How Samsung Became The World’s Top Handset Vendor
It sounds like Nokia’s classic ringtone just got a few octaves lower and sadder. Last night, Strategy Analytics revealed that our favorite Finnish phone-maker had been ousted from its lofty position at the top of the cellphone food chain. Samsung just became the leading shipper of mobile phone handsets in the world.
How did this happen? The same way a runner in any race pushes to the front: he speeds up, or the other guy slows down. Sometimes both happen at once.
Nokia Takes A Tranquilizer
There’s a kind of morbid fascination involved in watching a formerly great goliath stumble: we’ve seen it over the past few years in the mobile space with RIM and Palm (and then HP), but seeing Nokia trip over itself has been akin to witnessing a revered grandfather fall down the stairs. Nokia practically created the mobile phone industry; until recently its brand name was unassailable in most parts of the world, with the curious exception of the United States.
The nature of their missteps has been well-documented, but suffice to say that Nokia CEO Stephen Elop made some difficult choices. He made these choices rather publicly in his “burning platform” memo of February 2011, which, depending on who you ask, either told some hard truths or needlessly eviscerated Symbian sales at a critical point in the company’s history. Whichever view one takes, the fact remains that Nokia didn’t start shipping devices built on its new OS of choice, Windows Phone, until much later in 2011. Perhaps it was unavoidable, but that delay cost them dearly.
As is usually the case with platform wars, the data isn’t exactly clear regarding all the factors surrounding Nokia’s decline. It’s true that the Windows Phone platform has been slow to gain traction, but Nokia was also woefully behind in developing a replacement for Symbian -or even in realizing that a replacement for Symbian was needed- before Elop showed up. To anyone paying attention, the decline seemed inevitable, given the company’s lack of agility.
Seeing Nokia reinvent itself, with the accompanying beautiful design work coming from its hardware division, has been truly incredible; speaking personally as a consumer, the N9 and its derivatives are the reason I started noticing Nokia. But beautiful design and the most interesting innovations, while an indicator of potential greatness, are lousy at arresting downward momentum. A fall from grace was overdue, and it’s finally materialized. After watching storm clouds gathering on the horizon for months, a massive 24% decline in handsets shipped year-over-year is Nokia’s barometer finally crashing into the basement.
So it was only a matter of time before Nokia lost the number-one spot. But the king who loses the crown is only half the story. What steps did the new guy take to snatch it from his head?
Samsung Copies, Creates, & Conquers
Samsung’s current lead over Nokia is in part a byproduct of their war with Apple.
In an editorial a while back, I talked about the voracious appetite of second-place companies. There, the conversation was smartphone mind-share, and the leader was Apple, but the second place contender was still Samsung:
“… Marketing head Younghee Lee recently said, Especially in U.S., people are obsessed with Apple It’s time to change people’s attention.’ One need only look at the recent patent and advertising war between the two giants to confirm it: Samsung covets Apple’s leading mindshare position in that special way that only a second-place contender can. They’ve got their eye on the prize, and they’re fighting for it.”
Samsung’s approach to satiate that hunger for success has been unexpectedly multifaceted: instead of focusing their efforts on innovation, marketing, or emulation, they’ve done all three.
Look at what Samsung has released in just the past year and a half. The Galaxy Note, initially considered a novelty item or a target of mockery by many (myself included), sold 5 million units in five months. It carved out a new “phablet” category not just for itself, but for a host of imitators. “Note”worthy indeed, and not bad for a device many thought was DOA.
They brought the same zeal to the second coming of their popular Galaxy S smartphone series, once again blasting carrier after carrier with premium versions and midrange derivatives. Where the original Galaxy S devices still suffered a tad of stigma from “regular” consumers associating it with an iPhone knockoff, the growing brand prestige of Samsung had eliminated any such comparisons by the time the Galaxy S II line debuted. Apple, much more potent a competitor than Nokia but equally as sluggish, refused to incorporate larger AMOLED displays, giving Samsung some purchase for easy visual differentiation. Once buyers’ eyes were attracted by the larger devices, they were drawn in further by the promise of the Android ecosystem and the more advanced capabilities of the Samsung devices, further reinforcing the Samsung brand perception.
At the same time, that brand was being heavily pushed by an aggressive marketing approach. Samsung was taking jabs at -and in some cases openly insulting- iPhone users, a controversial tactic it continues even today with its “The Next Galaxy” teaser. The company isn’t afraid to ruffle some feathers in the name of increased mindshare, and judging by their new title, it hasn’t hurt them much.
Even the “bad press” seems to be working in Samsung’s favor. I’ve talked before about my lack of enthusiasm for some of Samsung’s “me-too” products; sometimes it seems like they’re brazenly copying the competition. Some elements of the competition seem to think so too, as Samsung’s been the target of numerous lawsuits recently. But all the accompanying exposure in the media is doing something invaluable: it’s keeping their brand name on people’s screens and in their minds. Ironically, the alleged untrustworthy conduct (copying) is working in concert with their impressive product portfolio to cement the Samsung’s brand name as a trusted one, at least when it comes to mobile phones.
A New Reality
These massive upheavals don’t happen often. They’re the result of years and years of hard work and determination on the part of one company, and stagnation or mismanagement on the part of another. The last time the number-one spot on mobile handset vendors list changed was 1998, when Nokia dethroned Motorola. Fourteen years is an impressive run.
That’s not to say that this change is permanent; it’s a volatile and unpredictable market. Nokia and Samsung are very different companies who couldn’t possibly be taking more disparate routes to success. And at the moment, the results they’re seeing are very different, as well. But the fact that Samsung is now the market leader shouldn’t be perverted into a reason to condemn Nokia’s new strategy; Nokia’s midstream shift was violent, and will take a long time to recover from.
The longer it takes, though, the more opportunity Samsung has to continue leveraging its considerable advantages to stay on top. Given the uncertainty surrounding Nokia, it’s anyone’s guess when or if we’ll see them on top again. But judging by past performance and looking at who’s sneaking up behind Nokia (a certain Cupertino company), we may see a shift in the second- and third-place slots before we see another change in the first.