What Nokia was thinking when Apple introduced iPhone in 2007

The whole world was watching when legendary Apple CEO Steve Jobs launched the iconic iPhone in 2007. Mobile was the future. Apple knew it (and rebranded itself to reflect it). And Nokia had a fight on its hands. So, what did Nokia think about the iPhone launch? 

Now we know.

Nokia, at one time the world’s leading mobile phone company, has made a huge archive of corporate assets available through a website curated by Finland’s Aalto University, the Nokia Design Archive. The fascinating collection provides deep insight into how the company operated; in particular, a 2007 Nokia Confidential report caught my eye, as it captures what the company thought when Apple introduced iPhone in 2007.

Much of the document focuses on price — Nokia believed the cost of the iPhone would put consumers off. 

The company was also less convinced about Apple’s touch interface; Nokia execs thought consumers would want to stick with those dinky little QWERTY keyboards everybody used at that time. But in the end, cost and keyboard didn’t form the competitive moat Nokia anticipated, because the iPhone was all about the user experience, and the report shows Nokia executives were concerned.

You and your UI

“User interface has been a big strength for Nokia,” the post-iPhone introduction report authors wrote, warning that at that time consumers were falling out of love with the UI Nokia provided. “Urgent action needed to prevent further erosion of this position,” they said.  

Apple’s new UI “may change the standards of the superior user experience for the whole market,” Nokia executives explained, noting it had been called “visually stunning and incredibly responsive.” Nokia also saw that Apple had protected its product with more than 200 patents, and once again argued that “UI may be the biggest threat that iPhone presents.

“Nokia needs a chief UI architect to re-energize Nokia’s IO innovations across platforms and businesses,” they wrote.

Apple’s product also introduced an innovative user interface built around the company’s powerful OS X system, something which integrated seamlessly with PC, Mac and the Internet, the executives noted.

Be cool, like Apple 

Apple’s cool factor was seen as another challenge. And the fact Apple had delivered a full-fledged internet experience in its phone was seen as an even bigger threat. The company confessed that its own high-end N-series devices, including the brand-new N800 it introduced just before iPhone in 2007, were challenged in comparison. 

Nokia’s executives delivered a strong and, in the end, accurate set of predictions about how iPhone would affect the wider smartphone industry at that time:

“A price war may emerge by Motorola trying to push their new models.” It did. Apple did not lose — and didn’t shift prices much, either.

“iPhone will also hurt Sony Ericsson’s momentum and coherent music strategy.” It did just that. iTunes was the dominant music service.

“N-Series and SEMC Walkman probably need to clearly undercut iPhone pricing to succeed in the market.” They tried, but consumers were not prepared to compromise on user experiences, and the integration with the Mac added a front that no mobile incumbent was able to match — certainly not Microsoft.

“Expect RIM and Palm to suffer – their stock prices have been most badly beaten.” Apple ate their lunch.

“All the high-end devices attract the enterprise segment — expect that also for iPhone.” Arguably, iPhone and iPad are what have led to Apple’s huge resurgence in the enterprise. Almost every company worldwide now users Apple products.

Nokia introduced its own iTunes competitor, Ovi a few months later, but this never really challenged iTunes.

The fascinating document confirms that Nokia understood some of what was coming when Jobs introduced Apple’s mobile phone. It could see that the iPhone had the potential to stimulate demand for high-end devices, which it did and still does. iPhones became the de facto high-end market leader.

When Android stole the market

Even today, Apple scoops up a vast share of industry profits as its customers continue to invest in the best model iPhone they can afford. They do this because they continue to enjoy the user experience Apple provides.

But even back in 2007, Nokia saw that the exclusive US iPhone distribution relationship Apple reached with Cingular (later acquired by AT&T) was both a strength and a weakness. To compete, the industry was famously forced to rally round Google’s Android, an operating system Steve Jobs once vowed to destroy. 

However, the embrace of Android proved ill-judged. It led the market into homogeneity, eternal price wars, and enabled Google, rather than the mobile device makers, to take the lion’s share of any services-related income. Apple did this too, of course — but Apple also took the risk of making and selling the hardware, software, and services used. Now, it sells one in every four smartphones, and perhaps almost one in five of those sold is now made in India. 

The problem for Nokia was that it didn’t make Android, either. Arguably, it failed to find a response in user interfaces and (looking through the online archive) seemed limited in its outlook when it came to designing operating systems to compete with Apple’s own. But I guess execs from around that time can console themselves in thinking that they accurately read the room.

It’s a fascinating archive (and the Nokia research document about iPod is also interesting). 

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