How European Phone

                                                             

This video was sponsored by Skillshare. Ever since Nokia sold its phone business to Microsoft about 5 years ago, European companies have essentially disappeared from the smartphone industry. But in the 40th episode of the Story Behindseries, I'd like to argue that European companies are finally starting to make a come-back. Even if it is a pretty modest one for now. Europe used to be a front-runner in mobilephones. Nokia at its peak sold over 450 million devices,which is more than even Samsung sold at its peak, and many European tech giants like FrenchAlcatel, German Siemens and Swedish Ericsson, were serious mobile phone makers too. That was until Alcatel sold its handset businessto Chinese TCL in 2005, Siemens sold its mobile business to Taiwanese BenQ the same year,Ericsson sold its stake in the Sony Ericsson joint venture to Japanese Sony in 2012 andjust one year later, Nokia too sold its phone business to American Microsoft. In just a few years, these titans of the mobilephone world were gone from Europe, supplanted by more aggressive and nimble players fromthe rest of the world. And 

 

                                  

                                                       

 

 

 

with them, moved much of the expertisein making and selling phones as well. US companies now control all major mobileoperating systems, while Asian companies have built unparalleled capabilities in designingand especially manufacturing hardware. It's a tough landscape for would-be Europeancompanies when they can't significantly impact software and can't possibly innovate as rapidlyand as cheaply on hardware as their Asian competitors. But after a long period of drought, I thinkthere's a couple of European companies who are starting to figure a way around this. I've actually interviewed 5 of the most interestingcompanies and studied many of the others and realized that there are 3 distinct strategies Europeancompanies have adopted. The first, and in my opinion least interestingone is what I'll call the regional champion strategy. French Wiko and Spanish BQ are the two companiesI talked to, but there is also Wileyfox from the UK and a few others. And, uh, French here is in quotation marksfor Wiko, as they were actually recently acquired by their Chinese manufacturing partner, butlet's leave them in the conversation for now. So both of these companies make very standard,affordable phones, but unlike others ,they focus on just a few markets. Hence why I call them regional champions. Not a complicated strategy, but it seems towork, because both companies I've talked to sell phones in the millions, BQ is actually showing healthygrowth figures and both claim to be profitable, which is more than the mobile divisions of companies like Sony, LG and HTC can say about themselves. Their most expensive dvices cost 3 and 400Euros respectively, and they both run stock Android for the most part, although BQ hasa few cool perks for geeks on top of that. BQ was the first phone maker to release anAndroid One device in a developed market, they also had a Ubuntu phone as well as aCyanogen OS device and unlike most manufacturers, they are even quite speedy at publishing theirkernel source codes to GitHub. So all in all, pretty cool, the BQ AquarisX2 and X2 Pro review unit they gave me are definitely solid phones for the price, butjust like the Wiko phones, they also ..., somehow just standard. The key strategic advantage these brands haveis that instead of having to build and maintain a global brand like Sony, LG and the others,through expensive global marketing campaigns, sales channels and customer support systems,regional champions concentrate their 

 

 

 

 

 

 

resources on a few markets, where they achieve a prettygood position. Wiko claims to be number 2 in France, BQ isnumber 3 in Spain and both have a somewhat dominant position in a few other Europeanmarkets too. It's much cheaper to acquire a good mindsharein just a few key markets, so they can undercut global brands like LG and Sony on price andstill make a profit. Now, this is a solid strategy against classic brands, like the ones we have already talked about, but I'm not sure how well it's going to work against more aggressive players like Xiaomi for example. Just like India, where an aggressive tidal wave of Chinese companies have pretty much completely destroyed the regional champions of India, I'm afraid the same will happen to the European versions of these companies as well. Because they don't have very strong brands, they don't have very differentiated products, so the only thing they can fight on is price, and that, against Xiaomi will be, very difficult. Now, I wish them good luck, especially BQ, who apparently designs hardware, develops software, and even manufactures some of their hardware, such as their 3D printers in Spain. That's a rare thing and I would hate to seethat go away. Okay. I'll call type two the Niche Brand strategyand it is a little more viable in my opinion. Fairphone and Blloc are probably the bestexamples of this strategy and the trick here is that unlike regional champions, these companieshave a very unique niche product that has no direct competitors for now. Amsterdam-based Fairphone makes a phone thatis modular, easy to repair, and has as little negative impact on the environment and thepeople in their supply chain as possible. You know, as many conflict free materials aspossible, no child labor, you get the point. Berlin based Blloc has pretty standard hardware,but develops really unique software for it. I'll have an exclusive in-depth video aboutBllocOS once it gets a little more polished, so subscribe if you want to see that, butin short, they have completely customized Android to make it as distraction-free andas non-addictive as possible. I like the idea behind both of these companies,they are unique and for now they don't have very direct competitors. And a niche product is a high risk high returnstrategy. It's high risk, because nobody 

 

 

 

 

knows if sustainabledevices or distraction-free software is something people actually want and even ifit is, it's unclear whether these companies can actually build the stuff that they have envisioned. BllocOS is a cool concept and the team hasmade some great progress, but it's still far from the universal solution that Bllocenvisions for the future. That is still years of hard work away andsuccess isn't exactly guaranteed. In the same way, Fairphone has had unimpressivesales results in the last few years because they just couldn't produce phones fast enoughwith their complicated manufacturing processes and supply chain. So these companies are highly risky. But of course the return is high also pretty high. Because they don't have a lot of direct competitors for now, which means that the prices they can charge are also pretty high. Case in point, the latest Fairphone that hasspecs straight out of 2014 costs 529 Euros, plus Fairphone also makes money from selling components. The price of the Blloc phone at 359 Eurosis much more reasonable, but still above what you'd pay for similar hardware from the likesof BQ or Wiko. Doing something unique allows companies tohave decent margins. As I said, high risk, high return. So the regional champion and the niche brandstrategies both focused on a particular niche. Either on a regional one or on a product one. And none of these companies can gofully mainstream, because just like other European smartphone makers as well,they have very limited control over both the software and hardware hardware of their devices. But, there is one European company who has the chance to go fully mainstream, I think. The Nokia strategy is the third and last onmy list and believe it or not, it is unique to Nokia. The formula is actually quite simple. The Nokia brand name is so beloved and hassuch a nostalgia factor that even if all the company behind it does is create solid phones andsells them at reasonable prices, lots of consumers will want to buy them, the biggest retailerswill want to stock them, the richest investors will want to fund them, the smartest peoplewill want to become their employees, the biggest manufacturing partners will want to producetheir phones, and yes, lots of YouTubers like me will give them free publicity by talkingabout them. The Nokia brand is still incredibly valuable. So HMD, the Finnish startup behind the brand'srevival has a huge opportunity to turn Nokia into a mainstream global brand. The trick is that they need to get to a largescale before the nostalgia and the "Oh, Nokia is back" factor wears off. And so far they have done very well. They have sold about 10 million phones intheir first year of existence, and it seems like they will do around twice as much nextyear, they are already in the global top 10 and in Europe even in the top 5, comfortablysurpassing brands like Sony and HTC in most major markets. They have established themselves in Europe,China, India and a few more key markets and they have a full portfolio of devices. All of that in a little more than a year. All they do for now is building solid phoneswith Android One and selling them at a reasonable price, but it seems like the Nokia brand andthe very aggressive management team who knows that they have to expand as fast as possiblebefore the nostalgia factor wears off, is working very well for them so far. I think they will soon have to start investinginto differentiating their products, because even though I like their phones,I use the 7 Plus on a daily basis, if they don't have differentiated products, I doubt the growth will continue for very long. If HMD can innovate something meaningful though, I think they have a chance at making Nokia a global household brand again, in just a couple of years. And as a European, I'd really like to see that. Inheriting something as valuable as the Nokiabrand name is like finding a cheat code in a video game. If you aren't lucky enough to find your owncheat code in life, then developing unique skills like Niche brands do is your best chanceto stand out from the crowd. And the easiest way to acquire your own newskills is by going to Skillshare. They have over 20 000 classes in design, photography,finance, marketing, and whatever you can think of and my favorite one lately is this courseon how to make animated YouTube videos from my friend Evan, who runs the very successfulPolymatter YouTube channel. It explains his process from the beginningto the end, including researching, writing and animating and it's so good that even Ilearned a few tricks from it, even though he's kind of explaining my job. So if you want to learn how to make animated videos,or acquire any other skill, use the link in the description which gives you 2 months offree premium access and really helps my channel out as well.