Monday, May 16, 2011

Apple pips Google to world's most powerful brand... but where's Nokia?

Millward Brown has recently announced its annual list of the world's top 100 brands, with Apple pipping Google to the number one spot. However it's the continued fall down the list for Nokia that makes for more interesting reading.

This is the first time in four years that Google hasn't topped the rankings with Apple moving up to first from third. Seven of the eleven newcomers in the top 100 are from the BRIC countries (Brasil, Russia, India and China) and while these are all significant and important changes in the list, it's Nokia's fall from being one of the world's most powerful brands that represents the biggest talking point for me.

This is the sixth year that the list has been published and Nokia has featured in each one. At it's current rate of descent, it won't be for much longer. This highlights how steep the fall has been:

Nokia's results in the top 100 most powerful brand's list:

Year    Rank
2006    14
2007    12
2008    9
2009    13
2010    43
2011    81

Contrast these with Blackberry's results, one of it's close competitors, and the picture is looking less than rosy for Nokia:

Blackberry's results in the top 100 most powerful brand's list:

Year    Rank
2006    DNF
2007    DNF
2008    51
2009    16
2010    14
2011    25

So where has it all gone wrong for Nokia? What has driven this descent down the list? Let's take a look at the formula Millward Brown used to calculate it's top 100. This is how they describe the list:

"The BrandZ Top 100 Most Valuable Global Brands is the most comprehensive annual ranking of brand value. Developed by Millward Brown Optimor, the ranking analyzes the world’s leading brands and the economic and competitive dynamics that influence value fluctuations."

The methodology is neatly outlined in this simple formula:

Okay so it's not all that simple. Many of these factors are pretty difficult to determine and calculate. However it's relatively easy to pinpoint that Nokia's brand growth potential has weakened over the last two years.

Nokia actually remains the number one manufacturer of mobile phones with a global market share of 29%, although this is down over 5% on 2010. New entrants have made the market more competitive and that has squeezed Nokia's share somewhat. Added to that Apple's ubiquity and the emergence of the Android Operating System (OS) and you can begin to understand why this potential for growth has diminished.

Consumers had always been loyal towards handsets, however as phones got smarter so loyalty shifted towards the Operating System. Apple understood this and locked consumers into both. The open source release of the Android OS in 2008 gave manufacturers the opportunity to exploit this change in behaviour, making for a much more competitive marketplace.

Nokia had a similar plan in mind for its Symbian Operating System, releasing its codebase on an Open Source license in early 2010. Two years after Android did the same thing. It soon emerged that some of its important components had been licensed from third parties, which prevented the source code to be released fully. These delays and limitations prevented mass adoption, which is where Android stole its march.

This isn't the only time that delays blighted the adoption of a Nokia product. The launch of its Booklet 3G in August 2009, six months before Apple launched its iPad, only highlighted its lack of forward thinking. Nokia was reinventing the wheel while Apple was shaping the future.

In fact it's this lack of true innovation that has eroded much of Nokia's brand value. The mobile phone market has always been fast and constantly changing, from smaller and even smaller handsets to smarter and powerful portable computers. Nokia were always at the forefront of these changes, however not any more.

In fact Nokia's 'connecting people' slogan is further evidence of a lack of forward thinking. Mobile phones are not simply about connecting people anymore, they have become personal computers with communication between people being only one feature.

While the iPhone introduced a touch screen and apps, Nokia focused on improving existing features. Its phones introduced high spec cameras and a handset that 'comes with music', which didn't prove to be the features that encouraged the anticipated migration.

So it would appear that Nokia has been left behind and is playing catch up. So where does this leave them and how do they stop their falling market share and subsequent descent down the list of powerful brands?

In September last year, Nokia appointed Stephen Elop, the then Head of Business at Microsoft, as its new Chairman. Less than six months later, the company announced a new alliance with Microsoft to replace its Symbian OS with Microsoft Windows 7. This is an interesting partnership and will position the OS as the closest competitor to Android and iOS. Despite this, Nokia's share price dropped 14% on the announcement. Too little too late?

With Android and iOS taking up so much of the smart phone market, and the attention of developers to work with them, it will take a hugely innovative handset from Nokia or a OS from Microsoft to make any significant dent. However I believe the biggest opportunity actually lies in the one thing that neither Android nor Apple will be able to compete with and that's Office.

Through this link up Nokia could be the first to offer the Office suite on their handsets, immediately encouraging business user migration from Blackberry. If I was Microsoft, I would be inclined to go against the established model and make it a free feature on the mobile OS for an introductory offer. This would do more to encourage its adoption than anything else, giving Microsoft the opportunity to reach mobile users and Nokia an opportunity to grow again.

Whatever is decided, it's clear that this alliance with Microsoft and their next release together is crucial for Nokia. With 4,000 redundancies announced at the company recently, it feels like they're hitting last chance saloon time.