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« Am Ready to Call it: Apple iPhone world's biggest smartphone maker Q2 of 2011 | Main | The Ecosystem Myth and Stephen Elop's Alternate Universe at Nokia »

June 07, 2011

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Comments

Archie_

Who ever says that Nokia's aren't used as smartphones are so far out of touch with reality. I disagree, I disagree - you simply have no idea. Just rate the N95 & E90 Communicator against its direct competitors circa 2007 - at the height of Symbian's dominance. These mobiles where top notch, feature-packed and high powered in their day. It is testament to their design & build quality that many remain in use to this day, and continue to attract app software upgrades -- notably mobileways.de's Gravity twitter app, Nokia Maps, and QuickOffice amongst other core user items.

Probably the main difference between Android & Symbian is speed. And between Symbian & iOS, apparently much more intuitive UI. By the way to posters, the author does not say that high-tech Japan sets the pace for mobile communications, rather that Symbian meets their (Japanese) needs well enough.


What Mr Elop has done is truly shocking, outrageous. It is the ultimate fail in tech history -- it is so shockingly bad, it may be the worst industrial fail ever. This is blue screen 101. Symbian did not kill Nokia. Elop is close now. And, I do get all those complaints on Nokia Discussions.

This is classic #REDBLUE -- and will be study material on the matter.

KPO'M

What good would firing the CEO do? It would show that Nokia has no strategy whatsoever. Going back to Symbian is not an option. Who'd believe them, even if they brought Anssi Vanjoki in? We can argue that Nokia should have kept it a secret until the phones were ready, or gone with Android, or any other number of moves, but the strategy is Windows Phone and they are stuck with it.

Anyway, it's disingenuous to point to the 2007 iPhone as a "failed design" because it didn't sell in blockbuster numbers outside the US. It was an EDGE phone, which has nothing to do with the software design. Indeed, the iPhone 3G was essentially the same phone but with a 3G radio, and it sold quite well in Europe. Apple and the "west coast guys" weren't trying to release cutting edge hardware with the original iPhone. They were establishing a market presence with what they had (great software with only basic phone hardware knowledge). They were starting from scratch. Anyway, the "west coast guys" also designed Android, which led to hit phones like the Droid. Nexus One had a flawed sales model, not a flawed design. It was more of an experiment for Google, anyway. Unlike Apple, Google shows no signs of wanting to be big in the hardware space.

Phil

Tomi, wise post as always (with some weird mistakes here and there, like the skype thing, but that's not your field plus it's pretty much irrelevant).

"A Reader" is absolutely right and I can't understand why anyone else here (including you, Tomi) is not considering what we all know very well: Nokia has already tried all the alternatives we're talking about.
If there's something we will never say is that Nokia board hasn't slept during these sad years of demise. Since the very first signs of decline they've taken action and they've tried this and then that and they've followed the manual word-by-word. Not one of their steps was wrong. Can you go down even when you're doing it right? Of course you can. Even when you are Nokia and your products are the best in any way and you have all the resources and you know exactly what people desires...even in this situation, once in a lifetime, comes a period of disruption that can take you down.
So, not the board's fault, they've done everything right...but Nokia was still going down. So what? Mid-2010 they followed the manual anyway (there are centuries of knowledge in that manual, let's not kid around) and took the very last resort you take when you're in the mud: you change everything. You start "doint it wrong" (or, at least, what seemed wrong till that point). You hire someone completely different that tells you that he will destroy everything you have. First, that's a political move (you tell people you understand you were wrong and are brave enough to set the house on fire) and second, that's probably the right thing (or, the only thing).
So, let's not talk about Nokia shares in the market (being comfortable in dominating the market while you lose share is exactly the mistake the board didn't do, and thank God for that), let's talk about trends; let's talk about the direction they were going long before Elop arrived (and the reason why Elop is there in the first place). The board in 2009 realized they were going to be extinct very soon (not 2011? maybe 2012). The board also knew they were going into single digit adopting a disruptive approach (it's not like they're stupid, that's their job to know). It's not like they expected employees to enjoy the process or shops to be friendly (not in this economy...). They knew they were going to get where they're about to get. The hope was (and I guess still is) that this disruptive plan reverses the trend that Nokia is suffering since 2008.
Tomi, if you think the board didn't expect all this it's ok, you just think they're idiots. And you treat them like idiots when you advise they get back on the same route where they were facing death. Plus, when you have made your choice and you're already are where we are, you're just dumb to go back. And you also look like someone who's lost confidence in his own choices (yeah, your advise to replace Elop is probably the only bad move for Nokia at this point in time).
So, I don't know how many of you play poker, but what we're observing from the comfort of our sofas is Nokia going all-in. When you go all-in you know you're taking a risk. This risk can be small or huge, but here's what most people think: if I'm wrong, a small risk will only wound me while a big risk will likely kill me. That's wrong. When you go all-in the difference between small and big risk is in the chances you have to not get killed...but if you're wrong you're dead anyway.
Thus, I don't think we're looking at a slow death (as it seems pretty obvious to paint), I think this is just a process and it has to follow its curve. Next year, Nokia phone unit could very well be dead (not for Elop but 'cause this was its destiny) or it could have reversed its trend and, while still in the single digit, have a strong successful future. We've seen this happening many times in history.
Tomi, I'd just like you to answer to this question: don't you think that a "non-disruptive treatment" of the Nokia patient (like in the pre-Elop era) is a bit cruel? Going slowly down, for years, while firing people and down-sizing your company and selling assets. I don't like to follow your analogy till the point where I have to advise euthanasia, but...yeah, if death is the apparent future then try to take me back to life even if it can kill me in the process.

Phil.

Cloud_Connected

Hello Tomi! Great and frightening post!

It´s hard to see Nokia struggling BUT if it´s the only way that the board of directors are forced to take action vs. this CEO it seems they have to do so.

I think business relationship to carriers/operators are very like diplomatic connections - hard to build up - easy to destroy... And if the CEO isn´t seeing that he should be forced to go.

I hope that Elop will be fired soon and that Nokia will follow a multiple OS strategy: Meego/Android and yes, even WinPhone as there seem to be at least a few people that are craving for such devices...

If HTC can do it, why ist it a problem for Nokia?

KPO'M

The carriers have no interest in killing off Nokia. They won't "force" the first Windows Phone Nokias to fail. Why would they? That would just hand more power to Apple and Google. Perhaps in 2011, the carriers could force Apple to delay the iPhone 5 (something I'm sure Apple did not want to do) to put the SIM slot back in, but Apple still managed to announce iMessage in iOS5 yesterday, which threatens the carriers' free profit stream known as SMS. Without a strong third player in the picture, what's to stop Apple from going e-SIM in 2012 or 2013? RIM clearly is floundering, and HP shows no real commitment to WebOS. The carriers need a strong third ecosystem to keep Apple and Google in check, and I'm still betting it will be Windows Phone now that Nokia has partnered with them.

Jarret

Great Article Tomi. Sad to see the demise of this once great company and I am not sure it will ever recover, because any change will take time and in this competitive market not moving swiflty leaves you in the dust!

Zeke

It seems logical to move away from older 2G services entirely. Why not have SMS and voice calls routed through a wide-ranging wifi network infrastructure that also provides mobile internet, rather than a mixture of 2G and 3G?

I doubt this is the Nokia plan but network providers having less leverage and putting the infrastructure more in the hands of the handset providers appears long overdue to me, and mobile media isn't even my specialist area.

KPOM

@Staska, a legitimate question is whether the N8 and now the E7 might have had better sales had Elop done a better job with the 2/11/11 Windows Phone announcement or delayed it until later. IOW, did the early announcement create an "Osborne Effect" that scared people away from the Symbian devices for fear of being left behind.

However, other comments make me wonder if that is the correct diagnosis. If Anohen is correct, Nokia is seeing a domino effect, not just on Symbian phones (which were losing popularity pretty steadily) but also on the S40 phones, which shouldn't be affected at all by whatever OS Nokia runs on their smartphones. If so, that would imply that the Nokia brand itself, and not just Symbian, is damaged. It's well known that OPK was buying market share (albeit a declining one) through the last two years of his management. Tomi blogged about it, himself. Such a cratering of sales of non-Symbian phone suggests to me that perhaps Nokia has decided to cut the cord entirely and to stop buying sales. That may be Elop's biggest miscalculation. I think going all-in with whatever OS decision (Android or WP 7) was the right strategic move. However, he may have underestimated the effect on the brand and should have been willing to increase carrier subsidies and in effect continue to buy market share during the transition.

kevin

Phil/Staska: Agree with both of you 100%. I commented here last June that Nokia and RIM were going down unless they really executed on a next-generation platform. S^3 and BB6+ fall way short.

Tomi: Please provide a source/reference for your assertion that Apple delayed the "iPhone 5" to switch SIM designs. My inside sources tell me that's not the case; Apple long ago decided to switch to Sept launch for several reasons, and the CDMA and white iPhone launches were part of the plan.

Piot

@Kevin
If only Nokia and RIM had been able to copy the LG Prada..... In six weeks.... They wouldn't be in this mess.

;)

Matthew Artero


Bravo Tomi, it's great when you give supporting facts. The only big thing in your post is what he has done to the relationship with the distribution channel because that is what makes him unable to recover from his burning platform mistake.

Everyone I know who has a data-plan has unlimited minutes for both data and voice, so I don't beleive Skype is an issue. If carriers want the business of people who travel a lot multiple sims are a must. I doubt if I showed up with my phone they would turn me down. The carriers here in Guam USA use multi-sims to attract business away from those carriers who don't offer it. I bet it is the same in Hawaii also.

You are going to see Elop's genius. He is going to say he made the burning platform announcement as way to be open an honest with the carriers. He regrets that he harmed them. He was trying to be helpful to them. Then they will forgive him and accept the WP7 phone.

What if when Elop says Apple is two years ahead of Nokia he is referring to profitability and not innovation?


Arun

Dear Tomi,

There are a few bold claims and a lot of interesting points. But
But.

Thats the most awesomest rant I've seen in a while. :)

Jarkko

Interesting post. My advice is keep on going with Meego. As simple as that. It is a good platform.

Phil

@Kevin: yes, I don't think invisible SIMs had anything to do with iPhone 5 future. Actually it's months I suggest the possibility that this year we won't see any new iPhone (or maybe just an iPhone 4S to revise the hardware and the demand). I was surprised that no one suggested too, but recently we start reading about that. Rumours, a couple of weeks ago, stated new devices release was moved to September, and this rumour appeared suddenly and was right on the money...so I think it was Apple who dropped it.
Apple has to move the release of new devices to a two year frame because from their brand his expected something "really new" each time, and they can't keep this pace because of hardware innovation scarsity). In fact my doubts started when they finally put everything in the iPhone, last year. They had created a false innovation scarsity by not introducing technologies that every device had, but last year had finally introduced the last bits so...where can they go now? They're just missing NFC, but they said they wouldn't use it (I'm sure they'll think again...). And it's not like Apple is going to introduce something when it's really new (like 4G or 3D), they are always at least a couple of years behind the competition technology-wise.
So, maybe an iPhone 4S, maybe no iPhone at all (especially if they are serious about releasing an iPhone Nano which, in my opinion, is a must if they don't wanna start going down like flies in a storm). Plus: iOS 5 is really behind the competition; Android general experience is a bit clunky, but it's getting better by the day, and Windows Phone was already better at the start and the new release is gonna be even better (in fact iOS 5 has introduced a lot of stuff they had). I think it's better if Apple introduces a new iPhone when they've completely revised and modernized their UX.

Yuri

The biggest irony in it all is that Microsoft decided to sabotage Windows Phone half a year before Nokia will even get a shot at its new strategy.

They announced that the touch optimized UI of Windows 8, their tablet OS, will be based on anew HTML 5-based framework, instead of the Silverlight-based one, already developed for Windows Phone.

It is not enough that Windows Phone is doing very bad on the market, that all of its current device makers are cold to the OS, and that the channel is choking WP7 too, but now this. No continuity of Windows Phone applications to Windows 8. Something that you get almost for free with Android and iOS.

Microsoft has done it again - after discontinuing Windows Mobile, now they do the same for Windows Phone. Simply unbelievable.
If I were a .NET / Silverlight developer I would be running screaming.

Microsoft, the stalwart of closed-source software is showing everybody why open-source is the only future-safe choice. And Nokia gave up its first-class open-source ecosystem for that. Truly ironic.

Boris

Nokia in Serbia is dying very fast.

Mt:s (by far the largest mobile operator) has formally only 3 Nokia phones and in reality none. They completely stopped selling (those left are stockpiles) and advertaising their phones! It's all about Android :-(.

Telenor and Vip mobile (=Mobilkom Austria) sells Nokia phones, but their advertise massively Samsung and HTC phones.

In our major tech forums nobody anymore talks about Nokia nor Symbian any more :-(.

This is just sad.

ary

Completely agree, WP7 sucks hard. just tried, can't even install 3rd party maps like google map, and very low third party apps.

tomi, please save your country brands.

Archie_

Phil has spoken Red Blue (Piepenbrock) in a way that I could not -- disruption (Blue) seems like the kind of shake-up a giant would need to completely re-look what it is that they do, try things differently. You have to humble the organisation to get them to seemingly abandon what it is they know already - even as you say they where a competent and humble bunch.

Staska - I see, & agree.

I think I quitely knew there was trouble brewing when I first compared the N97 spec sheet to the E90 - just as an observer - I think that carried more weight for me than what I was reading on the Discussions.

kevin

Phil: I think you have the correct view of Nokia, but you have a mistaken view of Apple and the future of smartphones. Everything is not yet in the iPhone. Far from it. There's a long way yet to go in hardware, and even more so, in software, because the iPhone is just a miniaturized computer that has cellular capability. The processing power of PCs have outstripped what 95% of the non-business population needs, but the processing power of smartphone chips have not yet reached what 95% of the population would like to have. Expand your vision. Even the just-announced iOS 5 and iWork apps are but a small portion of what people might want to do with a 24/7-in-the-pocket, always-connected computer.

You can be certain there will be a new (full-capability) iPhone before Christmas. I can't say whether there will be a low-cost 3GS-quality replacement for the masses; my guess is still not yet because the demand for the full-capability iPhone still outstrips a rapidly growing production capacity. The reduced price for the iPhone 4 (upon release of the next iPhone) will also lead to another burst of sales.

Phil

Kevin, I think you misunderstood me. After 30 years in IT I'll be the last to say that innovation is gonna stop. And we are probably gonna get the most powerful innovation by Apple, so...I just wasn't clear.
What I meant is that a new iPhone carries the weight of expectation, and they can work only on two fronts: software and hardware.
Software - they've shown iOS 5 yesterday and meh, there are some nice things (plus an important fix to the notifications mess) but nothing that can carry the "iPhone 5" label. iPhones are perceived as a great user experience (and more than once Jobs himself has said that they don't fight over technical specifications), and on this front an iPhone 5 would look basically like an iPhone 4.
Hardware - this area must be split in two: external (design) and internal (motherboard); as you know iPhone 4 completely changed the design part, so I'm gonna go for no, they're not gonna change it again; on the motherboard they can work (more ram, dual-core CPU, etc.)...then again, is it gonna be perceived as a big change to Apple typical customer? I don't know if you're familiar with iPhone app development, but an app is not gonna run faster if you are sporting a faster CPU.
That's why I don't think they're gonna release an iPhone 5, they've nothing big to put in there. No change in design, no change in software (I was in doubt until yesterday, they could have released a completely different iOS considering their approach is starting to look a little old, but they didn't) and nothing relevant (experience changing, situation enabling) in hardware like NFC. And let's not forget that Apple doesn't really invent or build this stuff, they go to SE Asia and shop around like any other manufacturer does. That's why I talked specifically about NFC, this is "what's new" today.
So they can release an iPhone 4S (with a simple hardware upgrade, and of course iOS 5) or nothing at all (for other business reasons). Plus: any observer knows that Apple products deserve to be bought every two years. If you look at the Apple line-up since the iPod era, it's always been like this. Take the iPhone: the first is very attractive and "good enough" to buy (even if it does nothing compared to the others)...next year (iPhone 3G) an incredible piece of hardware beautiful as before but that can also do what the others do (sorta) plus apps and more...the year after that(iPhone 3GS) meh, if you had bought an iPhone the year before you wouldn't regret it...next year (iPhone 4) completely changed, more beautiful than ever, this time it does everything, if you had bought an iPhone the year before you'd shoot yourself in the face...and so on. Jobs knows that his products are good for two years, why do double work (and double costs) when you can live two years with the same stuff? More importantly: you can keep selling at the same price the hardware you're going to pay less and less each month. So, this is the year of the "poorly-changed" iPhone (if any), next year is gonna be mind-blowing for sure.
One more thing (like Jobs says...): I'm astonished by the number of people convinced that there's gonna be an "iPhone 5"(meaning a truly new iPhone with which you can do more than the iPhone 4, whatever the name will be); I already have so many beer bets that after September Apple's event I'm gonna be either drunk or broke :)
Anyways, Apple has become big, but not that big to manage too many new projects at once, and this year must be the year of the low-cost iPhone. It MUST be. They ain't going far away if they don't attack that part of the market. And it's also their standard strategy (they've done it for every product line). They can use it for the price-point aspect but also for the color fetish some people have (again, like they did for their iPods). It's gonna be huge and iPhones have started to perform weakly since Q4 2010, so it's the perfect time.
My point, in less words: a new iPhone is not gonna sell more than an iPhone 4. It's gonna cost more and it's gonna sell the same. They have the strongest loyalty on the market, so this year all the old iPhone 3GS are gonna move to a brand new iPhone 4 anyway. They better focus on iPhone Nano, that's where the real money is (and next year they can start selling it in developing countries too).

Phil.

Baron95

This is revisionist history/analysis.

Nokia Smartphone share and margins were is free fall before Elop even got hired. Why do you think the board fired OPK and hired Elop? It was not because all was well. It was precisely because all was very, very bad.

You yourself wrote about channel stuffing and maintaining volume by discounting.

Don't misunderstand the slight pop when the first S^3 devices (like the N8) launched. That was just that, a momentary pop - until people realized how bad the N8 is for Browsing, games, etc.

Fact remains the same. Nokia got killed in the US by iOS/Android. When iOS/Android became generally available in multiple operators in Europe, it was killed there also.

Nokia retreated to the emerging markets. They found some temporary shelter, because iPhone/Android were rare there. Now that Apple and the Android OEMs are selling in more countries/operators, Nokia's fall was accelerated. Adding fuel to the fire was that Huawei and ZTE finally brought out their white label Android cheap phones.

The last simply COINCIDED with Elop's announcement.

The only thing I agree with your blog post is that Nokia is undesirable to operators. They went from mildly undesirable to severely undesirable. Not because of the Feb 11 announcement, but because of the arrival of choice (iPhone, Android, ZTE, Huawei, etc) in some critical Nokia safe heavens. What you are seeing here is only marginally influenced by the Feb 11 announcements. It was mostly baked in by 4 years of OPK's failures to respond to the iPhone, and the deficiencies of Symbian and Nokia's software incompetence.

nicolau werneck

Yes, Symbian sells a lot. Yes, Nokia has great technology and design, better than Apple's. I agree with all that. I _love_ Nokia phones. But still, they were not doing good _profit_. Apple's business is more profitable.

Nokia's board decided they didn't want to sell lots of non-lucrative phones, they wanted to sell whatever Apple is selling to whoever Apple is selling, and make that kind of money.

The problem is Elop decided to follow the USA's delusions instead of looking for a more auspicious way to improve their profits. "Took the easy way out", now seemingly in the more gloomy sense.

but about carriers and Skype... Skype onnly really damages them on long sitance calls, and do carriers win a lot there?... I though the biggest "cash cows" were first SMS then voice... Why can't carriers make money just charging people for the bandwith for using Skype or whatever?...

kevin

Phil: Okay, so I misunderstood you on the first part. And I can see that the next iPhone being mainly cleanup - A5 processor (which is much faster in graphics), slightly bigger screen but still same resolution, and better battery life.

I don't know how you can say "iPhones have started to perform weakly since Q4 2010". Of the biggest 5 or 6 cellphone makers, only Apple increased sales sequentially in Q1 2011. No other smartphone maker has increased sales by more units since Q3 2010 (Apple up 4.6m, Samsung in 2nd- up by 3.6m).

Your point will be proven wrong by millions; it's not going to cost more, and it's gonna sell at least 25% better. As I said at the beginning, you're not seeing how Apple is driving the increase in iPhone sales. You didn't see anything valuable in iOS 5, but it's a game-changer. Apple is once again shifting the whole smartphone battleground, just like they did in 2007.

We can agree to disagree. Just come back in a year from now. A year ago, Tomi said that Apple peaked. I told him no way; he was missing how Apple changed the game. Apple will move on up in units and share, Nokia and RIM were going down, definitely in share (and as it turns out, in units as well). A year later, it's exactly what has happened.

Phil

Kevin, I actually agree on everything you say. My point stands anyway, because I'm saying something different.
When I say that Apple performed weakly in Q4 2010 I don't mean they sold less devices than Q3, I mean they sold less devices than they were expected to (and that was the first time in years). In fact, they merely had an increase (1%) against a market that had grown more than 10%. It was the first time Apple underperformed the market (they usually overperform).
Q1 2011: they did exactly what the market did (which basically means they did nothing), but they had the Chinese New Year's that played an important role (Apple confirmed this) so, when you extract that, they did in fact underperform that quarter too. You should know that two quarters in a row starts to mean something.
Q2 2011: brace yourself and get ready to come back year at the end of July to tell me if I were wrong...This will be the first quarter (in years) that Apple goes down (in a growing market). I'm talking quarter over quarter, obviously, not YOY (that would be impossible in a market that has grown 100% in a year). They will only show MOM, total devices sales, etc. but analysts like Gartner will report iPhone shrinking share.
Q3 2011: this is the real mistery. I'm guessing they'll stay low (though they will never do bad cause they have the most desirable device on the planet). Apple as a co will still be the best co for its profits, and they could release iPhone Nano and stuff...but here I'm talking about iPhone exclusively and I think it'll stay down.

I'm not saying Apple era has ended, in 2012 iPhone could very well get to the first place, I'm just talking about the signs I'm seeing right now but...what about it has ended? It may be, no one really understands this market (Jobs himself, he does his magic and then prays it works...sometimes it does, sometimes it doesn't), three quarters in a row would usually be a strong sign but we can't know for sure. All I know is that devices don't sell for magic reasons (even when it seems so because we can't understand what's happening), and the reasons iPhone had may not be enough anymore. I also know that, at one point, you will have sold to all the people who can pay you that money, so you'll keep on selling your X devices per month (people renovating their contract) but you're not gonna grow. We actually don't know that number exactly, but technology is speeding up so fast that the smartphone chart is already including customers who bought a 70$ smartphone (only three years ago you had to spend 4 times that), Apple won't be first in this chart simply 'cause they don't wanna be (they care about profits, not charts).

Tim

"Steve Ballmer has killed Microsoft WP7’s chances as a smartphone OS, with this Skype malarkey." We can only hope, especially after Stephen "Quisling" Elop sacrificed Symbian to try and give WP7 life.

I don't know what the ultimate replacement for my N8 will be, but (a) if I have anything to do with it, I'll hang onto the N8 until it dies on me, and (b) the replacement will not be a WP device.

I'll say this much: I am NOT looking forward to the day that I have to replace my N8.

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