Nokia has struggled for years to come out with a true competitor to the iPhone. Part of the problem is that the company originally thought the iPhone would be a flop.
Nokia engineers did extensive research into the iPhone around the time it first came out and determined that it didn't pose a threat because it was too expensive to manufacture and because it failed a basic drop test.
That's according to an extensive Wall Street Journal article by Anton Troianovski and Sven Grundberg looking into what went wrong with Nokia's smartphone ambitions.
[W]hen the iPhone emerged, Nokia failed to recognize the threat.
Nokia engineers' "tear-down" reports, according to people who saw them, emphasized that the iPhone was expensive to manufacture and only worked on second-generation networks—primitive compared with Nokia's 3G technology. One report noted that the iPhone didn't come close to passing Nokia's rigorous "drop test," in which a phone is dropped five feet onto concrete from a variety of angles.
Apple's CEO Tim Cook has since showed the world how to keep manufacturing costs down. The iPhone did end up on 3G the next year. And the last few years have shown that consumers would rather buy a sleek smartphone that may have a higher risk of breaking when dropped than a bulky cellphone.
It wasn't until sometime in 2008 that Nokia's execs realized the iPhone was a blockbuster hit and knew they needed to respond. But according to the Journal, the company's efforts were stymied by organizational problems, including the fact Nokia's R&D teams were forced to compete with each other for attention and the fact that too many people were involved in business decisions, slowing things down.