Software Defined Vehicles? Nokia Lost to Software, Not iPhones

Automotive executives love talking about Software-Defined Vehicles (SDV), cars controlled by software rather than mechanical parts. On paper, that seems like the obvious next step; after all, our phones, TVs, and even doorbells are software-first. So why the frenzy? And if it’s such a clear idea, why are these cars taking so long to arrive, and why have so many attempts failed?

During my business studies, the classic case study of Nokia's collapse provided a deeper perspective that changed my understanding of the automotive industry's transformation. The conventional narrative says the iPhone killed Nokia. Nokia was too slow to innovate, was arrogant, or made the wrong operating system choices. However, this misses the real story.

𝗧𝗵𝗲 𝗦𝘂𝗿𝗽𝗿𝗶𝘀𝗶𝗻𝗴 𝗡𝗼𝗸𝗶𝗮 𝗗𝗶𝘀𝗰𝗼𝘃𝗲𝗿𝘆

Nokia's achievements before its fall were impressive:

• The first smartphone was launched in 1996 (11 years before the iPhone)
• €3.8 billion annual R&D budget, much higher than Apple's
• Over 20,000 patent families generating €1 billion annually today
• Nokia N95 featured GPS, a 5MP ZEISS camera, and video streaming before the iPhone existed

I owned an N95 and was proud of its features compared to the iPhone's initial mediocre touchscreen without even Bluetooth. Nokia had all the building blocks needed to dominate the smartphone market. The technology was there.

Yet they failed. Why? Not because of technology, but because they couldn't transform from a hardware company to a software company. They didn't take software seriously, so developers left them behind. It's a classic example of digital transformation failure.

Working in automotive software, I witness car companies making the same mistakes Nokia made.

𝗧𝗿𝗮𝗻𝘀𝗳𝗼𝗿𝗺𝗮𝘁𝗶𝗼𝗻: 𝗙𝗲𝗮𝗿 𝗮𝗻𝗱 𝗕𝘂𝗿𝗲𝗮𝘂𝗰𝗿𝗮𝗰𝘆 𝗞𝗶𝗹𝗹𝗲𝗱 𝘁𝗵𝗲 𝗚𝗶𝗮𝗻𝘁

The most revealing research (Vuori and Huy's study with 76 Nokia executives) exposed patterns we see in most big industrial companies:

• Middle managers were more concerned about office politics than beating competitors
• Teams competed against each other (Symbian vs MeeGo) instead of collaborating
• Problems never reached top management
• "Not Invented Here" syndrome, they rejected outside ideas, thinking "we know better"

𝗦𝗼𝗳𝘁𝘄𝗮𝗿𝗲: 𝗖𝗼𝗻𝘀𝘂𝗺𝗲𝗿 𝗘𝗹𝗲𝗰𝘁𝗿𝗼𝗻𝗶𝗰𝘀 𝗣𝗹𝗮𝘆𝗲𝗱 𝗕𝘆 𝗗𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝘁 𝗥𝘂𝗹𝗲𝘀

Nokia focused on hardware, improving batteries, and making stronger phones. Apple focused on making phones easy and enjoyable to use. The first iPhone couldn't even use 3G internet and had a terrible camera. But Apple understood something crucial: software makes the difference, not hardware specs.

Samsung leveraged its experience manufacturing TVs and appliances to mass-produce phones at every price point. Both companies approached phones as part of broader ecosystems rather than standalone devices.

They competed on dimensions that Nokia didn't even recognize as battlefields.

𝗧𝗵𝗲 𝗗𝗲𝘃𝗲𝗹𝗼𝗽𝗲𝗿 𝗘𝘅𝗽𝗲𝗿𝗶𝗲𝗻𝗰𝗲 𝗧𝗵𝗮𝘁 𝗖𝗵𝗮𝗻𝗴𝗲𝗱 𝗘𝘃𝗲𝗿𝘆𝘁𝗵𝗶𝗻𝗴

As someone who tried developing apps on all three platforms, the contrast in developer productivity metrics and their impact on the company's business shocked me:

𝗡𝗼𝗸𝗶𝗮'𝘀 𝗦𝘆𝗺𝗯𝗶𝗮𝗻 𝗣𝗹𝗮𝘁𝗳𝗼𝗿𝗺:

• Setting up tools: 2-3 days of complicated steps
• Getting app approved: 6-8 weeks wait
• Development tools: Fragmented across multiple platforms
• Distribution: No unified store until Ovi (too late)
• Time-to-market: 3-6 months for simple apps

The consequence: Developers abandoned Nokia. The Symbian store had only 25,000 apps by 2011. Most were low-quality utilities. Major developers chose iOS or Android instead, where they could ship quickly and get paid: no Instagram, no WhatsApp, no popular games. Users followed the apps, not the hardware specs. Nokia sold its Devices & Services unit to Microsoft for €5.4 billion in 2013.

𝗔𝗽𝗽𝗹𝗲'𝘀 𝗶𝗢𝗦 𝗘𝗰𝗼𝘀𝘆𝘀𝘁𝗲𝗺:

• SDK setup: 30 minutes with Xcode
• App review: 7 days (now 24 hours)
• Development tools: One integrated environment
• Distribution: App Store from day one
• Time-to-market: 2-4 weeks for simple apps

The consequence: Apple's App Store exploded to 500,000 apps by 2011. Developers could build, test, and launch apps quickly. This created a virtuous cycle, more apps attracted more users, more users attracted more developers. Apple captured 75% of mobile app profits despite having only 15% market share.

𝗦𝗮𝗺𝘀𝘂𝗻𝗴'𝘀 𝗢𝗽𝗲𝗻-𝗦𝗼𝘂𝗿𝗰𝗲 𝗖𝗼𝗹𝗹𝗮𝗯𝗼𝗿𝗮𝘁𝗶𝗼𝗻 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝘆

Samsung's approach fascinated me even more. While Nokia protected everything internally, Samsung embraced openness:

• Contributed more Android code than any other manufacturer
• Made 40,000+ commits to the Linux kernel
• Sponsored global hackathons and provided free devices
• Achieved 3x faster feature development through collaboration

The consequence: By 2012, Samsung had become the world's largest smartphone manufacturer. Their open approach meant every Android improvement benefited them. They could add features faster than competitors. Developers loved working with Samsung; they got free devices, technical support, and their improvements got integrated upstream. This multiplier effect helped Samsung dominate across all price points.

𝗧𝗵𝗲 𝗔𝘂𝘁𝗼𝗺𝗼𝘁𝗶𝘃𝗲 𝗘𝗰𝗵𝗼𝗲𝘀 𝗡𝗼𝗸𝗶𝗮

The similarities between Nokia versus Apple/Samsung and Traditional Carmakers versus Tesla/Chinese EVs are striking.

𝗧𝗵𝗲 𝗧𝗿𝗮𝗻𝘀𝗳𝗼𝗿𝗺𝗮𝘁𝗼𝗻 𝗖𝗿𝗶𝘀𝗶𝘀 𝗶𝗻 𝗔𝘂𝘁𝗼𝗺𝗼𝘁𝗶𝘃𝗲

• Volkswagen spent €5 billion on software. Result: 3-4 year delays, canceled projects, desperate $5 billion deal with Rivian
• Ford abandoned its "Fully Networked Vehicle" project in 2025 after $9.7 billion losses, eliminating 350 software positions and reverting to legacy systems
• GM quietly abandoned its software platform after significant investment
• 74% of car executives admit their mechanical-focused culture "won't change"
• VW's Scalable Systems Platform, initially scheduled for 2024, now has a delivery timeframe of 2027-2028.

Traditional carmakers spend €20 billion yearly on research. But like Nokia's €3.8 billion, it's spent on the wrong things.

These companies remain trapped in 5-7 year development cycles while Tesla and Chinese competitors iterate continuously.

𝗧𝗵𝗲 𝗗𝗲𝘃𝗲𝗹𝗼𝗽𝗲𝗿 𝗣𝗿𝗼𝗱𝘂𝗰𝘁𝗶𝘃𝗶𝘁𝘆 𝗖𝗿𝗶𝘀𝗶𝘀 𝗶𝗻 𝗔𝘂𝘁𝗼𝗺𝗼𝘁𝗶𝘃𝗲

Current automotive software experiences mirror Nokia's mistakes:

• Complex toolchains require specialized knowledge (any developer who has worked with "qualified" automotive tools knows the pain)
• Different systems for each brand—even "standards" like AUTOSAR don't work well together
• 6-month+ certification processes for simple updates, which go against any modern practices
• Limited access to vehicle APIs and data

Tesla's contrasting approach:

• Unified development platform
• Weekly software updates
• Open API access for developers
• Continuous integration/deployment culture

𝗠𝗶𝗻𝗱𝘀𝗲𝘁, 𝗡𝗼𝘁 𝗧𝗲𝗰𝗵𝗻𝗼𝗹𝗼𝗴𝘆, 𝗗𝗲𝘁𝗲𝗿𝗺𝗶𝗻𝗲𝘀 𝗦𝘂𝗿𝘃𝗶𝘃𝗮𝗹

Nokia had better technology, more money, and more patents, but failed because it couldn't adapt its thinking when the rules changed.

Three critical factors determine survival during platform transitions. It's not about adapting new terms like SDV or doing more open-source; it requires fundamental changes:

1. Culture beats technology: Nokia had better hardware but couldn't think "software first". Current automakers possess world-class engineering capabilities, but can't work like software companies. For example, SAFe is not the solution.
2. Ecosystem thinking over product optimization: Apple built an ecosystem; Nokia built individual phones. Tesla builds updatable computers on wheels; traditional carmakers build mechanical products that require much longer cycles. This is the core of SDV.
3. Openness beats secrecy: Nokia's "Not Invented Here" blocked Android adoption. Car companies often prefer to handle everything internally or maintain absolute control, despite repeated failures. AUTOSAR, for instance, is exclusive to its members, preventing the broader developers ecosystem from even using its specifications.

The car industry faces a moment similar to Nokia's 2007 moment today. Companies with 100-year histories often lose to newcomers who understand that software is what matters now.

I see positive changes emerging, including greater openness, new leadership, and diverse perspectives. But I still believe the mindset must change dramatically.

#AutomotiveTransformation #SoftwareDefinedVehicles #SDV #DigitalTransformation #InnovationStrategy #TechLeadership #Automotive #AUTOSAR #OEMs