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December 21, 2011

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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:

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J Gibbons

#Flosse R

I traveled to Finland to look at buying a high tech company about 10 years ago and was told exactly what you are saying. All the talent fresh out of university was going to Nokia and limited the ability of other companies to grow like the one I was looking at. Perhaps this will spread the engineers around and create some new business.

The game of taking over a competitive company to shut it down is not to be discounted. I was once part of a company that lost its way, was taken over and shut down. We were by luck a small division that didn't matter much to the buyer and were able extract ourselves from the mess without too much trouble. This sort of thing happens all the time, and with the current business climate, people don't seem to get punished at all. How much you want to bet Elop has a wonderful golden parachute?

Tomi T Ahonen

More replies..

first just darwinphish:

darwinphish - haha, ok, Nokia run by Elop vs a monkey, that was obviously hyperbole but also - now I am being serious - my point was, that Elop has been more damaging by his active decisions, than the paralysis if there were NO DECISIONS at all. For that to be proven, obviously the two (three) actions I discuss here are not really enough - Elop Effect ie Burning memo and timing of Microsoft announcement in February, and then the June sabotaging of MeeGo and N9 - are not the only things Elop has done this past year. So for me to really prove that point, I would need to write more about Elop on his other major decisions from installing a total novice to run the Nokia USA sales, to changing Nokia naming scheme (and then changing it back), to terminating the Ovi Store branding - these are issues I have covered on this blog so regular readers already know my position on those. And there is actually much more, such as selling off patents and trying to unload profit-engine Vertu unit and wasting very precious design capacity to pursue a tablet - and many more.

These are all issues where Elop has made a decision which is DEFINITELY against Nokia's best interest - although they usually are yes to Microsoft's best interest haha - and yes, I should write about that. So yes, you are right, just these two (or three) actions by Elop are not enough to prove my point. Regular readers may know why I feel it is true based on many other major errors Elop has already done to ruin Nokia in addition to these. But there is EVEN more that he has done - and is doing - that really do confirm my thesis that 'a non-CEO' would be better than Elop. So yes, while it sounds like hype, I honestly do think that if Nokia had gone to the Helsinki zoo and taken a monkey and named it the CEO - Nokia today would be a bigger company, with healthier profits and bigger market share, than what Elop has done with his mis-management. I seriously do believe that. Nokia's share price - haha, would probably have crashed if the monkey was named, though haha..

Then on the companies you mention. Note, I asked for any example of a company that was the global leader of its industry so some of those examples were nowhere close to that (Palm, RIM). Some I do not know well enough to comment but yes, I appreciate it that you posted that listing. I would immediately comment on a few - WordPerfect I remember well as I was in the PC industry at the time. Their fight for word processing dominance saw them fighting Microsoft Word which was only on the Mac initially, but came to Windows. The transition was long and AmiPro came into the fray when Windows 3.0 came along. The transition from WP to Word as the bestselling word processing software took years and WP never really crashed. Certainly didn't lose anything like half its market in one year haha.

Motorola's fall from first place I also remember, I was employed at Nokia at the time. Nokia took the lead quite dramatically but still their lead a year later was less than 10 percentage points and Motorola didn't crash in mobile phones until suddenly when the iPhone appeared and by that time Motorola wasn't even the second biggest phone maker (Samsung had already passed them).

Commodore vs Apple was also as my hazy memory tells me a race that ran for a couple of years as the Apple 2 took over but Commodore came up with newer models and the market was topsy-turvy for a while. I really don't remember any 'crash' of Commodore sales in one year. Their loss might have been of the scale of 10-20 percent perhaps? Anyone remember or care to research it, haha? Atari I can't recall and Microsoft is nowhere near facing a rival in the PC software business today haha..

On your last point about Osborne vs Nokia - good point, Nokia definitely has deep pockets of cash (which was why they maintained a healthy credit rating all through the economic crash, they kept reporting profits and always kept large cash reserves.

Tomi Ahonen :-)

Tomi T Ahonen

then karlim:

Good observation about the 'two camps' and we've seen similar heated debates previously on this blog for example with Apple loyalists haha.. I don't think that is bad at all. Some will be dogmatic and refuse to listen. Some will come with an open mind and actually read through the comments. Some who may be dogmatic - will actually think a moment when engaged and may re-examine their viewpoint in the disucssion (others never budge haha). If this discussion thread changed one mind to accept a new view - it was all worth it to my readers haha and the discussion thread at this Communities Dominate blog is famous for very intelligent discussion and long and detailed debates with very little flaming wars haha (I keep policing it and removing all who post rude comments etc)

For me - I read every comment - I learn TONS from the comments. I absolutely love the comments here and even when some quite dogmatic visitors return to argue the same points, I occasionally pick up finer points from some of those arguments too. I appreciate it that you noticed this but I'd also think its quite normal at many forums and blogs haha.

Now to Clayton's disruption. I hear you, fully. I was the first analyst published anywhere to suggest - months before the iPhone sold its first copy to say not that the iPhone would disrupt the telecoms space - that the iPhone would also disrupt the PC/IT industry centered in California! I really do get it. But now karlim, I hope I am not going to offend you - but I would argue that YOU do not get it. The magic of mobile is NOT that it now has been able to put the computer into our pocket. That is not the magic of mobile. We had pocketable computers - with apps and ecosystems YEARS before there was one smartphone. The pocketable computing experience is not the disruption here. The ability of the mobile is .. mobile. Not that the device is portable. The SERVICE is MOBILE. We can accept an incoming phone call while the bullet train runs 400 km per hour. We can be woken at night when there is a volcano eruption or tsunami wave. If you think the apps space and 'PC-like' experience is 'disrupting' this industry - you are truly looking at the disruption from the wrong angle haha. Did you know that ringing tones - ringing tones - were 2x bigger than total iTunes global sales - FIVE years ago. Today ringback tones (you may not have even heard of them) earn more money than ringing tones AND iTunes. SMS is used by 3x more people than email, 8x more people use SMS than use Facebook. SMS alone earns more money than all content revenues on the internet. SMS alone is bigger than global videogaming, global music industry, global Hollywood - combined! And I haven't even started on the mobile data SERVICES industry (excluding SMS) which is 14x bigger by revenues than all apps - and most app revenue is not at app stores or app advertising - most of that about 7B dollars of apps revenues is business/enterprise apps, not consumer 'app store' apps.

Many technologists are already joining in the view, that apps are a short-term phenomenon, and most mobile users will shift to 'mobile web' use - something we can do on far simpler phones than smartphones today! No, karlim, I DO understand disruption but if you think the smartphone 'ecosystem' app store phenomenon is disrupting mobile, you are seriously mistaken. The app stores are relevant to software developers yes, who saw their PC market growth plateau. But the total global PC/IT industry is less than half the size of the mobile industry haha. And yes, the app store experience is a casino where Apple gets the profits and more than half of all app developers never earn more than 1,000 dollars for their app which cost on average 25,000 dollars to develop. How long will that non-economy thrive haha..

It is a VERY important point which you make talking of the 'mobile computer'. The primary use of USA smartphone owners - the world's biggest app stores by volume of English-language apps haha - the primary use of those smartphones is not computing (apps) its communication - haha - its SMS. The mobile phone is a multi-purpose device where COMMUNICATION is the killer app, not the ability to install Angry Birds. I have written about this for 10 years and debated it thousands of times and I have all the evidence if you want. I don't want now to write more, because my above writing may have opened your eyes so lets see if you have a comment or question or rebuttal, I'll come back with more if you want. But what do you think, is it possible that it is mobile which is disrupting the PC/IT/software/apps space and actually - when the models from Japan filter to the world - in Japan developers earn 90% out of every dollar on the mobile WEB - what point is an Apple 70/30 share there haha - that is the inevitable future in my mind.

Tomi Ahonen :-)

Tomi T Ahonen

Then Rodrigottr

(thanks for replying to karlim)

about your questions. Is there a reason people ignore this? I cannot see why. There is a philosophy in Finland among the media to try not to be too critical of Nokia because it is so vital to Finnish GDP so while journalists may have little squabbles they heard from some disgruntled middle manager etc - their editors remove those stories. If its really important yes, but small troubles best not be reported, knowing that the Nokia-watchers from the other big media will always pay attention to what the Finnish media write about Nokia.

But that would certainly not apply to colossal failures like what Elop is doing now. And I do find Finnish media taking issue from time to time (and its funny to see how often they lead their story with 'ex-Nokia exec Ahonen is saying on his blog' haha to kind of 'protect' their story that it is coming from outside of Finland haha..) The part which more puzzles me is Wall Street. They seem to be quite oblivious to this story and it seems strange to me. Their journalists are more trained to be fiercely competitive to seek out good sensational stories and this Elop saga is about as sensationalist as you can get. Yet they are surprisingly silent about it. I hope of course to raise their hunger..

People who hate Nokia? Of course there are some and with Elop recently, there are many new ones (developer partners who invested efforts in MeeGo, Qt, even Symbian believing Nokia etc). But generally if Microsoft for example has a big 'hate army' and Apple has of course a smaller but quite passionate group of critics etc, Nokia has mostly avoided all that as they tended to be very open, very friendly, willing to share with competitors - look at Symbian. Who does that? Nokia invited EVERY rival to come and co-develop Symbian with them - all of the biggest handset makers at the time - Motorola, Samsung, Siemens, Sony, LG, Ericsson, Panasonic, Sharp etc - all joined to co-develop Symbian. And remember, Nokia INVENTED the smartphone and utterly dominated the early smartphone world. Who does that? Imagine Apple? No way. Microsoft? Absolutely not. They look FORWARD to the day they can sue potential rivals about patent infrignements of their inventions haha..

Nokia shareholders are more in the USA than Finland, but have many big investment companies like insurance companies etc. I believe - I don't know -
I believe the shareholder ownership is very broad-based. I recall that Nokia was the second most widely held share in Finland for example, so its not in the hands of a couple of billionaires haha..

The Board, sorry Rodrigo, I don't bother to keep track - but pls go to Nokia.com and you'll see. Ollila is still the Chairman but is scheduled to retire now in early 2012. There were some new USA based additions who came to the Board when Elop was hired I recall.

on your replies - yes, I'm sure any company that is the biggest will get its share of envy and there will be many who are happy to see Nokia failing but again, that is far less than in most other cases, because Nokia was so supportive of the industry in the past.

On the market perception - you are right that the market felt that Nokia was seriously failing - we see it in the comments at this blog still today. Nokia was not failing - if you are as big as both of your nearest rivals and still are comfortably profitable - then this is failure that anyone at Toyota or Boeing or Coca Cola would die to have haha. I have written many times in the past before Elop, that one of Nokia's biggest problems was managing the image - but Finns are notoriously bad at communcating - look at Formula 1 champions like Kimi Raikkonen and Mika Hakkinen or Finnish NHL hockey legends like Jari Kurri and Teemu Selanne etc. The CEO of a Finnish corporation is going to be even less prone to any kind of flashy marketing gimmicks or having a powerful stage persona like say Steve Jobs haha. Finns are the total opposite of that. They are on stage like an accountant (at best). So while Nokia had tons of great stories to tell the investors via the press - they, mostly USA based, would just look at the ever-worse Nokia share of USA smartphone market - and see the rise of the iPhone and Androids, and compare to the ultra-cheap lousy phones they received in the USA and quite naturally, felt that Nokia was losing the battle.

I think China is the perfect metaphor here. Nokia had 76% market share in China's smartphones last year and was the most desirable phone brand in China (yes, ahead of the iPhone). This helped sell the N8 and E7 as the bestselling smartpones as gifts this time last year in China for Chinese New Year. Apple was tiny, Blackberry was nowhere and Samsung was not the bestselling Android phone either - having to fight against Chinese domestic Android makers ZTE, Huawei, Lenovo, G'Five etc. And the Ovi store? By far the biggest app store of China.

This is what you want to have in the world's biggest smartphone market, and if Nokia CEO had bothered to explain that in 2011 China will overtake the USA as the biggest smartphone market - and Nokia utterly dominates China - it would be understood by the investors. And then things like China Mobile recruited to the MeeGo camp. Come on, this is a slam-dunk victory! Apple refuses to sell the iPhone on the China Mobile 3G standard - Nokia has offered smartphones on that standard for years.

And this 'license to print money' Stephen Elop wiped out with the Elop Effect. But yes, Nokia did not talk to the US investors like how they want to be talked to - like a Steve Jobs haha. That is clearly what the Nokia Board liked in Elop - he is VERY good on stage and on camera (something Anssi Vanjoki was far weaker at, even though Anssi was one of the best speakers among Finns at Nokia). I am not saying this was the only reason they hired Elop haha, but Ollila definitely knew that after his 'wooden' style to speak to the press, when he was replaced with the even more 'robotic' style of Olli-Pekka Kallasvuo - Nokia really did need a more expressive and 'USA-trained' CEO to appeal to the press. Nokia had GREAT stories to tell. If Elop had bothered to lead his company and take advantage of its leadership - he would have had the chance to be the next Steve Jobs. But he is on a mission to bankrupt Nokia obviously to bring it to Microsoft at a bargain price.

Good links thanks.

Tomi Ahonen :-)

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darwinphish

Tomi:

As I have said, I absolutely agree that the collapse has been accelerated by a number of Elop's moves. However, the speed of Nokia's collapse, I would argue, is primarily a reflection in how fast the mobile industry is moving. In my list of failed companies, I meant to include Kodak. Admittedly their loss of market share did not happen as quickly, but the camera market probably never moved as fast as the market for mobile devices. When the average users are replacing their device yearly, you can lose market share very quickly.

Now let me tie this in to Disruption (a subject admittedly I am not an expert of). Nokia's business model has been Disrupted. Based on your comments in various post I think you would agree that the 3 keys to Nokia's past success have been hardware innovation, carrier relationships and brand maintenance. Those may have worked in the past, but now, I would argue, software trumps hardware, consumer choice can negate carrier relationship and ecosystem (or should I say community) dominates brand.

msaied

I think that even if elop is fired immediately that alone will not help much, it might indicate that the company realized how bad the situation is. it takes more than meego to bring nokia back on its feet, meego needs an ecosystem which needs community support and years of work and thousands of apps. windows mobile OS is way behind that it needs its own rescue.

if their is one intelligent thing that Nokia can do now is to support dual booting of android OS on all of its high end smart phone lines. but i don't think that they have the intelligence nor the courage to do that, RIP Nokia.

Martin Kuba

You have asked for an example of another market-leading brand that destroyed its market overnight. I recall one such devastating statement. The "OVB Allfinanz" was a leading company in the Czech Republic specialized on giving advice to people where to invest their money. They have recommended to thousands of clients to invest into a Swiss fund which turned out later to be a complete fraud. And the CEO of OVB Allfinanz made a statement which I consider the worse I have ever seen. He announced that OVB Allfinanz is not responsible for the advice they give. Imagine - the CEO of a company living from making recommendations where to invest said that their recommendations are worthless ! Instead of announcing that they made a mistake but their other recommendations are good, he announced that all their recommendations are bad. Their market share collapsed overnight.

ashok pai

absolutely, perfectly, brilliantly spot on. not releasing N9 is a criminal mistake. people in india would lap up N9 which is familiar grounds like symbian - it would sell like hot cakes. but instead he's pushing an unknown lumia. the ads are all over, but I have not seen a single lumia in anyone's hands!!!! the nokia showrooms say half heartedly that lumia is the best - it's rote, it's something they do not like. meego would have built a sizeable set of apps by now had there been good backing. Qt being a good development tool, they could have ported the same set of apps on still selling symbian phones. elop just razed all of it with his memo. plenty of symbian fans think the same like you! kudos for getting it all right and also from a good platform. Nokia is not listening to its own most loyal fans.

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N9 rules

What a fantastic article Tomi. This mirrors my thoughts/anger etc. towards this stupid moron of a man.
I recently changed from an iphone to a Nokia N9 and cant speak highly enough about it. I have never been so excited about a phone in my life and the simplicity, elegance of the Meego operating system is phenominal.
For me personally it beats the iphone hands down. Of course everybody has their personal views about every phone on the market but I have never read so many experts who have praised a phone so much....EVER. I will NEVER go back.
I say that we start a 'Save Meego' campaign to put even more pressure on this clown.
Cheers

PR1964

Elop obviously has an inability to multitask.
Maybe if he was a woman then ....
Nokia would have several product lines all on the market and then we'd see what sold best and which direction Nokia should be going in.

Killing Symbian was sheer lunacy as all the existing happy Nokia customers would have no upgrade path to follow, that would result in losing Nokia customers to other manufacturers.

The middle ground is where Nokia were strongest but Elop insists on aiming for the high ground where the market is very very well served.

Insane incompetent and inexplicable.


What would be the problem 
Nokia Meego
Nokia WP
Nokia Android
Nokia Symbian 


Pay your money and take your choice.

Elop is Insane....

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No one needs to destroy his company, but if he want to left, he need to sale out his company name just. you can get example of Yahoo.

Illa J

It wouldn't surprise me if we saw FLOP becomming the CEO of Roche or something else that has patents with values to microsoft and it's partners after microsoft has acquired everything that has value from the bankruptcy estate of what was once Nokia

Robert Waters

In terms of comparable destruction of value, look at Marconi - lost more than 95% of its market cap in less than a year.

Also, to put USD 28bn in context, look at the list of GDP for each country in the world - http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal) - this puts your estimate of the loss in revenues at the GDP of a country like Latvia.

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    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

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