Unit 4Learn from a Failing Business
Reading
DISCUSS WITH FRIENDS
Do you know any business that went bankrupt? What do you think the causes are?
READ THE
PASSAGE
Where Nokia Went Wrong
by James Surowiecki
https://www.newyorker.com/business/currency/where-nokia-went-wrong
Nokia’s agreement on Tuesday to sell its handset business to Microsoft for $7.2
billion is something of a minor business coup for Nokia, since a year from now
that business might well turn out to have been worth nothing. It also
demonstrates just how far and fast Nokia has fallen in recent years. Not that
long ago, it was the world’s dominant and pace-setting mobile-phone maker.
Today, it has just three per cent of the global smart phone market, and its
market cap is a fifth of what it was in 2007—even after rising more than thirty
per cent on Tuesday.
What happened to Nokia is no secret: Apple and Android crushed it. But
the reasons for that failure are a bit more mysterious. Historically, after all,
Nokia had been a surprisingly adaptive company, moving in and out of many
different businesses—paper, electricity, rubber galoshes. Recently, it
successfully reinvented itself again. For years, the company had been a
conglomerate, with a number of disparate businesses operating under the
Nokia umbrella; in the early nineteen-nineties, anticipating the rise of cell
phones, executives got rid of everything but the telecom business. Even more
strikingly, Nokia was hardly a technological laggard—on the contrary; it came
up with its first smart phone back in 1996, and built a prototype of a touch-
screen, Internet-enabled phone at the end of the nineties. It also spent
enormous amounts of money on research and development. What it was
unable to do, though, was translate all that R. & D. spending into products that
people actually wanted to buy.
One way to explain this is to point out that Nokia was an
WMLI 2018 — 3rd Edition Page 15
engineering company that needed more marketing savvy. But this isn’t
quite right; in the early aughts, Nokia was acclaimed for its marketing,
and was seen as the company that had best figured out.
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Unit 4-Learn from a Failing Business
how to turn mobile phones into fashion accessories. It’s more accurate to say
that Nokia was, at its heart, a hardware company rather than a software
company—that is, its engineers were expert at building physical devices, but
not the programs that make those devices work. In the end, the company
profoundly underestimated the importance of software, including the apps that
run on smart phones, to the experience of using a phone. Nokia’s development
process was long dominated by hardware engineers; software experts were
marginalized. (Executives at Apple, in stark contrast, saw hardware and
software as equally important parts of a whole; they encouraged employees to
work in multidisciplinary teams to design products.)
It wasn’t just that Nokia failed to recognize the increasing importance of
software, though. It also underestimated how important the transition to smart
phones would be. And this was, in retrospect, a classic case of a company
being enthralled (and, in a way, imprisoned) by its past success. Nokia was,
after all, earning more than fifty per cent of all the profits in the mobile-phone
industry in 2007, and most of those profits were not coming from smart
phones. Diverting a lot of resources into a high-end, low-volume business
(which is what the touch-screen Smartphone business was in 2007) would have
looked risky. In that sense, Nokia’s failure resulted at least in part from an
institutional reluctance to transition into a new era.
And there was another mistake. Nokia overestimated the strength of its
brand, and believed that even if it was late to the smart phone game it would
be able to catch up quickly. Long after the iPhone’s release, in fact, Nokia
continued to insist that its superior hardware designs would win over users.
Even today, there are people who claim that if Nokia had stuck with its own
operating systems, instead of embracing the Windows Phone in 2011, it could
have succeeded. But even though the Windows Phone has been a flop, the
truth is that, by 2010, Nokia had already introduced too many disappointing
phones, and its operating system had already proven too buggy, clunky, and
unintuitive to win consumers over. In 2008, Nokia was said to have one of the
most valuable brands in the world. But it failed to recognize that brands today
aren’t as resilient as they once were.
The high-tech era has taught people to expect constant innovation; when
companies fall behind, consumers are quick to punish them. Late and
inadequate: for Nokia, it was a deadly combination.
A. Match the words with the meanings
1. A minor business coup (B) a. early days in the past
2. Dominant(adj) (E) b. a little business achievement
3. A Conglomerate (F) c. they think it’s greater in amount than you think it is.
4. A technological laggard (G) d. fascinated or captivated
5. Marketing savvy (K) e. more powerful than others
6. Early aughts (A) f. a large business firm consisting of several different companies
7. In stark contrast (L) g. the technology isn’t performing as well as its competitors
8. Enthralled (D) h. business that sell expensive products
9. A high-end business (H) i. manage to do something
10. Overestimated (C) j. stable
11. To succeed (I) k. good understanding about marketing
12. Constant(adj) (J) l. totally diffirent
B. Find which paragraph explain these statements
1. Nokia failed to acknowledge that the transition to future trend were crucial.
In paragraph 4 ( It also underestimated how important the transition to smart phones
would be. And this was, in retrospect, a classic case of a company being enthralled
(and, in a way, imprisoned) by its past success.)
2. The prototype product by the research and development team didn’t really appeal to
customers.
Even today, there are people who claim that if Nokia had stuck with its own
operating systems, instead of embracing the Windows Phone in 2011, it
could have succeeded.
3. Hardware development was the only main focus of Nokia.
In paragraph 3 ( Nokia’s development process was long dominated by hardware
engineers; software experts were marginalized.)
4. The company highly believed that its name and reputation could spoke for its own and could
quickly adjust itself with the current situation.
In paragraph 5 ( Nokia overestimated the strength of its brand, and believed that
even if it was late to the smart phone game it would be able to catch up quickly.)
C. Answer the following questions.
1. Name other 3 side business Nokia had beside telecommunication.
The other 3 business Nokia had is paper, electricity, rubber galoshes.
2. Why did the writer said that Nokia was more a hardware company rather than a
software company?
It’s more accurate to say that Nokia was, at its heart, a hardware company
rather than a software company—that is, its engineers were expert at
building physical devices, but not the programs that make those devices
work.
3. What were the reasons that Nokia phone was claimed to be a disappointment by 2010?
The truth is that, by 2010, Nokia had already introduced too many disappointing
phones, and its operating system had already proven too buggy, clunky, and
unintuitive to win consumers over. (paragraph 5)
