Nokia’s dive into the digital health industry may be coming to a halt, reveals a memo leaked to earlier this week. This comes less than two years after the Espoo, Finland-based company created its digital health unit through the acquisition of French digital health company Withings for $191 million.
“[R]ather than only falling in love with our technology, we must be honest with ourselves,” Kathrin Buvac, Nokia’s chief strategy officer, wrote in the memo. “In its entirety, our Digital Health business has struggled to scale and meet its growth expectations. Currently, we don’t see a path for it to become a meaningful part of a company as large as Nokia. Thus, we are conducting a strategic review to determine the best next steps for the business.”
There were signs that the division might be in trouble. At the beginning of last week Nokia announced that it would be conducting a strategic review of its digital health division. However, specific details in the public announcement were scarce at best.
In addition to the strategic review, the company as a whole is currently in the midst of a synergy and cross savings initiative, which kicked off in 2016 after the acquisition of Alcatel Lucent. This initiative hopes to save $1.3 billion and could lead to 425 jobs getting cut in Finland this year, according to a report.
There are no public details as to if or how many of these jobs will be in the digital health division. But the leaked memo indicated that the company will be focusing on transforming Nokia into a business-to-business and licensing company in telecoms and industrial automation. The memo also said that the company will continue to address the IoT opportunity in digital health with private connectivity solutions, platforms and software, just no longer from a consumer product perspective.
After selling its Device and Service Business to Microsoft for $7 billion Nokia, started to look to digital health as a new avenue for the company.
Bill Geiser, former CEO of MetaWatch, who has a wealth of experience with health wearables, offered Babyforyou.net.ua some thoughts on the news.
“It looked to me like some very bright people took a look at the size of the digital health market and correctly gauged it was a huge market opportunity, but underestimated what it was going to take and what kind … of knowledge it was going to take to be successful,” Geiser said.
However, the memo does not explicitly state that the company is ending its digital health offerings altogether. Last week a spokesperson from Nokia affirmed the companies interest in digital health.
“Nokia has taken an entrepreneurial approach to running Nokia Technologies, exploring different ventures in new industries. We continue to believe in the promise of the digital health sector and the Nokia digital health product line,” a Nokia spokesperson told Babyforyou.net.ua last week. “Products like SteelHR, BodyPlus and Nokia Sleep are receiving solid reviews. During this strategic review we are focusing our resources on delivering strong products to serve a market need and how we can meet connectivity needs of hospitals and enterprises.”
Nokia only acquired Withings in 2016—making digital health a fairly new focus area for the company. Geiser said it’s not uncommon for a company to see that something isn’t working and decide to set the iniative aside. It’s not always a bad idea, he said.
“You just have to look at the reality and ask yourself, do we have what it takes to turn this around?” said Geiser.
Still, some companies have stayed with products that were originally not taking off but turned a corner later down the road. Geiser said the Apple Watch, for example was not originally successful by industry standards but the company stuck with the product and it is now dominating the category.
“It is the rare company that gets it right at launch,” he said. “You launch into a new world based on assumptions and you learn as you go but there is a fundamental commitment some companies have it and some don’t.”
Several Nokia digital health customers have reached out to the Twitter handle about what the changes might mean for them. The representative has assured customers that the company will continue to support its customers and products.
This Twitter account has been busy in recent months. In January Nokia suddenly pulled Withing’s Body Cardio scales’ velocity measurement feature, citing a potential need for regulatory approval for the product. This was met with a backlash from clients and a glut of complaints on the page.
What is is next for Nokia’s digital health unit remains to be seen, but the memo ends with a quote about failing, which could be telling.
“Digital Health has given us a perspective on a new sector,” Buvac memo reads. “It has opened conversations with companies and influencers outside our core business. We have learned from this, and with a sharper focus are using that knowledge to our advantage, just as 5G and IoT opportunities are accelerating. As I commented in our internal story today, 'Failing fast isn’t failure, it is accelerated learning.'”