Value investing guru and competitive strategy expert Bruce Greenwald of Columbia University has said that, “In the long run, everything is a toaster.” It is his own pithy way of summarizing the brutal realities of creative destruction and operating or investing in a business without a competitive advantage, or as Buffett famously calls it a “moat”.
Although this lesson has been learned – and re-learned – many times, Nokia once again reminds us that we neglect it at our own peril.
Today’s Wall Street Journal reports that Nokia’s CEO Stephen Elop has revealed his plan for turning around the ailing company.
“Nokia, our platform is burning,” Mr. Elop writes in the memo, reviewed by The Wall Street Journal. “It will be a huge effort to transform our company,” he adds.
Some believe that Nokia will now adopt Google’s Android platform.
It was only a few years ago that that the business press and investors were enamored with Nokia’s dominant position in the global mobile phone market. It enjoyed growing market share, nimble design and distribution resources, and a leading and growing presence in emerging markets.
What Nokia did not have was a moat.
Can they turn the company around? Maybe. But it will be very tough sledding given the prevailing competitive market.
The takeaway: add this lesson to your investing checklist – if you haven’t already – and resolve to use it as one of your fundamental filters.