Apple and Nokia: The Transformation from Products to Services

Abstract

In the mid-to late 2000s, Nokia flourished as the world's dominant mobile phone --- and mobile phone operating software --- producer. Founded in 1871 originally as a rubber boots manufacturer, by 2007 Nokia produced more than half of all mobile phones sold on the planet, and its Symbian mobile operating system commanded a 65.6 percent global market share.1 But within half a decade, Nokia would falter and be surpassed in the smartphone market not only by Apple's revolutionary iPhone but also by competitors including Google and Samsung. And in September 2013, Nokia would sell its mobile phone business to Microsoft for {$}7 billion.2 Apple literally came out of nowhere --- it sold exactly zero mobile phones before the year 2007 (the year Nokia held more than half of the global market share) --- but by the first quarter of 2013, Apple had captured almost 40 percent of the US smartphone market and over 50 percent of the operating profit in the global handset industry.3 In fiscal year 2013, Apple would sell five times more smart-phones than Nokia: 150 million iPhones compared to Nokia's sales of 30 million Lumia Windows phones.4 In contrast to Nokia, Apple realized it wasn't just about the mobile device itself, it was about leveraging software to create a platform for developing compelling mobile experiences --- including not just telephony but also music, movies, applications, and computing --- and then building a business model that allows partners to make money alongside the company (e.g., Apple's iTunes and AppStore) and, in so doing, perpetuate a virtuous cycle of making the iPhone attractive to customers over multiple life cycles through ever-expanding feature sets.