Stephen Elop: “Nokia, our platform is burning”
When the ship is sinking there is no time for formalities and you have to be brutally honest and fast to save it or to save the people on board. That is the exact approach taken by Stephen Elop, ex-Microsoft employee and current CEO of Nokia in a memo to Nokia staff: “We too, are standing on a "burning platform," and we must decide how we are going to change our behaviour.”
That is just one quote from an honest introspection about Nokia and its place in the mobile industry. To stress his point Elop repeats it over and over again: “I have learned that we are standing on a burning platform. And, we have more than one explosion - we have multiple points of scorching heat that are fuelling a blazing fire around us.”
But the much needed change doesn't seem to be MeeGo either - rather everything else ranging from Windows Phone 7 to Android. Why not MeeGo? “We thought MeeGo would be a platform for winning high-end smartphones. However, at this rate, by the end of 2011, we might have only one MeeGo product in the market,” Elop answers this question quite frankly.
But it's not only the high-end segment that is in serious trouble – Nokia's CEO talks about the invasion of Android in mid-range phones, while “at the lower-end price range, Chinese OEMs are cranking out a device much faster than, as one Nokia employee said only partially in jest, "the time that it takes us to polish a PowerPoint presentation."”
This eloquent presentation is full of analogies that look aimed to inspire Nokia employees ahead of what seems to be a huge shakeup. If Symbian is burning and MeeGo is far from ready for primetime, we cannot see any other path but one of a revolutionary change for Nokia such as adopting a new operating system.
The last two quarters marked a nose-dive in market share for Nokia smartphones, which lost 11%, down to 28% from 39% at the end of Q2, more than any manufacturer we can think of in such a short period of time. As Elop mentions, rating agencies such as Standard & Poor's will be re-evaluating Nokia's outlooks soon and a downgrade in rating might mark the beginning of a bigger slip. We can still remember Motorola's downfall, when the company plunged from the world's second manufacturer to ninth in just four years, but hopefully change is coming for the Finns. Whatever it is, February 11th seems to be one of the most decisive Capital Markets Day events for Nokia so far. Check out the full text of Elop's memo as obtained by Engadget below:
There is a pertinent story about a man who was working on an oil platform in the North Sea. He woke up one night from a loud explosion, which suddenly set his entire oil platform on fire. In mere moments, he was surrounded by flames. Through the smoke and heat, he barely made his way out of the chaos to the platform's edge. When he looked down over the edge, all he could see were the dark, cold, foreboding Atlantic waters.
As the fire approached him, the man had mere seconds to react. He could stand on the platform, and inevitably be consumed by the burning flames. Or, he could plunge 30 meters in to the freezing waters. The man was standing upon a "burning platform," and he needed to make a choice.
He decided to jump. It was unexpected. In ordinary circumstances, the man would never consider plunging into icy waters. But these were not ordinary times - his platform was on fire. The man survived the fall and the waters. After he was rescued, he noted that a "burning platform" caused a radical change in his behaviour.
We too, are standing on a "burning platform," and we must decide how we are going to change our behaviour.
Over the past few months, I've shared with you what I've heard from our shareholders, operators, developers, suppliers and from you. Today, I'm going to share what I've learned and what I have come to believe.
I have learned that we are standing on a burning platform.
And, we have more than one explosion - we have multiple points of scorching heat that are fuelling a blazing fire around us.
For example, there is intense heat coming from our competitors, more rapidly than we ever expected. Apple disrupted the market by redefining the smartphone and attracting developers to a closed, but very powerful ecosystem.
In 2008, Apple's market share in the $300+ price range was 25 percent; by 2010 it escalated to 61 percent. They are enjoying a tremendous growth trajectory with a 78 percent earnings growth year over year in Q4 2010. Apple demonstrated that if designed well, consumers would buy a high-priced phone with a great experience and developers would build applications. They changed the game, and today, Apple owns the high-end range.
And then, there is Android. In about two years, Android created a platform that attracts application developers, service providers and hardware manufacturers. Android came in at the high-end, they are now winning the mid-range, and quickly they are going downstream to phones under €100. Google has become a gravitational force, drawing much of the industry's innovation to its core.
Let's not forget about the low-end price range. In 2008, MediaTek supplied complete reference designs for phone chipsets, which enabled manufacturers in the Shenzhen region of China to produce phones at an unbelievable pace. By some accounts, this ecosystem now produces more than one third of the phones sold globally - taking share from us in emerging markets.
While competitors poured flames on our market share, what happened at Nokia? We fell behind, we missed big trends, and we lost time. At that time, we thought we were making the right decisions; but, with the benefit of hindsight, we now find ourselves years behind.
The first iPhone shipped in 2007, and we still don't have a product that is close to their experience. Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes. Unbelievable.
We have some brilliant sources of innovation inside Nokia, but we are not bringing it to market fast enough. We thought MeeGo would be a platform for winning high-end smartphones. However, at this rate, by the end of 2011, we might have only one MeeGo product in the market.
At the midrange, we have Symbian. It has proven to be non-competitive in leading markets like North America. Additionally, Symbian is proving to be an increasingly difficult environment in which to develop to meet the continuously expanding consumer requirements, leading to slowness in product development and also creating a disadvantage when we seek to take advantage of new hardware platforms. As a result, if we continue like before, we will get further and further behind, while our competitors advance further and further ahead.
At the lower-end price range, Chinese OEMs are cranking out a device much faster than, as one Nokia employee said only partially in jest, "the time that it takes us to polish a PowerPoint presentation." They are fast, they are cheap, and they are challenging us.
And the truly perplexing aspect is that we're not even fighting with the right weapons. We are still too often trying to approach each price range on a device-to-device basis.
The battle of devices has now become a war of ecosystems, where ecosystems include not only the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things. Our competitors aren't taking our market share with devices; they are taking our market share with an entire ecosystem. This means we're going to have to decide how we either build, catalyse or join an ecosystem.
This is one of the decisions we need to make. In the meantime, we've lost market share, we've lost mind share and we've lost time.
On Tuesday, Standard & Poor's informed that they will put our A long term and A-1 short term ratings on negative credit watch. This is a similar rating action to the one that Moody's took last week. Basically it means that during the next few weeks they will make an analysis of Nokia, and decide on a possible credit rating downgrade. Why are these credit agencies contemplating these changes? Because they are concerned about our competitiveness.
Consumer preference for Nokia declined worldwide. In the UK, our brand preference has slipped to 20 percent, which is 8 percent lower than last year. That means only 1 out of 5 people in the UK prefer Nokia to other brands. It's also down in the other markets, which are traditionally our strongholds: Russia, Germany, Indonesia, UAE, and on and on and on.
How did we get to this point? Why did we fall behind when the world around us evolved?
This is what I have been trying to understand. I believe at least some of it has been due to our attitude inside Nokia. We poured gasoline on our own burning platform. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times. We had a series of misses. We haven't been delivering innovation fast enough. We're not collaborating internally.
Nokia, our platform is burning.
We are working on a path forward -- a path to rebuild our market leadership. When we share the new strategy on February 11, it will be a huge effort to transform our company. But, I believe that together, we can face the challenges ahead of us. Together, we can choose to define our future.
The burning platform, upon which the man found himself, caused the man to shift his behaviour, and take a bold and brave step into an uncertain future. He was able to tell his story. Now, we have a great opportunity to do the same.
1. ryq (unregistered)
at least he is admitting that nokia is in trouble unlike those nokia fanatics who are angry every time someone post something not nice about nokia.
2. hps (unregistered)
change of behaviour might be sign for adoption of android or windows phone 7.
3. gogogogo (unregistered)
i like elop attitude, not like the nokia fan boy and symbian advocate who always think that OS is perfect. if it perfect nokia will not sink,thats it!
the nokia boss will not said "Symbian is proving to be an increasingly difficult environment in which to develop to meet the continuously expanding consumer requirements," if that OS mean to be good,cool or great everybody will not want android or iOS in their phone
he will not admit it if that symbian is a perfect OS. it fail to be a smartphone OS from the start.
nokia cannot grow because that symbian is their own obstacle.
apple only need 4 years to bring evolution in smartphone industry,not with 20 new phone a year but only 1 smartphone. and they do it without SDcard and megapixel camera and replacable battery.
while android needs only 2 years to change every phone into a high tech touchscreen phone.
if iphone not appear 4 years ago and google not decided to build their smartphone OS 2 years ago, i believe today in 2011 we still proud with our lovely keypad phone,we still playing snake, sms and call only, brag about camera megapixel, never hope to see much innovation, all we care just megapixel battle, no magnetic compass, no free map (ovi map used to be expensive u know?), no compatition mean no innovation, etc
for me, symbian have been a huge boulder for mankind to jump into higher technology.
dont be a fanboy cause im not, just think with your clear mind, everything is there.
i dont have an iphone nor an android, just cheap proprietary phone its a huawei. im not a fan of any brand and will not gain anything from any brand if i said good thing bout them,
i dont have any relation with any mobile manufacture just want you all to wake up from advocating something bad, and that OS already prevent us to accelerate on technology.
today elop say that to us, and finally someone from nokia awake and realize that deformity OS is not that smart and he realize it had been wrong to said symbian is the right platform for smartphone OS and now he also realize that deformity OS have been causing them sinking.
dont u the symbian fanboy ever feel guilty for suggesting a flawed OS to your friend or family??? i did.
4. JustPlainDave (Posts: 45; Member since: 03 Feb 2011)
If Nokia decides to do something totally out-of-the-box and create their own new OS, that'd be interesting enough to pry some market share back from Android and Apple I would think. Apple is known for innovation, and Android is gaining that reputation as well fairly steadily. Nokia could try its hand at OS-building and see how they do. It's certainly not because they can't make a decent piece of equipment. Nokia phones are pretty reliable.
5. vvelez5 (Posts: 623; Member since: 29 Jan 2011)
I don't know but it seems like Elop is just trying to get Windows Mobile on a Nokia handset. He did work for Microsoft after all. Not saying that he is trying to sabotage Nokia's Symbian^3 and Meego handsets but it's hard to compete in the biggest smartphone market in the world without having any subsidized phones on any of the four major carriers in the U.S. The general public will not purchase an unsubsidized handset when they can purchase a subsidized handset just by signing on the dotted line. Just take a look at the X7 that phone could of possibly done well in the U.S market but we'll never know.
6. protozeloz (Posts: 5381; Member since: 16 Sep 2010)
I still think having one or two smartphones with 'Hot OS' is not a bad idea, and gives you a selling product while you work on your personal OS and interface
16. shimmyx20 (Posts: 280; Member since: 03 Mar 2009)
How does that make him/her a sheep? What they said was true
18. protozeloz (Posts: 5381; Member since: 16 Sep 2010)
as you may see I'm talking about a company that makes hardware adapting new software available, and she/he comes with something related with a company that makes software and gets the hardware for it...
and also from apple... I'm counting 4 phones
7. WOS (unregistered)
Who knows, this might actually be a good thing for Nokia. I've always admired Nokia's hardware, but based on personal experience, never liked the OS.
And it is nice for a change to see a CEO not saying the same old canned answers and actually doing a reality check.
8. snowgator (Posts: 3293; Member since: 19 Jan 2011)
World wide consumers can only benefit from a healthy, innovative Nokia. He has my best wishes.
9. Max (unregistered)
After read the whole memo, got a feeling that:
1. Symbian will be faded out of Nokia’s picture in a very short period of time.
2. Meego may not be released after all due to its slow product development.
3. Nokia may focus on more low-end products to meet the market demand.
4. Nokia realize that Apple already has an upper-hand in the smartphone market. They may focus on how to catch up with Android in term of sale volume.
Well, good luck Nokia. Your platform is not just burning; it has already burned to the ground. Nobody else is willing to invest in Symbian, time and $. Time to leave the past behind and move forward
10. Wireless Guru (unregistered)
Great analogy, and good news.
I was a long-time fan of Nokia, then Apple dumped them on their heads.
I can only hope for a glorious, high quality, Nokia made Android phone
12. 530gemini (Posts: 2198; Member since: 09 Sep 2010)
Now let's watch nokia fanboys, who hated on android, have a change of heart about android and say that they've always loved android, hahahahaha.
13. RichB (unregistered)
i used to be a Nokia fan, still am......for the hardware, but the symbian os if outdated......give me a N8 with Android, higher quality screen and I'll be the first in the queue.....
15. BaiGanyo (Posts: 308; Member since: 07 Feb 2011)
The thing that really struck me in this article is that a group of cheap, essentially no name Chinese manufacturers now sell about a third of the worlds cell phones. I have heard that it's not really companies like ZTE and Huawei, but at least a dozen others who operate in a much different manner (quicker, cheaper, not much research, etc) but are putting out highly capable and reliable basic phones. Well, between ZTE and Huawei and the others, some are going to take off and start making a lot capable and complex phones very rapidly and probably shake up the entire industry in just a few years and really put a hurt on some of the old standbys like Nokia and Motorola and Sony Ericsson. I have a feeling we're all going to be learning to pronounce some new names soon.
17. JustPlainDave (Posts: 45; Member since: 03 Feb 2011)
That's entirely possible. ZTE offers at least one device for AT&T. Not sure about Huawei. Where the came from is about as much of a mystery as Nokia's future.
19. rob (unregistered)
ive had the n900 for a year now and its a darn good phone. ive tried to replace it several times. HD2 from tmobile. the galaxy S captivate. the DROID X...
(now waiting for the motorola Atrix) the reason i kept trying to replace the n900 came down to the "ecosystem" Google Apps and navigation Apps. period. without a partnership with a commercially viable developer base nokia will never advance.
remember i said "commercially viable developer base" im not knocking any of the developers that have made nokia what it was at its height.
ive installed meego OS on my handset in the past. its cute. but not going to be any different than maemo5 OS that is currently running on my N900.
I run ubuntu on my home computer. Jolicloud on my netbook. so, ive done my share of hacking my systems to do what i want them to do.
but i am truly tired of hacking and tweaking my nokia n900 phone. So, i believe nokia will not throw all its eggs in one basket by choosing to partner up with just one operating system.
i see them offering Android and also Windows mobile 7. just like samsung, LG and others. Like so many post about how great nokia makes their phones. i know i would love android on my n900. nokia phones would suddenly be selling side by side with every other phone availale in all the major carriers stores.
right now consumers are going into stores and buying.... Android handsets. not necessarily a motorola or samsung etc.. phone .. but android .now, if they see a sleek pretty nokia phone right next to the others....... then all of a sudden, the consumer will remember back to one of their first phones and remember it was a Nokia and think about what a great phone it was. Then, im sure nokias marketshare will rise instantly.
22. nokfan (unregistered)
Dear Mr. Elop,
It is nice to see someone from Nokia finally responding to the suicidal tendencies that you organization has been displaying.
From the symbian debacle to ovi bomb to maemo 5 treason, Nokia has been on a backward path so clear to consumers, it's sad it took Nokia soo long to realise.
As a long time Nokia customer (8250 to N900), it has been sad to see the decline of a great brand to the depths it is in now.
a few words of advice;
1) listen - customers are not always right, but a general idea of where you are going can be garnered from the opinions voiced.
2) answer - customers like feedback. especially the devel crowd.
3) abandonment - when Nokia threw the Maemo 5 crowd away like a soiled tissue, it hurt. doesn't actually bode well for a symbiotic relationship. you should have corrected that.
4) Apple - most of your clientele hate apple and what it stands for. not all smartphones need to be dumbed down to work. Use a N900 for a few days, then go back to whatever piece of plastic you're used to. even with all the shortcomings, i'm quite sure you will see what Nokia has missed. and why the brightest are choosing to leave.
5) Time - You are only as good as your last device. If that needs explaining, you don't deserve your paycheck.
6) Meego - even with the funny name, it gives back to the people what they need. a sense of control over a piece of tech that cost them a sizeable chunk of their salary opposed to a stupid corporation telling us what we need. so go ahead with it and make it the best it can be with the paying customers in mind rather than making a quick buck. you'll see your profits soar..
Humble opinion of a heartsick Nokia fan who has seen a fav digging itself further and further into it's own grave.
23. JV (unregistered)
Well, I hate to say it . . . but I don't think this will fly.
As I was telling my good fried at Nokia, who happens to head up one of their support centers, the only and best option for Nokia today is to embrace Android and run with it.
Look what it did for Motorola, who were once, in the not too distant past, almost on the verge of going down.
Anyway, with the global marketing and distribution muscle, and the established brand recognition, particularly in this mobile phone space, Nokia will take the market by storm if they embrace Android and dedicate their resources to just focus on Android for at least the next 3 years. Later, they can go off and play with their pet projects like MAEMO, etc.
Right Nokia needs to stop bleeding and start to regain their market position. Else, Nokia's downward market momentum will pick up, and before they realize it, Nokia would be history. The management needs to stabilize Nokia and start to chart a profitable course immediately. This will not only get the shareholders off their backs, but will duly check their loss of market share and share value. This will also give them a breather to concentrate and strategize on their product mix for now and for the future.
Getting in bed with Microsoft is, in my opinion, the most flippant move and strategy of all. Just because you happen to have come from an organization, no matter how big they are, is not reason enough to get back in bed with them, if they are not the right fit for you. This is not the time to play favorites with your old colleagues or score browny points with them; surely not when your future and the life of a company depends on it. This is no time for gambles, risks or games . . . If you are hard pressed to come up with ideas of survival to rebound back, you can borrow from others who have survived from a similar situation - read Motorola!
Getting back to what Nokia can do:
For starters, sit down with Google, probably with Rich Miner himself, co-founder of Android, who came to Google with the acquisition of Android. Initially, he helped lead the development of the Android platform and ecosystem at Google. Prior to Android, Rich was a Vice President at Orange, where he led R&D activities in North America and other activities. Rich came to Orange through the acquisition of Wildfire, as their co-founder, which developed a voice-based personal assistant.
Today, Rich is part of the Google Ventures Team. He sits in a perfect position to help Nokia and he has the market, business, and technical experience to go with it.
After entering into a strategic understanding with Google, suggest Nokia set up shop at Google, maybe at their StartUp Lab or wherever else is most appropriate, and get their nose to the grind to:
- Tweak Android for existing Nokia devices,
- Customize Android for new Nokia smart phones, and
- Leverage and utilize all of Google resources available to become the most successful Android partner.
. . .a huge opportunity here!