Purpose – The purpose of this treatise is to present an analysis of the importance of positive transformational crisis management. The analysis relates to the difficulty now being faced by Nokia, historically the world's leading manufacturer of technologically advanced mobile phones, of Apple's innovative combination of its iTunes, iPhone, and applications that deliver internet content to the iPhone. Design/methodology/approach – A crisis, typically considered to be a negative issue, can be a positive transformational event in the life of a business firm when that firm recognizes a crisis and makes appropriate changes in its operations to facilitate positive growth and development. However, the initial stage of a crisis must be recognized and appropriately responded to. The crisis management paradigm that is the foundation for this case analysis focuses on four stages of a crisis: the preliminary crisis, acute crisis, chronic crisis, and crisis resolution. The case deals with the innovations of Apple that have enabled the firm to become a direct competitor to Nokia in the smart phone market. The preliminary crisis stage was not appropriately recognized by Nokia, and the firm was thrust into an acute crisis that has now evolved into a chronic crisis. A brief overview is presented of the historical development of both Nokia and Apple, and an analysis of the present crisis situation in which Nokia now finds itself is presented in some detail. Findings – It was concluded that Nokia is now in a very difficult position regarding Apple due to its failure to engage in a timely transformational response to the competitive innovations of Apple. Originality/value – This is an excellent example of failure in positive transformational crisis management.