Our view of the Nokia-Microsoft match is that it makes for a good fit on the basis of leveraging a two awkward, slow industry giants that now find themselves out of step with the meteoric rise of the web device environment.
There is a basic miscue. What is changing rapidly is the mode of the business environment that coincides with the structural differences of distributed internet and applications. The “right formulation” for doing business is not just about putting together the right pieces, but about being structured to be flat and responsive.
The large amounts of capital, huge armies of developers, valuable technologies or manufacturing muscle have a degree of importance. However, as recent history has taught, these can be upset by new technology, market evolution and device connectivity reforming modes of business to the flatter, web-centric, simplified open OS environment.
We had thought that Nokia’s best choice was to embrace the level of innovation needed by embracing both the Google and Microsoft OS. The company found itself in the difficult spot of needing to leverage expensive assets including mapping while leveraging still large numbers of handset sales. The agreement does provide Nokia with billions of dollars in return for mapping and other assets, however, these can only be leveraged to the extent that MS Windows Phone 7 is successful.
Nokia and Microsoft will likely have a degree of success in enterprise markets where Microsoft’s office suite reigns supreme. The problem is their speed of delivering innovations. We think that the merging of the two slow giants is unlikely to result in a restructuring of the basic problems.
The Google and Apple OS platforms are such juggernauts because they precipitate innovations at a pace that thwarts competition. This is made possible by their flatter, less top-down and faster-paced structure. The control of apps stores and subscribed content can come only after capturing the volume and momentum of the open environments. While Microsoft and Nokia retain market share, these are about to be pressed by that rapid convergence of markets.