The iii unlikely lessons from the Microsoft/Nokia crash

Michael Vakulenko

Michael Vakulenko

A results-oriented and tech-savvy Production Management executive

Published Jul 9, 2015

Microsoft has finally raised the white flag in the battle for smartphone authority. Microsoft announced that the company volition be scaling downwards its mobile phone concern it acquired from Nokia laying off vii,800 employees and writing off $seven.vi billion (this is well-nigh the entire value of the Nokia Devices and Service business minus the greenbacks information technology came with).

The determination is dramatic, but inappreciably unexpected. David Pierce writes in WIRED:

Requite Nadella some credit for seeing the writing on the wall, though to be fair it was basically written in huge messages and lit past floodlights.

The writing on the wall is still there and can help united states see where Internet of Things will exist in a few years.

#1: Concern model, not product features define your destiny

In my analysis from 3.5 years agone on the VisionMobile blog I argued that the paramount challenge for Microsoft and Nokia is a cleaved business model, non production features, user interface or integration of software and hardware. (A business model describes how a company creates, delivers and captures value.) From my 2012 weblog:

The basis for contest in software and mobile has changed – the one time-successful business models of Microsoft and Nokia can no longer ensure profitable growth.
Combining ii business concern models of the 1990's due west on't help the two companies regain their positions in the new globe order, dominated past companies with Net-age business models, like Apple, Google, Amazon and Facebook.

Looking at the industry through the lens of software-defined business organization models has helped the states to accurately predict years before the story unraveled the duopoly of Apple tree and Google (2009), the demise of Palm (2009), the outcome of HP's foray into mobile with WebOS (2010), BlackBerry'due south meltdown (2010), and the failure of Windows Phone (2012).

The story repeats in Internet of Things. Much like in mobile, software-defined concern models crusade deep shifts in how value is created and delivered. The IoT winners volition be decided past business model innovation, not by technology, product features or standard committees. VisionMobile's Stijn Schuermans wrote about it hither - What the Internet of Things is not almost.

#2: Skate to where the money will exist, not where it has been

The mobile manufacture continues to modify. In 2013 we wrote, together with Sameer Singh, in the The evolution of the handset business models:

A 3rd wave of disruption will again reshuffle the deck for all [mobile] manufacture players. We will see growth in a new class of business models, where handset hardware is no longer seen equally a source of profits, simply is treated as a distribution channel for digital products and services.
As toll competition increases, commoditization force per unit area in the smartphone industry, variations of "hardware as distribution", could become one of the principal drivers of profitability.

In 2014 Xiaomi became the most valuable tech startup in the world by executing on "hardware as distribution" business organization model and creating a new e-commerce market for itself. From "Only for fans, or why Xiaomi is not what you think it is":

Comparison Xiaomi with other traditional smartphone makers is like comparing Apple with Orangish (a mobile network operator). The two happen to be in the aforementioned manufacture, only they are really in different businesses. Apple, Samsung, Huawei, Lenovo sell phones to make profits. Xiaomi sells phones to seed competitive e-commerce business organization that goes far beyond mobile.

Nokia and Microsoft focused on chasing today's competition and missed the market place transition that turned their strengths into weaknesses. The same will exist true for the Internet of Things (IoT): five years from at present the IoT market volition exist very different from what information technology is today. The time to come IoT winners skate to where IoT is going to be, non where it is today.

#iii: Follow developers to notice futurity winners

Microsoft and Nokia spent a fortune trying to attract developers to its Windows Phone platform. Merely it was too late. Google and Apple tree understood the importance of developers much before and had established thriving programmer ecosystems. VisionMobile'south Andreas Constantinou wrote in "The Dead Platform Graveyard":

You can't buy developer honey. Yous can merely institute the seeds.

The data from the VisionMobile Q1 2015 survey of 8000+ developers shows that the majority of developers, including most valuable innovators, brand apps for the Android and iOS duopoly (71% and 54% of developers respectively). The story of Windows Telephone proves that distant 3rd identify is not viable in the ecosystem race. Moreover, as nosotros argued earlier, ecosystems create "Black Oceans" that make competition impossible for late comers to the ecosystem party (hither's why).

Software developers emerge as a driving force in industry afterward industry, not just in mobile. VisionMobile's Stijn Schuermans writes in Developer Megatrends 2015:

Developers are conquering the wrist, with 3,500+ Apple Lookout apps and 2,300+ Android Wear apps.
 They're conquering the car. Android Car and Apple Carplay will exist available on dozens of car models this year. 250+ OBD apps provide aftermarket solutions for car data, with growing support from big players in telecom and insurance.
 Developers are conquering the dwelling house, taking advantage of new technologies and platforms similar Samsung SmartThings, Apple tree HomeKit, Google Weave, Eclipse Smart Domicile or dozens of device APIs.
 Developers are fifty-fifty conquering the sky. Major drone players similar DJI (from Phantom fame), 3D Robotics (dronekit.io) or Airware are providing SDKs for drone apps, helping developers to put drones to utilize in industry, agriculture, construction or mining. Cities, healthcare, article of clothing, factories, … – They'll all fall to the wave of innovation by developers.

Much like in mobile, IoT competitive battles volition exist decided past attracting developers, not by standards committees.

There is a lot to learn from how the mobile industry was reshaped by software-defined business concern models, market-creating innovations and developer ecosystems. The lessons are in the plain sight. Microsoft and Nokia ignored them at their own peril. Who will be adjacent?

-- Michael