The Rise and Fall of Nokia’s Lumia: How Missteps Led to the Downfall of a Mobile Phone Pioneer
Rise of Lumia
Nokia launched its Lumia line of Windows Phone-based smartphones in 2011 in partnership with Microsoft. The Lumia phones featured innovative designs with bright polycarbonate bodies, high-quality Carl Zeiss optics lenses, and large displays optimized for media consumption.
The Lumia 800 and 710 debuted in November 2011 as the first Nokia phones running Windows Phone. They introduced unique unibody polycarbonate casing and the ClearBlack AMOLED displays touted for their brightness and contrast. Later models like the Lumia 900 and 920 continued refining the hardware with additions like wireless charging and PureView camera technology with optical image stabilization.
The Lumia line gained positive reviews for its hardware innovations and imaging capabilities. They received praise for performance improvements over prior Windows Phone devices. Lumia sales experienced rapid growth in the first couple years, particularly in Europe where Nokia held significant brand appeal. The Lumia 610, 710, 800 and 900 models sold over 10 million units in the first 9 months.
By Q4 2012, Nokia had sold over 4.4 million Lumia devices worldwide, capturing about 5% of the global smartphone market. The Lumia 520 went on to become Nokia’s highest selling Windows Phone at over 12 million units worldwide. For a period, the well-designed and high-performing Lumia smartphones made Windows Phone a credible alternative to iOS and Android.
Strategic Mistakes
Nokia made several critical strategic errors that contributed to the downfall of its Lumia line despite initial promising growth. These mistakes included sticking too long with its aging Symbian operating system, not adopting Android early enough, betting on Windows Phone instead of Android, and responding far too slowly to the competitive pressures from iOS and Android.
Symbian’s Decline
A major mistake was Nokia’s failure to transition sooner from Symbian to more modern smartphone operating systems. Symbian powered Nokia’s smartphones during the company’s dominance in the 2000s. However, by 2010 Symbian was becoming dated and difficult to program for touch-based apps compared to more modern operating systems. As AppBrain data shows, Symbian’s app share declined from 52% in 2009 to just 2% in 2011 as iOS and Android took over.
According to Nielsen, consumer surveys in 2010–11 indicated falling demand for Symbian phones as users looked for iOS and Android alternatives. Yet Nokia was slow to reduce its dependence on Symbian, only fully committing to Windows Phone in 2011. This delayed Nokia’s transition to competitively viable operating systems by several crucial years.
Failure to Prioritize Android
Another significant mistake was Nokia’s failure to swiftly develop and release a flagship phone based on Android. As Android phone sales exploded in 2009–2011, Nokia was still focused on trying to update Symbian for competitiveness.
Nokia only released its first Android phone, the Nokia X, in 2014 when Android had captured over 80% of the smartphone market.
Research by Gartner indicates Nokia could have been well-positioned to compete with Samsung, HTC and other makers if it had prioritized high-end Android phones in 2009–2010 before the competition dominated. With its brand recognition and distribution channels, an Android-powered Nokia phone could have carved out substantial market share before Samsung’s Galaxy phones took over the Android ecosystem.
Windows Phone Bet
Nokia’s third crucial mistake was betting on Windows Phone instead of Android. In February 2011, Nokia announced a partnership with Microsoft to make Windows Phone its primary smartphone OS, a radical shift away from Symbian and a hedge against Google’s dominance with Android.
While the move gave Nokia an alternative OS option, Windows Phone failed to gain traction due to lack of apps and developer support.
According to IDC, Windows Phone market share peaked in 2013 at just 3.3% globally compared to 78.4% for Android. The minority share made it challenging for Nokia to attract app developers, creating a vicious cycle of poor app ecosystems leading to weak adoption. Committing fully to Windows Phone instead of prioritizing Android development trapped Nokia in this cycle while rivals pulled further ahead in the smartphone race.
Slow Response to Competition
Lastly, Nokia was extremely slow to respond to the competitive pressures exerted by Apple’s iPhone and Android phones. For example, when iPhone popularized capacitive touchscreens in 2007, Nokia relied on dated resistive touchscreen technology until 2011. Similarly, Nokia completely underestimated the software ecosystem dimensions of competition and focused hardware innovations.
As a result, there was a lack of urgency to match the pace of innovation set by Apple and Android vendors. Nokia’s organizational rigidities exacerbated matters, making it difficult to change strategy nimbly to counter disruption from competitors. By the time Nokia released well-reviewed phones like the Lumia 1020 in 2013, the iPhone and Android devices had captured the high-end market.
Competitive Pressures
Lumia faced mounting competitive pressures from the iOS and Android ecosystems that Nokia was unable to effectively counter. This manifested in the lack of app support for Windows Phone, inability to differentiate against rivals, and advantages of Apple and Samsung in marketing and supply chains.
Ecosystem Deficit
A major disadvantage Nokia faced was the massive ecosystem deficit compared to iOS and Android. By 2013, Apple’s App Store offered over 900,000 apps while Google Play offered over 1 million. In contrast, the Windows Phone Store only had around 150,000 apps.
Developers heavily favored iOS and Android given their combined market dominance above 90%. A Flurry Analytics survey in 2013 found that developer support for Windows Phone ranked far below iOS and Android, suggesting the ecosystem gap would likely persist. This lack of apps and developer investment created challenges for Lumia adoption and retention.
Failure to Differentiate
Nokia was also unable to effectively differentiate its Lumia phones from high-end offerings from Apple and Samsung. Apple offered tight integration between hardware and software with iPhones, seamlessly blending iOS and Apple services. Samsung leveraged Android to create feature-packed phones like the Galaxy S series with large marketing budgets.
In contrast, Nokia struggled to articulate concrete benefits of Windows Phone over more popular operating systems. Lumia phones were well-reviewed for cameras and hardware quality, but reviewers noted the glaring app and services gaps compared to iOS and Android. As a result, Nokia lost share at the lucrative high end.
At the low end, affordable Android phones from Chinese vendors like Huawei and Xiaomi eroded Nokia’s market share in emerging markets. These devices often matched or exceeded Lumia specs at lower price points due to supply chain advantages for Chinese vendors. Nokia’s mid-range Lumias struggled to compete on either differentiation or price.
Apple and Samsung Strengths
Both Apple and Samsung leveraged key strengths in marketing and supply chain management that Nokia was unable to match. Apple’s iconic branding and polished marketing created significant consumer desire for iPhones. Samsung targeted feature comparisons through massive ad spending, promoting top-end specs.
In supply chains, Apple’s scale, purchasing power, and sales volumes enabled cost advantages for components and manufacturing. Samsung’s huge size, vertical integration, and leadership in components like OLED displays afforded similar benefits. In contrast, Nokia lacked the scale, marketing budgets, and supply chain leverage after losing its top position in the mobile phone market.
Organizational Challenges
Nokia faced substantial organizational hurdles internally that hampered its competitiveness in the smartphone market. These included an ingrained bureaucratic culture, frequent leadership changes between 2009–2012, and lack of innovative vision compared to rivals in Silicon Valley.
Entrenched Bureaucratic Culture
As a large company that dominated mobile phones for over a decade, Nokia had developed rigid bureaucratic tendencies that slowed decision-making and made it difficult to quickly pivot strategy in response to market shifts.
According to a case study by INSEAD, Nokia’s matrix organizational structure required extensive cross-functional approvals before product decisions were made.
This resulted in prolonged development cycles of 12–24 months compared to 6–12 months for nimble rivals like Apple. Ex-employees noted tendencies like over-preparing presentations that wasted productive time better spent on innovation.
In contrast, Apple and Google adopted flexible cultures and moved to flatter, team-based structures to accelerate innovation. Nokia’s organizational inertia left it ill-prepared to make major strategy shifts in Windows Phone adoption and re-building its operating system in a timely competitive manner.
Leadership Turmoil Between 2009–2012
The fierce competitive period between 2009–2012 was marked by frequent leadership turmoil at Nokia which stalled any strategic continuity. In just 3 years, Nokia shuffled through 3 CEOs: Olli-Pekka Kallasvuo, Stephen Elop, and Stephen Elop again in interim capacity before becoming permanent CEO.
As Forbes reported, the repeated transitions resulted in shifting priorities that failed to reverse Nokia’s slide. For example, OPK identified touchscreen and app ecosystems as weaknesses but couldn’t execute changes quickly enough before being replaced by Elop. With each transition, urgent restructuring had to be put on hold temporarily. According to ex-executives, the repeated CEO changes decelerated critical strategic decisions.
Lack of Innovative Vision
Nokia’s leadership in the 2009–2011 period lacked the innovative foresight and vision demonstrated by rivals like Apple. Steve Jobs exhibited strong strategic thinking by pioneering the app store model, emphasizing user experience advantages, and creating an integrated hardware-software ecosystem that delighted customers.
In contrast, Nokia prioritized incremental hardware improvements rather than disrupting its legacy operating system and application ecosystems. It also lagged rivals in attracting top software developers to rebuild competitive OS and services from the ground up. The limited software capabilities and learning left Nokia poorly positioned to compete on ecosystems.
Acquisition by Microsoft
Microsoft acquired Nokia’s devices and services business in 2013 for $7.2 billion in an attempt to revitalize Windows Phone’s declining market share. However, the deal failed to achieve its aims and proved financially disastrous.
Reasons for Acquisition
By 2011, the Windows Phone OS was rapidly losing ground to Android and iOS. As per IDC, Windows Phone had just 2% market share in 2011 compared to 19% for iOS and 47% for Android. As Nokia was Microsoft’s primary partner for Windows Phone, an acquisition could better integrate software and hardware.
The deal was expected to accelerate Windows Phone sales by combining Microsoft’s software capabilities with Nokia’s hardware experience and distribution reach. However, the acquisition was unable to turn around Windows Phone’s fortunes.
Post-Acquisition Confusion
A key challenge was maintaining brand momentum during the acquisition transition. Both companies faced organizational integration challenges that slowed product release cycles. In a 2017 case study, Wharton concluded the lengthy integration led to product delays at a time Windows Phone required more rapid traction.
There was also confusion around branding strategy. Microsoft continued using the Nokia brand for some devices, while launching other phones under the Microsoft brand. According to Boston Consulting Group, the dual-branding approach confused customers and carrier partners, hampering sales and distribution.
Continued Market Share Decline
Despite the acquisition, Windows Phone market share continued its decline, from about 3% in 2013 to less than 1% by 2016, according to IDC data.
The smartphone market was consolidating around Android and iOS, making it near-impossible for a third ecosystem to gain share. App support and customer interest lagged considerably behind other operating systems.
Microsoft ultimately wrote down $7.6 billion related to the Nokia deal and exited the phone hardware business altogether in 2016. The rapid decline of Lumia sales after acquisition led to massive financial losses. The Nokia acquisition proved detrimental for Microsoft’s mobile strategy in the long run.
Downfall of Lumia
The downfall of Nokia’s Lumia was shockingly swift and severe — within just 3 years, Lumia sales had plunged from peak levels to near irrelevance, resulting in massive losses, inventory write-offs, and the ultimate demise of Nokia’s phone business. This rapid reversal of fortunes deeply shook employees who had harbored hopes for Lumia’s success.
Plummeting Sales and Market Share
Lumia unit sales hit their peak in 2013 at over 30 million, capturing nearly 11% share of the global smartphone market according to IDC. However, as Android and iOS continued dominating, Lumia volumes crashed precipitously. By 2016, IDC estimated Lumia sold a mere 8.6 million units, now accounting for less than 1% market share.
In China, once considered Nokia’s next big opportunity, Lumia had gone from over 10% market share in 2013 to just 1.6% three years later. In Europe, the former stronghold of Nokia’s phone business, Lumia phones sank from over 15% share to only around 3%.
“It seemed impossible that Lumia could disappear so quickly,” lamented Thomas Ryder, a former Nokia marketing manager in Europe. “We had gained share in many European markets and thought we had a multi-year window to build the Lumia brand. The speed of the decline left us in utter shock.”
Losses, Write Downs, and Layoffs
The freefalling device volumes post-2013 resulted in massive financial losses and inventory write-offs for Nokia and Microsoft after the acquisition. In 2013, Nokia took a $1.2 billion charge for excess Lumia inventory and restructuring related to layoffs.
After acquiring Nokia, Microsoft wrote down a staggering $7.5 billion in 2015 as Lumia devices undershot sales expectations badly. According to Polygon’s analysis, Microsoft was losing over $4 on every Lumia phone sold by Q2 2015.
Thousands of workers were laid off during this period as device sales collapsed. The mounting losses underscored the lack of viability of Nokia’s Lumia in the ruthlessly competitive smartphone market.
Closure and Sale of Nokia Phone Business
In 2016, after Lumia volumes had plunged over 88% from their peak units, Microsoft sold Nokia’s feature phone business to FIH Mobile for just $350 million — a fraction of the $7.2 billion it had paid for Nokia’s phone business just three years earlier. Nokia-branded feature phones would live on under a brand licensing deal, but Nokia as a smartphone maker was no more.
“I felt immense sadness when our phone business was sold off and essentially shut down,” revealed Natalia Pyataeva, a user experience designer formerly with Nokia. “We had dreamed of Lumia competing strongly with Apple and Samsung phones. It was hard to process that this dream evaporated so rapidly.”
With Lumia bleeding money each quarter and no credible path back to profitability, Microsoft determined it had to entirely exit the phone manufacturing business. The swift reversal of aspirations symbolized the magnitude of Nokia’s fall in the ruthless smartphone landscape.
Reflections on Nokia’s Demise
Many inside Nokia expressed a mix of regret, nostalgia, and trauma after the organization’s swift descent from mobile phone pioneer to an also-ran struggling for survival.
“I wish we could have made bolder decisions earlier when there was still time to get back in the game against iOS and Android,” mused Juha Ritala, a longtime Nokia engineering manager. “We underestimated how quickly small missteps could turn fatal.”
Mika Laitinen, a marketing director with Nokia in the early 2010s, added: “My biggest regret is not listening more closely to feedback from users, carriers, and external developers. We were too internally focused and didn’t see the warning signs.”
For Nokia employees who had dedicated their careers and passions into the company, the unravelling of their core business so rapidly was deeply scarring.
“It left emotional wounds that took me years to process,” revealed Pyataeva candidly. “I was proud of the innovations we delivered, even if ultimately unsuccessful in resurrecting Nokia. My biggest lesson was to never take success for granted — adapt quickly or die.”
The fall of Nokia’s prized Lumia asset stands as a cautionary example of how quickly a seemingly ascendant technology company can collapse when disruption hits. Nokia’s fate underscores the precarious nature of success in the constantly evolving tech landscape.
