Fallen giant

The purchase of Nokia’s cellular phone business by Microsoft is an operation in which, beyond its financial scope and the symbolism it embodies of the difficulties Europe has in competing globally, makes plain the deep fallout from a lack of innovation.

Nokia was the technological flagship of Finland and, by extension, a showcase example of Europe’s potential for becoming the world’s most competitive region. However, the Finnish firm failed to grasp developments in a sector that at one point it dominated and was unable to respond to the challenges presented by the advances made by its rivals in the past six years. The impact this had on its global sales of mobile phones was drastic, moving from a situation in which it controlled almost a third of the market to only four percent at present.

Some analysts and a section of the Finnish media have accused Canadian Stephen Elop, the first non-Finnish chief executive officer in the history of the company, of having sunk Nokia, serving it up on a 5.540-billion-euro plate for his former employer, Microsoft, which he is now rejoining. Since he arrived at Nokia in 2010, the fruits of his management have been confined to dire financial results. However, Nokia had already been languishing before Elop’s arrival in the face of more innovative rivals such as Apple, Google and Samsung — both in terms of operating systems as well as handsets, and particularly in the sector of smartphones.

The irony is that Microsoft’s acquisition of Nokia does not guarantee the survival of the Finnish company for reasons in part similar to those behind its decline: the problems the US firm has in imposing its operating system over those of its competitors.

The European Union started the new millennium with a number of success stories, such as Nokia and Airbus, while it was setting itself new technological goals in a number of areas. Thirteen years later, the situation at the Finnish firm, which was at one point was the world’s leading cellphone manufacturer, confirms the serious difficulties Europe faces in remaining in the technological vanguard at the global level.

This is still the case even when Finnish investment in research, development and innovation has been well over the average level in Europe, which has stagnated at two percent of GDP, compared with three percent in the United States.

The case of Nokia invites serious reflection on industry’s ability to adapt in the most dynamic sectors, and the errors of analysis committed at times when one is on the crest of a wave.