|The fall guy|
Nokia won the race to build a true convergent mobile computer.
All it lacked was good software.
Product teams at Nokia were built around, well, products. The hardware differences around the phones defined the offering - not how well it worked with the Nokia ecosystem. The N81 team developed experiences and software that weren't compatible with the N82 - and then the teams would struggle to introduce their "improvements" into the master Symbian stack. Splintering from a common software strain leads to fragmentation and grinds improvements to a halt, as reintroducing code is slow and painful.
The result: a total mess. Despite an enormous footprint in market share, it was essentially impossible to develop software that would work on all high-end Nokia devices and the store experience was pretty crappy as well. That's why there really wasn't any significant app ecosystem around Nokia. This is the opportunity that Apple took with iPhone - and the rest is history.
I've seen a lot of talk lately blaming Stephen Elop for the downfall of Nokia. I think this is unfair. The real reason why Nokia has had a hard time is because it has moved into an industry that it hadn't previously been in: building holistic device and software platforms. Elop inherited a house built by the previous management, and this house was rotten to its core. Symbian was, and probably still is, a mess of spaghetticode and, despite a promising start, the Meego team suffered the same fate due to weak management and the weird decision to integrate Moblin into the stack, all while trying to get it ready for the new flagship device launches. The result was the N9 - too little, too late - and too many corners cut to scale.
A lot of blame has been put on Elop - saying that his announcement of the Microsoft partnership was too drastic, and therefore he destroyed the Symbian phone business and subsequently the company. To these people I ask: try using a touch-screen Symbian device from 2010 for a few weeks. Let's see if you'd choose to buy a Nokia device as your next phone. Perhaps, due a process of tap-dancing and sleight-of-hand, Elop could've managed to postpone the Nokiacalypse by a few months, but it was on its way. The device portfolio was just too messy to attract developers and the user experience too poor to keep or gain customers.
In hindsight, the company should've just talked to ten or twenty N95 owners in 2007 to realize that, nobody really used any of the it's fancy functions due to poor level of OS experience and the lack of interesting software. Focusing on that problem, rather than megapixels or the bill of materials, would've been the right thing to do. Instead, Nokia decided to stay the course. This decision was made well before Mr. Elop took the reigns. And that was the decision that destroyed the company.
Edit: typos, removed fragment sentences and tautology.