My Photo

Ordering Information

Tomi on Twitter is @tomiahonen

  • Follow Tomi on Twitter as @tomiahonen
    Follow Tomi's Twitterfloods on all matters mobile, tech and media. Tomi has over 8,000 followers and was rated by Forbes as the most influential writer on mobile related topics

Book Tomi T Ahonen to Speak at Your Event

  • Contact Tomi T Ahonen for Speaking and Consulting Events
    Please write email to tomi (at) tomiahonen (dot) com and indicate "Speaking Event" or "Consulting Work" or "Expert Witness" or whatever type of work you would like to offer. Tomi works regularly on all continents

Tomi on Video including his TED Talk

  • Tomi on Video including his TED Talk
    See Tomi on video from several recent keynote presentations and interviews, including his TED Talk in Hong Kong about Augmented Reality as the 8th Mass Media

Subscribe


Blog powered by Typepad

« We Are Hitting Major Milestone: Time to stop calling it 'mobile PHONE' | Main | The 20 Most Advanced Countries in Mobile (Updated Listing for EOY 2011) »

December 21, 2011

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00e0097e337c8833015438a54f47970c

Listed below are links to weblogs that reference Calculating the Elop Effect: He's already destroyed a company the size of Oracle, and profits the size of Google:

Comments

darwinphish

Tomi:

Please do not take this a defense of Elop, but there is a serious problem with your analysis. This and other posts you have made on Elop assume his actions and decisions are the only or prime reason for Nokia's decline. There is certainly a strong connection between Elop and the Nokia's recent troubles, but not everything is attributable to him.

In the 3 years preceding Elop's hiring, Nokia stock dropped about 80%. This suggests the market was already significantly discounting Nokia's future. That is, the market anticipated Nokia losing market share and profits even before Elop was hired. During his reign, the stock has dropped another 50%, but the real damage was done before he showed up.

It is not entirely Elop's fault that much of Nokia's collapse has occurred under his watch. Yes, Elop has made horrible mistakes and his performance has been bad. I even think its more than fair to say he has accelerated Nokia's decline. But when he arrived, neither Nokia's position nor its future where as strong as you imply.

I say all of this because I think you lose a little creditability (or appearance of objectivity) with what is ultimately hyperbole. Again, I agree Elop has done a very bad job. But focusing almost exclusively on Elop and his actions creates a very incomplete analysis of Nokia and its collapse.

By the way, there have been many collapses like this before, especially in the tech and consumer electronics industries. Yes, Nokia was very big and is crashing very fast. However, I think the speed of their decline is as much a reflection of how quickly markets move these days and the nature of the mobile industry, perhaps more so than the failings of one CEO.

Tomi T Ahonen

darwinphish

I hear you. First, so you know, I have a policy here on my blog, that if my response requires me to write 'as I wrote on the blog' ie if the person leaving the comment didn't read my full article, those comments are removed. I decided to maek an exception in your case because you did take a moderate view on your point so you're a kind of borderline case in my book.

I very clearly wrote early in the blog at part about Burning Memo "I agreed then and agree still now, that Nokia had then (and still has now) severe problems that the top management has to deal with" - so for you to say that I somehow am living in an alternate world, where Nokia had no problems and Nokia's troubles started with Elop - is patently not true. But now I have to waste my time - and the time of my readers - repeating what I said because you were too lazy to read the actual article I wrote. Next time you do that, your comment will be deleted without mercy. This serves no value in debate.

Onto your other points. So yes, Nokia lost value in its share price prior to Elop arriving. That also cost the previous CEO his job. What Elop HAD to do is stablize and turn to growth the price of Nokia shares - as he did. In his first 5 months, the Nokia share price turned to growth - growing 11%.

It was explicitly February 11, the Microsoft announcement date, when the growth trend of Nokia's share price broke and turned into a severe dive. The only modest recovery came after even worse news for long-term Nokia viablity - that Nokia had become a take-over target in July (the trend has returned to its decline since).

There are many things wrong with Nokia, and many things that Elop has done wrong besides this blog article. This article is about the Elop Effect. I argue it is the costliest managmenet error ever and I argue no market-leading global company has ever lost half of its market in one year, under any circumstances, in any age, in any industry including this 'fast-moving' high tech. You claim there are others. I give you the benefit of the doubt - please list at least one such company. Else we must continue with the premise that Elop is currently establishing a world record for destruction of a global market leader - and in my book, such an action is fully cause for being fired.

Thank you for writing, come back..

Tomi Ahonen :-)

don_afrim

Nokia is done. Elop has succeeded or failed depending on his intentions. And Microsoft can't' even profit from this, cuz Nokia will be dissolved. Even if MS buys Nokia's smartphones, they won't succeed and probably will bring MS down the rabbit hole as well.

Right now if Nokia would fire Elop and I mean like immediately, hold an announcement tomorrow morning that Nokia will bring back MeeGo as their future platform releasing all MeeGo handsets as soon as possible and making the N9 and N950 globally available I think Nokia has still a chance of turning this sinking ship around.

Otherwise, nice knowing you Nokia.

AtTheBottomOfTheHilton

I don't understand why Tomi claims that Stephen Elop is incompetent. So far he has succeeded with his mission, very well I would say. What is his mission? Destroy a competitor of course. Microsoft has always had problems with getting into the mobile market. Just look at previous attempts with Windows Mobile and Zune, which didn't attract many people.

So what do you do? Well obviously the desirability for Microsoft mobile products is still very low but you can still be a contender if you beat your opponents to death. Create a monopoly sort of speak, even if they will never reach it, they might reach an oligopoly situation which far better than being the loser on the block among many other contenders.

I could be wrong but from what I've understood, there was already some MS ownership in Nokia. Nokia was weak and an easy prey. They strengthen their shareholdings in Nokia and force Stephen Elop as CEO and they cannot get rid of him because of MS shares in Nokia. They quickly kill anything that could compete with Microsoft, force Windows Phone 7 to be their main OS. How obvious could it be really?

From my point of view, this is a textbook assault, very classic and this is not the first time. This has been done to many other companies before. However, why does this particular case stand out? I will name a few.

It's obvious that Stephen Elop constantly lie to consumers and the press about his ambitions. He doesn't care about Nokia, he's there to save Microsoft.

Nokia was a good company with many great products. I think they had a temporary dip and given some time they would have rehashed both Symbian and Meego. They would have to downsize in order because of increasing competetion from cheap Androids but their would still be Nokia.

Nokia constitutes about 25% of the Finnish BNP. Since much of the development is now moved to the US, the question is what are the Finns going to do?

The big bully stigma. I think this is what makes people angry. Microsoft, the producer of less desirable phones, kill their competitors by buying up shares to destroy them. Consumers want competition and that companies should compete with products. What's the next step? Ballmer holding a gun to our heads until we buy their products? I liked Nokia phones and I don't want to be forced any MS product.

In short it's nothing odd about this, a regular buy up shares and destroy mission. Nokia is over. What do we learn? I'd say that we should have stricter legislation preventing these kinds of manoeuvres in the future.

Flavio Noschese

Hi Tomy,
This isn't about that specific December,21 writing, but I couldn't find your E-mail.
I read your blog since a long time ago, and like very much the way you put things.
But a few days ago, I was thinking about something that you never discussed in your blog.
I think that there is one more reason to the Symbian failure.
Let’s see: Nokia tried to copy IPHONE.
It was a new paradigm of interface and there isn’t other way to proceed. Everybody did it.
You know, I really think that “Symbian Belle” in the Nokia device is OK. Not a disaster!
But the huge mistake done by Nokia was to try copy ITUNES !!!!
Very ambitious and Nokia was not capable for sure !
Android didn’t and today is in a very good shape!
That was the “technical disaster” from Nokia!!! (We know that the hardware is fantastic)
The Pc software’s from Nokia are a great trap.
I think what made Nokia Symbian’s Phones almost unusable as smartphones is: OVi, PC Suite, Music Player, Map loader, software updater, etc, etc.
All of them are unfunctional !!!!
They often severely damage Windows (worst sin)!
Crash all the time and fight against each other.
So buggy! So cranky!
Have you ever try to put a single music in a playlist with OVI?
Have you ever try to find your music files in your PC, after the Nokia Music Player job mess?
Duplicate files? Wait! There will be more!
Very simple jobs that “NOKIATUNES” (OVI, Nokia Music Player,etc) never done well.
Well, I think that those softwares built the undeserved Symbian’s bad name.
The PC interface was the most severe problem and Nokia didn’t understand it.
After a single Windows disaster (so common in OVI’s world), 90% of the people will not use anymore those softwares (and the phone as a smartphone).
And then, Elop abandoned the plataform. (A drunk one but not in fire)

Regards,

Flávio Noschese

Will Morley

A fascinating article and compelling reading, with some inspired illustrations - e.g. the 'Google-sized' hole in Nokia's profits.

However, regarding the killing off of the N9 and MeeGo - have you considered that Elop was in fact avoiding yet another 'Elop effect', this time on Nokia's WP handsets (in which Nokia has vested its long term interests)?

Powering on with selling the N9 and MeeGo in the biggest markets would have significantly eroded the strength of Windows Phone as Nokia's flagship product. The CEO would have effectively been communicating that he had such little confidence in WP that he needed to run a similar offering alongside it. Moreover, it would have created a confusing brand message for consumers, further eroding the 'brand equity' you discuss later on. Surely this would have been an indirect Ratner effect (implying the main product is crap) and a very short-termist solution to profits?

Elop has made dubious decisions - most of which we are yet to see the full outcome of - but he must stick to his guns and show full confidence in WP to secure Nokia's long term future.

Will

JS

Playing armchair quarterback is always easier than being in the game, right?
ELOP Effect, 100% correct and unfortunatley cost Nokian's 20% in market share and untold profits.
Yet moving forward what would you do to seccure the future? iOS apps & cloud services along with Androids army of apps & same services... Jorma was caught flat footed, no? And that begs the question, who's head are you calling for? Come on, Jorma has been running this ship since the early 90's, he brought Elop in and has overseeen it all. Having worked for KP in the States for a decade and seeing how we dominated the wireless world with great products and execution makes me sick to watch what is happening. Yet, Elop was hired by Jorma and the board. I would throw some attention on how they thought through the transition to the windows/phone strategy from Symbian/Meego

Tomi T Ahonen

I removed a few longer comments with good points that went into that Symbian nonsense. They were veteran visitors to this blog and know better. I CLEARLY said at the top of this blog that I was VERY clear that my view has been long before Elop appeared that Symbian has no long-term future and will be replaced. If you waste your effort trying to bait me to argue Symbian then in the comments, your effort utterly wasted. You know better. Stick to the topic - Elop Effect. You made good points that are now deleted. Perhaps you should post with more relevance again? I wont tolerate abuse of this space and waste of the time of those who come here often to debate.

Feel free to repost but staying on topic and NOT getting into stuff I have already conceded in the original posting.

Tomi Ahonen :-)

darwinphish

Tomi:

Thanks for responding and not deleting my post. I did read the entire blog entry as well as every one of your other blog posts on what is happening with Nokia over the past 10 months or so.

You have devoted 10's of thousands of words on this subject, the vast, vast majority of which were about Elop. I know you know there have been and continue to be non-Elop related problems at Nokia. My point is simply that you have focused far too much on Elop's actions. By focusing so much on Elop I believe you actually detract form your overall message. I have a great deal of respect for your work and analysis, but you lose me a bit when you suggest, for example, Nokia would be better off with a monkey instead of Elop.

As for other examples of catastrophic corporate/brand collapses, there are lots of examples. To name a random few: Commodore (out sold Apple 3-1 and dominated the home PC market for 7+ years), Atari (once the fastest growing US company of all-time), Word Perfect, Palm, Motorola, soon RIM and perhaps even Microsoft one day. Companies that do not adapt as markets shift fail, often very quickly. What makes Nokia's collapse so spectacular, as you have said, is their size and reach at their peak. However, I would argue 1: size doesn't matter (unless you are a bank) and 2: when you are fighting in a market that grows as fast as this one, a collapse can happen very quickly.

One last note. The Osborne Effect tale does not really tell the whole story about what happened with Osborne. It was not just that they announced a new, better model before it was ready. Their big mistake was they kept buying parts to build a product that was not selling. As a result, they quickly ran out of money. If they had the resources to make it until the new product was ready, Osborne may have survived (or at the very least, been judged differently). I am willing to bet that when Elop issued the "burning platform" memo and announced the move to Windows Phone he believed Nokia had the resources to make it through to their next product cycle (which , it turns out, they did).

karlim

Tomi,this comment may not be about Elop Effect per se, but I think it's about the key reason for most of the heated arguments we have here in comments.

I have a feeling that we have two camps here, shouting at each other in post after post after post, not listening to each other and not addressing the main difference.

Here's how differently our camps look at things:
____________________________________________________
We - of the "Nokia was sinking already, so WP strategy was the best Elop could do" camp:

We see all that happened to Nokia through Clayton Christensen's "disruptive innovation" theory prism.

In fact, despite the same name, we do not even see smartphones before 2007 - phone centric devices with computing capabilities tacked on top - as the same category device as what we call smartphones today - true mobile computing devices, with phone/voice (and SMS)as one more app among many.

And, no, despite Nokia inventing the term "mobile computer" and using it to describe its smartphones years ago, they never were true computing devices. Even N8 suffered from phone centric paradigm - and the only devices Nokia built on new mobile computing paradigm were N900 and N9.

Looking from disruptive innovation POV - everything that happened to Nokia in 2010 and 2011 looks logical. During the period of the disruptive change - incumbents are always slow to react. And, right until almost the end - the numbers they watch and care mostly about - usually look pretty good. Until the tipping point when the game/market expectations change, most of the incumbents go into a rapid, very often terminal decline, and disruptive challengers take over.

In periods of sustaining innovation - incumbents live and thrive by their numbers. In periods of disruptive change - they die by the same numbers, because those numbers stop to matter.

For Nokia the tipping point was 2010, when Android growth exploded and it started rapidly moving down market to the price points held by Symbian devices. The number of phone centric smart handsets on Symbian^1 or even Symbian^3 (e.g.N8) Nokia shipped, mattered as much as the number of feature phones Nokia shipped. Very little. The market moved on - to true mobile computers and Nokia had none. N9 was too little too late, and Elop, with full support of Nokia board, decided that their only option was to move to third party OS for variety of reasons.

The Elop Effect, if there ever was one, had much lesser impact then you insist, and a very big part of Nokia troubles this year can be explained through disruptive displacement by Android devices.
____________________________

You, and others in "Incompetent Microsoft Muppet Elop" camp:

You seem to completely ignore disruptive innovation angle/possibility. In fact, I don't think I ever saw you discussing disruptive innovation angle in your blogs.

Do you think disruptive innovation theory can not or should not be applied to describe what happened in smartphone market over the last 5 years?

I know you said that iPhone changed everything when it came out. But you seem to apply it more to the simple things like user interface, touch screens, etc; And not meaning that the whole way mobile device business works, changed.

All that is happening in smartphone market since its inception in early 2000's is a process of natural evolution/change. While Nokia had some problems, they could have solved them if only they stuck to business as usual and improved execution. Focusing on better texting phones, expanding its model range even more,improving marketing,etc;

Instead - Elop decided kill most of the things Nokia was strong in. Then made things even worse by disastrous "Burning platforms" memo, and Feb. 11th announcement. At the time when Nokia was already turning things around with N8 and N9. The rest, as they say, is history.
______________________

Now that I've put my thoughts into text - I am not sure there is a way to reconsile the differences between our two camps. Even if the ultimate outcome turns out to be as one of our camps predicted. Short of a lot of internal Nokia communication and numbers getting out into the public domain.

If some investigation or (wiki)leak reveals some e-mails were Elop is discussing with Ballmer the ways to take Nokia down for the best interest of Microsoft - it's clear your camp is right. If Nokia internal sales numbers and projections for Q4 2010 and Q1 2011 come out, showing terrible N8 end user sales numbers and piled up inventories; and we get to see some internal memo by Alberto Torres describing the terrible state N9 and Nokia Meego roadmap was in, in December 2010 - well, it will be hard to argue that we were wrong.

But short of that - I don't know.

If Nokia goes belly up, or is bought and divvied into pieces - we will continue to insist that it would have happened anyway, and it was mostly OPK's fault.

If Windows Phone strategy succeeds, and then Meltemi and the "Next Billion" part of the Nokia strategy works out - your camp will insist that it could have been much better and easier without Feb.11th. And that Meltemi success proves that Nokia could have done it all the same and even more with Meego, instead of Windows Phone.

Tomi T Ahonen

Ok now responses

Hi don, At, Flavio

don - first - I agree Nokia can be reasonably well recovered and restored if Elop is fired immediately and the WP strategy abandoned in favor of MeeGo. I am contemplating a blog and analysis of that scenario option but honestly, I have a ton of 'more important' blogs I need to write about non-Nokia stuff haha. And some more urgent Nokia blogs too still to come.

About Nokia done otherwise, not really. I think Nokia's major role as smartphone and innovation leader will be gone if Nokia doesn't have the presence and scale (and profit margin) but it will continue in low-cost dumbphones for a long time, even as with current trends Samsung will pass Nokia and become biggest handset maker in 2012.

The most likely scenario is a bidding war and Nokia split by whoever ends up buying it. I do have an inkling that one of the rivals to step up might be Intel, they have definitely raised their interests in mobile on a regular basis and could be one of the finalists in that race (obviously Microsoft will be fighting hard not to lose Nokia).

At - you make a good point that from Microsoft's point of view, this is well executed capture, about 70% or 80% completed as we speak. Only a spoiler rival hostile bid could spoil this party. But if so - and I think in any case if Nokia was ever sold to Microsoft - there would be a colossal case of 'an appearance of conflict of interest' in how Elop has acted. His every action can be seen as in the best interest of Microsoft and often against the best interests of Nokia. If he was found to be acting against his fiduciary duty it would not only jeopardize the take-over (both US and EU courts and New York and Helsinki stock markets) but also the principals involved would face investigations and even lawsuits and possible bans from holding public office. For Ballmer, Elop is a pawn he can afford to lose. But for Jorma Ollila and Steve Ballmer - I cannot imagine them being so stupid to have let this happen and place themselves in jeopardy.

But anyway, you make an excellent point - from Microsoft's view this is all gravy. They were out of the mobile races. After a decade, their peak market share for Windows Mobile was 12%. Their current Windows Phone markets share (Q3) is under 1 percent and falling. Ballmer already decapitated his President of Windows Phone so he is livid and knows WP is dead without Nokia.

When Elop and Ballmer made their first calculations of how to sell Microsoft to Nokia last summer (informally, before the official bidding started) they were counting the prize to be 35% Symbian market share plus 5% Windows Mobile + Windows Phone market share and looked at Blackberry and iPhone and Android and thought they would be gaining the number 1 position. That is how the calculations were made and why Ballmer was able to 'overpay' for Nokia.

By the time the deal was consumated in late January, Nokia's market share was 29%, Symbian about 34% and both Windows OS market shares were down to about 3%. They still could hope to see 37% out of the partnership.

Today the Symbian market share no longer matters because NTT DoCoMo was so infuriated by being screwed by Nokia, they went Android. So no gain from the last bits to WP. So they only have Nokia 14% and Microsoft both OSs combined at 1% to aim for. That is 15%. This is only a third from what they hoped for a year ago. But - it is FAR better than what Microsoft ever achieved alone.

And then my projection. I expect Nokia to be down to a bottom of 6% next summer, recovering to 8% by the end of the year 2012. Even at that level - Nokia and Microsoft would be 8 times better performance than what Microsoft has managed alone without Nokia. So no matter how you spin it, the Nokia way for Microsoft is better than without it.

Tomi Ahonen :-)

Tomi T Ahonen

Ok now responses

Hi Flavio, Will and JS

Flavio - yes, I really do agree with your point. I have written before on some Nokia and iPhone type of topics that Nokia has made big mistakes trying 'to become' Apple or copying the iPhone etc. Nokia should - yes SHOULD - learn from Apple but Nokia is totally different from Apple and serves different customer segments, and lives in totally different scale. Its the classic Porsche vs Toyota comparison. Porsche cannot become a Toyota global rival any less than Toyota can become a valid Porsche rival. Both can make individual cars to compete against one another but only in very few overlapping areas. Same with Nokia and Apple.

Will - yes, that makes some sense but note first, that MeeGo was designed to be a top-end smartphone OS, specifically for Nokia to migrate its top-line N-Series (that traditionally have had phones far more capable than say the iPhone) like the successors to iconic Nokia flagship phones of the past like the N93, N95, the N900 and now the N9 (and N950). Also the E90 Communicator. Phones far far more advanced than ANY other phones on the planet. WP7 was not designed for that. Microsoft has spoken in public that WP7 is intended to be mid-priced smartphones to help push prices near the 100 dollar level for smartphones. So of the two, clearly MeeGo is the flagship OS, not WP. And we can see it from the very basic functionalities like WP doesn't support two cameras, doesn't support NFC, doesn't have full multitasking etc etc etc. MeeGo does of course (as does Symbian).

Now, about Elop sticking to his guns. Yes, I see that Elop believes that, because he likely does believe that WP is a winning strategy - or has a chance to win for him - and even if he did not believe that, he is so arrogant and so 'confident' and said in public that the leader's perception is part of leadership, he has to convince people so they can believe - he will never quit the WP strategy. That is why I say he has to be fired.

But for the strategy. I have become convinced that WP is no longer viable as a strategy. I have mentioned many problems in it here on the blog and on Twitter but haven't explained it fully so you don't really know why I have become convinced but I do honestly think so. The WP strategy with Nokia as an 'independent' company whether led by Elop or anyone else - will fail. And Nokia will abandon WP sooner or later and switch to MeeGo or Android, the only choices left. (where Tizen is a variation of MeeGo). But if Microsoft bought Nokia or even bought only the smartphone unit - even then the WP story is doomed. The carriers HATE Microsoft, globally. Everywhere with the massive Microsoft dollars the launch is a dud. The performance of WP will never reach the peaks that Windows Mobile achieved (12%). Will not. And if Nokia is taken over by Microsoft, then what remains of carrier 'trust' of the untrustworthy Elop and the suddenly 'we cannot trust their promises' Nokia - will evaporate. Micrsoft with an 'independent' Nokia will sell more WP phones than Microsoft that controls formally Nokia. Thats my personal view, I have not yet explained all of it, but do come back to the blog, I will be getting those thoughts out sometime in the next weeks. This strategy was plausible if unlikely, when announced in February. It is untenable today. It was killed when Microsoft bought Skype.

JS - haha, 'playing armchair quarterback' sure. But honestly - go back and read my February blog about how to fix Nokia (and the related posting about Nokia smartphone OS strategy). Then see a) how much of what I said Nokia has been doing. And see b) what of the parts I said, Nokia 'really' should have done. And keep in mind, that Elop himself is now admitting, Nokia's problem is not innovation or ecosystems - it is execution. And see how much I talk about explicit exectution issues in those two blogs. And haha, think how much more damage Elop has added to the execution of Nokia this year.

Of 'how to move forward' - I DID write how to fix the mess in the summer. To recover from the dead-end path that became out of the Microsoft strategy. I even calculated how much Nokia could recover with that strategy. Every week that Nokia waits in firing Elop, the level that can be recovered will diminish, obviously - but the Microsoft strategy will never pan out for Nokia. It is now a lost cause. The sooner it is abandoned, the more of what we used to know as Nokia can still be salvaged.

Thank you all for writing, come back with more!

Tomi Ahonen :-)

@rodrigottr

@Karlim

I believe is tottaly fair to argue from the POV of disruptive innovations theory but I believe it is deffinetly not the case here.

Elop Effect, which is deffined by the worst self endorsment plus worst way of introducing a new product, is an event of completely independend relation with disruptive innovation.

Ok, the market analists are togheter saying your products are obsolete (from the SW point of view because all them togheter also sair the HW was better so it can't be completely obsolete) but there is no reason for the CEO to state the same publicaly if there still people buying your products and you have not a new product for substituting it.

Elop effect is about self inflicted damage made by poor communication in a organization.

Even if you argue that the damage isn't as big as Tomi is stating, it is undeniable that there was a self inflicted damage.

Steve Jobs never came publicaly saying:

"hey people! spot buying the iPhone 3GS because this is obsolete crap! Buy this brand new beautifull iPhone 4!"

And thus, the iPhone 3GS still sells in the same time the iPhone 4S...

What Elop did was like "hey people! stop buying symbian because this is crap! Wait 10 months and buy a wonderfull windows phone!"

Thats what people did. The stoped buying imediately.

Tomi's attempt to calculate the size of the Elop effect is an attempt to show that, besides MeeGo x Windows discussion, besides Apple x Microsoft discussion, besides USA x Finland discussion there is an undeniable fact that Elop did something stupid that costed Nokia billions.

And because of that, he desarves to be fired.

@rodrigottr

@Tomi

I have questions for you, Tomi.

1 - Is there a reason maybe many people could be ignoring this disaster with Nokia now? Is there people who hate Nokia? And why?
2 - Who are the stockholders of Nokia and why aren't they doing nothing about it?
3 - Who are in the board now?

I'm gonna try to answer 2, 3 and 4 with my thinking then you could come with yours.

1 - Is there a reason maybe many people could be ignoring this disaster with Nokia now? Is there people who hate Nokia? And why?

R: Nokia is like Michael Jackson and Britney Spears. Once a King, but then when they got weak they get a reaction of hate like if everybody was enjoying to see its decadence. No matter if Nokia, Michael Jackson or Britney Spears has ever done you a harm. You hate it because it was on top.

How strange and bizarre human beings are, right?

Of course those who where competidors of Nokia should have reasons to hate it but there should be many neutral people on media watching and taking part of Nokia. Where are them?

2 - Who are the stockholders of Nokia and why aren't they doing nothing about it?

R: Nokia has not physiscal personas as stockholders and probably most stockholders are institutions like banks and funds who could:

A - be wrongly convinced that Nokia had no chances in the way it was (Qt, MeeGo)

This is a hipothesys that doesn't sounds real because if the Market had perceived Nokia as uncapable to do it without the help of Microsoft then stocks shouldn't had felt, right?

B - be intereseted on Nokia's changing of strategy. Maybe funds who also have stocks over Microsoft.
C - could be big investors of software companys and could be too much afraid of an open source ecosystem do become popular and strong.
D - could be investor who where interested on profiting on the way ecosystems are closed.

this hypothesys links me to this guy:

@davidascher
"we're heading towards a world where who you get your phone from will determine way too mcuh about how you experience the internet"

http://blog.ascher.ca/2011/12/19/you-knew-the-old-mozilla-meet-the-new-mozilla/

The way the big media has worked in favor of Apple and its closed system capable of saving the press media makes me wonder if the big media couldn't be ignoring Nokia because a open source, open web system like MeeGo could put their intentions in danger.

That links me to this:

"6 media giants now controla a staggering 90% of what we read, watch and listen to"

http://frugaldad.com/2011/11/22/media-consolidation-infographic/

3 - Who are int the board now?

A - Guys who didn't worked for Nokia and don't know its values and are only interested on money
B - Guys who worked for Nokia but where extremely evolted with it to the point of wanting to destroy it
C - Guys who where bribed with money or power in the Nokia that would come after Elop.

incognito

Just a quick note about 'failing ecosystems', with 'ecosystem' being the most favorite word Elop is uttering (something along the lines of Jobs' 'HTML5 is the future' before realizing that they DO need 3rd party apps on their platform which made the iPhone the success it is today) - Nokia Ovi Store is/was doing quite admirably from the 'ecosystem' perspective: http://www.distimo.com/appstores/app-store/21-Nokia_Ovi_Store .

That's more than double the amount of apps available for the WP7 'ecosystem', and with the number of downloads rivaled only by the Apple App Store (up until recently at least, I think that Android Marketplace has leapfrogged the Ovi Store in the meantime), that Burning Platforms memo must have been the biggest BS memo any CEO has ever sent out to his employees. Sure, not all apps on the Ovi Store are for the S^3/Qt platform so you can't really count on the shear number alone (then again, Nokia platforms allow for sideload so you can't really count the actual amount of apps available out there), but with the brilliant transition strategy in a time window of couple of years that number would become the sole Qt realm (and available across the whole of Nokia offer), right up there with Android and iOS - or the actual third ecosystem that Elop likes to blabber about. I can't see WP7 achieving that in any similar amount of time, and even if it does one day, Nokia will not be able to survive until that day. What I find the most surprising that Nokia, not even before Elop, and especially not after he became the Nokia ship's captain, never monetized nor advertized on the fact how Ovi, with all its problems and nuisances, is actually quite a success.

Just another nail in the coffin of Elop's competence, or rather lack of it. I'm not ready to call him a Microsoft shill or a trojan, purely because Nokia was already in trouble when he stepped in, but the way he executes 'his' strategy screams one massive, neon-glowing, ears-bleeding INCOMPETENCE.

Terence Eden

I have to (ever-so slightly) disagree with you Tomi. Although your analysis of the numbers is undoubtedly correct, I don't think that this is a PR mistake.

There's a difference between Ratner announcing his products are crap, and Elop telling the world that Nokia's products aren't good enough.

Firstly, I don't think the average consumer cares whether Symbian will be available in 18 months. And, even if they do, I don't think what the head of Nokia says will be heard by even 5% of the customer base.

Secondly, it was refreshing to me to hear a CEO so clearly articulate the problems with his company. For too long we've heard meaningless platitude "we are a world class leader", "Our EBITDA showed organic growth", "we're entering a new phase".

Finally, we have someone saying "what we've done so far has been shit. This is where we are failing and it's not good enough."

To me, it shows that he understands the problems and isn't afraid to articulate that to the market and industry analysts.

Now, personally, I think that his "cure" is wrong. Were I Elop, I'd have done the following.
1) Android. There are $80 Android phones available - it is perfect for porting to low end devices in developing markets.
2) Partner with or buy a firm that understands the parts that Nokia simply can't do. Take Nokia Music (I don't know how much of a success Nokia Music really is - I assume it isn't) - drop it and buy / partner with Spotify. Same with Ovi Suite.
3) Innovate in form factors. Nokia's strength was always that there was a device for you - no matter what shape you wanted it. Play on that industrial design strength.
3) Buy T-Mobile USA - or some equally radical action to get in to the important US market.

Matthew Artero

@Your in denial

Just today cnet reported that although RIM has lost over 75% market share this past year it still grew its subscribers by 35% up to 75 million. 6 days ago Cnet reported that RIM's revenue is down only by $320million. This is different from Nokia's more than 50% unit sales loss. Therefore RIM's problems are not proof that disruptive technology devestates as quickly as the Elop effect.

n900lover

I don't think Elop is doing it on purpose, in the sense that he intents to destroy nokia and transfer what is usable (patents, market share, ...) to ms and other wp manufacturers. I think he really believs that wp is the way to go on smartphones, he probably got it at these long nights in seattle golf clubs where they debated the future with windows being in fridge, tv, doors, heaters, controlling whole home, in phone, car, etc., in essence really everywhere with similar dominance as ms has on desktop. In future like that his strategy of total support for windows&ms now is actually smart thing.

Just take the february announcement. Although it was immediately obvious to everyone how absurdly one sided the deal is, no doubt for him it was huge success that nokia can now participate in the ecosystem of future, and he probably doesn't regard things like being locked up in wp as something useful for negotiation. After all windows is going to be everywhere, so I'm not giving anything, right? It's like promising release of nokia pc suite for windows 8. I bet he was really really suprised by the uproar when he was forced to rush back and try to mitigate it by telling the world that ms is giving nokia 1 billion.

It would be interesting to know what is ms position. Right now they have everything they could get from nokia for free, but if nokia goes under I'm not sure they would want to buy nokia, or just their smartphone unit. Imo the plan always was to copy situation on desktop - lots of hw manufacturers in fierce competition driving prices hw price down and on top of them ms with windows monopoly commanding big premium.

Although there is lot of talk about nokia being preferential partner, the deal doesn't give nokia nothing specific or tangible, whatever wp changes ms approves, it will be available to everyone else. Even Elop himself stated he don't want to differentiate outside the case design, hw quality and nokia apps, the os must be the same for the ecosystem to work. He also wished samsung success with their line of wp phones, because it will broaden the wp "ecosystem".

And remember, ms attacked google for purchasing motorola, suggesting that google wont treat others equally and with their ability to control both sw and hw will eat hw manufacturers. Although google can legitimately claim motorola was just about the patents, in ms case nobody would doubt the reason for acquiring nokia is to go directly to manufacturing&sales.

So with all this, are they really going to purchase nokia directly? Also bear in mind that another mobile failure can spell end for Ballmer as ceo, so maybe he wont be the one to decide this.

michael

Tomi over here in Croatia we have following situation.

Our economy is a mess, due to 8 years of mismanagement and corruption in all parts of life. Our GDP, unemployment and everything else is falling for last 3 years in a row. We are in a position that our credit rating will be proclaimed junk in the following three weeks. Just to name few of our problems.

Tomorrow new goverment is sworn in. They will have to take serious measures in order to avoid economic meltdown as seen in Greece.

Now Mr. Tomi Ahonen you tell me:

Whose fault it is? The goverment which led the country for the last 8 years, or the goverment which will be sworn in tomorrow and which will have to make hard decisions.

Matches

@n900lover, MS would purchase Nokia smartphones to protect their investment. Without Nokia, MS is left with basically only Samsung to make their WP7 phones, unless the new phones get traction and some of the other smaller players join Samsung with a split of Android/WP offerrings. If a potential buyer of NOK would not continue the MS strategery, but instead switch to Android or, what I would love to see just from a pure spectacle standpoint, do what Tomi suggests and return to the Meego/Harmattan platform to reap those $2.9 billion of profits that Tomi claims are being squandered, then Microsoft would be theoretically be forced to come in outbid. I wonder if there's really $2.9 billion of yearly profit to be had, with Nokia share price so low, why hasn't someone swooped in already to do this? The company as a whole is only valued at what, $18-25B?

kevin

Three points:
1. I think Elop and the board's main failing was not figuring out how to properly do the transition to another platform (from Symbian). There were other approaches. As some have said here previously, Nokia could've said that WP was an initiative to revive its fortunes in the US (or US and Japan) only. Once they had WP phones to sell, they could've claimed success in the US, and started transitioning other markets to WP. This approach would require spending more money on Symbian, but it could've bought goodwill by releasing Symbian upgrades.
2. 4Q10 was a disaster for Nokia. Total phones sold declined yoy. Smartphone sales increased by 36% yoy but the market grew 87%. That gap between Nokia growth and market growth was the largest since 2008, and had been growing since mid 2009. To Elop and board, the 2009-2010 strategy was failing (especially since some of the gain in units sold was due to lowering prices and stuffing the channel). So I think you overstate the positives for 4Q10.
3. If the carriers aren't afraid of Android dominance and don't force an alternative (besides iPhone), then I think WP will fail. Android got a huge boost from its Droid marketing partnership with Verizon, who badly needed a competitor to AT&T's iPhone, having failed with RIM the year before. (Android was going nowhere with T-Mobile and Sprint.) WP's UI is not paradigm-shifting, and there is nothing about WP that is far better than other smartphones to drive consumer-demand. Then add in Microsoft's inability to market to consumers, and no hook to bring in business/corporate accounts. Finally, carriers might not be afraid of Android dominance because its "power" is spread over many vendors, and it isn't exclusive to just one carrier in a market (like iPhone was and no longer is).

@rodrigottr

@Everybody
@Your in denial
@Tomi

Sorry guys but I believe what I'm going to say WON'T PLEASE MOST OF YOU. Is not related directly with Elop effect and if you want, Tomi, feel free to delete it.

I don't think Tomi is in denial. In fact I believe there is a whole group, a whole nation that is in denial. But not Tomi.

There is a whole group here that is trying to deny their paradigma is over. They lost the lead of the industry. They lost the game they created and always won.

The lead of tech industry isn't anymore America. In fact, America's status as a superpowerfull nation is ending.

For the first time in recent history the safest place to put your money isn't anymore US bond titles.

For the first time in history average american people will be less educated then the generation of his parents. That is cruel!

Soon american industry will be manufacturing small and energy efficient cars like the rest of the world always did. The sweet times of cheap gasoline are over. Welcome to reality.

Today american symbols like Budweiser, Burguer King, Chrysler Motors aren't anymore controled by american capitalists.

Microsoft, the most successfull tech company in the last 20 years, is now depending on its suspicious influence over a Finnish company to keep its hope for the future. They failed to engage other players in their self centric vision. Why would that be? he he

Soon Apple will reach satturation over the richest markets and will be locked in its own closed ecosystem. Rich, but small and becoming less relevant.

Sooner or latter Intel, Samsung, Mozilla, HP, or any other player will be succesfull on building an open source ecosystem chalenging the monopoly of the silicon valley software over worldwide manufacturers.

The only american companys who will remain will be those who are able to see world outside the US. Like Google is doing and is winning the mobile battle, as did on search, and Facebook, and Twitter.

Expect in next 5 to 10 years BILLIONS of new users, coming from markets like China, India, Africa, Indonesia, Brazil, Peru, Venezuela to set the new trends into internet. The Internet number or users will grow TWO OR THREE TIMES!!

And US centric companys like Apple and Microsoft will be just ignored or swiped like dust by the crowd.

The voice of american media that singing like one celebrates the lead of Apple and Google over the industry isn't nothing more then the last screams of a dying giant: "SEE!! WE AREN'T DEAD YET!" For the first time the nation who has ruled the world, WILL BE RULED BY THE WORLD!

But look. What I'm saying isn't the trend for next 2 or 3 years. Is the trend of next 1 or 2 DECADES!

That is what I honestly see, feel and think.

Now you can start throwing the rocks on me. he he

Captain Anonymous

Despite protests to the contrary, I think the decision to go with Windows Phone in preference to the alternatives was pretty much decided when Elop was hired as the CEO. There's been talk about weighing up the alternatives and the negotiations with Google over Android, but we only have one side of the story on the record at the moment, and that makes it inherently difficult to trust. This may change if or when Barnes & Noble get some information out of Microsoft and friends: see http://www.groklaw.net/article.php?story=20111208101818692 for more about this.

Looking at all the lay-offs and sell-offs, it makes me wonder if Elop was hired by the board for the purpose of breaking up the company and selling its assets. Maybe the goal is to sell off everything except the smartphone part of the business, leaving a Motorola Mobility-like company. Perhaps the plan was to create a Symbian-sized hole in the market that it could fill with Windows Phone. Maybe more information will come to light next year.

Flosse R

This might tick off a lot of people.. you have been warned.
I used to work for Nokia and it was a company suffocating under its own dead weight. With that I mean that Managers got promoted because it was the right thing to do and people were hired that did not fit the position.. simply because we MIGHT use them somehow later. Nokia had so much burocratic processes inside and none cared that it wasn't even funny anymore.
Now, Nokia's decline has had one HUGE benefit... for the home country, Finland. I work in the Management of a finnish company and I deal with a lot of externals and consultant companies as well as small suppliers and manufacturers. Guess what.. EVERY SINGLE ONE SAID THE SAME THING: Since Nokia is not gobbling up the finnish tech world and not every intelligent student ends up working for them, these companies are doing great. As a matter of fact most of them say they have more profitable business now than when Nokia dictated all the terms all the time.
I see the future a bit of a mixed bag. YES the days of the blue finnish giant are over... but Apple's are counted too. Nokia will re-emerge and they will still innovate, as they always have. Elop will be fired and made an example of and I wouldn't be surprised if half the board goes too.
You can bet that the Nokia AGM will be a bloodbath and I will, for the first time, actually go there.

In plain words.. Elop fucked up and caused massive damage to a globally rich company. He has however,inadvertedly, caused the release of young talent that now really is driving new things out of the nordics...

Just my 2cents... on a personal note: Tomi.. your articles plain rock.

MrEricWu

Tomi says "I have to stop here because I am growing ever more despondent re-writing and re-reading and redrafting this blog article". I say "imagine if you still worked there!". Quite literary the company is destroying itself at every single level. Whether it be Elop, the leadership team, the middleware or the unhappy people at the bottom of the pile. They are all working hard, but it is all badly executed, misadventure or just plain missing the mark.

So, I have a question. If Nokia does sell off, or completely destroy the Smartphones Department, such that they re-align and go for featurephones/dumbphones market (perhaps they give away NSN and sell Vertu too), do they have a chance of survival? That is, can they make a viable future in non-smartphones. I've read the many blog articles about the countries passing 50% smartphone sales, so in (at least the industrial world) the game is now about smartphones only. How long will non-smartphone sales last?

Thanks for all the blogs and look forward to reading more in 2012!

The comments to this entry are closed.

Available for Consulting and Speakerships

  • Available for Consulting & Speaking
    Tomi Ahonen is a bestselling author whose twelve books on mobile have already been referenced in over 100 books by his peers. Rated the most influential expert in mobile by Forbes in December 2011, Tomi speaks regularly at conferences doing about 20 public speakerships annually. With over 250 public speaking engagements, Tomi been seen by a cumulative audience of over 100,000 people on all six inhabited continents. The former Nokia executive has run a consulting practise on digital convergence, interactive media, engagement marketing, high tech and next generation mobile. Tomi is currently based out of Hong Kong but supports Fortune 500 sized companies across the globe. His reference client list includes Axiata, Bank of America, BBC, BNP Paribas, China Mobile, Emap, Ericsson, Google, Hewlett-Packard, HSBC, IBM, Intel, LG, MTS, Nokia, NTT DoCoMo, Ogilvy, Orange, RIM, Sanomamedia, Telenor, TeliaSonera, Three, Tigo, Vodafone, etc. To see his full bio and his books, visit www.tomiahonen.com Tomi Ahonen lectures at Oxford University's short courses on next generation mobile and digital convergence. Follow him on Twitter as @tomiahonen. Tomi also has a Facebook and Linked In page under his own name. He is available for consulting, speaking engagements and as expert witness, please write to tomi (at) tomiahonen (dot) com

Tomi's eBooks on Mobile Pearls

  • Pearls Vol 1: Mobile Advertising
    Tomi's first eBook is 171 pages with 50 case studies of real cases of mobile advertising and marketing in 19 countries on four continents. See this link for the only place where you can order the eBook for download

Tomi Ahonen Almanac 2009

  • Tomi Ahonen Almanac 2009
    A comprehensive statistical review of the total mobile industry, in 171 pages, has 70 tables and charts, and fits on your smartphone to carry in your pocket every day.

Alan's Third Book: No Straight Lines

Tomi's Fave Twitterati