I have been critical of new Nokia new CEO Stephen Elop strategy relating to smartphones. I felt it unwise when the Microsoft strategy was announced on February 11, and from about April, I have become convinced that strategy is going to fail. So far the facts seem to prove me increasingly correct. This blog has nothing to do with the change of smartphone operating system platforms, away from Symbian and MeeGo and switching to Windows Phone and Meltemi. This blog is about sales. Nokia sales.
Note this is a long contemplative article about what very few ever write about - the carrier relationships and in this case, Nokia's sales to the telecoms operators/carriers around the world. The blog article will take you more than half an hour to read so you better get a cup of coffee before you start.
MOBILE IS NOT LIKE OTHER ELECTRONICS
Before we go on, I have to first make this statement to those who visit this blog who are not long-time readers of my writing. Why sales matters in mobile? Because the market for mobile phone handsets, including smartphones, is NOT LIKE other consumer electronics industries. It is not like the home electronics that Sony and Panasonic and Philips and GE know well. It is not like the PC industry that features giants like HP and Dell and Lenovo. The mobile phone handset business is not like the videogaming industry of Sony's Playstation and Nintendo's Wii and Microsoft's Xbox. Mobile phone sales is not like cameras or cars or clothing. In all those other industries, if you make a good product and offer it at competitive prices, you will have success in the market. In mobile, even if you have the best phone ever made, it is utterly IRRELEVANT if the carriers decide not to support it.
There is no other major consumer technology industry like mobile in that sense. The television broadcasters cannot decide against Sony in favor of Panasonic. In mobile they can not only decide Motorola over Nokia, they can decide which handset models of Motorola will be or will not be supported. This is what killed Microsoft's two Kin phones in a world-record of only six weeks. From new product launch to end of production of a family of global consumer electronics gadgets, dead in six weeks (because the carriers revolted against Microsoft). That is what killed the world's first 'superphone' intended as Google's 'iPhone killer' the original Nexus One. The carriers. That is why the iPhone was delayed this year. The intended device known as iPhone 5 was suddenly pulled late this spring, hastily redesigned and released four months behind schedule later in this past year. It was not Apple's desire to delay its most important product of this year. They did it because the carriers decided against the intended iPhone 5 (which had no SIM card slot - the carriers refused to sell it. The redesigned iPhone 4S does have a SIM card slot). Carriers decide which phone will be supported on their network(s).
Understand what I say. ABC television networks in the USA does not decide that Samsung flat screen TVs will be supported but Sony will not. If the TV functions on that standard, then you can buy the TV from any retailer and just hook it up and it will work. The TV sets on NBC or CBS television networks are not in any way different from those on ABC. Yes, internationally there are still differences, so a TV bought in Europe will typically not work in the USA (unless its an 'international' or 'multi-standard' TV) but the TV industry does not see control of the end-user sales, by the TV channels ie broadcasters ie 'networks'.
Same for PCs. If your PC runs Microsoft Windows operating system, it doesn't matter which country you bought the PC from, was it made by Lenovo or Acer or Toshiba or Dell or HP or Fujitsu or whatever maker, you can come here to Hong Kong and buy a Windows based PC and you can go back to the USA or UK and use your PC there and install local software and all works fine.
Theoretically, you can do that with mobile phones too. Except that by far the most, at least 98% of consumers, will not buy handsets for mobile networks from stores that do not specialize in them - from their home countries. So you go to an AT&T store to buy your AT&T phone. Or to a Vodafone store to buy your Vodafone phone. Or to a Telefonica store to buy your Telefonica phone, T-Mobile for T-Mobile etc. While the phone handset is the same model, you don't go to buy an Nokia handset from the T-Mobile store and then go connect it to the AT&T network, even though both networks use the same GSM technology.
A mobile phone is pointless without the network connection (note, even a TV set can well be used with a DVD player or Xbox and doesn't necessarily need the live TV broadcast feed). Without a mobile connection, your expensive iPhone is just an iPod Touch. So the consumers (and business/enterprise customers too) will buy their mobile phones from mobile telecoms stores. If not one by the operator, then from an independent - but mobile specific store like Europe's Carphone Warehouse for example.
CONTRACTS AND SUBSIDIES
In many countries the phones are sold with subsidies, tied to two-year contracts. (Some readers will be surprised to find this is not the case for the majority of the world, where people pay full retail price for their handsets - ie 600 dollars for the iPhone - upfront, but then are not locked to two-year contracts and get far cheaper phone services obviously). When phones are sold with contracts, and subsidised heavily, the 600 dollar iPhone 4S is sold for 199 dollars for example - then the carrier bundles your monthly payments into the next 24 months and charges the remaining 401 dollars - plus interest obviously - onto the base of your contract, before adding all telecoms surcharces for which they 'kindly' give you any 'free minutes' and 'free messages' buckets.
That makes sense if the carrier is subsidising your purchase over the next 24 months, that the carrier also then controls which phones it sells (it has to support these, if you have a problem, you will be calling the calling center to complain etc). The carrier is legitimately carrying part of the risk of that type of customer. Countries where most phones are subsidised heavily include the USA and Japan. In other countries the carriers offer no subsidies at all, and you pay full retail price for your handset, and subsequently you have cheaper telecoms services and minimal or no set monthly fees, like in Italy and Hong Kong for example. The trend globally is away from subsidies to unsubsidised phones, as we see in Israel and South Korea recently for example.
But even in countries where there are no subsidies, the carriers still control which handsets are supported and then the (usually independent) handset stores in those countries, will of course favor only those phones that will be supported by the carriers in that country.
It is utter folly to come from other consumer electronics industries into telecoms, and think, if I manufacture the best phone ever, I will win. That is irrelevant to market success. What matters is that the carriers will support your phone. That the early iPhone was a huge hit in the USA made no difference to its sales, once Verizon became the second network to offer the iPhone - three years after the launch of the original iPhone - the sales of the iPhone in the USA surged. Having the best gadget is not the key to success - many great phones have failed totally like the Google Nexus One that many US based technologists said was a true iPhone-killer - or similarly the last Palm using WebOS - another excellent smartphone called an iPhone-killer. Having a great phone is not the key to winning in mobile. Having the carrier relationships is the key.
IS NOT LIKE PC INDUSTRY
This is totally different from the PC industry where Stephen Elop comes from being ex-Microsoft. This is also totally different from the home gaming industry (Microsoft Xbox) or the home electronics industry (Microsoft Zune music player) etc. In all those industries, 'normal' rules of 'free competition' apply. So if you make a good product at a competitive price, you will have market success roughly in the right proportion to your competitors and their offers and prices. That is not so in mobile telecoms. Not at all. What makes sales to the carrier community even more challenging, is that the total global field of carriers is very tiny - only 600 carriers of which about 60 only are 'large' ie having more than 10 million paying subscribers and they control two thirds of the total global subscriber base.
These in turn are aligned into carrier groups (Vodafone, Orange, T-Mobile, Telefonica etc) where the top 20 carrier groups control 70% of the worlds' mobile phone subscriber base and are operational in essentially every country. To understand how powerful those are - only one US based carrier, AT&T fits into the (bottom of the) top 20. The top 5 are China Mobile group out of China obviously, Vodafone gout of the UK, Telefonica out Spain, America Movil out of Mexico and Bharti out of India. These five giant international operator groups control 32% of the world's mobile phone accounts and obviously they decide a third of the world's handset sales, among the five of them. Bharti, the smallest of the top 5, is more than twice the size of AT&T by subscribers (and by numbers of mobile phone handsets it will therefore support). China Mobile in China alone, excluding its international affiliates, is twice as big as all USA based carriers combined.
So there are about 600 carriers for about 200 countries worldwide, so obviously on average there are about 3 carriers/operators per country. In the more liberalized and open competition parts of the world, the Industrialized World, there often are more than three, as many as four or five in many cases, and obviously in some very restrictive markets its down to two or even only one carrier/operator like in Cuba and North Korea.
But if the typical industrialized country has say 4 carriers (from 3 to 5 in most cases, 3 in Japan, 5 in Britain for example) then Nokia, Samsung, Apple, RIM etc will very quickly learn who are the people in charge of buying phones at those few customers. The handset buying team is always small with carriers. Those buyers are very long-term professionals who have been doing this for years, even decades. They think long-term for their company, they know the random buyer on the street will usually come in asking for a phone model, not for the operator (they want the newest iPhone or Samsung Galaxy or Blackberry, not the latest Verizon or T-Mobile or Orange phone).
The buyers are also playing this for the long-term benefit of the carrier/operator. They don't care about the latest gimmick this month, they want the long-term interest for the carrier. Which handset supports the portfolio of services that carrier/operator is committed to, in its strategy. A music store? An app store? Mobile payments and banking? NFC? Digital TV? Picture sharing? Social networking? Videocalling? Etc etc etc.
There are more than 200 manufacturers of mobile phone handsets, who produce at any given time more than 2,000 current models of handsets worldwide. Over 70% of those are manufactured in China, most of them here withing bicycling distance of Hong Kong, across the border in Shenzhen (if you really want to understand this industry, you have to visit the handset mall in Shenzhen with the boutique handset makers and parts suppliers and repair shops and accessory guys etc). I just met up with an African phone maker brand, Mi-Phone two weeks ago in South Africa. Their phones are made.. in Shenzhen. And before you think its somehow cheap or demeaning, Nokia operates the world's biggest mobile phone factory, in China. Apple's iPhone is manufactured by Foxconn ie Hon Hai of Taiwan with most of the manufacturing done in China. The iPhone is no more a USA-made smartphone as the Mi-Phone is an African phone. Both come from China.
SALES WAS NOKIA KEY
Now lets get to the meat of my beef with Elop. If you believe that Nokia had lost the plot with its handset designs after the iPhone came along. Where the N96 and N97 etc were increasingly clunky and obsolete. Where the N8 was redesigned and bug-fixed so many times, it was literally launched a year behind schedule (the N8 released for December 2009 against the iPhone 3GS, oh my gosh, that would have been a true iPhone killer!). I know very many think the wheels came off the Nokia train sometime around the emergence of the iPhone. That is a valid criticism. And many, even ex-Nokia VP Anssi Vanjoki admitted Nokia was losing it with its recent launches and that the N97 was a spectacular flop.
Others say the Symbian OS was past its prime (I agree). And not so much because of bad hardware (Nokia typically had phenomenal cameras for example and great QWERTY keyboards etc) but it was the tired Symbian OS which was killing Nokia and was driving Nokia to its doom. This is also a valid concern and I have been doing a lot of analysis here on this blog about what was wrong, what was perhaps right, and what was the direction of Nokia OS strategy. But even me, the Nokia-lover or 'fan-boy' was fully ready to abandon Symbian (I believed the right strategy was MeeGo, not the selected Microsoft strategy) but lets not debate Symbian/Microsoft/MeeGo/Meltemi/Qt here. This is about sales. I will openly admit, it was a very fair judgement of Nokia last year, that Symbian is no longer up to par, and should be replaced. Even I was in favor of shifting away from Symbian.
Then there is a third technologist camp who is often here on my blog too screaming that again Tomi doesn't get it. Apple changed the whole game, its no longer about hardware or software, its about the ecosystem. Look at the App Store and billions of downloads. Fine. The third argument against Nokia was that Nokia was 'losing' the battle of ecosystems. This is actually the weakest of the three arguments, when placed against the facts. Nokia's Ovi store launched a year after Apple's iPhone App Store. There were dozens of other app stores yet by end of 2010, Nokia's Ovi had become the second best-selling app store on the planet, closing rapidly the gap to Apple itself. If you want to argue Blackberry or Microsoft Windows Mobile or Palm had failing ecosystems, that may be true. Nokia's Ovi was the second best-performing ecosystem out there - and gaining on Apple, not losing ground to it. But lets set this argument also to the side. There are many who honestly believe that Nokia was losing the battle of ecosystems. It was, after all, Nokia's own CEO who published the infamous Burning Platforms memo, which said his own platforms were on fire and the situation was so badly beyond repair, that Nokia staff had to jump off the platfrom into the freezing water and chance death by drowing or cold, to try to discover a better platform than the ecosystem that Nokia had built. So whether I can convince you the reader that Ovi was or wasn't succeeding, clearly there is a vast 'expert' community out there who believe honestly and sincerely, that Nokia's ecosystem was failing.
So. If you honestly believe that Nokia was losing in the hardware battle, the Nokia handsets were no longer as good as they used to be, and newer phones such as the iPhone and Samsung Galaxy were now beating Nokia hardware. And/or if you believe that Nokia was losing the software battle with Symbian obsolete (and perhaps also that MeeGo was not able to replace Symbian). And/or if you believe that the ecosystem battle of apps and the app store was being lost by Nokia. Or any combination of the above. That is a fair view, one shared with many tech analysts and to some degree or another, I agree with you too! So Nokia's product, what it offered to consumers, whether defined the classic way as hardware and software, or even with the new revised definition, including the ecosystem - Nokia's product was lousy! It was failing against its rivals. Yes?
Now lets look at the facts. Today we know Nokia has fallen to third ranking behind Samsung and Apple as the biggest smartphone makers of the world. After Stephen Elop took over, for Q4 of 2010 (exactly one year ago) Nokia was still as big in smartphones as Apple and Samsung - combined! Not just that, Nokia was growing unit sales of smartphones! The same is true of non-smartphones, so called 'dumbphones'. Nokia's two biggest rivals there are Samsung and LG. Nokia was also bigger than Samsung and LG, combined. For every year since a smartphone existed, Nokia's market share in smartphones was better than it was in dumbphones - this means literally, that as Nokia transitioned from its world-dominating position in dumbphones, to the new future of smartphones - Nokia was not losing customers in that transition like Motorola, SonyEricsson and Samsung etc - Nokia was consistently, year after year, picking up MORE customers, as it shifted from dumbphones to smartphones!
That is a fact. And Nokia did this all profitably, its handset unit was profitable every single quarter of its existence, even through the worst economic crisis the world has seen in our lifetimes, where all Nokia's full-portfolio rivals suffered so badly, the all went from profits to losses at some point in the economic crisis. Not Nokia.
I am not writing this to celebrate Nokia brilliance. I am here to make a point.
You believe Nokia had an undesirable product technically on its hardware. You believe that Nokia had an undesirable product from its software. You believe the Nokia ecosystem was failing. If the product is bad, then what caused Nokia to outperform its strongest rivals so massively, it was bigger than its nearest two rivals - combined! This is more dominance than what Toyota had ever achieved in cars. This is more than what Airbus has over Boeing. This is more than Samsung's lead over Sony in televisions. Nokia overwhelmingly dominated the smartphone space last year - if you're as big as both of your nearest rivals that is domination. And contrary to the popular myth, perpetuated by ill-informed (often USA based) so-called 'experts' - the facts don't lie. Nokia's sales in smartphones, as recently as 12 months ago, were not declining, they were growing. Nokia average prices were rising so this growth was not achieved by pricing gimmicks like price cuts. Nokia profits for Q4 in the smartphones unit jumped a massive 64% - a Nokia record - so the growth was not achieved by marketing gimmics either.
If you honestly believe that the Nokia products by 2010 were falling behind Apple iPhone and Samsung Galaxy and various HTC and SonyEricsson Xperia etc prodcuts - hardware, OS, or ecosystem -wise, then if the product is bad, but Nokia grows sales and dominates over its rivals - something else is causing that sales success.
NOKIA SALES RULED SUPREME
That is called sales. That is what was Nokia's secret to its longevity and profitablity of its handsets unit - its global carrier relationships, developed and nurtured patiently over more than two decades, in every country and every market and with every carrier (excluding a few nations with many domestic handset makers where the local rivals and local standards were used to block Nokia - ie Japan, South Korea and yes, the USA). If we exclude the countries with a strong domestic handset maker and yes, obviously we exclude then Finland too being Nokia's home yard - in those remaining countries where 90% of the world's mobile phone owners live - Nokia's market share was over 50% in dumbphones and almost 60% in smartphones! Understand this point - if there is no home field advantage like Motorola and Palm and Apple have in the USA, or Samsung and LG and Pantech have in South Korea, or Sharp and Sony and Fujitsu have in Japan - in the world where there is no domestic rival - Nokia in smartphones was bigger than all rivals COMBINED. Those are the facts. Look at 2010 sales. Nokia towered in all other countries except in the USA, Japan and South Korea. Even in many cases with a strong domestic handset maker, so countries like Sweden (Ericsson), China (ZTE, Huawei), France (Alcatel) etc Nokia still dominated.
This with the weak tech, the lousy handsets, the obsolete Symbian and the failing Ovi ecosystem. Like Sherlock Holmes said, if you elimiate the other reasons, you arrive at the truth. If the cause for Nokia's success is not a superior handset, or not a superior OS in Symbian, or a superior ecosystem, then it has to be superior sales ie carrier relationships!
Understand the point. If you are willing to argue that the Nokia N8 was not up to facing the iPhone 4 or the Samsung Galaxy last year, then Nokia sales should have been declining dramatically - not increased! If you feel that Symbian was outclassed by iOS or Android, then Symbian phone sales should have declined, not increased. And same for Ovi. If you are here claiming Nokia was losing the battle on the hardware, or on the operating system or on the ecosystem - and inspite of having fallen behind, and pushing 'obsolete' or 'non-competitive' products and services at the consumers, that Nokia was able to increase sales, raise its average sales prices and increase profits can only be caused by one thing: excellent corporate sales, business-to-business sales. The best carrier relationships on the planet. Its easy to sell if you have the best product. The true mark of great salespeople is to sustain your sales (grow them?) even when you are forced to peddle inferior products!
WHAT DOES TOMI KNOW ABOUT SALES
I know a bit about sales. I worked in consumer sales and then as a wholesale account rep in retail in my native Finland before I went to college in America to study marketing and computer science. After a stint on Wall Street after I got my MBA, I next worked in business-to-business sales, as an account representative selling computer networks in New York City, arguably the most competitive computer market at the time - just on Manhattan we had over 200 companies as direct competitors. I set the company record for sales in a single year, which I then broke twice more before I left the USA and returned to Finland. What kind of sales? Most of those computer networks went into small and medium businesses on Manhattan that ranged from ad agencies to law firms to warehouses to medical practises and accounting companies. But among my clients were such globally recognized New York City icons such as MOMA yes the New York Museum of Modern Art, the Paramount Hotel the iconic Art Deco style grand hotel at Times Square, and the United Nations Security Council. At that time the Economist Group moved its headquarters from London to New York City and their network was also sold by me, as was that of the Economist Intelligence Unit also on Manhattan. So I've done high tech networking sales, seriously, professionally for many years, and in the business-to-business environment, as an account manager, and I had won far more than my fair share of iconic Manhattan clients.
In fact most of my corporate working life was involved in sales or near sales. Yes, I also did some product development, R&D, systems integration, field engineering tech work, even actual coding in software programming but most of my work was always in or near sales. I've worked as Key Account Representative, as Sales Manager, as Product Manager, and in many sales support functions from market intelligence and competitor analysis to my very last job over at Nokia HQ where I yes, headed Nokia's Global Consulting Department. Notice, that the Nokia Consulting Department was functionally involved in 'pre-sales' and our customer visits would regularly be together with Nokia top sales reps, with our clients - the carriers - at their HQs and often with their CEOs, CFOs, CTOs and even Board Members. So my consultants that I managed were all in Nokia's pre-sales activities, closely involved with Nokia's most strategic customers - carriers/operators - and their strategic management executives. I was one of the few Nokia HQ executives so highly trusted by Nokia sales people, they would 'allow' me to meet with their client CxO's without necessarily including one of their own sales staff to accompany me. That is a rare privilege and for those who have actually worked in business-to-business sales, they know its a very rare group who are entitled to that.
I could go on to brag about how much my sales staff loved me, that is neither here nor there, it is near-impossible to prove today, more than a decade later. But I have a most unusual accomplishment among my accolades. I led the team that achieved the world record for taking market share from the incumbent. This was with my days at Elisa Group, and the sales was yes with the operator/carrier fighting for market share in Finland. Not just that my work was the best in Finland that year. Or the best in Finland ever. Not even the best in the world at that time. A genuine world record! Yes, the performance we did, winning sales from the market - this was Finland, and we were fully liberalized competition already at that time, mind you, against several dozen competitors. And yes we achieved a world record in telecoms market share. The best sales performance in telecoms competition in any country that had ever been seen. Ever! I obviously did not do that alone, but I led the team that achieved that. It was celebrated in the Finnish press and even got international press at the time. I doubt you'll find another blogger writing about mobile today - who has personally achieved a world record in telecoms carrier/operator competition. If you can read Finnish go read Kauppalehti or Helsingin Sanomat or Taloussanomat from about spring of 1998 and again in 1999 to read about 'maailmanennatys' (literally 'world record') and see what they wrote about my product branded '999'. Needless to say that was part of my 'empire' as Product Line Manager of all international telecoms services of the Elisa Group, including Helsinki Telephone, Radiolinja and Finnet International. The person who was usually quoted was Finnet International's CEO, Gunnulf Martenson - my direct boss.
So its not that you've stumbled upon some bizarre theorist who sells some weird views on his blog. I've done all aspects of telecoms and tech sales from serving consumers to corporate clients to wholesale to sales management and just about every type of sales support from segmentation to pricing to product and service bundling. And then, I've taken what I knew, and wrote about it. A 333 page hardcover book. Not just any book. 3G Marketing, co-authored with Timo Kasper and Sara Melkko, the book about how carriers/operators should do their marketing and sales - was published by John Wiley & Sons the world's biggest publisher of engineering and telecoms books (my third book with them at the time).
Not only was the first edition of the book sold out, it was in huge demand, it was several times reprinted, and achieved the very rare accolade for a tech book: it has since been translated. (Most tech books tend to become obsolete before anyone bothers to translate them). Wiley brought me to have a special book signing event at the biggest telecoms event on the planet, the 3GSM World Congress in 2005, when they celebrated 3G Marketing as the fastest-selling telecoms book of all time! And do my peers respect my views in that book? Most authors in tech books do not get mentions of their books ever. Some who do, get a few mentions years after the authors have died. So far 3G Marketing is referenced already in 7 books by other authors while the book itself is only seven years of age and of all of my 12 books, it is the book third most referenced. The book has been turned into a marketing and sales course we've run at Oxford University many times, and other course adaptations have been held at universities and educational institutions on four continents.
So I know what I am writing about when I talk about sales in telecoms. I've done it. I've studied it at the university level and have bachelors and MBA degrees (both with honors) about marketing, sales and business. I have successfully managed sales accounts in networking sales in most severe competition in New York City for many years with trophy account wins. Then in sales management I have led the team that set a world record in telecoms sales. And after more than a decade of sales and related work, I have then written a global bestselling and multple-printed and translated hardcover book about it - a book which itself set the record as the fastest-selling telecoms book of all time. And that book is already referenced in many other telecoms books. I know about sales. I can do it. I can manage it. I can support it. I can also explain how it works and write a book about it. My readers loved it. And my peers so highly respected the thinking, they are now referencing the book too.
That is who I am. That is why 15 of the 20 biggest telecoms groups have used my consulting services. And that is why I often talk to the operators/carriers at the CxO level and even Board Member level today. That is why 9 of those 15 clients have even said in public that they have used consulting services of Tomi Ahonen - and they said me, the person, not just that they used the consulting services of my company. That includes each of the Top 3 - China Mobile, Vodafone and Telefonica, which reach phones in over 1.2 Billion pockets and which three alone control one fifth of all mobile phone subscribers on the planet. I am not saying that these three are my clients. They have said in public, that they have used Tomi Ahonen. That is how much China Mobile, Vodafone and Telefonica trust me and my services to them.
I know that this blog is open, and anyone can come and comment. And with a giant corporation like Nokia and its partner Microsoft another giant global corporation, this type of blog article is likely to attract a lot of comments. And some may be knowledgable about what they write in the comments, but others are not. Please bear in mind - if the world's biggest book publisher of engineering and telecoms books invites someone to write the world's first sales and marketing book for mobile telecoms - then that author is in a very rare group of recognized experts of that rare field, not just any old technology pundit who happens to be unemployed and decides to write a blog so they can seem important. With that, lets look at Stephen Elop as CEO of Nokia and how he's dealt with Nokia's greatest competitive advantage, the sales relationships that have been developed with the carriers/operators. This is going to be painful.
DO NOT CHANGE WHAT IS NOT BROKEN
There is a standard management law saying "if it ain't broke, don't fix it". Any change you make will cost you money, time and resources. If that part of your business works to total satisfaction, ie it is not broken, then do not meddle with it. I am not in any way claiming Symbian or Nokia handset hardware or even the Ovi store was 'not broken' but the Nokia corporate sales of its carrier relationships was exceptionally good. I would say, if they can take inferior handsets, on an obsolescent OS platform and an under-performing Ovi app store ecosystem, and inspite of those three huge handicaps, still manage growth of unit sales, with increased average prices and a Nokia-record jump in profits - that is perfection in sales performance. Perfection. If you can take inferior products and services that are rated less than those from competitors - and in that environment you the sales people can deliver growth (without price cuts or marketing gimmicks) - that my friends, is the definition of 'not broken'.
That becomes vital, when the management of a company decides to voluntarily abandon a key pilar of the company and cause two years of change-related turmoil. Like when Elop announced February 11, that Nokia would abandon its Symbian (and MeeGo) based smartphone platform, and adopt the Microsoft based OS in its place. This means not only firing Symbian (and MeeGo) staff and related hardships to the organization, it also means retooling factories - the Microsoft OS requires some different components into the hardware etc, so much so, that the first 'Nokia' branded smartphone, the Lumia800, is not even manufactured in Nokia factories, it is made by a third-party manufacturer out of Taiwan. (Think about that lunacy, at the same time Nokia factories run idle so badly, that Nokia has already permanently shut down one of its big factories in Romania).
The Windows Phone based Nokia smartphones need to be completely redesigned from the ground-on up, and all new Microsoft processes have to be learned. Many Nokia 'staples' that Nokia phones have supported for many years need to be 'un-learned' such as that the Microsoft OS does not support NFC technology etc.
This is not a blog about whether the shift to Microsoft is smart or not (I have plenty of blog articles where I am critical of that). This blog looks at what happens to sales. If the CEO decides to rudimentally shake Nokia from its ground on up - all major industry experts say that the mobile phone handset industry is shifting from dumbphones to smartphones - Nokia started that trend and Sony just now announced a few days ago that they will achieve 100% transfer to smartphones and will end the making of their 'featurephones'. Motorola is also at about 80% done with that transition. All major industry experts also agree that the handset industry is 'increasingly' going to be about software, some go as far as saying the future of mobile phone handsets will eventually land on 'the cloud'. And most industry experts also agree that the battle is increasingly about ecosystems.
Nokia had a successful transition from dumbphones to smartphones - Nokia was leading all rivals in that transition up to when Elop took over. Nokia had invested heavily in its software competence, developing Symbian, Maemo and MeeGo operating systems for smartphones, and various other software projects from music services to maps to advertising to mobile money. And Nokia had started its path towards an app store years before there was an iPhone (with the N-Gage) and their several app store type of solutions were centralized around the Ovi brand. So Nokia staff the world over knew Nokia was on a long-term project to transfer the traditional hardware vendor into a smartphones maker, with its own OS, its own software and its own app store. Elop demolished all those visions in one statement when he annouced the Microsoft selection.
If we set the sanity of that decision to one side, and consider what remains. This is one of the biggest changes of any company ever. Imagine if Apple had abandoned the Macintosh Apple OS/X platform and gone fully Microsoft? That is the type of change. Like when Sony threw in the towel with Betamax and joined the VHS video recording consortium. Or imagine of Microsoft decided to abandon Xbox and start to produce Playstation-compatible gaming consoles. That is the kind of dramatic platform change that reverberates across the whole organization and its effects will be felt for years.
If you initiate such an enormous and painful change - you don't want to rock the boat on anything else! What Nokia needed on February 12, was the sure hand of management to reassure all staff that everything else is as normal (even if Elop may have wanted to tinker with some other things as well). Because the change was not forced upon Nokia, it was a voluntary decision taken by the Nokia CEO, at a time of his choosing. Because it was an 'unforced' strategic change, then it MUST HAVE BEEN PLANNED WELL. After February 11, when the Microsoft announcement was made, after that point, in every communication coming from Nokia, what Nokia needed was for all other issues to be as stable as possible, to minimize the pain of the big platform change.
DON'T ADD TO THE PAIN
This is the wrong time to tinker with the Nokia brand, such as the confused messages around the naming scheme. Nokia had announced previously they were going from letters and numbers (N8, E7 etc) to full names. Now the new CEO added totally unnecessary confusion with a new naming scheme - and bizarrely - against ALL major marketing wisdom - he went 'backwards' to pure numbers. Nokia announced they'd only sell numbered phones. A Nokia 700 and a Nokia 500 and a Nokia 701 etc. Previously the business-oriented phones were at least clearly identified as the E-series and high-end consumer smartphones the N-Series etc. None of that. Now you'd only come and buy a Nokia 643. Or was it the 634. What is the difference with a 635 or 642? Obviously a mad strategy, even numbers-fanatical brands like BMW in cars has been moving away from only numbers.
That was a moronic decision obviously and Nokia took a lot of heat for it. That didn't last long. Now Nokia has reversed that decision and announced the new Microsoft phones will be Lumia sub-branded and Nokia's low-cost dumbphones will be Asha-branded and no doubt, there will be more Nokia sub-brands. That is a far better choice. But consider how much totally unnecessary pain this back-and-forth has caused the Nokia branding and marketing and sales departments, when the story has totally reversed itself now twice in less than half a year. That took away effort from making the transition from Symbian to Microsoft as smooth as possible. All while they try to un-learn what all was advanced about Symbian better than Windows Phone, and what all was even better on MeeGo than Windows Phone, and what in Windows Phone is going to be applicable to Nokia's version - which differs from that Windows Phone that existed in February, etc.
What of the end of Symbian? On February 11, Elop announced Nokia was ending Symbian. Then the market interpreted this as an 'Osborne Effect' and it stalled Nokia Symbian sales. Elop was confused and it took him more than a month to come back and say, no-no-no, Symbian is 'not dead' and Nokia will make new Symbian phones well into 2012, and will support the Symbian OS with new releases and software at least until end of 2016. How costly was that marketing communication mess?
Then about the song. Why on earth, would the CEO pick now, year 2011, the troubled year, as the time to change the Nokia tune? The Nokia tune ie the standard default ringing tone on Nokia phones, is the world's most recognized song. More known than Elvis's Love Me Tender the Beatles's All You Need is Love or Michael Jackson's Thriller or Bing Cosby's White Christmas or Queen's We Are the Champions, or Frank Sinatra's My Way or indeed any popular songs like Oh Tannenbaum or Happy Birthday. The Nokia Tune is on phones that are on the pockets of 1.8 Billion people! That is 26% of the total planet. That is unprecedented in the history of humankind. Nokia is more widely spread than any other brand ever, more people have a Nokia phone today, than at its peak listened to a Sony Walkman, or drove a Volkswagen Beetle, or told time on a Timex watch, or wore Levis jeans, or played Solitaire on a Microsoft Windows based PC, or smoked a Marlboro, or drank a Coca Cola, or wrote on a Bic pen. Nokia is today by a long margin the most widely used brand on the planet and its iconic ringing tone is an unprecedented identifying branding and emotional tool. You'd have to be certifyably mad to want to mess with this WHILE you also force customers to abandon one platform for another. What you want, is for the customers to feel that 'everything you ever loved about Nokia is exactly as you wanted' (while we change the OS quitely underneath). Why why why would the CEO entertain the idea to change the Nokia tune this year?
And on the stability front. What of Ovi store. Why on earth, when even such giant communcation entities as CNN regularly were promoting the CNN app 'available on the Ovi store' would Nokia CEO decide to kill the Ovi brand this year. CNN is giving incredibly valuable air time to promote the iReporter app on explicitly the 'Ovi store' not the 'Nokia store'. The Nokia app store is not going to be ended. So the Ovi store will continue. But idiot Elop wants to now add to the confusion by killing the 'Ovi' branding that had already been established. Isn't it enough hassle for the branding, marketing and sales staff to fight with the stories about Symbian, MeeGo and Microsoft, without now voluntarily throwing Ovi hassles into that mix. That is sheer madness again. No wonder the global Interbrand survey dropped Nokia from the Top 10 most valuable brands on the planet for the first time in the ten years that the survey has been published. Nokia's brand is being tortured by the CEO.
I could go on, but this blog is about sales. I want to point out, that the sensible thing for any intelligent CEO to do, if the CEO voluntarily decides to abandon a growing platform that dominates the world and is bigger than its two nearest rivals combined - when such a massive change is forced on the Nokia organization, its partners and suppliers, its resale channel (the carriers/operators and the handset retailers) and of course the customers - what you want is UTMOST, TOTAL stability in all else. TOTAL, utmost stability in all else. In ALL ELSE that Nokia does. And Elop has been doing exactly the opposite. He compounded his Microsoft Mistake with the infamous Burning Platforms memo (creating the Elop Effect) and then as the analysts and tech press and Nokia clients - the carriers/operators - and Nokia customers and most of all, Nokia investors have punished Elop for the mistakes - he has engaged in an orgy of brand destruction events. What he should have done, is painstakingly gone on every TV show and visited with every carrier, repeating the boring old same story - EVERYTHING you ever loved about Nokia continues, absolutely everything, except the OS, which we will shift to Microsoft (and this is why, blah-blah-blah). What he does not want under any circumstances, is ANY FURTHER reason to question the direction of Nokia. No other critical opinions of further stupid mistakes.
Elop is running the company like a distracted child. Every week he comes up with yet another way to mess with the organization, to cause more pain internally, to employees, to partners, to the retail channel and to the end-users. This year is the worst time to introduce any other changes - remember, Nokia was not failing in 2010 - Nokia grew sales, and in smartphones, it grew unit sales, grew average sales prices and jumped profits. So he did not need to fix what was not broken. If he had decided in 2010 that the Symbian SO needed to be changed (and as CEO he has the right to make that call, he knows much more about the company than we outsiders can know) then only a fool would compound the pain with more silly changes to everything.
YOU DON'T ASSASSINATE YOUR HEROES
So lets get to those sales reps. We've established that if the Nokia smartphone handsets were not up to par anymore, not compared to the iPhone 4 and Samsung Galaxy etc - and if the Symbian OS was obsolete compared to iOS and Android, and if the Ovi store ecosystem was struggling too - then yes, the Nokia product and service offering was not truly competitive. And if in that context Nokia achieves unit sales growth, with higher prices and a giant jump in profits - then the only way that happened, if the sales organization were the heroes. It was not achieved by great hardware not great sotware or ecosystem, and not by marketing or pricing gimmicks. It had to be good sales.
The heroes of Nokia when Elop took over were the sales reps, who handled Nokia's precious carrier relationships. It is certain that an outsider coming in to run Nokia, could not possibly know all about the intricacies of this industry. But we know that Elop asked all Nokia employees to write to him via email and he actually responded personally to everyone who did. It is also reported that his early weeks and months Elop went throughout the organization talking to very many mid-level managers to learn about the business.
He came from the PC industry with the typical baggage that PC industry players usually have when they approach mobile (look at how much traditional PC makers struggle when attempting to get into smartphones from Dell to HP to Lenovo to Acer etc). He further came with the trouble of having lived in the laggard market of mobile, the USA (if you need proof, just look at where the USA sits today in adopting smartphones compared to the world), and will not know much of the finer points about more advanced markets and what mobile is and can be in more advanced markets such as Japan and South Korea, or more relevantly for Nokia brand, advanced markets such as Singapore and Sweden, both years ahead of the USA. He will have heard time and again and again and again, what those differences were, and where Nokia had strengths - and where it had weaknesses.
He would have had to be a total idiot not to learn in that process. Look at Apple, look at Google. Both come from West Coast USA and both have adopted to the mobile market and are doing phenomenally well (contrast their rapid success in mobile to their close rivals like Microsoft, HP and Yahoo who have for a decade tried to muddle into mobile to dismal success). But Google and Apple both recognize that Nokia is/was a leader of this industry, not a laggard - and that Japan as a nation is the foremost leader and both Apple and Google regularly illustrate by actions if not by words, that they copy both Nokia and Japan. Remember - Apple settled a patent dispute with Nokia paying it hundreds of millions, not the other way around. Eleven of the first 12 changes made by Apple in the next 3 years after 2007 after the iPhone 2G was launched, were copies of what Nokia had done - before 2007. And as I have written on this blog, if you want to see what will be in the next iPhone, go and look at a Nokia top phone from a couple of years ago (which itself is a copy usually of what Japan had even before that - remembering that NTT DoCoMo the Japanese carrier/operator was Nokia's partner on Symbian and most of Nokia's chief designers have held their primary desk at Nokia's small Tokyo office).
And Elop would have to be mentally deficient not to instantly observe and learn, that inspite of technical product and service shortcomings, his sales staff were the internal heroes, they were bringing in the massive handset contracts from the carriers around the globe.
We don't hear much about the actual sales heroics, its a very murky world of very few people within that club. And talented sales reps are a rare breed and will not want to 'publicize' any possible arguments with management, because they know that the sales rep's reputation is his biggest asset and if they don't like this boss, they may want to go work for another company, so most sales reps depart very quietly. But a few stories have leaked out from Nokia. Lets start with Superman.
The ultimate achievement for a salesguy is to win back the lost client. That is the pinnacle. That is what separates the brilliant from the good. And Nokia had lost its way in the USA more than six years ago. And by 2010 Nokia was selling low-cost phones and its brand was severely tarnished in the USA. Where once it was the second biggest phone brand behind only Motorola in the USA, it had fallen out of the USA Top 5 and its share was down to single digits. The Symbian based Nokia smartphone market share had become so bad, it was a couple of percent in the USA, and those were the cheapest versions.
Nokia's previous CEO, Olli-Pekka Kallasvuo had made it his mission to return Nokia back to the US market and in his three years of leadersship he had failed and this was one of the reasons why he was fired (the bigger reasons were the fall in Nokia share price and perilous decline in profitability). So, what Nokia wanted more than anything else, was to land a major US carrier to subsidise one of Nokia's flagship smartphones.
And in January that incredible come-back feat was accomplished by Nokia's sales staff in America. They didn't land the smallest of the big four, T-Mobile, but one of the two giants: AT&T. And the phone that AT&T agreed to sell with subsidy was none other than the X7, scheduled for Spring 2011 launch, the follower to Nokia's flagship hit phone of 2010, the N8. This was a superb achievement! This was what three consecutive Nokia CEO's had hoped to land for more than half a decade, to no avail. And now the new CEO was gifted this amazing 'win-back' achievement. Nokia was to be back in the USA, in a big way, in the Spring of 2011, and on AT&T the iconic USA network (original launch network of the iPhone). And the CEO of AT&T was to come to the world's biggest telecoms event GSM World Congress in Barcelona in February to celebrate this new dawn for Nokia, to share the stage with Elop.
If Elop cared about Nokia's success, he would have taken that stage and enjoyed the moment. Except that the X7 would run Symbian. And Elop wanted desperately to move to Microsoft. Not just to move to Microsoft (which wouldn't happen until November at the earliest, so in February there was no need to announce anything about Microsoft) he wanted to share the stage rather with his former boss and idol, Steve Ballmer the CEO of Microsoft - rather than 'just some CEO of a carrier'. Clearly Elop idolizes Ballmer.
So, after years of failing, when the win-back is finally achieved, on AT&T's giant network to be the launch customer of the new X7, the deal is killed. By AT&T? No. By Nokia! Elop would rather step on the stage to announce the Microsoft deal - where he had no phones so this would only damage Nokia sales - and thus he wouldn't take the stage with the AT&T CEO to announce another Symbian based phone for America.
I don't know which is worse - the ego of Elop eloping with Microsoft to Nokia's damage, or the permanent damage to the sales rep's relationship with AT&T - but this one act alone is enough to disqualify Elop as CEO of Nokia. If he will take a win, no not a win, a win-back - in a market where Nokia was failing before and Elop himself has said he wants Nokia to come back - and Elop torpedoes that rare heroic achievement. He is incompentent and must be fired. You don't assassinate your own heroes.
Put this in a sports context. You're the coach of the NFL team in the Superbowl. Your team had fallen behind by half-time. Your team has not scored. Then, finally, your superstar quarterback throws a perfect touch-down that launches your come-back. What do you do? You don't pull the quarterback off the field and bench him? You celebrate with him and encourage him to go on, and lead your team to victory by throwing more touchdowns!
WHO DO YOU PICK
It gets worse. At this time in January-February 2011, the USA was still the world's biggest smartphone market (that has since been taken over by China, no surprise). Again, we do not hear of all the finer details, but later this spring we heard that bizarrely, Elop had decided to replace his USA Nokia sales boss. And relocate the Nokia USA sales HQ.
Ok. First, if you have that hero salesguy who won AT&T for you. That is your USA sales chief forever, until you perhaps promote him for global sales head. You don't let him leave for any reason at any cost. He is the exceptionally capable and rare sales talent. He is able to win-back lost customers, and of such giant scale as AT&T, a carrier so big it qualifies by its size in the top 20 biggest mobile carriers of the world (remembering that Verizon Wireless is 55/45 owned by Verizon and Vodafone, so with its global footprint, yes UK based Vodafone is far bigger that AT&T but USA Verizon's mobile customers without the Vodafone part are far smaller than AT&T). You bend over backwards to hold on to this superhero! Incidentially, what did Nokia USA President Mark Louison do on February 11 in sheer frustration. You betcha! He resigned. I woulda done that too, Mark, I'm with you on this one. When you see your CEO is mad as a hatter, you are better off jumping off that non-burning platform even if you have no other job in sight. You will land safely somewhere far better than performing heroics to the CEO who will then destroy your work.
Secondly, back to Elop. If. If after your massive efforts to bribe and charm and convince your superhero salesgun to stay, and if, for some reason this superhero guy retires or is headhunted to run another company or I don't know, goes on maternity or paternity leave or something - then who do you appoint? The number 2 guy on that AT&T account team of course! Or then you go down the line, take the top guy from the Verizon team at Nokia or Sprint sales head; or go further down the line and hire someone else from Nokia's top sales guys perhaps from the Vodafone team from the UK - ie Verizon tie-in or the T-Mobile team from Germany.
Why? Because mobile telecoms is the most complex technology ever - more complex than rocket science - no thats not fair. Mobile is FAR FAR more complex than rocket sciense. And the BUSINESS of mobile is the most complex big business that has ever existed - and the sales competence required is very time-consuming to acquire, takes literally a decade or more, to know the networks standards from 1G to 2G to 3G to 4G and beyond; then the network operators/carriers including MVNOs and their operating models and business models; handset sales including subsidies, handset features and abilities; the operating systems; apps, services; the radio environment including base stations, indoor coverage issues, capacity, coverage etc; SIM cards, app stores; then the end-users from consumers and youth and senior citizens to enterprise/corporate customers etc etc etc. The sales guy is expected to know by heart all the details of every single Nokia handset ever made (a numbering jungle nightmare as you can imagine) and which ones had what problems with that carrier that one time, with that particular network equipment like a cell tower, etc etc etc.
You don't bring in a novice! What you bring is someone supremely competent in a) mobile telecoms business, b) carrier business, c) handsets, d) networks, e) the subscribers of the carriers ie the end-users. And obviously all that happened both on the Nokia side and the carrier side of that relationship. So if for some reason, the right competence is not available (almost inconceivable for Nokia after several decades of selling handsets in the USA) then you go to another HANDSET maker top guy who has years of success selling to the carriers in the USA, ie headhunt the top guy from Motorola or RIM or Samsung's top USA guy or LG's top USA guy etc.
What did Elop do? He brought in his buddy Chris Weber from Microsoft. Yes. A guy who has never ever sold one handset in his life. He's been involved in Microsoft's sales of software, to PC makers. The sales is not through carriers and dedicated handset stores. Microsoft sells most of its software as either pre-bundled on the PC or else sold through 'VAR's ie Value-Add Resellers (My New York networking company I mentioned in the above where I sold networks, was a Microsoft VAR among many other brands). These VARs are essentially Microsoft slaves, tiny companies that Microsoft bullies at its whim. It is the exact opposite relationship to what carriers have with handset makers - just look at how quickly Kin died, or how rapidly Apple - come on Apple - had to redesign the iPhone 5. Someone who thinks the reseller world of mobile is like that of Microsoft is in for a rude awakening and only a moron would appoint such a total novice to head Nokia's big come-back to the US market.
The PC makers are also slaves to Microsoft because they have no credible choice, at least not with Windows. The carriers have literally choice of over 200 manufacturers and they can tell any one of their current suppliers to go jump off a cliff. So the relationship of Microsoft 'sales' to its VARs or its PC makers is that of the typical cruel dictator that we've seen in public in Steve Ballmer regularly, and what has given all in the tech world to call Microsoft the 'Evil Empire'. And would you know it, when you read what press Mr Wunderkind has achieved for Nokia in US newsmedia so far, the word 'tablet' is nearly as frequent as 'smartphone' in those stories. What? He is peddling tablet rumors when he should be selling Nokia's smartphone story? (Note, there is no formal announcement of any tablet project and Nokia would be surely pinheaded to work on a tablet in this mess, before getting its smartphones house in order - just look at how many carcasses sit in the tablets wars vs iPad. But this is not a blog about how futile it would be for 'we have never made PCs Nokia to attempt a tablet where even Nokia's reseller channel is the wrong one for tablet sales' strategy. This blog is about sales.) So, this Weber guy, another Microsoft Muppet is your new USA head of sales, Stephen Elop? You've gotta be kidding!
Go back to the sports analogy. Its not that you the coach have seen your star quarterback lead the team to the first score for your side to start your come-back and to do it throwing a beautiful touch-down pass. You not only bench the QB, you then send in the replacement. Not your backup quarterback. No. Not your third-string quarterback either. Not even anyone else on your existing team who knows how to throw a football. You bring in a star athlete from another sport who has never played one game of football! You bring in a champion figure skater!
Elop is the most incompetent CEO ever. He has to be fired.
But wait, it gets worse. Look at the Nokia USA office. They had their office in upstate New York, very close to the HQ of Verizon. A good place to be near to one of the biggest carriers. And by time zones, being on the East Coast gives you some overlap time with Finland where the Nokia HQ is.
Now where did Chris Weber decide to move the sales HQ of Nokia USA? If its not near Verizon, then where? Not near to the AT&T's office. Not near Sprint's office. No. He has set up his Nokia USA sales head office to... Seattle? Duh?
Where the Nokia USA sales HQ is as far as possible from any USA carriers so they can no doubt collect a lot of airmiles? - and where they are on the opposite time zones as Finland is, to make it as difficult as possibile for the sales guys to talk to Finland, or the Finnish guys talk to USA sales. What a mad mad MAD move!
But that office is right next to Microsoft. Haha, yes. And who are the Nokia sales people selling Nokia to? Are they supposed to sell Nokia handsets to USA carriers? Or to try to sell Nokia corporation and Elop's 'magnificent' achievements to Microsoft? This is the epitome of madness. Look at a map. Verizon Wireless is based out of Baskin Ridge New Jersey (Verison parent HQ is located on Manhattan). AT&T is based in Dallas Texas. Sprint Nextel is based in Overland Park in Kansas. T-Mobile the smallest of the four is of course the wholly-owned subsidiary of T-Mobile of Germany. And this is your first step as a Nokia employee, Weber? To move as far away from your work as possible?
That was the soap opera known as Elop in America. Lets now go to another soap called China Rising. Yes, we know by now, that China has eclipsed the USA as the world's biggest smartphone market and will rapidly grow to be at least twice the size of the USA. And in China, Nokia owned that market, had over 60% market share just a year ago. Nokia was performing awesome sales growth gaining market share with the new Symbian S^3 based smartphones like the N8 and E7 up to February 11. The sales were so strong, that while the rest of Nokia smartphone sales shrunk for Q1 following Elop's Microsoft Madness, China had managed growth ! So here is another superstar superhero sales guy, who bucks the trend and brings in supersales.
And then in Q2 we see China smartphone sales crash heavily. Hey. That was not a China Syndrome. Nokia smartphone sales crashed GLOBALLY. Nokia lost 30% in one quarter! Yes, China's fall was the biggest of any region, but that was only because China was also strongest growth with the new phones that sold in Q1, and due to Nokia's very strong Symbian position, the Nokia sales would of course crash right at the time that China was in its ascendancy and taking over the title for world's biggest smartphone market.
And what does Elop do? He fired the China team! Did that work? The guy who came to repair China sales was Nokia's global head of sales, who also is the past China sales head, who really knows the China market and carriers and end-users. Did he manage any better. Of course not. The crash in China was not because of bad sales effort - it was only due to the Elop Effect. The team that had achieved 60% market share before Elop meddled int the smartphone market is now being replaced with expert when Nokia's market share is less than half it was and falling further. Nokia in China is now so poisonous that Nokia's own, branded Nokia franchise 'flagship' stores, have started to sell handsets made by other brands! Imagine going to a McDonalds and seeing hamburgers and fries wrapped in Burger King paper, sold by the McDonalds staff. That is total collapse of Nokia in the biggest smartphone market of the planet. And Elop had winners there, and he fired them. And where Nokia would need their top salesguy to go help America recover, he is now doing pointless repair work in a ruined market. What is Elop doing? He is incompetent and needs to be fired.
The latest sales numbers from November are so dismal, that of the ten bestselling smartphones in China, only two anymore are Nokia branded, ranked 5th and 9th. And they are 2 of the 3 cheapest smartphones on the top 10 list. A year ago Nokia owned the high-priced end and only a few ultra-low-cost Chinese manufacturer smartphones by ZTE and Huawei made that list,
Elop killed the China market on February 11 announcing Microsoft (China Mobile the world's biggest carrier, had been Nokia's partner on MeeGo the smartphone OS to replace Symbian. What will China Mobile think of this way of being stabbed in the back by a 'partner' called Nokia. You can be sure China Mobile will not forget and will favor any other brand smartphone ahead of Nokia.) So. Would the Nokia China sales team hear about the three Chinese clients and how angry they were? Of course. Would the China sales guy talk to Elop. Of course he did. And what does the smart CEO who cares about his company do? Especially the sales guy whose client is by far the biggest in the world, and who alone accounts for 10% of the world's phones? You listen to that sales rep like he was reading from the original stone tablets containing the ten commandments. You do not question that guy ever ever EVER. And you do not fire him or her!
The China team firing was a skapegoat for Elop. He didn't like to hear being told he made a mistake, and rather than think of Nokia's best interest, he let his ego do the talking and fired the team serving the most important client in the industry - and with the carrier where Nokia had been winning more sales than all other smartphone makers combined! Where the partnership had been so intensely solid, that the carrier had agreed to specify Nokia's new OS, MeeGo as its default smartphone OS and where the carrier itself would be a developer partner. Elop put his own ego ahead of the interests of his company.
Elop is incompetent and has to be fired.
There are more stories like this but they tend to not be out in the open. I hear some stuff privately that I can't talk about but the sales professionals of the best sales team in telecoms is quite demoralized that they have a lunatic running their company and who is not only making their work more difficult regularly causing totally un-needed hassles to an already difficult year; and he is that most dangerous of CEOs in that Elop is even destroying some of their hard-won sales contracts like that of AT&T.
DON'T FIX WHAT ISN'T BROKEN
So lets turn to other sales and marketing efforts. Over in Britain Elop then decided to terminate the contract of the local wholesale agent for Nokia handsets and replace it with a company that is an expert not in mobile phones but PC sales.
What did I say about "if it ain't broke, don't fix it"? Again! Elop took a sales organization that had the Nokia contract for a decade, and knew every player - and which is an expert at handsets, and replaced it? What? Now? This year when Nokia itself is causing incredible troubles with the shift to Microsoft? What was not broken at Nokia was sales. This is absolutely the wrong move (once again).
And what does Nokia get for its money? I was just in Birmingham three weeks ago and with a bit of extra time I stopped by at a shopping mall. It had three phone stores. The Orange store featured the Lumia800 prominently in its window - with the free Xbox offer for all who sign a contract. But the T-Mobile store had no Lumia or Nokia anywhere on its two display windows. And the neutral Carphone Warehouse did have the Lumia800 but that was on one window on one side of the door - the other window display had a similar-sized iPhone 4S ad, which is exactly the comparison Nokia does not want. The Lumia800 is the first Nokia flagship ever that has no redeeming factors when compared to its contemporary iPhone (the N95 beat the original iPhone 2G by almost all of its features and not just rated better, the N95 outsold the iPhone 2G; the E90 Communicator outclassed the iPhone 3G and in most head-to-head comparisons was rated better, the N97 did suffer badly when compared to the iPhone 3GS but had a QWERTY keyboard and better camera etc; and with the N8 compared to the iPhone 4, Apple had closed the gap but at least the camera of the N8 totally outclassed that of the iPhone 4 and many European comparisons gave the choice to the N8 last year).
So now with that side-by-side advertising, any customer who walks into a Carphone Warehouse will automatically think of comparing the Nokia with the iPhone 4S and of course in that comparison the Nokia Lumia800 falls very flat. Its the first flagship phone by Nokia ever that has nothing to beat the current Apple offering and by contrast the iPhone 4S beats the Nokia Lumia800 in most areas. And in the UK Nokia has a long history of loyal Nokia customers. Many are now being pushed to the iPhone. Apple must be laughing all the way to the bank.
So this is what your Microsoft 'Billions' of marketing money buys you Stephen Elop? The early analysis by people who study the market are telling that the reception of the Lumia800 is disappointing all over the early markets and Nokia won't come anywhere close to its previous similar launch of the Symbian S^3 and the N8 model last year this time when Nokia did 4 million sales on its then-newest version of its OS. The analysts have been downgrading their estimates for Lumia sales anywhere from 2 million to under 1 million units.
THE PINNACLE OF INCOMPETENCE
When Stephen Elop decided to cause the self-inflicted double wounds of both the Osborne Effect (February 11 announcement of Microsoft when he had no phones to sell) and the Ratner Effect (the Burning Platforms memo the costliest management communication of all time) - and this unprecedented management madness is now called the Elop Effect - he did cause a world record crash of market share in any industry. In seven and a half months Nokia had lost half of its market share and fallen from a massive lead at number one, to ranked 3rd and falling. The projections show Nokia to be near 10% by the time this Q4 is done and that would mean Nokia lost two thirds of its market in less than one year. This is far worse than New Coke or the problem with Toyota brakes or Jet Blue jailing its passengers onboard its planes on the tarmac. Obviously Nokia's share price crash has been as rapid. The previous CEO saw Nokia lose half of its market value in a period of three years - and was fired. This new CEO has destroyed more than half of Nokia's share price in only 11 months. The only reason the Nokia price climbed the past few days is because Danske Bank is now expecting Nokia to sell its previous crown jewel unit - the now loss-making smartphone unit - and Danske Bank expects the buyer to be (drumroll.....) Microsoft of course. Danske Bank expects this to happen in the first half.
IS HE A MICROSOFT MOLE?
If Nokia new CEO Stephen Elop causes Nokia's world-leading market share in its smartphone unit to be crashed deliberately with glaring mismanagement - and that damage is used as an excuse to sell that unit to Microsoft, Elop's previous employer - then Elop is clearly guilty of his fiduciary duties and having not served the best interests of Nokia. If there is any confirmation of any talks however secret of a Microsoft buy-out of any Nokia unit - that must be prevented by all stock exchanges involved as a clear breach of Elop's duty to Nokia. And that this kind of rumors surface, suggest that it is being quietly prepared. And that means that Nokia's Board of Directors is also potentially guilty and has ignored its duties to supervise its CEO.
ELOP IS INCOMPETENT AND MUST BE FIRED
But the decision to switch away from Symbian and MeeGo to Microsoft was a choice by Elop, and he could select the timing of when to do it. He knew what he was doing. He planned it. Any graduate of business school knows, if you decide to inflict such severe damage to your company - that in your official Nokia results you warn that the transition-related problems will last for two years - then you minimize all other changes. You act as the epitome of stability for those two years, you do not rock the boat. You do not cause additional pain and stress to the company, its employees, its suppliers and partners, its sales channel and customers, and its end-users. You don't make any other changes unless absolutely necessary!
And for whatever problems, real or imagined, Nokia may have had in its handset hardware, its operating systems and software, and its ecosystem - Nokia's sales were true heroes. They achieved growth with inferior products and services when Elop took over. These were the best asset that Nokia had. If Elop caused the self-inflicted wound with his Elop Effect, then the worst possible thing he can do, is to compound that error - by firing some of his best sales people (or letting them leave) and related sales organizations.
I wrote before that the Elop Effect is like finding your friend has a heart attack, you start to strangle him, and then to be sure, you take your shotgun and also shoot the friend in the face (like Vice President Dick Cheney).
What Elop is now doing with his sales force, is seeing a doctor rushing in to try to help your friend, and you then pour gasoline over the doctor and set him on fire...
Please pay attention to Stephen Elop and the Nokia saga. We are witnessing the world record in incompetence in managing a Global Fortune 500 sized company. He is single-handedly destroying the company and we have a front-row seat. This story will be reported in future MBA textbooks as the ultimate folly in running a tech company and I promise you, future students of business will be so incredulous about all the silliness, many will initially not believe the case study is true, some of the madness is so ludicrous that some students will think there are typos in the textbook.
This was only about the sales silliness. I will return with the big picture and the failure of the new Microsoft strategy. Elop has to be fired! Nokia Board! Why are you asleep on the wheel. If you don't act soon, you will be accused of being in collusion with this clown, this Microsoft Muppet.
I usually welcome all comments on my blog under some basic rules (ie you must have read the blog to discuss it. If my reply to you requires me to write 'if you had read the blog article' those types of comments are deleted without mercy). In this case I will insist that the discussion be limited to the sales and marketing of Nokia and its rivals. Do not include any discussion about the iPhone vs Nokia phone models or any discussion about app store ecosystems or Symbian as an OS. There are plenty of blog articles on this site about those issues, post your comments there. This is a rare discussion about sales with handset makers and I will enforce clearly a limit of the discussion to those topics. But as usual, I warmly welcome discussion about this blog so please do comment. What do you think, is the matter of carrier relationships ie the sales at Nokia a true asset and has that been now unnecessarily damaged by Elop this year with meddling and mismanagement? Or do you think Nokia is doing a great job in its sales to the carriers and independent handset store chains?