Kirk Klasson

Requiem for a Business Model…..Part II

This one’s just too good to pass up.

Normally, I don’t post about current events. Mostly because it is difficult to learn any thing from the blur of the present. But since the last couple of posts dealt directly with Microsoft and Open Source Software (Requiem for a Business Model) and indirectly with Nokia (Value Based Strategy Formulation) I couldn’t resist.

Recently, Nokia’s new CEO recognized that he pretty much didn’t have a strategy and the place was going up in flames. The next day, in a moment of radical capitulation, he announces a strategic deal with Microsoft. You know it’s radical capitulation when they scrap their internal software platform, toss it to the open source community and rush into the arms of Microsoft.

So what would a value based strategy assessment say about this move?

Well, for starters Nokia was known as a cost leader, not an innovator, in the smart phone market, big in emerging markets where cost matters. The Microsoft move entails adding the highest OS device cost in the industry, $15 a copy compared to the $1 a copy for using open source software which most ODM’s employ. Next, Nokia will become increasingly disadvantaged due to Microsoft’s lack of developers and lack of innovation. Android and Apple will continue to pull ahead due to better innovation and a larger community of value added applications.

So what does Nokia get from this?

Well, according to Nokia’s new CEO, Microsoft will subsidize Nokia’s transition to their platform to the tune of several billion dollars. This is very reminiscent of the deal that Novell made with Microsoft to help distribute and integrate the Novell Linux distro. This was going to launch Novell to a leadership position in the operating system market.The numbers were smaller but the deal was the same. Four years later and Novell is out of business.

The moral of the story is that, no matter how badly your platform may be burning, be careful who you let hump your leg.

One Comment to "Requiem for a Business Model…..Part II"

  1. Moamn says:

    Fantastic goods from you, man. I have understand your stuff purvioes to and you are just extremely fantastic. I actually like what you’ve acquired here, really like what you are stating and the way in which you say it. You make it enjoyable and you still care for to keep it smart. I can not wait to read far more from you. This is actually a great website.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Insights on Technology and Strategy