So yes. Lets continue with the Nokia analysis of how could this mobile giant handset maker implode so totally, to produce the biggest collapse not just in handset industry, but any industry ever, by its global market leader. In this series I've taken one element of the failure and studied it through one picture, per blog. We've done 7 so far - the Nokia smartphone sales collapse due to Elop Effect, the competitive picture of Nokia vs Apple and Samsung, Nokia market failure in context of other handset collapses, the failure of the migration from Symbian to Windows Phone, the disasterous Lumia sales pattern with Windows Phone, the Revenue Collapse in Nokia's handset business and the CEO delusions: When was Nokia truly burning, and when was it safe from any platform fire?
As to this blog, we'll now look at the strategy that Nokia CEO Stephen Elop introduced on 11 February, 2011. He showed this picture at all strategy sessions two years ago.
So this was how his new Microsoft partnership, and the migration to Windows Phone was supposed to happen, according to his new strategy, over the next two years. This picture is in revenues, Windows Phone was supposed to achieve better than 1-to-1 revenue migration from Symbian sales levels, and even take a small part of Nokia's basic featurephone sales revenues. The total revenues of Nokia handset unit were supposed to remain flat during this transition period.
LETS ADD CONTEXT
The part Elop conveniently omitted from that picture, was that Nokia showed strong growth in both its smartphone business, and its featurephones business, during 2010, and that revenue growth was accelerating towards the end of the year, as the world was emerging from the global economic crisis, and as Elop took over. This should be the picture, to show the context:
So to start with, Elop abruptly interrupted Nokia's strong revenue growth in both the smartphone unit and the featurephones unit - this while the global handset industry was growing revenues very strongly (has doubled in the two years since this was announced). But yes, we can see the three legs here. Since we know when Lumia series was launched (Q4 of 2011) and as we've heard Nokia CFO Timo Ihamuotila tell us that Q4 of 2012 was the last quarter of meaninful Symbian sales, we have the actual time scale for the strategy clearly defined. The new Strategy was announced February 11, 2011, when Q4 of 2010 was the last reported quarter (Nokia reported the numbers only three weeks earlier); and the transition will have ended by the end of Q1 of 2013, so the two year transition period as promised by Elop in February, will have been achieved. That sounds good. Lets now look at what he delivered in that time.
So we have three legs in the strategy. Nokia's world-leading sales of Symbian based smartphones - which outsold nearest rivals at the time - Nokia smartphones outsold Apple's iPhone by 2 to 1, and Samsung's smarphtones by 4 to 1 - and Nokia grew more in 2010 than either rival so the gap between these was not closing, actually Nokia was pulling away from its strongest rivals. Nokia's dominance of the smartphone market was bigger than what Toyota or GM has ever had in cars. Ever! Nokia's dominance in smartphones was bigger than what HP or Dell (or Apple) has ever had in computers. Ever! Yes, what Elop inherited in 2010 when he took over as Nokia CEO was a massively overpowering global juggernaut in smartphones. And yes, look at that picture - the revenues generated by Nokia's smartphone unit in 2010 did grow - strongly. And Elop's strategy would cut the growth, and hold smartphone sales revenues flat for 2 years, and generate about 150 million more sales out of Symbian as he would transition to Windows Phone. So what happened to the 'cash cow' of Nokia, the highly profitable smartphone business based on Symbian smartphones, the bestselling smartphones of China, India, all of Africa, all of Latin America, etc. This is what happened to the first leg of Elop's strategy:
Ouch! That is massive failure. That is a disaster! Yes, the Nokia Symbian sales did not sustain healthy sales for three more quarters before the new Lumia sales could emerge, but rather, collapsed immediately (due to the 'Elop Effect' in particular the Osborne Effect part of the Elop Effect but also the Ratner Effect associated with the Elop Effect). So lets redraw the strategy picture, showing now the reality and the loss that Elop's management of his promised strategy, did in fact destroy half of Nokia's promised Symbian sales. This is reality vs promise in the first leg, the Symbian leg, of the promised new Elop strategy for Nokia:
So yes, the yellow/blue vertical lines show the area that was destroyed by Elop with his Elop Effect, the annuncement of this strategy before he had Windows phones to sell (ie 'Osborne Effect') and that he bad-mouthed his own products as uncompetitive (the Burning Platforms Memo ie the 'Ratner Effect').
Gosh-darn-it !! How big is that damage? Yes, very good question. We can now measure it. Since this diagram offered by Elop himself was in revenues, we can now calculate the loss of this part 1 of the Strategy failure, the Symbian part. It was.. (you better sit down) .. 11.9 Billion Euros (16.0B US Dollars). Ouch with a big Oh.. Why is this clown allowed to remain as CEO if he is this incompetent? But at least we have his saving strategy, part 2 of this plan, the Windows Phone sales, which will recover from the loss in Symbian sales. So lets adjust his strategy picture (first picture) to this loss and see how the Windows Phone part will save Nokia's position. This is what the revised picture looks like, after the self-induced damage to Symbian, by Elop. Now his strategy looks like this:
So, luckily Elop promised us that his Symbian losses will be compensated by more than 1-to-1 with Windows Phone smartphone revenues. So yes, it started to seem that the Symbian collapse was bigger than expected, but if Elop could recover to same level of smartphone sales revenues as he inherited when he took over as CEO, then yes, maybe a little bit of pain along the way was ok, if Elop could deliver on the promise of the transition. And while Elop admitted his Burning Platforms memo did damage Nokia Symbian sales, and he admitted being surprised at how big the drop in Symbian sales was, he has repeatedly told us that Elop is satisfied with his Lumia/Windows Phone strategy! Elop has repeatedly said that Nokia was on the right path and he would not alter his strategy. So the above picture is what we must expect from Elop. Anything less than full recovery by Windows of the lost Symbian - is by very definition a failure.
So lets look at how Windows Phone has fulfilled Nokia's new smarpthone sales as this strategy was being implemented. Elop never once said his Windows/Lumkia part of his strategy was failing or disappointing. This is the reality:
That, my dear friends and readers, is a catastrophy. There is no 'rescue' here. This is no 'savior'. This is arriving at a Tsunami wave devastated area, then to discover you now face nuclear contamination as well. This is comprehensive utterly total failure of Elop's promised strategy. The Windows Phone sales are nowhere near restoring Nokia smarpthone sales. Not in the least bit. This is the size of the damage so far:
The new lined part, yellow horizontal lines with the dark blue, is the loss to Windows Phone reality vs Elop's promised strategy. And yes, how big is that loss? So far, since Lumia series was launched, Elop's Strategy promise for Windows and actual sales, has failed to produce 11.1 Billion Euros (14.9 Billion US dollars) of revenues. This strategy has utterly failed also on its second leg. But luckily, there is a solid foundation to this strategy, the featurephones business, which was growing when Elop took over, and when Elop changes the 'smartphone operating system' - that should not in any way harm the sales of Nokia featurephones, that do not use any smartphone OS. So at least part 3 of his strategy was safe. Or was it?
NOKIA FEATUREPHONES SALES FAILURE
Unfortunately, the smartphone end of Nokia handsets is seen as the flagship and premium product, the aspirational side of handset sales. The consumers do not differentiate what is a smarpthone or not, and thus, when the Ratner Effect hit Nokia, where the Nokia CEO bad-mouths his own products (half of the Elop Effect) - that not only damaged Nokia smartphone sales, it also damaged Nokia featurephone sales. This is what happened to the floor of his strategy. It did not hold:
That is a three-leg strategy failing on all three legs. The featurephones business has also experienced severe loss of sales revenues, and the damage achieved by Elop's strategy is worth 8.6 Billion Euros so far (11.6 Billion US dollars). So if you want to see how the floor fell out of this strategy, it looks like this:
So yes, all three legs of the Elop Strategy have failed. What does any sane CEO say when his 3-legged strategy is failing? That he will abandon that strategy, and develop a new one, of course. Not Elop. He promises to give us more of this Microsoftian misery in the years to come. So he promised us this:
And he delivered us this instead:
This is utter comprehensive strategy failure, a three-part strategy that failed on all 3 parts. This strategy has so far wiped out 40.9 Billion Euros (55 Billion US Dollars) and damages Nokia handset sales to the tune of 4.7 Billion Euros more (5.3 Billion US dollars) every quarter Elop is allowed to remain in charge of this mad self-destructive and utterly doomed 'strategy'. Understand, while the global handset industry has doubled in size, Elop has taken the undisputed global giant handset maker, 50% bigger in dumbphones than its nearest rival, 100% bigger in smartphones than its nearest rival - and wiped out 56% of the revenues that Nokia was making (not to mention, plunging the highly profitable smartphone unit into massive losses ever since)
Why is Elop allowed to pursue this doomed strategy? Why is Elop still selling this strategy as a success?What is wrong with Nokia Board that they have not already fired this clown? Why are Nokia shareholders not insisting on firing not only the Nokia CEO but its Board as well. This is a world record in destruciton of a global market leader, fastest collapse of a market leader ever, in any industry.
But yes, this was part 8 in my series. More misery to come, hold on...
(all data and pictures on this blog may be freely shared and used)