picks 25 startups and gives them $40K for 6 months (no equity), airfare to travel to Chile and a temporary 1 year visa to work in Chile and build the company.
4. Very clear goals –   In the first year (2010) called the pilot phase the program brought in 25 teams.   In 2011, they want to scale the program to 300 participants and in 2014 they would like a 1000  participants.   A little ambitious but not hard to execute if done well.

I believe the Indian Government needs to step up if they want India to be competitive in the new world order.   We cannot be complacent and point to our growth in the Outsourced Services business and not do anything about promoting entrepreneurship and startup culture.   The VCs in India are all mostly doing pipe deals and are not doing early stage deals.   In a way they have abandoned early stage companies entirely and are leaving it up to the best entrepreneurs to create tangible businesses that they can get into in later stages.     On the other hand, in Silicon Valley young kids just out of college can raise $100K to $1M from angels, super angels and now VCs at the idea stage.   Sure, the investors are faced with huge amounts of risk but this approach of the valley has ensured a steady funnel of startups that is so very vital to creating the next Google or Facebook.

We are one of the more fortunate startups to have found a VC that just believed in our capabilities and wrote us a check.  But , I know hundreds of founders in India who are all very smart and capable who are struggling to raise money and go work on their dreams.

I strongly believe that the Indian Government needs to start a program like Startup Chile and offer support to the many *young* entrepreneurs in India who want to shun the secure path of getting a Job and building career and instead can dream big and create big businesses and employ a lot of people.  Without a vibrant early stage program, we will not be able to produce great companies that will make India relevant in the future.

“Hello, I am Macintosh. Never trust a computer you cannot lift… I’m glad to be out of that bag” – talking Macintosh Computer., Apple

Larry Ellison was inspired by the paper written by Edgar F. Codd on relational database systems called “A Relational Model of Data for Large Shared Data Banks”. He founded Oracle in 1977, under the name Software Development Laboratories (SDL).

“to organize the world’s information and make it universally accessible and useful” – Google Founders

Bezos named the company “Amazon” after the world’s largest river. Since 2000, Amazon’s logotype is an arrow leading from A to Z, representing customer satisfaction (as it forms a smile); a goal was to have every product in the alphabet.

The greatest technology industry leaders in the world started companies that are hugely successful today as they had envisioned the future very early, typically because of their personal experience with a problem. This personal problem or issue that was nagging them inspired them to drop whatever they were doing and make a life changing transformation to go out and follow though with their inspiration. “Tech” companies founded in this manner went on to change the world and become large business leaders. The founders were following their heart and dreams and did everything possible to make their dreams a reality.

“Motivation” to do something that arises from the intent of I can do something to “make the world a better place” is extremely powerful. There are 1000s of Tech startups that are being created every year. In the world we live in, “Success” is measured purely by the financial impact a company is having.

This, very inspiring TED talk on  ”Motivation” provides evidence that reward based motivations generally work for very task oriented mechanical work but not for creative/inspirational work.

I love this creative version of the same talk

In my experience (I don’t have any empirical evidence though) there are two types of founders:

1. Founders that are inspired to change the world and have a strong vision around a generally profound idea or a flash of wisdom

2. Founders that do startups based on very well researched plans, copying a trend or a phenomenon, doing lots of market analysis, spreadsheets and scheming to get rich

In general the founders in the first category go on to build companies that are very successful while the ones in the second category either fail or build companies that are not lasting.

A lot of people I meet in India are enamored by the terms “startup” and “entrepreneurship” but don’t really seem to understand that to be successful the motivation to do a startup has to be right.   The pre-condition to starting up is to understand that success in the way the world expects us to succeed (i.e., financially) is not guaranteed. Once you have this clarity you really need to ask yourself if you are willing to commit your time and resources for an indefinite period of time to achieve your dreams whatever be the outcome.  If the answer to this is “No” then do not startup.  If you are doing a startup to look cool/hip, to make a statement, to get rich and famous then question the motive.

My motivation to do paisa.com was to fix the frustration of dealing with the sub-standard, poor quality, me too consumer finance portals / online brokers in India when I had exited Zimbra and wanted to invest my money in the Indian markets.

As Confucius once said “ I hear and I forget. I see and I remember. I do and I understand.”    If you want to understand the world of startups, Just do it!

http://framethink.wordpress.com/2011/01/17/how-facebook-ships-code/

Please also read the corrections by a Facebook Employee  here http://www.reddit.com/r/programming/comments/f3u0n/how_facebook_ships_code/c1d3b37

To build a highly successful Internet Service, you need the following ingredients:

1. A solution (product) to a real problem that lots of people are facing

2. The product needs to be simple  for people to use

3. The user experience of the product should be world class.  The Internet Population in India are primarily using world class products like facebook, google *services  a lot and these are the gold standard of well designed and engineered products.  If you build a product that is not as well designed/engineered then you are going to have a hard time convincing someone to use your product everyday.  As a result, you are going to spend a lot of money on pushing ads to attract users and when they land on your site and are not impressed will bounce away increasing your Cost of Customer Acquisition (CAC).   There is enough evidence that the best designed products grow virally and don’t need a huge marketing budget to acquire customers.  Most startups in India don’t spend enough time perfecting the user experience.

Perfecting the User Experience requires the developers of the product to optimize the following:

1.  the user interaction design  - this is a key aspect of design where the designers need to build detailed mockups of the product and map how a user will interact with the product. The optimization phase of this process is to see how to make a user achieve his objectives with the least number of interactions with the product.  Humans are inherently lazy and if your product is not easy to interact with then they will just stop using it. We fortunately live in an era where we are spoiled with choices. For every idea, there are multiple startups trying to deliver solutions.   In this type of a competitive era, it would be foolish to start an Internet company without this core DNA fragment. If you have not developed this skill in your startup, go find a co-founder who  has very deep product design background.

2. the visual design  - people like eye candy.   this is a very important aspect of product design where the visual elements, the color schemes, the typography, the symmetry really differentiate your product and make it attractive.   Humans love things that are attractive and shiny – we are simply built that way (think about the time you checked out that pretty girl/boy or that awesome sports car with shiny alloy wheels).  If your site looks like crap don’t expect your visitors to be attracted to it.  Again, if you have not built this core DNA fragment, go and find an awesome co-founder who gets it!

3.  the perceived speed of the product  -  humans are lazy and impatient.  the slower your site, the more users that bounce off or churn away. Marissa Mayer of Google did a nice talk on this very critical aspect. Watch the video if you have not seen this talk.  It will open your eyes.

We spend an incredible amount of time at Infinitely Beta thinking through this right at the design phase of any product we build.   We then pick the right technology stack to deliver this experience and we either learn new technologies if we need to or do everything that is needed to deliver this experience.     Our first product Paisa.com was developed with the nginx/memcache/python/clojure/mongodb/redis stack and I remember every decision/brainstorming session we had during the design process that led us to this stack.   The result was awesome.   The speed of the product is something we get complemented on every day by our users.  Our production servers are in Singapore and all our pages are dynamically built.  The backend is constantly updating market data for 3000+ companies and yet things never slow down.    I hear from a lot of startups who have not taken the time to build a deeply technical team struggle with performance and scale issues even with 1000 visitors a day on their sites.   I know that it is incredibly hard to build a company and you are always worried about the monetization aspects or the next round of financing. But, please take the time to find a deeply technical co-founder who has worked on awesome products before and understands or is willing to learn all the aspects of how to engineer awesome product and create a culture that is so deeply technical that people who interview with you should feel like they faced the hardest interview of their life and hire the best.  At Infinitely Beta even our designers (people who traditionally use photoshop, dreamweaver etc – visual tools) use Emacs to hand craft all the HTML and CSS.   We spend the time to teach people skills that they need to be very productive.

4. the reliability of the product  -  this is something many startups struggle with as traffic on the site grows.  server crashes, late night debugging is a part of startup life.  Not!  At Infinitely Beta we have zero administrators.   We have automated the crap out of everything.  With the push of a button we can provision servers on the amazon cloud and build a server with all dependent code and light it up in a few minutes.  We sleep well at night and I can’t remember a single night since the last 4 months of Paisa.com going live where we have had to baby sit our servers.   We had one outage for a few hours once which was a due to a bug in our mongoDB client.    There is so much tech out there that can be applied to solve all these problems today.   We are not in 90′s when web technology was being built.  Again, do your homework.  Stay on top of hacker news to see what awesome new technology is being released that could solve /automate away problems that your facing.

In a nutshell, get off your asses and go learn!

PS: There are some awesome Indian startups that are killing it like Flipkart, Slideshare, Instamedia, Komli/Pubmatic and Cleartrip – are companies you may want to emulate.

Disclaimer: This post is relevant to technology/Internet startups in India and may not be applicable to startups that are not delivering a technology led/driven service. This is my personal blog and reflects my own views and opinions and in no way my companies views or opinions.

Like all Internet startups we are extremely bandwidth hungry and were looking at various options for good bandwidth.  We ruled out leased lines as they are exorbitantly priced in India thanks to the greedy telcos.   The best quotes we got for leased lines were pretty much around Rs. 2 Lakhs  for 1 mbps (one)  and Rs. 4 lakhs per year for 2 mbps.   At the same time we were seeing Ads from TATA that they were offering 4 mbps DSL conections at Rs. 9000 per month and Airtel was offering similar DSL connections.    The only issue with DSL is that the SLA’s are not as good as leased lines and the bandwidth may be shared on the last mile which means that effective bandwidth may drop to a 4th of the bandwidth during peak hours.   To solve this issue I started to wonder how it was possible to use technology to bond multiple cheap DSL connections and create one big fat pipe for the office.  A little bit of tinkering with routing tables convinced me that this was easily possible and I started to search the Internet for solutions that can do this so that we did not have to mess with IP tables etc and manage a PC.  BG and I looked at this problem closely and came up with many solutions:

1. Software Based Solutions – Get a cheap whitebox PC and install multiple lan cards on it and then do some IP tables magic to get the WAN connections bonded into a single fat pipe on the LAN.   The box would cost around Rs. 15-20K to build and each Ethernet/LAN card is about Rs. 600.  Depending on how many DSL lines you wanted to bond, you would need that many Ethernet/LAN cards.   So if you want to bond 4 DSL lines you would need 4 +1 = 5 Ethernet cards /Ports on the machine.  If you are not xNix/Linux savvvy and don’t want to mess with IP tables and command line you may want to look at these options:

ADSL Bonding – How To and Review

Link aggregation

Ubuntu Trunking

pfsense

endian

2.  Hardware based Solutions -  These are for the folks that don’t want to manage a PC and do some hacking and are not cash strapped.   They pretty much work out of the box.   We went with this option.    We got the Mushroom networks Truffle Bonding device which costs about US$2500 and has 6 WAN ports with 2 USB ports for Cellular WAN backup ( using the Reliance Netconnect Wireless Broadband + or TATA Photon).  With this device we can bond 6 WAN connections into one big fat pipe.    We have been using this for a month now and love the bandwidth situation in our office.

Mushroom Networks

I have been reading on the Internet that Dlink and Netgear are planning really cheap 2-4 WAN port bonding devices and these will be launched as early as Q1 2010.   So, watch out for these if you don’t want to spend a little over a Lakh on Mushroom.

We in the Startup community need to push the envelope and use these technologies so that the ISPs wake up and stop charging exorbitant fees for leased lines / bandwidth.   If India can fix its power/energy situation and provide cheap bandwidth to all, I am sure India will become a serious contender for world domination.   I see bright young people around me all the time and all they need is the resources to help them achieve excellence.   I truly believe that our Internet/Telecommunications growth was seriously hampered the day the Reliance split happened and Mukesh Ambani handed over Reliance communications to Anil Ambani and Dayanidhi Maran resigned as the IT minister due to divisive regional politics.    I am 100% certain Mukesh Ambani would have commoditized Internet Service in India and created a self fueled growth cycle in India for Broadband the same way he started the mobile revolution in the country.   RCOM which was built by him has degenerated in the hands of the ADAG groupand it is just appalling the way it is managed.  They don’t even seem to have a clue about the market.

Case in point…..We recently got a RCOM DSL connection in our office as they were the only ones who had free ports on their DSLAM and could connect our office immediately (both TATA and Airtel were out of capacity – this should tell you about the demand for RCOM).    I reluctantly got RCOM as their pricing was not inline with the market.   While TATA and Airtel were offering 1 mbps business broadband at around Rs. 2500 per month,   RCOM was charging Rs. 4500 (almost double) for the same bandwidth.    I told RCOM that the day TATA and Airtel provide service to my office, I will disconnect their service if they don’t fix their pricing.    1 week after we got our RCOM connection, TATA provided us with a 4 mbps connection for Rs. 9000 per month and we gladly disconnected RCOM.

“On the 6th of November, very late in the evening as we were working on our main product, @abinashtripathy our founder saw a tweet from his mentor @satishd that said

“I hate it when I space out on breakfast meetings and have to call to apologize. I want calendar reminders on my twitter client “

Abinash jumped up out of his seat and said “I know what we are going to work on this weekend” and quickly explained what the product should do. 2 days later we had an initial prototype of I’m not spacy.”

Keep on Minnovating!

Highlights from the Article:

1. Apple’s iPhone division’s operating profits for Q3 2009 is estimated at $1.6B (based on quarterly earnings release data)

2. Nokia’s handset division’s operating profits for Q3 2009 is $1.1B based on the quarterly earnings release

Quoted from the article:

” Nokia’s director of strategy, Anssi Vanjoki, admits that the Finnish company was ill-prepared for the sustained and undeniably successful attack on its commanding position by the likes of Apple, Google and RIM and “does not rule out” the sale of its handset business at some time in the future. Martyn Warwick reports.

In an interview published this morning in the German magazine Wirtschaftwoche, Mr. Vanjoki, who is also Nokia’s head of marketing, admits too that his company needs to work harder to improve its mobile Internet products if it is to to stay in contention with the likes of Apple, Google and Research in Motion – the manufacturer of the increasingly popular Blackberry PDAs.”

Takeaways from the article:

1.  Nokia’s march to the deadpool just seems to be accelerating over time as it remains uncompetitive with the onslaught of Apple and Google who are using their Silicon valley style Product Innovation capability to cut the oxygen supply to Nokia.

2. Apple’s profitability is based on the sale of only 5.2M handsets while Nokia sold 113.5M handsets out of the total market of 308.9M handsets sold in Q3 2009.  The argument that I always made that selling large volumes of low end mass market feature phones and losing sight of the highly profitable high end market may be the sole reason why Nokia will fail as a company.   Moore’s law applies to the mobile devices market as well and what is high end today will become low end in 1-2 years and when that happens the already uncompetitive Nokia will not have a market to play in.

3. Product companies need to focus on innovation and providing product delight to customers so that they don’t face the same fate of Nokia.   If a large Goliath like Nokia can fail  simply because they took their eye off the ball and started dabbling in fashion, gaming and areas that were not important to customers and started delivering poor user experience (btw, user experience is what made Nokia a great company a decade ago) then small companies with poor product offerings have a much shorter lifespan.

Indian product companies do not focus on delighting customers and keep offering sub-standard products to the market (Internet and Media companies included).    The only reason they continue to do business is because our market is very large and due to the socio-economic background customers are not exposed to great products YET.   Our markets have opened up nicely and we can now get the same products available internationally.  It is only a matter of time until our people will start getting spoiled by great products and start demanding great products and services.

A nice example of this phenomenon can be observed in the Home Appliance business.   LG and Samsung now dominate the home appliance business in India.  Almost all the Indian companies in this space have been systemically eliminated and the few left standing like Videocon are struggling to remain competitive in this business and are diversifying into other businesses (DTH etc) where they can compete more effectively.

All Indian technology startups should focus on building great products that delight customers and can be benchmarked against the best in the world.  If not, it is a matter of time until some silicon valley company will look at India as a part of their global expansion strategy and obliterate Indian companies that deliver poor quality.

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.