A case study on Nokia N-Gage

Why did it fail?

Strategies of Innovation and Growth

Anagha Mahajan Manasi Somalwar

1. Company: Over the past 150 years, Nokia has evolved from a riverside paper mill in south-western Finland to a global telecommunications leader connecting over 1.3 billion people. Changing with the times, disrupting the status quo its what Nokia has always done. At the last count, the Nokia Group employed approximately 139,000 people around the world. Nokia's official corporate culture manifesto, The Nokia Way, emphasizes the speed and flexibility of decision-making in a flat, networked organization. Although we believe that the corporation's size necessarily imposes a certain amount of bureaucracy. (Exhibit 1) Mission and Strategy: Nokias mission is simple: Connecting People. Our goal is to build great mobile products that enable billions of people worldwide to enjoy more of what life has to offer. Our challenge is to achieve this in an increasingly dynamic and competitive environment. In today's mobile world, it feels like anything is possible - and that's what inspires us to get out of bed every day. Innovation Culture: Nokia as it now exists truly began in 1967 with the acquisition of the Finnish Cable Works, a telegraph and telephone cable company. This period witnessed the advent of Nokia's mobile communication devices manufacturing. Nokia was at the forefront of innovation - always changing and innovating with time. This is evident from its move from a paper mill to worlds largest mobile manufacturer (at one point in time). (Exhibit 2) Nokia was at the peak of the market in the 2000s, with massive profits and phone shipments keeping their shareholders happy. But this success made it harder for them to change their business to react to the looming threats from other companies. A BBC report analyzed following problems about Nokias culture -

A local Finnish culture, insulated from outsider Managers who have worked for the business for their whole careers A masculine culture, with deals brokered in the sauna (firms offices have steam rooms) A lack of focus, with too many products on the market

2. Product: In this paper we are going to analyze Nokias revolutionary product N -Gage. The N-Gage is a mobile phone and handheld game system by Nokia based on the Nokia Series 60b Platform released on October 7, 2003. N-Gage attempted to lure gamers away from the game boy advance by including mobile phone functionality. N-Gage was the first mobile phone in the market with the gaming and phone functionality in the same handset. In spite of being such a revolutionary product it failed in the market. Sales History: After its launch in 2003 to until 2007 Nokia ultimately shipped only 2 million handsets as against its initial target of 6 million (This was the metric for success of the product). Also, this shipped number does not give a reliable picture of the actual sales of the handsets. (Which analysts predict to be much less).Below is a quick timeline of N-Gage Phones -

N-Gage Launch

N-Gage QD Launch

Stopped N Gage Phone

Launched NGage social gaming service

Stopped the NGage service

2003 3. Analysis:

2004

2005

2007

2010

What went wrong despite having a revolutionary product, new-age design and novel application device??

Product design: The original phone's taco-shaped design was considered clumsy: to insert a game, users had to remove the phone's plastic cover and remove the battery compartment as the game slot was next to it. Another clumsy feature was the speaker and microphone being located on the side edge of the phone. This often resulted in many describing it as talking into a "taco phone" or "Sidetalking", or simply that they had one very large ear, because the user held the edge of the phone against the cheek in order to talk into it. Also, since the N-Gage tried to do both (games and phone), the buttons were made more for dialing instead of gaming which annoyed the gamers - core target market. Price Point: It was first sold for $299, but retailers began offering $100 discounts only after two weeks to drum up sales. Still, gamers opted to get cheaper actual handheld gaming devices and a separate mobile phone. At this point the industry was also moving towards subsidized hardware and revenue generation via software and services. Poor understanding of the market: With N-gage Nokia targeted a very new audience of Gamers. The approach to satisfy the segment should have been very different from Nokias typical product development and innovation approach. Nokias older and established methods seem to have intervened with the newer ones. Nokia seems to have yet to understand that while shipping a new cell- phone every six months is ok, the same cannot be said for gaming platforms. Nokia did rub the software developers the wrong way by releasing N-Gage, N-Gage QD and N-Gage V2 within short time intervals. There is an adoption curve for both gamers and game developers, and Nokia was challenged to maintain credibility with these shipping schedules. Innovation culture: Nokia was able to disrupt the market by combining phone functionality with video game device. The product concept was novel and hence it was able to capture the

initial market buzz. But once the early adopters were satisfied, Nokia struggled to scale up the product to mainstream market. The reason for this failure was the inability to innovate experience and business model. With the apple itunes store launched in 2003 the industry was moving towards the whole experience aspect. Social gaming started becoming prevalent with the launch of ipod touch. Business model changed -earning revenue through value added services/software became a norm. The experience aspect for the gamers and smartphone users was neglected completely which costed losing out the early market. (Exhibit 3) Persistence and Grit: Tomi Huttula, a Nokia product manager, said the old 2003 N-Gage and its successor, 2004s N-Gage QD, were good ideas that were ahead of their time. Todays phones are so capable. The graphics problem has been removed. And phones today are always connected and you always carry them with you. Phones are now the perfect device for gaming. After N-Gage, Nokia did not come with any other similar product for 4 years. In essence, Nokia had the right vision and was on the path to next generation phones. But Nokia failed to continue to carry forward on this path with persistence and grit. Today, all the big players (Samsung and Apple) have large number of phones with similar functionality as N-Gage. Had Nokia believed in its own innovation and continued to improve, they could have dominated the market for yet another growth phase. Failure to recognize the Chimpanzee: During this time iPod touch was already in the market. Even when iphone was released in 2007, Nokia did not recognize Apple as a threat. Nokia engineers' "tear-down" reports, according to people who saw them, emphasized that the iPhone was expensive to manufacture and only worked on second-generation networksprimitive compared with Nokia's 3G technology. One report noted that the iPhone didn't come close to

passing Nokia's rigorous "drop test," in which a phone is dropped five feet onto concrete from a variety of angles. 4. Nokia after N-Gage Failure Product: Nokia introduced 2 new versions N gage QD and N gage V2 after the original N gage. But the dismissal performance continued and hence Nokia finally pulled the plug in 2005 and introduced an N gage store instead. This store enabled users to buy games and interact socially with other gamers. This new introduction also failed to capture customers as they had moved to other platforms. Nokia pulled of N gage store in 2010 and moved to Ovi. People: Data was not available on what happened to the people who worked on this product within N gage. Although owing the serious financial pressure on the organization, Nokia has begun major downsizing and outsourcing work in the last 2 years. Company: Nokia continued to launch new products and experiment in the market even after the failure of N gage. But given the fact that it has missed the boat on a major trend Nokia consistently finds itself behind its competitors and playing the catch-up game. Nokia is now contemplating exiting its hardware business (sell to Huawei) and concentrate on software and services business in partnership with Microsoft. 5. Conclusion: To conclude, N-Gage was a visionary product but Nokia failed at understanding the needs of the new smartphone market it was entering and carried out using the same old knowledge gained from the traditional mobile industry. It failed to recognize the competition (Apple) and lacked the persistence to get similar new products in the market immediately. Overall, Nokia needed a fresh perspective and entrepreneurial approach to innovation for N-Gage as against the run of the mill big corporation approach which eventually failed.

Exhibits: 1) Organization Structure

2) Nokia Industry Timeline

3) Innovation Cycle

Sources: 1 www.nokia.com 2 http://en.wikipedia.org/wiki/N-Gage_(device) 3 http://tutor2u.net/blog/index.php/business-studies/comments/nokia-a-business-cultureproblem/

4 http://faculty.insead.edu/adner/Bonus%20projects%20may%2005/Nokia_NGage.pdf 5 http://online.wsj.com/article/SB10001424052702304388004577531002591315494.html 6 http://techland.time.com/2010/11/04/top-10-failed-gaming-consoles/slide/n-gage/ 7 http://innovationleaders.org/nok_company_profile.html 8 http://www.famicomworld.com/forum/index.php?topic=6185.0 9 http://www.xbitlabs.com/news/mobile/display/20091105190901_Nokia_Buries_N_Gage _Completely_Admits_Failure_to_Become_Maker_of_Game_Consoles.html 10 http://techcrunch.com/2012/12/31/nokias-long-drawn-out-decline/ 11 : http://www.businessinsider.com/why-nokia-wasnt-able-to-fight-back-against-theiphone-2012-7#ixzz2SLT7K6vZ