Nokia didn't put their head in the sand. Nokia responded immediately, but it basically couldn't compete. It didn't have the right knowledgebase to make anything like the iPhone.
http://appleinsider.com/articles/13...stroyed-nokias-world-leading-symbian-platform
One of the problems with tech journalism is that writers vastly underestimate the difficulty of execution; of actually producing something. So you get a lot of focus on *ideas*, but little analysis of the much greater difficulty of translating these ideas into products.
As the linked article showed, Nokia knew immediately that they were in trouble. They weren't in denial; they didn't have their heads in the sand. They just couldn't do anything about the problem because they didn't have the right skillset.
Google, who had been working on a mobile phone OS, did - but it took them a couple of years to get Android up and running...and they had the luxury of not losing market share hand over fist because they weren't in the market yet, as well as the advantage that they didn't have to produce handsets themselves.
MS was eventually able to get around to making a new phone as well.
But it is important to realize that the game is really about execution. Buggy whip makers didn't go out of business because they didn't realize that the automobile wasn't important, or because they stuck their heads in the sand. They went out of business because despite knowing that the automobile was the wave of the future, they couldn't do anything about it. Having a workforce skilled in running a wood lathe, varnishing, and tanning and weaving leather doesn't make you qualified to make engines on an assembly line. Even if you are vaguely in the transportation business.