The value of strategic vision

Yesterday the rumor hit that HTC was working on a Windows Phone variant of the HTC One.  If I could YAWN any louder I would.  This is the history of manufacturer support for Windows Phone.  Take your flagship Android device and six months later, when it is beginning its way down the inevitable curve of decline into mid-range devicehood, put out a variant of it running Windows Phone.  My original Windows Phone, a Samsung Focus, was a warmed over Galaxy S.  It was on the market only a couple of months before Samsung relegated it to mediocrity by announcing the Galaxy S II.  When I excitedly showed the Focus to people they inevitably pulled the Galaxy S from their pocket and showed me they’d had the same hardware for months.  Microsoft was never going to gain traction with this kind of support from device manufacturers, and the manufacturers themselves were about to be blindsided when one of their own took a different approach.

Nokia, in committing their entire smartphone energy to Windows Phone changed the game.  While the first generation of Nokia Lumia phones showed promise, the second generation positioned Nokia (and Windows Phone) on the front lines of the smartphone battle.  Nokia isn’t just producing the best camera phones in the Windows Phone market, they are producing the best camera phones in the phone market period.  And they aren’t running Android on them.  Nokia isn’t just producing a very inexpensive low-end smartphone, they are producing one with better specs than high-end hero phones just over three years ago. And they aren’t running Android on them.

The vendors who gave lip service to Windows Phone such as HTC and Samsung have been pushed almost entirely out of the WP market, and they don’t look inclined to alter their strategies to change that situation.  For HTC and Samsung, as well as others, “the plan” around Windows Phone appears to be to throw a model or two out on the market and move as many units as they can with as little effort as they can get away with.  There is no strategic vision around their participation in the Windows Phone market.  And as far as I can tell, the only reason for them to remain in it is so they won’t have to start over from scratch should WP really take off and becomes a competitive threat to their Android efforts.

It’s time for a little side story.  Back in the 90s I’d do at least two customer tours a year visiting CIOs and other senior IT executives to talk about SQL Server.  At the time a lot of those customers were existing Sybase customers and I was always being asked to justify their committing to SQL Server 7.0 versus Sybase System 11.  Now Sybase had indeed done us a great favor by totally screwing up System 10, but they were promising great things for System 11.  Meanwhile, of course, Microsoft was unproven in its ability to produce a database product independent of Sybase (as even SQL Server 6.0/6.5 were based on the technology licensed from Sybase).  So I would proceed to explain our strategic vision, not just for SQL Server, but around Visual Studio, Data Access, Transaction Processing, Integration of Microsoft Office particularly Excel and Access, Windows Server, and various other technologies.  And I’d end up pointing out that with Sybase you were buying a nice database product but with Microsoft you were buying an overall strategic vision for enterprise computing.  I never lost one of those discussions.

Now let’s imagine a conversation between Nokia CEO Stephen Elop and AT&T Mobility CEO Ralph de la Vega.  Elop presents Nokia’s strategy.  How they are going to build a range of smartphones, each designed to be a leader in its class.  He describes how Nokia intends to be the clear leader in photography on smartphones.  He describes how Nokia is making major investments in higher-level software to differentiate their devices from Samsung and Apple.  He talks about Nokia’s design language and how their devices will be as far from “me too” as any major manufacturer has dared go.  He talks about how Nokia will have the perfect device for AT&T’s GoPhone pre-paid service as well as hero and mid-range devices for the post-paid service.  He explains how Nokia will provide exclusivity, and differentiation, amongst devices (particularly higher end devices) for each carrier.  At the end of all this de la Vega says something like “That’s a great story and we’d love to work with you to make the Nokia Lumia family a strategic part of our offering.  Let’s have our staffs get together and put together a plan for the Lumia to be one of AT&T’s two or three top efforts in the coming years”.

Ok, now HTC CEO Peter Chou comes in for his annual discussion with de la Vega.  Somewhere in the middle he devotes a couple of slides to their next generation Windows Phone device.  He mentions that it is a variant of the HTC One that AT&T is already selling.  de la Vega tells him AT&T is interested in carrying it and that AT&T’s buyer will contact their HTC Account Rep to make the arrangements.  Then the conversation moves on to Facebook and the HTC First, or Last, or whatever other flavor of the month HTC is attempting to differentiate their Android offerings.

Is it any wonder that Nokia is blowing HTC and Samsung out of the water when it comes to Windows Phone?

Let’s now explore another aspect of strategic vision.  One of Microsoft’s observations about the success of the iPhone, and about problems with its own Windows Mobile ecosystem, was that fragmentation of the user experience was a bad thing.  Obviously the success of Android, despite this fragmentation, is a counter-example.  But back in 2008 trying to minimize user experience fragmentation became an important goal for Microsoft, and so Windows Phone was designed to prevent skinning by device manufacturers.  Microsoft would enable extensibility through hubs and other mechanisms, but all Windows Phone devices would retain a common look and feel.  The device manufacturers balked and saw Windows Phone as preventing them from offering sufficient differentiation from their competitors.  Meanwhile Nokia accepted these limits, knowing they could push Microsoft for more mechanisms for differentiation than existed in Windows Phone 7.  And in my opinion, Nokia has validated Microsoft’s vision.

I’m not sure I’ll ever be able to switch from a Nokia Lumia to another Windows Phone because I’m locked in to what Nokia has added in the way of software.  On the other hand, I can pick up a non-Lumia Windows Phone and have no problem at all operating it.    That to me is the best of the world Microsoft wanted and the world that the device manufacturers wanted.  The Lumia family is a highly differentiated set of devices.

The problem for device manufacturers like HTC and Samsung is that their idea of differentiation is so centered around changing the top-level user experience via skinning, an idea that they originated with Windows Mobile and then put at the center of their Android efforts, that they refused to see or invest in an alternative.  And since Windows Phone was never a strategic priority for them, they didn’t have to.

Having a clear and compelling strategic vision counts for a lot in this world.  Nokia has proven that having one, and executing against it, can turn you into the dominant player in a niche.  Next up is for them to prove that the one they have can return them to glory in the larger phone market.  The fact that they have the vision and appear to be executing well against it is a very positive sign in their ability to survive and thrive.

BTW, Don’t let low U.S. market share confuse the issue.  Nokia was never a leading supplier of phones in the U.S., and had absolutely no presence with Symbian-based smartphones.  That they are shipping devices on all four major U.S. carriers, with strong efforts at the two largest, and have any measurable market share at all, is a huge advance for them.  But in any case, pay more attention to the progress they make in faster growing markets.  That’s where their channel and other business strengths should best leverage the product-level work we are all so focused on.

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11 Responses to The value of strategic vision

  1. Given HTC’s limited resources, a redo of the HTC One is all we can reasonably expect. Samsung could do better if they cared to.

  2. Bob Kemp says:

    I think you’re criticism of HTC and Samsung is a tad unfair. Why should they put considerable effort and resources into a “niche” market? Any strategic innovations they create should logically be put into their Galaxy and One lines first. As Android has matured, they are also attempting more than just “top-level user experience” changes.

    Ultimately, the final “value” of strategic vision shows up in quarterly reports. Elop has done a commendable job turning around Nokia, but shareholders are not at all happy being a “dominant player in a niche.” Unless profits increase, Nokia will be under extreme pressure to amend their vision and adopt Android…which would be a shame. Nokia is pulling more weight than Microsoft in this uphill battle!

    The low U.S. market share is a huge detriment to Nokia and simply cannot be separated from their strategic vision. App developers, the lifeblood of smartphones, will continue to ignore WP’s 4% U.S. market share. Elop’s put out the burning platform, but can he survive the Android tidal wave? As a Lumia user, I certainly hope so.

  3. Tim says:

    I have and enjoy an HTC 8x. I picked that over the Lumia last year because the Lumias didn’t look or feel as nice in my hand…the dimensions and material made it harder to grasp comfortably. I don’t regret my decision, but I will give Nokia another look whenever I upgrade again, in large part because of their focus on and energy around Windows Phone.

  4. SpragueD says:

    Wondering… how much does Microsoft depend on Samsung for PC sales (given that even their Enterprise division is pushing “SAFE” Android solutions)? Was there ever the possibility of using patent leverage to slow their Android growth in US/EU markets?

  5. Mark says:

    A lot of good insights there, Hal. It’s definitely been a differentiator for Nokia. But now they need to break out of the niche, as you indicate. Their new lower-priced strategy is getting some traction. So that’s directionally positive. But it’s going to be tough to reemerge as a major force.

  6. Brian says:

    The interesting thing about Nokia right now is that they are running a two-track WP strategy. The Lumia 920 and 1020 are all about hero phones. However at the other end of the spectrum, they have the 521 (which you can get for $129 (no contract) at Walmart right now). My co-worker just got one (he had a T-Mobile feature phone and wanted email). It does just about everything I can do on my 920.

    I keep reading that Nokia is getting up into the double-digit market share in some high growth markets (I think I saw 20% in some country recently). Getting that kind of volume is definitely going to be good for Nokia (and for the WP ecosystem) over time. Bowing to suggestions that they start making Android phones would be crazy – instead of being a leader at something, they’d be in the middle of a very crowded pack; a pack where only the leader is making any money these days.

  7. fluxman says:

    In hindsight, the only unfortunate (but probably not totally avoidable) part of Nokia’s move into Windows Phone, was the quick obsolescence of their line of WP7.5 phones (510,610,710,800,900). They announced their move to WP in February 2011. They obviously couldn’t just wait for WP8 to come out in late 2012. They had to release WP7.5 phones. To their credit, they were able to release the 800 and 710 pretty quickly. But the Lumia 900 hit the US market quite late — 3 months after first announced in January 2012. And the Lumia 510 was announced only in October 2012 — the same month WP8 was released. Obviously, the non-upgradability to WP8 was a disappointment.

    But that was then. Now Nokia seems to have found its footing. The quick interval between announcement and retail availability of the Lumia 1020 is pretty impressive. And so is the aggressive pricing of their low-end Lumia 520.

    • So few Windows 7.5 phones were sold that Microsoft should have just offered to buy every one of them back and replace it with a Windows 8 phone. That would have convinced people that they were serious about supporting their customers, and would have cost perhaps 1/10 of the cost of the Surface RT writedown.

      • Bob - Former DECie says:

        That would be nice. My wife’s Lumia 900 started dying last week. She had trouble hearing people and there was a slight buzzing sound. Then people started having problems hearing her. We just had it replaced less than a week before it went out of warranty. Now if the new one will last until her contract is up in another year, she can get the latest Windows Phone available at the time. She doesn’t want an iPhone or an Android, but wishes there were more apps available for the Windows Phone.

  8. Nick Kline says:

    Good points from my old boss Hal about WP oems. Microsoft makes a fine product in windows phone 8, but there doesn’t appear to be anything to recommend it over android or ios (Nokia hardware may be good, but absent cameras I don’t see anything that compelling). Nokia’s cash position slumps every quarter. With android soaking into the low end feature phone market, it’s hard to see what will be left for Nokia. This nbc article says windows phone activation rate is about 8 million *a quarter* while android is 187 million (http://www.nbcnews.com/technology/windows-phone-android-vault-ahead-smartphone-market-share-6C10871655). I guess WP has had some success in low cost markets up to now – maybe that’s a niche for them.

    I think Microsoft just can’t advance their os and platform as fast as the others, fast enough to get any distance. Back in the day, that had it all, way before everyone – os, apps, touch screen phones with stylus, all those dev frameworks, and they just let their lead fritter away.

    I hope the new leader of Microsoft removes the shackles, and lets the WP folks launch a tablet with WP. There’s only one thing I see missing from today’s android and ios phones, and that is really long battery life. Give me a smartphone that lasts 5 days, and I’d consider switching.

  9. dunketh says:

    Is it really any surprise manufacturers are shying away from full-on WP support?
    Microsoft is still seen as the ‘evil emprire’ and windows is still seen as unreliable bloatware amongst a lot of potential purchasers. How many white collar office workers are going to leave the office and think “I know what I’d love to see now – another Windows screen”.
    Whether any of this is justified or not it’s going to take some convincing to generate interest amongst the public. The trouble is, we’re in the classic catch-22 situation here – no interest from customers = no devices but no devices = nothing for customers to be eposed to.
    The only way Windows Phone will succeed is through youth buy-in. Aggressive marketting campaigns to build up the brand image. The recent Surface ads are proof Microsoft can compete with Apple in the ‘you-need-our-trendy-kit’ category.. they just need to do the same with the phones.
    Gone are the days when Nokia were the go-to guys for the latest phone kit. So, get some funky ads on the telly Microsoft, show us why we need a Windows phone. Help your partners sell your kit.

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