The Rise And Fall Of Nokia: How Nokia Went From Phone Titan To Obsolete Explained
Across the globe, Finland is known for various things: heavy metal bands, soreness, unique bus stop etiquette, and Nokia. Currently employing over 100,000 people worldwide and boasting annual revenues of over twenty-nine billion dollars, Nokia has risen to become a global force.
But its beginnings in history are as unique as the country, where it all started. We’ll examine the rise of Nokia and how it became one of the world leaders in mobile phone technology.
Founded over 150 years ago, Fredrik Idestam wanted to capitalize on Finland’s huge forestry industry and created a paper mill near temporary. Not long afterward he built a second paper mill near a town called Nokia, on the Nokia and Vertu River. A few years later, Fredrik Idestam partnered with a man by the name of Leo Mechelin, who had grander visions than running a couple of near paper mills in the backcountry of Finland. He convinced Fredrik Idestam the former public company Nokia AB and after Frederick retired, Leo Mechelin used the same River to start generating electricity in a new venture for the company. At the same time, a man by the name of Edward Pollan founded Finnish rubber works which made rubber products like boots and tires.
After World War I, Michelin’s Nokia AB was failing and was bought out by Finnish rubber works, enabling the company to continue generating electricity and paper products.
A third company was also destined to join the Nokia family of companies. In 1912 Finnish cable works was founded and then acquired by Finnish rubber works 20 years later. The timing of their deal could not have been better. After the devastation of World War II, the Soviet Union was desperate to rebuild its infrastructure. For Finnish cable works, a company that sold telephone and electrical cables, they were positioned to make a fortune. The massive influx of cash helped the company strengthen its financial position. Expanding their opportunities into new markets.
The conglomerate would grow into an unrecognizable company from the modern Nokia that we’ve come to know today. They operated within nearly every industry you can imagine. TV production, paper manufacturing, gas masks, plastics, and chemicals to name a few.
The start of the new focus happened in the early 70s when Nokia invented a new digital switch for telephone exchanges. This began a long history of developing telephone technology that helped transform the cellular systems used around the world.
In the late ’60s, Nokia was already producing radio-telephones that were used in cars and by the military. By 1978 they claimed 100% coverage across all of Finland with their radio car phone systems.
It was just a year later that the diverse Nokia took steps to align with a TV maker called Silora to develop a brand new Nordic mobile telephone network. It was the world’s first cellular network.
An upgrade from the previous radio system used at the time. It was known as the 1G system. The very first cellular generation which used analog signal.
By the early 1980s Nokia launched its first car phone the Mobira Senator. It was effective but incredibly bulky with each unit weighing in at 10 kilograms. Soon after they released the Mobira talk man, half the weight of the first version but still too clunky and only accessible in a car. The first truly portable cellular phone was the Mobira Cityman weighing in at just 800 grams. But it came with a huge price tag at 24,000 Finnish marks, the equivalent of 8200 U.S. Dollars today.
Due to its exorbitant price a city man didn’t really catch on. That was until a photo of President Mikhail Gorbachev, president of the USSR was photographed using it in Helsinki in 1987. Almost overnight it became a cult status symbol. Owning it proved your wealth and power. It also earned the nickname the Gorba after the Soviet President himself.
Nokia continued developing its cellular network establishing the 2G GSM network that went from analog signals to a digital signal. By 1987 the 2G system standard across all of Europe. It enabled data to be sent digitally.
Eventually paving the way for SMS text messaging in July of 1991 the Finnish Prime Minister made the first phone call on the 2G network and about a year later the world’s first text message was sent.
It read Merry Christmas.
The 2G system would later go on to take the world by storm. Eventually gaining over 3 billion users. In the early 90’s Nokia was facing some financial problems. In an effort to streamline the business they started to sell off divisions and create separate entities. First went there paper industry, the origin of the whole company. Followed soon by tires and rubber production. After selling off most of the other industries Nokia had one singular focus: Telecommunications.
In 1994 Nokia released its model Nokia 2100: a new entry-level phone series designed for anybody to use. It included the now-iconic Nokia ringtone and the game snake. Demand went through the roof.
Originally Nokia predicted a run of 400,000 units for this series they ended up selling over 20 million worldwide.
Nokia couldn’t make the ‘Nokia 2100’ fast enough. They saw that managers were trying their hardest to buy just enough materials to keep their factories producing. They created a whole new division to overhaul its entire supply chain.
In Western Europe alone mobile phone users went from 5 million to 23 million in just four short years. Faced with the same challenges as other brands like Ericsson and Motorola, Nokia had to make drastic changes if they were going to keep up with the increased demand for mobile phones.
Instead of relying on one supplier in Japan, Nokia learned how to build their technology in their home country and taught it to a Finnish electronic supplier. They also outsourced their plastics to a Finnish company as well for their five factories around the world. Once they solved their supply chain issue, Nokia rapidly outpaced its competitors.
From 1996 to 2001 they multiplied their revenue 5 times over. What’s also truly amazing is their domination of the industry. They had become the world’s largest mobile phone provider. A position they held for 14 years.
It appeared nothing could stop the rise of Nokia. But then Apple introduced the iPhone which would mark the beginning of the end for Nokia.
The iPhone was more than a mere sleek device made from premium materials. A major upgrade from the cheap-feeling plastic used by other smartphones at the time. It was also the world’s first smartphone to feature a multi-touch display. Overnight the smartphone touchscreen revolution was born. The world would begin its shift away from physical plastic to digital on-screen keyboards. Over the next few years, Nokia’s global market share would crater to less than 5%. Today its stock prices plummeted over 90%, since the iPhone’s debut.
Nokia’s greatest lesson is to be wary of complacency. Innovation went both ways. On one hand, the advent of 1G enabled their success, on the other hand, it was their unwillingness to take risks which allowed Apple the opportunity to steal their throne.