Nokia and the Burning Platform

The story

In 2007 Nokia, a company from Finland, was the king of mobile phones. It sold more phones than anyone else in the world, and its own smartphone software, called Symbian, ran on about 62 percent of the world's smartphones that year, according to the research firm Gartner. Nokia phones were known for being tough, with batteries that lasted for days.

That same year Apple released the first iPhone, a phone that was mostly a touch screen and worked more like a small computer. In 2008 the first phones running Google's free Android software appeared, and many phone makers began to use it. The contest was changing. People started choosing phones less for the hardware and more for the apps, the web browser and how easy the screen was to use. In this new game, a phone maker needed a strong "ecosystem": software, app stores and outside developers all working together.

Nokia still sold huge numbers of phones, but its smartphone software struggled to keep up. Symbian's share of smartphones fell to about 47 percent by the end of 2008. In the last three months of 2010, according to the research firm Canalys, Android passed Symbian to become the best-selling smartphone software in the world, with about 33 million phones shipped against Symbian's 31 million.

In September 2010 Nokia hired a new chief executive, Stephen Elop, who came from Microsoft. In February 2011 he sent employees a memo that soon leaked to the press. He compared Nokia to a man standing on a burning oil platform who must decide whether to jump into icy water. "We too, are standing on a 'burning platform,'" he wrote, "and we must decide how we are going to change our behaviour." Three days later Nokia announced a major partnership: it would stop betting on Symbian and use Microsoft's Windows Phone software instead.

The plan was risky. Nokia's first Windows phones, the Lumia 800 and Lumia 710, came out in October 2011, months after the announcement, and many buyers stopped buying the older Symbian phones while they waited. Windows Phone also had far fewer apps than the iPhone or Android. In the first part of 2012, Samsung passed Nokia as the world's largest phone maker, ending Nokia's 14-year run at the top. By 2013 Nokia's share of all mobile phones sold had fallen to about 14 percent, down from about 20 percent a year earlier, according to Gartner.

On September 3, 2013, Nokia agreed to sell its phone business to Microsoft for 5.44 billion euros, about $7.2 billion, including a license to Nokia's patents. Nokia itself did not disappear. It kept its business making equipment for phone networks and its patents, and it still exists as a large company today. But the Nokia that once led the world in phones was gone.

People still argue about what went wrong. Some say Nokia was slow to see that software and apps mattered more than hardware. Others say the switch to Windows Phone was the wrong bet, or that it came too late to matter. What almost everyone agrees on is how quickly a leader can lose its place when the rules of a market change.