Only months before the release of "The Nokia Revolution" (Amazon, 2001), in which I recorded the early success of the company, Finland-based Nokia's stock price peaked at $60 and market cap exceeded $250 billion.
After the technology bubble burst, the stock declined to $16. Unlike its big country rivals that made most of their money in the U.S. and the U.K., Nokia made more than 99 percent of its revenues outside its tiny home market. It was Nokia's success in China and India and the takeoff of mobile services that boosted the stock to $40 before the global crisis in 2008, as I argued in "Winning Across Global Markets" (Wiley 2010).
But was everything all right at Nokia? No.
By 2010, Nokia was being squeezed by competition on two fronts. Even as its handsets were challenged by low-cost producers in emerging economies, Apple's iPhone, followed by Samsung, was surging in smartphones that Nokia had been developing already in the mid-1990s, but failed to commercialize.
There was nothing inevitable in this dual challenge, however. Intel, too, had struggled with parallel low-end and high-end challenges in the late 1990s, but survived.
Despite its mantra of listening to the customer, Nokia had also grown less responsive and more self-contented. When Apple was pushing its user-friendly iPhone in 2007, Nokia's R&D was looking too far in the future.
Indeed, Nokia's U.S. operations exemplify its strategic erosion. In China and India, it was far more flexible, willing to tailor products and services, and to localize its workforce. In the U.S., such responsiveness was belated. Unlike Samsung and LG, it failed to expand market share in the U.S. and it did not invest adequately and in time in the market, industry, developers, R&D or personnel.
The problem is that Nokia's strategic erosion—its failure to sustain its technology innovation and retain its market leadership in both advanced and emerging markets—explains Nokia's relative decline until 2009, but not its value meltdown after 2010.
(Read more: Nokia's tweet taunt of Apple goes viral)
Before and after the great restructuring
After the Great Recession, Nokia still dominated markets. Its stock price was at about $16. In 2009, the worldwide market volume of mobile devices amounted to 1.14 billion units. Of the total, Nokia accounted for 432 million units and Apple only 20 million. iPhone was growing explosively, but its market share was barely a third of Nokia's 68 million smartphones.
Globally, Nokia's market share was 34 percent. In China, it still had 35 percent of the massive market; in India, the share amounted to a massive 54 percent. In Europe, it held its own. Outside the Anglo-Saxon world, Nokia's operating system, the clunky but influential Symbian, dominated worldwide.
But competition was catching up in many key markets and in the U.S., its market share was in decline. Soon after Olli-Pekka Kallasvuo was appointed CEO in 2006, he vowed to increase Nokia's U.S. market share—but the latter shrank by more than a half to less than 10 percent during his tenure.
That's when Elop walked into the Nokia headquarters in Espoo, Finland, in fall 2010. What followed was three years of massive restructuring. It cut costs, as it had to, but it failed to create revenues. Successful restructuring can revive ailing corporate giants, but in the case of Nokia, it all went terribly wrong.
After three years of restructuring, Nokia's global market share was halved to 16 percent. In China, it is less than 4 percent, barely a tenth of what it once was, and less than 1 percent in smartphones. In India, Nokia's share was halved to 27 percent, and to barely 5 percent in smartphones. Nokia's stock price plunged 75 percent to less than $4.
Some observers like to explain the rise and decline of Nokia on the basis of the "Trojan horse" story. In this view, Elop was Microsoft's mole, whose evil intention was to crush Nokia's market cap so that Microsoft could more easily digest the company. True, Elop's name first popped up in Nokia half a decade ago, when it began to cooperate with Microsoft. But what the Trojan horse story ignores is that Nokia's erosion began in the early 2000s and that it was Nokia's senior executives who picked Elop as CEO.
(Read more: Microsoft and Nokia are both dumb about smartphones)