Nokia

"A Counter-Positioning challenge is one of the toughest management challenges. When I started teaching at Stanford in 2008, Nokia was the leader in smartphones. By 2014 they had disappeared from this market. Their CEO Stephen Elop’s “Burning Platform” memo in 2011 captures well the immense frustration of a Counter-Positoned incumbent: While competitors poured flames on our market share, what happened at Nokia? We fell behind, we missed big trends, and we lost time. At that time, we thought we were making the right decisions; but, with the benefit of hindsight, we now find ourselves years behind. The first iPhone shipped in 2007, and we still don’t have a product that is close to…"

"Currently, BYD owns two major industry groups: IT and automobiles. Its main customers are top-tier international communication industry clients such as Nokia, Motorola, and Samsung. As a global leader in secondary rechargeable battery manufacturing, BYD's IT and electronic components industry has covered all core components and assembly business of mobile phones, with market shares of nickel batteries, lithium batteries for mobile phones, and mobile phone keypads leading globally."

"The BYD Miracle In February 1995, BYD Company was established with a registered capital of 2.5 million yuan and about 20 employees. In 1997, the company began to produce its own developed lithium-ion batteries and quickly went into mass production. In December 1998, it passed ISO9001 certification. In the same year, BYD Company began to develop overseas with an international perspective, and its European subsidiary was established. In 1999, it developed the industry-leading high-current discharge battery at the time, and the annual production of nickel-cadmium batteries reached 150 million. In 2002, it became Nokia's first Chinese lithium-ion battery supplier. In July 2002, it was listed on the Hong Kong main board, setting a record for the highest issue price of H shares at the time. On January 22, 2003, BYD Company acquired Xi'an Qin Chuan Automobile Co., Ltd., and established BYD Auto Co., Ltd. In 2006, BYD Auto completed a cumulative sales volume of 63,153 vehicles, a year-on-year increase of 472%, becoming the fastest-growing domestic brand automotive company in the world. In January 2007, the monthly sales volume of BYD F3 broke through 10,000 units. This was the first time that a local brand entered the "Ten Thousand Club" with a single model, ranking alongside Elantra, Excelle, and Forman as the "Big Four Kings" of the medium sedan market in China."

"RIM had an advantage that Nokia and other phone makers lacked: its own data network. BlackBerry messages traveled through RIM’s in-house network, which was plugged directly into the carriers. The unique connection gave RIM a back door to sneak in services carriers wouldn’t allow. In the mid-2000s RIM began shipping BlackBerrys secretly loaded with sleeper applications. Carriers and customers had no idea the applications existed until RIM sent an alert to BlackBerry users about a software upgrade. Hidden within the digital transmission was a file that unlocked the applications on the device—a Web browser and links to popular instant messaging services. Icons immediately popped onto BlackBerry home screens around the world. By the time carriers realized what was happening, millions of customers were using the Internet and exchanging instant messages on their BlackBerrys. Initially carriers were furious. Verizon threatened to pull BlackBerry from all retail channels. “I had to speak with probably twenty different carriers about this,” says Aaron Brown, then a director of services in RIM’s product management group. “But at that point, they realized the truth”: carriers were powerless to turn off the browsing or messaging services. Brown reminded his angry callers about the fine print in service contracts that gave RIM the right to change features and services on its phones “without permission or notice.” After a while carriers stopped complaining. Lucrative data traffic was becoming a multibillion-dollar business for the carriers thanks to the growing popularity of e-mails and instant messaging. “The key was stealthily leveraging and launching, then asking for forgiveness,” Balsillie says."

"RIM capitulated to pressure for more choice by opening its e-mail system to other handset makers. They would design keyboard phones, and RIM would supply software and links to connect the phones to its data network. In exchange RIM charged licensing fees. RIM called this new program BlackBerry Connect. Many employees couldn’t understand why RIM was rushing to aid competitors. It wasn’t. Like some Balsillie strategies, appearances were deceiving. Balsillie and a small team of executives had other ambitions for Connect. This was more than a licensing program; it was a Trojan horse. RIM’s long-term game was to buy time. Competitors who signed up with RIM would be preoccupied making BlackBerry Connect phones rather than creating their own rival e-mail service. RIM gained an inside peek at rivals’ long-term development plans and opened the door to new customers. Every enterprise customer signed up under the program represented another stream of service access fees for RIM. It wasn’t empowering competitors at all; it was locking in its lead. “Sometimes you have to disguise yourself as another animal in the forest,” says Tyler Nelson, a RIM vice president who ran the program. Lazaridis was initially concerned that Connect would distract RIM’s engineers and designers at a time when RIM was racing to keep up with demand and introduce new BlackBerrys. He never worried, however, that corporate customers would abandon RIM for the Connect phones offered by other handset makers. Their Connect phones could not hope to match the security and encryption protections that made BlackBerry such a valuable business communications tool. “We knew ultimately that the enterprise customer … was never going to go for it, because it was not a verifiably secure solution,” he says. “It was our advantage. It wasn’t hidden; it was in plain sight.” Unaware of RIM’s hidden agenda, phone makers in Europe and Asia flocked to the program to strengthen their presence in North America with BlackBerry-enabled phones. Samsung was so keen to make a Connect phone that one of its employees idled for weeks at a Waterloo hotel waiting for RIM to grant him a meeting with Balsillie. Finally the visitor appeared at the company’s offices in a distraught state. Samsung, he explained, would not let him return home to his family and job in South Korea unless he secured a Connect deal. RIM opened Connect discussions with Samsung, and the manager was free to fly home. RIM’s most dedicated Connect partner was Nokia. The Finnish phone maker had been trying to break into the U.S. wireless business market for years, and Connect looked like an easy shortcut. Nokia’s executives did not worry about dancing with a competitor because Balsillie played down RIM’s ambitions during initial discussions in 2002. “He emphasized he didn’t believe RIM would be able to compete in the hardware business [and] might even give up their hardware business,” says Panu Kuusisto, who managed Nokia’s Connect agreement with RIM.…"

"Indeed, the industrial clusters supported by Apple’s gargantuan investments were so significant that other phone makers came under tremendous pressure to keep up. But lacking a playbook or the detailed knowledge of how Apple operations worked, they turned to Chinese suppliers for help, giving over intellectual property in exchange for a speedy response. “They all completely abdicated,” says Horace Dediu, the former Nokia executive who now runs the market intelligence group Asymco. Apple, in other words, set in motion a series of events that helped Chinese suppliers win more orders and advance their understanding of cutting-edge manufacturing. At the same time, Western manufacturing of electronics atrophied."

"Indeed, the industrial clusters supported by Apple’s gargantuan investments were so significant that other phone makers came under tremendous pressure to keep up. But lacking a playbook or the detailed knowledge of how Apple operations worked, they turned to Chinese suppliers for help, giving over intellectual property in exchange for a speedy response. “They all completely abdicated,” says Horace Dediu, the former Nokia executive who now runs the market intelligence group Asymco. Apple, in other words, set in motion a series of events that helped Chinese suppliers win more orders and advance their understanding of cutting-edge manufacturing. At the same time, Western manufacturing of electronics atrophied."

"Indeed, the industrial clusters supported by Apple’s gargantuan investments were so significant that other phone makers came under tremendous pressure to keep up. But lacking a playbook or the detailed knowledge of how Apple operations worked, they turned to Chinese suppliers for help, giving over intellectual property in exchange for a speedy response. “They all completely abdicated,” says Horace Dediu, the former Nokia executive who now runs the market intelligence group Asymco. Apple, in other words, set in motion a series of events that helped Chinese suppliers win more orders and advance their understanding of cutting-edge manufacturing. At the same time, Western manufacturing of electronics atrophied."

"It’s no exaggeration to say the iPhone didn’t kill Nokia; Chinese imitators of the iPhone did. And the imitations were so good because Apple trained all their suppliers. Cook didn’t want Apple to be the developer of the world, and it wasn’t. It did, however, become the developer for China."

"Another important supplier was TPK, which placed a special coating on the Corning glass, enabling the user’s fingers to transmit electrical signals. The Taiwanese start-up had been founded just a few years earlier by Michael Chiang, an entrepreneur who in the PC era had reportedly made $30 million sourcing monitors and then lost it all on one strategic mistake. In 1997 he began working with resistive touch panels used by point-of-sale registers. When Palm was shipping PDAs that worked with a stylus, Chiang worked on improving the technology to enable finger-based touchscreens, even showing the technology to Nokia. But nobody was interested until 2004, when a glass supplier introduced TPK to Apple. An iPhone engineer calls Chiang “a classic Taiwanese cowboy [who] committed to moving heaven and earth” by turning fields into factories that could build touchscreens. The factory was in Xiamen, a coastal city directly across from Taiwan. “The first iPhones 100 percent would not have shipped without that vendor,” this person says. He recalls Chiang responding to Apple by saying, “ ‘We can totally do that!’—even though [what we were asking was something] nobody in the world had ever done before.”"

"Much later, when production was set up, two-thirds of the line was devoted to testing and validation—an unheard-of idea at the time, indicating just how seriously Apple was rethinking the rules of mass manufacturing. “Nobody would do that because of the cost,” one of the engineers says. They were adamant that the thirty millionth unit be identical to the first. A Nokia engineer working within Foxconn in the late 2000s confirms this, recalling that Nokia had one test station for its phones. When he got a chance to see the Apple area—which was making fewer phones than Nokia—he was stunned to see fifty test stations. “It was incredible micromanagement of the whole process,” he says."

"Tim Cook had once described inventory as “fundamentally evil,” likening electronics to dairy products that might spoil. Another time he said, “I’d prefer to be able to talk inventories in terms of hours, not days.” The results showed this was not a mere aspiration. Apple had 2.5 times better inventory turns than Nokia or Tesco, a grocer lauded for its efficiency, and it was 12 times better than Coca-Cola."

"O’Marah recognized that Apple’s strategy was brilliant. It accounted for why the company was running circles around the competition, turning revered companies like Nokia and BlackBerry into case studies of strategic failure. But it had one major flaw. Whereas smartphone rivals like Samsung could bolt a bunch of off-the-shelf components together and make a handset, Apple’s strategy required it to become ever more wedded to the industrial clusters forming around its production. As more of that work took place in China, with no other nation developing the same skills, Apple was growing dependent on the very capabilities it had created."

"Volvo’s then-CEO PG Gyllenhammar, who for many years was considered Sweden’s most powerful person, was one of those who bought into this reasoning. Among other things, he added the food company Procordia and the pharmaceutical company Pharmacia to his automobile business. A group like the forestry company Stora owned Swedish Match, which in turn not only produced matches, but also building materials, flooring, cardboard, and machines for fish gutting. Nokia manufactured such diverse products as televisions and rubber boots."