The New Math: When 5 + 4 = 1 (Nokia and Microsoft Get Together)

The rumored partnership of Nokia and Microsoft has come to pass, as Nokia announced today that it is going to embrace Windows Phone as their primary smartphone platform.   I’m not going to go into a deep analysis of the keys to success.  That will be well covered in the news today.  The big one obviously is how many platforms will developers support?  iPhone, of course.  Android is on the cusp of becoming 1a to Apple’s 1.  A must-do platform.  In certain markets (e.g., enterprise), Blackberry is 1b or at least a strong contender.  HP made its WebOS move earlier in the week, with some interesting value propositions, linking computers, tablets, phones and peripherals.  What would make Windows Phone compelling for developers?

Nokia has had its own set of challenges.  While they long said they were the world’s largest Smartphone company, they were kidding no one.  Once the iPhone came out, they were yesterday’s news.  Once Android gained momentum, they were in full denial mode.  They missed key trends (like Americans were buying clamshell phones) and took years to rectify the shortcoming, never to regain market position.

So now Nokia and Microsoft are partnering.  Not surprising, considering where Nokia’s new CEO, Stephen Elop came from.  (Microsoft, if you don’t already know.)  It didn’t take him long on the job to conclude that Nokia’s own efforts were failing and ultimately failed.  Nor did it take him long to conclude that his best strategic bet was Microsoft.  Given his background and their mutual desperation, it didn’t take long to conclude this deal.  In some ways, it’s almost stunning in its rapidity.

I just want to ask one simple question:  when have  two waning market players ever combined together to create one market-winning entrant?  I was sitting in a session yesterday at New York’s Social Media Week next to IBM AR star Mauricio Godoy and I asked him to come up with any examples of where this had worked.  Interestingly, he came up with a couple of situations.  Involving musical artists/groups.  I’m not sure they were entirely compelling but at least they had merit worth discussing.  But neither he nor I, nor anyone else I’ve asked this question to, could come up with a compelling instance where two fading businesses combined to reassert market leadership or even competitiveness.

Combining my problems with your problems sometimes solves both our problems.  More often, however, it increases complexity and amplifies both of our problems.  Friend and fellow analyst Bob Egan Tweeted this morning “Execution has been Nokia’s shortfall yet now it seems they are taking on even more execution complexity. Was hoping for simpler more focused.”

Often in business conversations, you hear people say that they’re looking for situations where 1+1 is greater than 2.  Here we have a situation where 5+4 is supposed to produce 1 or 2.  Now I admit that I’m just old enough that I missed the “new math” in high school.  (My sister, two years younger, learned it.)  But I don’t see the math working.  And in a market so dynamic and fast-moving, combining these two entities, neither of them known for their speed, may just hasten their mutual demise.  (I would, however, love to hear of successful business combinations in this vein in the comments.  Anyone?)

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6 Responses

  1. Oracle + PeopleSoft + Seibel + xxx = SAP shrinker?

    Microsoft + Powerset (PARC technology) = Bing unseats Yahoo…

    Google + YouTube = 2nd most visited site

    SalesForce + Heroku = Data PaaS

    HP + WebOS = post windows devices…

    5 + 4 x execution = an eagle?

  2. None of these fit the definition of two *waning* market players.

    Oracle = continued dominant if not ascendant.
    Microsoft = making major investment and overtaking a collapsing Yahoo does not constitute advance alone.
    YouTube = already a power, amplified by more power.
    Salesforce = still ascending
    HP + Palm = we shall see but this one, I agree, has interesting potential.

  3. No argument, the odds are against them, for all the obvious reasons.

    I’d contend, though, that every other strategy available to the two “what just happened?” market participants is even worse.

    And they do have the potential advantage of being able offer tighter, more seamless integration into the computing everyone already uses than any of the existing entrants provide.

  4. Nice to hear from you, Bob.

    I would contest that every other strategy is worse, for either partner.

    For Nokia, an Android strategy is viable, perhaps even essential. Are they really going to pursue ultimately a WinMo-only solution? The only other device manufacturer pursuing a single platform strategy is Apple. And with the “Osborne effect” (http://en.wikipedia.org/wiki/Osborne_effect), their sales for the next 6-12 months could crater. Would you buy anything of theirs now?

    As for Microsoft, they’re more in a position to play to win. However, they’ve got tough decisions. Do you play favorites with WinMo and in so doing cede integration on other platforms to other back-end solutions or small third parties? Are they best served by owning the mobile OS or by owning the middleware and application solutions that tie mobile devices of all types into the broader back-end and desktop/laptop solutions?

    With this Nokia play, do they cut off all other WinMo players? If you’re HTC, do you press your lead or do you double down on Android?

    Microsoft’s pulling a “hail mary” when the smarter solution might be going for the first down. I don’t think the math is in their favor.

  5. If you want a further explanation of the new math, Tom Lehrer does a great job of explaining it here. http://www.youtube.com/watch?v=8wHDn8LDks8 (reference from my daughter)

  6. Hey Jyarmis!

    I really don’t know what the collaboration of these two companies will bring, and I also don’t know of any examples of such businesses flourishing. But like you, I’d also like to see a move in a positive direction.

    I’m not writing this comment out of being paranoia (okay, I’ve accepted of being one already with that) of going against Microsoft, I too think they are “losing” edge (though they still remain the most used software makers and now, the Kinect). I jumped in my seat when I saw the news of them coming together, but at the very same time I found myself wondering what they might bring in their prospectus now that they have done so.

    To me, this is a good move, considering people around the world still consider Nokia as a reliable name and swear by their quality of phones, no matter how cheap or out of the world the phone is. And this way, Microsoft can reach out to masses again for once, which they lost it to Apple, and with (or without) the change in user experience/interface of the plain OS updates.

    WP7S has seen lots of takers and it’s only going to get better with the refinements and small knicks kicked out, with time. After failed attempts of Kin, the only way they could have made it back was to find a seriously good company to not to see the fate of dinosaurs, and they have made a move in right direction, I think. What’s there at the end of the road is hard to say from here at this point of time. And yes, the “new math” proposed, will be given a face if this thing fails. The proposition is hilarious anyway.

    One has to take risks, calculated one at that.

    I’d like to see where things go from here.
    And from where I came across your article link was here – http://gigaom.com/2011/02/10/corporate-dna/

    It was a great read and I enjoyed it more than even I enjoyed writing this comment.
    Do help me out if my knowledge is inadequate.

    Have a great time!
    Good work.

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