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.
Stephen.
Nokia CEO’s letter to employees – The Times of India http://timesofindia.indiatimes.com/tech/news/telecom/Nokia-CEOs-letter-to-employees/articleshow/7459579.cms#ixzz1DuVamw8p
Related:
As expected, Nokia and Microsoft announced a new partnership deal ahead of Nokia’s Capital Markets Day which will align the two companies to compete together in the mobile economy. As part of the strategy, Nokia will begin using Microsoft’s new Windows Phone 7 operating system on its mobile devices as its primary smartphone platform, and Nokia’s current mobile platform Symbian will eventually be phased out. Nokia’s original plan to use its MeeGo operating system on high-end smartphones also takes a backseat under the new deal – MeeGo will become an open-source “project” with just one device launching this year. Both companies will collaborate on development, marketing and their mobile roadmap, they said.
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New Nokia CEO Stephen Elop, a former Microsoft exec who took the helm last fall, has moved quickly to bring change to the Finnish company whose market share has been steadily dropping in the face of increased competition from Google and Apple. He recently sent a memo to employees, rallying the company to change. “I believe we have lacked accountability and leadership to align and direct the company through these disruptive times,” he wrote. “We had a series of misses. We haven’t been delivering innovation fast enough. We’re not collaborating internally. Nokia, our platform is burning.”
With a deal of this magnitude, casual observers may have several questions. What does this mean for Symbian? What of Qt, Nokia’s development platform? What’s to become of MeeGo? Who’s in charge of what at Nokia?
We’ll attempt to answer those questions below.
1. What Will Happen to Symbian? (And When?)
With Nokia’s new mobile strategy, Windows Phone 7 will displace Symbian…eventually. In a slide presented by Elop and Nokia CFO Timo Ihamuotila, it’s clear that Symbian will be wholly replaced by Windows Phone 7. However, the slide was not meant to be a forecast as to when that transition will complete. That said, Symbian will certainly begin to spiral downwards in terms of developer interest almost immediately – few parties will want to build apps for a dying platform with no future.
Nokia says Symbian will become a “franchise platform, leveraging previous investments to harvest additional value,” but tried to downplay its death by touting sheer numbers:
“This strategy recognizes the opportunity to retain and transition the installed base of 200 million Symbian owners. Nokia expects to sell approximately 150 million more Symbian devices in the years to come.”
2. What’s Going on with MeeGo?
MeeGo, a joint OS project built from Nokia’s Maemo platform and Intel’s Mobiln OS was, at one time, going to be Nokia’s means of competing in the smartphone market. Now, it will become an “open-source, mobile operating system project,” says Nokia. “MeeGo will place increased emphasis on longer-term market exploration of next-generation devices, platforms and user experiences. Nokia still plans to ship a MeeGo-related product later this year.”
What does that mean, exactly?
It means that Elop didn’t think that Nokia could build a smartphone ecosystem around MeeGo quickly enough to compete on the new, and rapidly changing smartphone market. Now, says Elop, MeeGo will serve, “not as part of another broad smarpthone platform strategy, but as an opportunity to learn.”
Only one MeeGo-based device will ship this year, probably because it’s so late into the process, Nokia sees no reason not to. However, after that phone ships, the MeeGo team will change focus to work on “exploration of future platforms, future devices and future user experiences.”
Intel, which was a partner in Nokia’s earlier plans for MeeGo, has this to say: “While we are disappointed with Nokia’s decision, Intel is not blinking on MeeGo. We remain committed and welcome Nokia’s continued contribution to MeeGo open source.”
3. What’s to Become of Qt?
Nokia’s work at making its development environment Qt easier to use – efforts which were seeing moderate success, Nokia said in November – will no longer matter in the company’s new strategy. That’s because going forward, developers will use Microsoft’s tools for Windows Phone. Specifically, they will have access to Visual Studio 2010, Expression, Silverlight and the XNA Framework. Qt will be phased out, like Symbian.
In a letter to developers, Nokia spelled out details of the changes, again downplaying the change by touting how Nokia still plans to sell “around 150 million more Symbian devices.” The company also noted that the MeeGo project will use Qt.
In addition, Nokia boasted of Ovi Store numbers in the letter: 190 countries, with local specific content in 90 of those, 4 million downloads a day, 300,000 users signing up daily and 400,000 developers.
As a part of the company’s organizational changes, its Services and Developer Experiences (SDX) unit will be responsible for Nokia’s global service portfolio, developer offering, developer community relations, and integration of partner service offering, the company said. That also includes Forum Nokia, which will continue to support developers for Symbian smartphones and Series 40 mobile phones.
4. What’s Happening on the Organizational Level?
Both Nokia itself and its management structure has be reorganized based on the new strategy. However, the rumors had gotten this part wrong – Elop isn’t dismissing its top execs, just moving them around.
As of April 1, Nokia will have a new company structure, which features two distinct business units: Smart Devices and Mobile Phones.
- Smart Devices will be responsible for creating the Windows Phone portfolio and will also house the sub-units of Symbian smartphones, MeeGo Computers and Strategic Business Operations. Jo Harlow will lead this group.
- Mobile Phones will “leverage its innovation and strength in growth markets to connect the next billion people and bring them affordable access to the Internet and applications,” said Nokia. Mary McDowell will lead Mobile Phones.
- Niklas Savendar will run Markets, which is responsible for “selling products, executing compelling marketing and communications, creating a competitive local ecosystem, sourcing, customer care, manufacturing, IT and logistics across all Nokia products.”
- Tero Ojanpera will lead the Services and Developer Experience unit which is responsible for Nokia’s global services portfolio, developer offering, developer relations and integration of partner service offerings.
- Design, responsible for Nokia product and user experience design, will be led by Marko Ahtisaari.
- Rich Green will be CTO.
- Timo Ihamuotila is CFO.
- Corporate Development, responsible for driving implementation of Nokia’s ecosystem strategy and strategic partnerships, will be headed by Kai Oistamo.
- Corporate Relations & Responsibility, responsible for Nokia’s government and public affairs, sustainable development and social responsibility, will be led by Esko Aho.
- Human Resources will be led by Juha Akras.
- Alberto Torres, the EVP of MeeGo, has stepped down from the management team, effective February 10 to “pursue other interests.”
Additionally, Nokia will be cutting thousands of jobs in Finland and elsewhere in the world. Nokia and Nokia Siemens Networks employed some 132,000 people at the end of last year, and of those 19,800 were in Finland.
5. Does this Mean Nokia/Microsoft Will Have a New Tablet Strategy?
Although nothing specific to tablets was laid out by either company, Elop did confirm thatNokia had tablet plans in the works.
“When it comes to this platform, we reserve the right to introduce tablets on other platforms, he said. “Whether that be internal projects or we could take advantage of what Microsoft is innovating with, we’ve nothing to announce on that today.”
However, the tablet will not run MeeGo, Elop said. When asked what would be the point of launching a tablet with a dead OS, Elop said “you’ve answered your own question there.”
http://www.nytimes.com/external/readwriteweb/2011/02/11/11readwriteweb-nokiamicrosoft-deal-confirmed-5-key-questio-28250.html
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