Chapter 2 The Smartphone Revolution

Nokia's burning platform

Whatever the impact of that extraordinary performance by Steve Jobs as he unveiled the iPhone in 2007, it seemed far from inevitable in the months that followed that Apple would transform the mobile phone industry.

Chapter 2 begins with the reactions of industry rivals to the new interloper. “There’s no chance that the iPhone is going to get any significant market share. No chance.” said Steve Ballmer, the bullish chief executive of Microsoft , whose Windows Mobile operating system was making some progress at the time.

Jim Balsillie, co-chief executive of Research In Motion, the Canadian company behind the Blackberry, was also sanguine:“It’s kind of one more entrant into an already very busy space with lots of choice for consumers. But in terms of a sort of a sea-change for BlackBerry, I would think that’s overstating it.”

In 2007 the industry giant was Finland’s Nokia, with 40% of global mobile phone sales and an even bigger share of overall profits. In this extract former Carphone Warehouse chief executive Charles Dunstone, who had worked with Nokia for years, describes how he tried to warn the company that the world was changing:

“We were really really close to them, they were our best supplier. I would be a huge customer for them so they really were our friends.”  Having signed a deal to be the exclusive High Street retailer for the iPhone in the UK, Dunstone went with a colleague on one of his regular trips to Helsinki to see Nokia. “We went there to say, you really have got to watch out because this iPhone thing is completely different. And they didn't want to hear it.”  Somewhat frustrated, his colleague explained that the iPhone was so different that his four year old son could use it. “And the guy from Nokia said, we don’t want to make phones for four year olds.”

Nokia was slow to understand the threat from Apple, and then Google’s Android, which was more about software than the hardware. Perhaps even more important than the unveiling of the iPhone was the launch in 2008 of Apple’s App Store, followed swiftly by the Google Play store. Very quickly it became clear that the mobile phone experience was going to be dominated by two ecosystems, iOS and Android, and any phone or app developer not on those platforms was going to struggle.

Eventually Nokia did realise that it was in trouble and recruited the man in the photo at the top of this post, former Microsoft executive Stephen Elop, to try to turn things round. In February 2011 he wrote what I describe in this chapter as “one of the frankest, and most devastating assessments of a company’s prospects any chief executive has delivered.”

It was a speech and company blog which became known as the “burning platform” memo, in which he compared Nokia to a man trapped on a North Sea oil platform after an explosion:

“The first iPhone shipped in 2007, and we still don't have a product that is close to their experience. Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes. Unbelievable.”

He decided that the solution was to leap onto another platform, Windows Phone, made by his former employer. In the photo taken at Mobile World Congress in February 2012 you can see an advert for one of the fruits of that partnership, the Nokia Lumia 900. It got pretty good reviews, as did other phones in the Lumia range, some of which had far better cameras than were available on iPhones or Androids.

Microsoft was so convinced things were looking up that it bought Nokia in 2013. But it was software which remained the problem. App developers focused on iOS and Android first, then looked at the Windows Phone platform and decided it was not worth the bother to craft another version for such a small audience.

Two years later the new Microsoft CEO Satya Nadella wrote off the entire value of the deal hatched by his predecessor Steve Ballmer and laid off nearly 8,000 workers, many in Finland.

By that stage, Apple had gobbled up nearly all of the mobile phone industry’s profits, Google’s Android was the dominant operating system and names like Blackberry and HTC were fading away. It hadn’t taken long for the world to be turned upside down.

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