Follow-Up: Nokia’s Odd Innovation Problem May Be Microsoft

Microsoft and Nokia are spending $24 million to entice developers to their platform. They’re desperate for this outsourced innovation to attract customers. But is MS weighing Nokia down?



Microsoft is trying a bunch of tricks to boost its new smartphone business. It must be frustrating for Nokia.

A recent Reuters article says that Microsoft is in a Catch-22 because it needs to attract developers to its Windows Phone platform if it’s to stand a chance against Apple and Google, but in order for developers to leap aboard they need the attraction of a platform that has enough users to pay their wages. And Reuters suggests developers are still staying away. Microsoft is therefore trying to solve this problem in concert with Nokia by slapping money down to pay developers for their efforts–a power play to kick-start Windows Phone 7. Meanwhile, we learn the flagship Nokia Lumia 900 Windows Phone 7 device is arriving on AT&T for an attractive-sounding $99, placing the high-end phone below the iPhone’s price and among cheaper and less-capable Android phones on the market.

It’s all about money, it would seem. And while $24 million sure sounds like a lot, it’s pocket change to Nokia and Microsoft. The dough is going toward an “AppCampus” at Helsinki’s Aalto University over three years–an interesting choice, as it suggests Nokia wants to keep things very close to home (perhaps ensuring a super-tight fit between the apps’ software and its own hardware?). That sounds, at first, like a great idea.

Except it’s potentially slow moving. And if MS had spent perhaps $24,000 on a thousand individual developers, and still given each developer their fair share of the income from app sales or in-app advertising, then MS could have quickly assured that several thousand high-quality apps appeared on its platform sooner rather than later. More apps more quickly may also have driven the average price of apps down, which is another odd money-related problem MS has with its ecosystem.

And it’s this “sooner” success window that’s the biggest issue. There was a lot of fuss last week about Rovio’s supposed decision to skip the Windows smartphone platform with its hot-to-trot Angry Birds Space game. Rovio eventually stepped in to say it would be supporting WP7 after all. But the fact that many people felt Rovio’s decision was plausible tells you something about the perceived audience for Windows apps. Other app developers have already said they have no plans to support Windows smartphones, including well-known augmented reality firm Layar, and Reuters quotes a recent IDC survey that revealed just 37% of app writers polled said they planned to make apps for Microsoft’s phones (compared to 89% enthusiasm for iOS and 79% for Android).

Hence the $24 million AppCampus “sweetener” deal. Alongside this is the Lumia 900’s enticing $99 price on AT&T–deliberately pitched to attract consumers who are wary of spending big bucks on an iPhone or the latest Samsung Galaxy device. As online comments have noted, the plot does stand a chance of appealing to many…but AT&T’s terms and conditions for the deal simultaneously stand a chance of crippling the incentive. That’s because the $99 is for new 24-month contracts that have a mandatory minimum $40-a- month voice package plus a $20-a-month data package. Add in activation fees and the cost of the phone itself and you’re looking at a total phone package cost of over $1,500. Savvy consumers will be aware of this.


Critics may question both of these financial decisions, in terms of their efficacy in driving customers to the Windows platform and Nokia phones in particular. It does seem short-sighted and also smacks of a careless opinion toward MS’s other Windows phone maker partners. So should MS spend still more in order to make a bigger splash in the smartphone pool? It can certainly afford to, and it has enough invested in Nokia to make the extra cash worthwhile.

The big question is: Is it worth it? Because the public doesn’t seem all that dramatically smitten with MS’s phones thus far–even coming with Nokia’s household name and reliable quality. Microsoft has certainly innovated the design of smartphones with its sleek Metro UI…but it’s now having to pay other folk to innovate in another direction–to create the added app store draw for consumers.

Outsourcing innovation sounds like an uneasy solution to the problem. And it must be doubly frustrating for Nokia, which seems to have such promising plans for the future. Perhaps if we the public, and the thousands of potential developers, had a glimpse of the greatness to come we may all be enticed now rather than later. Or not at all. And then Microsoft would not feel compelled to buy affections.

[Image: Flickr user ardenswayoflife ]

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I'm covering the science/tech/generally-exciting-and-innovative beat for Fast Company. Follow me on Twitter, or Google+ and you'll hear tons of interesting stuff, I promise. I've also got a PhD, and worked in such roles as professional scientist and theater technician...thankfully avoiding jobs like bodyguard and chicken shed-cleaner (bonus points if you get that reference!)