For a long time, Nokia was running a giant ship at the top of it's class. Nobody could beat them in mobile phone market share for a very long time. Even when they released poorly designed phones, nobody really cared because it was still Nokia. When a ship starts leaking, often it will be a small leak that doesn't really affect it much. Nokia's small leak started around 2008 when the iPhone 3G and Android started becoming popular. Sometimes a small leak in a ship can be repaired and you can stay afloat. Other times, the small leak just starts getting bigger and bigger and the ship starts sinking faster and faster.
At some point you're going to have to make a decision. Do you completely give up and let everything go down with the ship? Or do you try to save as much as possible in lifeboats and then band together to start building a new ship?
Building a new ship is not at all easy especially if your current ship with all of your money is sinking all around you. There's a good chance that it will take you down anyway if you don't get far enough away and salvage enough valuable resources to start rebuilding.
Another important thing that you can consider doing when your ship is sinking is to call for help. Nokia did just that when they were looking for a new direction to start rebuilding a new ship. Building something around Android could have helped, but there are already way too many Android boats floating around and many of them aren't doing as well as they hoped. Plus, Google doesn't really care that much about all the little Android boats out there. You're kind of on your own when developing Android phones.
Microsoft was willing to help in a much more involved way. Their mobile operating system ship had sunk for the same reason Nokia's hardware business was sinking. Microsoft knew that they too had to let the old stuff go and start building something new and thus they started working on what was to become Windows Phone 7 in 2009.
So really, the Microsoft and Nokia partnership made a lot of sense since both companies could see that they were sinking quickly due to Nokia's poor software experience and Microsoft's mediocre hardware partners who tend to lack Nokia's innovation at least with their initial Windows Phone offerings.
When Microsoft and Nokia announced their partnership, everyone realized that the Nokia ship was sinking, so consumers and investors jumped ship even faster. I personally think announcing the abandonment of the old platform so soon and saying that Nokia's going to start building something new was a mistake. They should have started building something new first so that everyone would have something good to swim to right away. Instead, everyone is going to Android because all the little Android boats combine to make a pretty big floating city and who wants to wait for Nokia to rebuild?
What can Nokia do?
Really they need to build faster and show everybody that even though their old ship is sinking, this new one is much better than everything else. They need to build something world-changing, really… and market it extremely successfully. The questions is will Microsoft and Nokia be able to do that? Nokia has some incredibly advanced hardware technology that they've been working on. Their 808 Pureview camera leapfrogs everything else on the market, including some dedicated point-and-shoot cameras, by a large margin. Lately Microsoft has been pumping out some highly innovative software as well.
You may remember that Apple was in a similar situation in the late 90's, however they were able to reinvent themselves and after a few more years of innovation and aggressive marketing they've become more successful than ever. It took a long time for Apple to convert from a niche computer maker for graphic designers to the most successful music store in the world and then again to the most profitable consumer electronics company.
Does Nokia have that kind of time? Can they bring out something ground-breaking before it's too late? Let us know what you think in the comments.