Can Nokia and Microsoft ever be Mobile?

Today Nokia and Microsoft announced a JV to retake the Smartphone market - Nokia:

While the specific details of the deal are being worked out, here’s a quick summary of what we are working towards:

- Nokia will adopt Windows Phone as its primary smartphone strategy, innovating on top of the platform in areas such as imaging, where Nokia is a market leader.

- Nokia will help drive and define the future of Windows Phone. Nokia will contribute its expertise on hardware design, language support, and help bring Windows Phone to a larger range of price points, market segments and geographies.

- Nokia and Microsoft will closely collaborate on development, joint marketing initiatives and a shared development roadmap to align on the future evolution of mobile products.

- Bing will power Nokia’s search services across Nokia devices and services, giving customers access to Bing’s next generation search capabilities. Microsoft adCenter will provide search advertising services on Nokia’s line of devices and services.

- Nokia Maps will be a core part of Microsoft’s mapping services. For example, Maps would be integrated with Microsoft’s Bing search engine and adCenter advertising platform to form a unique local search and advertising experience.

- Nokia’s extensive operator billing agreements will make it easier for consumers to purchase Nokia Windows Phone services in countries where credit-card use is low.

- Microsoft development tools will be used to create applications to run on Nokia Windows Phones, allowing developers to easily leverage the ecosystem’s global reach.

- Microsoft will continue to invest in the development of Windows Phone and cloud services so customers can do more with their phone, across their work and personal lives.

- Nokia’s content and application store will be integrated with Microsoft Marketplace for a more compelling consumer experience.

So far so good, now here is the harder bit:

We each bring incredible assets to the table. Nokia’s history of innovation in the hardware space, global hardware scale, strong history of intellectual property creation and navigation assets are second to none. Microsoft is a leader in software and services; the company’s incredible expertise in platform creation forms the opportunity for its billions of customers and millions of partners to get more out of their devices.

The reason the JV is happening is that the assets being brought to the table are not so much incredible but non-credible. The two companies have completeley dropped the ball in mobile over the last 5 years, from positions of strength, due to a combination of world class arrogance, incompetence and intransigence. The question is, can they remove the cultures that made this happen? The next paragraph makes you wonder:

Together, we have some of the world’s most admired brands, including Windows, Office, Bing, Xbox Live, NAVTEQ and Nokia. We also have a shared understanding of what it takes to build and sustain a mobile ecosystem, which includes the entire experience from the device to the software to the applications, services and the marketplace.

That shared undestanding of what it takes to build an ecosystem is a chimera in the smart mobile world, they have both been comprehensively outdone by Apple and then Android (Fool me once, shame on you. Fool me twice, more ...). They are right when they say that ecosystems need to be at scale and execution is key:

Ecosystems thrive when they reach scale, when they are fueled by energy and innovation and when they provide benefits and value to each person or company who participates. This is what we are creating; this is our vision; this is the work we are driving from this day forward.

There are other mobile ecosystems. We will disrupt them.

There will be challenges. We will overcome them.

Success requires speed. We will be swift.

My Broadsight colleague Dave Short has a rule of thumb, that Nimbleness = 1 / Size squared - ie double the company size, you get 1/4 of the nimbleness. In other words, Nokia and Microsoft doubling up is likely to reduce, not increase speed.

As to disrupting the market there is an irony here for Microsoft, as they disrupted the PC market in a similar way - find a sluggish giant that has missed a step (IBM) and use its assets (brand, sales channel) to capture a market (Microcomputers, or PC's ase we now call them) with their* new operating system (MS-DOS) and snaffle the market from Apple. Only thing is this time, Google has already aggregated the very fragmented non-Apple market under an O/S - ie Android. The lesson last time was that once there was a major mass market OS, all the other later entrants failed and had to adopt MS-DOS. This was partly because of the dominant OS effect by then, but was more due to the applications Ecosystem that MS-DOS and Apple already had. Android is now the MS-DOs in this industry, so it's highly likely that the New MSFT/Nokia play will struggle in the market.

But for Microsoft, there is an added pressure to consider in mobile. When it was all dumbphones, it was no threat to the Microsoft core user base. Even smartphones are no real threat, more a market missed - but tablets are the real threat, as a good tablet OS will be a major competitor for laptops and PCs.

The saving grace is the huge market share Nokia potentially can upsell to, but they will have to move very fast, every month people are opting fior iPhones and Android phones, and the whole market cycles around in about 2 years and we are well into the Smartphone upgrade cycle.....and if Dave's formula is right, that Nimbleness ain't going to happen. Rosabeth Moss Kanter once wrote "Can Giants learn to Dance" where she argues it is possible, my view on the book was it was more the triumph of hope over evidence. Or, as Telecom TV's ever-sharp mobile device fundi Lelia Makki (@leilamakki) puts it, she is:

"hopeful but not holding my breath."

Me neither - in fact, it seems more a desperate "last dance at the disco" tie-up. I'd bet on Nokia/Microsoft phones running Android in 2 years time (in fact I'd bet more on Kinect protecting MSFT's PC/Laptop assets)

Update - infomation on the new Nokia structure - looks like one small newly created division is responsible for this whole smartphone turnaround, but key assets - R&D, dealmaking, sales channels, even finance - are owned elsewhere in the company. This won't dance, never mind fly, as it will be mired in the peanut butter of the existing Big Battalions. They need to create a proper Joint Venture or Spinout with real independence. And time is fleeting, as yet there is no Nokia/Microsoft smartphone or tablet, they need one sooner rather than later.

Update 2 - Ian Betteridge makes a good point:

You can see that Nokia doesn’t comprehend what went wrong by the fact that it’s got the right to customise everything on Windows Phone, something no other licensee has. That Microsoft has allowed Nokia to insert this clause shows that it doesn’t understand the success of iPhone (and the failings of Android).

Good point - what killed Planet Mobile was the Operating System Tower of Babel - it made apps writing extremely uneconomic and using them extremely frustrating.

Update 3 - interesting theory - Microsoft has set up a Puppet Government in Nokia (the $0 acquisition)

* Ignoring the nip and truck they did with the original PC-DOS of course.....