Welcome Stephen Elop to Best Job in High Tech: New CEO for Nokia

(First, its been a hectic week of travel for me, Asia, North America, Europe this week, so apologies for this blog being somewhat 'delayed'. I know there are many who are interested in my view about Nokia's new CEO. Secondly, I promised a review of major smartphone player strategies after the half-year results came in. I had already given my view of Apple's strategy in smartphones which I wrote during my summer vacation. This new Nokia CEO blog is also going to be, by necessity, a review of Nokia's smartphone strategy. Thirdly, please allow me some more clumsiness and brevity and even more meandering in my writing style this time in this blog article, as I am back from vacation and heavily travelling and super-busy, so I wanted to get my thoughts out sooner, rather than try to find the time to refine and edit this blog down some more. But yes: Long blog warning! And lets delve into the biggest news in mobile of last week..)

ULTIMATE JOB ON THE PLANET

Imagine, its just about the ultimate job? If you were in the IT industry in the early 1990s, and you were given the job of CEO of Dell, the world's biggest PC maker - and with it came the job of Toshiba, the world's biggest laptop PC maker - where the bulk of the revenues were in desktops (Dell) and the future of PCs and more of the profits, was in laptops. And as a bonus the job came with being CEO of Microsoft, the biggest operating system that ran on all those PCs? Thats a bit what the job of CEO of Nokia is today. Except that the job at Nokia in 2010 is actually far better, and far more than those three giants even, two decades ago! What is best, is that the strategy and business basics at Nokia are supremely sound. The new CEO inherits a powerhouse mobile phone maker giant, which is on solid foundations, well positioned to reap benefits of the economic upturn, and well poised to capture a disproportionately large share of almost any conceivable mobile phone industry opportunities that can currently be seen on the horizon, including all flavors of smartphone opportunities from superphones to app stores.

Against its real rivals today, Nokia is a powerhouse utterly dominating its industry, the true gorilla of the mobile world. Yes, its share price has taken a battering recently, but even then - in the worst economic crisis of our lifetimes, when all rival giant global handset makers stumbled, Nokia came through with flying colors, its handset unit profitable every single quarter. And most of Nokia's stock price issues are related to either communication problems (not fundamental business and strategy) and of sectors of the market where Nokia's global success is not in any way dependent - but which have recently received significant shareholder attention (US market, iPhone, Android). And best of all, Nokia is poised to launch a new phone that the early reviews suggest could be a huge hit - any of its success over the next 12 months will befall the new CEO.

WELCOME STEPHEN ELOP

Its the ultimate job for someone hungry to make a name as a miracle-maker in high tech. Enter Stephen Elop, from Microsoft, to take the reigns as Nokia's new CEO. Welcome Stephen and we wish you the very best of luck from here at the Communities Dominate blog - both Alan Moore and I have been regular advisors to Nokia in the past, and we know you will be joining a great team of professional senior managers who take things strategically and with focus, yet constantly observing this industry - mobile - to ensure Nokia understands how the landscape is evolving.

I do not know anything about Stephen Elop except that he's a Canadian, he ran Microsoft's Office unit and championed cloud computing at Microsoft. He is not just a Microsoft guy, he was previously with several other IT companies based in the USA. I honestly am not even Googling his background now - I am sitting at a Starbucks in Toronto, waiting for my next meeting appointment, and am drafting this article with a nice tall cup of cappuchino. So I cannot tell you really anything 'deep' and 'insightful' about Mr Elop. I can make some very general assumptions but honestly I have never met the man, cannot comment on his management style etc.

I do know Nokia pretty well, as a former Nokia executive and having followed it actively through my independent consulting career this past decade, and regularly discussing Nokia in my books and on this blog (I was just quoted about Nokia in the Financial Times this week for example). So I can talk about Nokia's strategy and corporate health, in this age of the 'ultimate contest in convergence' for the 5 Trillion dollar prize, as I blogged last week.

NOKIA IS NOT APPLE

Apple was a struggling PC maker who was finding it difficult to sustain the proprietary Macintosh operating system and its expensive ecosystem. Apple saw the trend to tiny pocket computers years ago and launched the Newton PDA - a gadget far ahead of its time - which was a technical masterpiece and a market failure. Apple revived itself in the pocket electronics market, by re-inventing the pocket music player market with the iPod and revived the whole company, with iPod mania helping sell more Macintosh PCs and boosting Apple's margins. But it was not until Apple entered the mobile phone market with the iPhone, that its profitability exploded. This was a PC maker company with a tiny global market share of about 3%, that made corporate losses in the mid 1990s, that found new profits by selling premium luxury smartphones.

Nokia was nothing like that. Nokia was a juggernaut profit factory, selling the world's most widely adopted gadget (the mobile phone) utterly dominating that space and doing it profitably. For the whole past decade, Nokia was every single quarter as big as two of its next largest rivals combined, there were several quarters where Nokia made more mobile phones than the next 4 biggest handset makers of the world - put together. This at a time when mobile phones went from geeky-nerdy tech toys for business execs, to must-have communication tools of the whole planet, from the youth to the grandparents. Mobile phones sell 1.3 Billion units annually - in any one year they sell more mobile phones than the total installed base of personal computers on the planet. And for several years now, Nokia has been selling more than a million handsets every single day of the year, including weekends and holidays. In that decade, Nokia became not just the world's biggest mobile phone maker, and the gadget most used on the planet - Nokia became the world's most prevalent 'clock' or 'watch', the most used camera brand - even the Nokia default ringing tone, known as the 'Nokia Tune' - became the most recognized song on the planet, known more than White Christmas or Happy Birthday or any song by the Beatles or Elvis or Frank Sinatra or Michael Jackson or Madonna.

There is a Nokia branded phone in the pockets of 1.6 Billion people! Thats almost a quarter of the planet! There has never ever EVER been any brand even remotely as dominant globally, as Nokia is today. Ford once sold more than half of all cars manufactured on the planet yes, but in no country was there a Ford in the garages of 25% of the total population. Even at the height of 'Beetle mania' meaning the iconic Volkswagen original Beetle, there was not a VW for every fourth person on the planet. Timex is the best-selling watch of all time, but never was a Timex on the wrists of one out of every four people. Microsoft ended up selling over a billion copies of Windows and for long times they had over 80% market share in the PC market, but PCs are not that widely spread across the planet, so Microsoft never approacted 25% of the planet's population. Levi's jeans, Coca Cola drinks, Sony Walkmans, Bic pens, Hoover vacuum cleaners, there is no brand ever, that had one quarter of the planet - but Nokia is almost at that incredible point, currently used by 23.5% of the planet's population (and climbing)

There are those who say 'But Tomi, the iPhone, the app stores, the software/internet side of phones'. Yes. Sure. I hear you. Who invented the smartphone? Not Apple. It was Nokia. Remember Nokia was not a PC maker like Apple or HP or Lenovo now urgently trying to capture the shift from traditional PCs to smartphones. Nokia invented the smartphone more than a decade ago. Nokia was the first company to boldly claim that the future of phones was smartphones (a view still found controversial to many today) and more brazenly, Nokia was the first company to say a smartphone was a computer (something ridiculed by the 'real' PC makers at the time, and only very recently the PC makers - all 6 of the 6 biggest PC makers in fact - have all found it to be true, that a modern smartphone is indeed a 'real' computer, only a tiny and pocket-sized one).

What happened when giant mobile phones makers Motorola, SonyEricsson, Samsung and LG tried to shift their 'dumbphone' user base to smartphones in the past decade? They lost customers in that shift! The market shares of those other 'big 5 handset makers' in smartphones was almost every quarter worse, than their share in dumphones. Motorola was so bad at it, that for about two years, for every one customer they convinced to 'upgrade' to a smartphone, they lost literally nine other previous Motorola customers of dumbphones to either other branded dumbphones, or the new pure smartphone makers like Apple, RIM and HTC.

That was the norm for dumbphone makers. You lost customers trying to shift them from dumbphones to smartphones. The norm. To all except Nokia. Nokia market share in smartphones has year after year, quarter after quarter, been better than its market share in dumbphones. And this amazing transition they have done - consistently - while making the best profits of any big phone maker. That is the ultimate perfection in 'executing a smartphone strategy'

Those who marvel at Apple's iPhone or Google Android phones today, seem to forget that Nokia in its smartphones is not just bigger than all iPhones and all Android phones put together - in smartphones this past quarter, Nokia was almost as big as its biggest rivals numbers 2, 3 and 4 put together! Thats dominance. And again, doing it profitably.

Even better than that, Nokia's operating system for smartphones, Symbian, is so huge, it powers half of all smartphones in use on the planet. Even in the big growth stages of the Android now, Symbian has lost only a little, still selling more than 4 out of every 10 new smartphones this year - where Microsoft's Windows Mobile and Palm have all but disappeared, and Apple's iPhone took big losses the past few quarters. Even Blackberry has been seeing declines in market share. Yes, Symbian too has lost market share, but very little. Android has been killing Microsoft and Palm, and damaging Apple - while Symbian (and Blackberry) has been barely touched.

And yes, Symbian is an open source OS (something Apple and RIM and Microsoft are not), it is supported by 4 of the world's 10 largest mobile phone handset makers (Apple and RIM are not used by any other makers) and most tellingly of all - in the world's most advanced mobile phone market - Japan - Symbian powers half of all smartphones sold there (it is the OS used by NTT DoCoMo for almost all of its smartphones).

But Nokia is not Apple. Apple can focus exclusively on its super-premium luxury smartphone, the iPhone, releasing only one new model per year, putting all its effort to create genuine most-desirable masterpieces, much like a Ferrari or Porsche in cars. That means Apple is consigned to being a tiny nicheplayer which has a global market share of 2% of all phones sold (14% of all smartphones). Apple does it thumbing its nose at industry standards and quarrels with major players like its long-standing feud with Adobe Flash. That is a way to produce exceptional devices and services - for the luxury crowd, ie for a tight niche market - but it is not the way to win the world. You cannot win the world that way.

Nokia is more like Toyota or GM, where Apple is more like Ferrari or Porsche. And recently the Nokia shareholders have lost faith in Nokia, comparing Nokia's flagship model only, rather unfairly, to the Apple iPhone, and then concluding that Nokia has somehow 'lost it'. In reality, the top of the market is not the growth opportunity in smarpthones - all major analysts say, time and again, that the growth opportunity in smartphones is in the bottom of the price range, as smartphones go mainstream to the mass market consumers.

Who invented the cheap consumer smartphone? Not Apple. It was Nokia again. Nokia already sells basic non-touch screen smartphones at 100 dollars (price without subsidy, ie without contract, where the iPhone without contract costs 600 dollars) and is pushing the price point of cheapest touch screen smartphones to that level too - already offering its cheapest touch screen smartphone at nearly 100 Euros. No matter what the Apple loyalists think of the iPhone, it will never be a mass market phone. Apple is a classic premium luxury niche maker, who can hope to have 3% of the market - like it has with the Macintosh PC, after 26 years of fighting those battles with its 'revolutionary' PC.

WHAT IS NOKIA?

Nokia is the world's most used technology brand (And most used brand, period). It is the world's most popular smartphone too. But the vast majority of Nokia's business still today, is in 'dumbphones' ie the basic phones and the featurephones like say a cameraphone or a musicphone. And yes, a fraction of Nokia's total phone output is smartphones, and this year the revenues out of smartphones roughly speaking match the total revenues of the dumbphones. But Nokia sells more than phone handsts. It also sells apps, services, and networking gear.

So lets look at it in terms of size. There are three major business units at Nokia which derive most of the revenues. There is the basic phones unit, there is the newer smartphones unit, and there is the roots of Nokia's telecoms business (many people do not know this, long before Nokia made handsets, it was a telecoms networking equipment maker) which is now known as NokiaSiemens Networks. These guys manufacture the wireless telecoms infrastructure, ie the thousands of 'base stations' and various antenna gear etc that is needed to build a billion-dollar cellular network. Nokia is one of the giants of that business too, which is not well known, as it is a B2B (Business to Business) type of enterprise.

Apple's iPhone or indeed none of Apple's products compete directly with 2/3 of Nokia's business (the dumbphones and the networks). Neither does any of RIM's Blackberry products nor any of Google's Android related initiatives. And Nokia's basic handset (dumbphones) unit is also profitable, and while its networking unit had struggled for a few years after Nokia bought the loss-making networking unit from former giant rival Siemens, Nokia networking management very efficiently turned that loss-making business around, and now the combined entity is profitable - albeit only marginally so. It should be said, that the telecoms networking business has been a huge drain on most major telecoms vendors - Motorola's networking unit went bankrupt, Ericsson's was loss-making for many years, Nortel of Canada went bankrupt and Lucent from the USA, also loss-making, was sold to Alcatel of France. So the NokiaSiemens Networking unit has been fighting a brave fight in a loss-making industry and turned it around to generate modest profits - that is a very good sign of good management.

Beyond the networks, looking at phones, while RIM and Apple are pure smartphone makers (in the telecoms industry), Nokia is not. Nokia's true rivals are Samsung, Motorola, LG, SonyEricsson and ZTE - each of those five makes both dumbphones and smartphones. It is true that the dumbphone market is shifting to smartphones - they expect half of all new smartphones sold in the USA next year to be smartphones - that is happening in Western Europe now, and has already happened in some of the most advanced markets of the world - like my new home country of Hong Kong where half of all phones already are smartphones today.

But Nokia dominates the 'old way' of dumbphones - bigger than its nearest rivals (profitably) - and it dominates the 'future' being far bigger than any rivals in smartphones, whether they are classic big phone makers like Samsung or SonyEricsson of Motorola, or pure smartphone makers like RIM, Apple or HTC. Nokia utterly dominates the new smartphone market too (and does it profitably).

NOKIA MISSED THE TRENDS... NOT !

There are trends happening in smartphones. The touch screen phone was not invented by Apple, Nokia had its first touch screen phone out years before the iPhone. But Apple did what it always does, it made existing things far better - so we see a new world (in touch screen interfaces) after the iPhone - and now also in tablet PCs too (Kindle, iPad etc). This is similar to what Apple did to the PC industry in 1984 when it released the Macintosh, and all 'IBM compatible' PC makers had to adapt, where the primary change was the shift to Windows, Microsoft's version of attempting to copy what the Macintosh offered. Apple brought a new era to PCs (but was unable to capture a major part of that new world).

Similarly now, the touch screen smartphone Era. I wrote about it before the iPhone was ever sold, promising the iPhone would accomplish this to the industry. So its nothing new, and it was relatively easy to predict. That kind of revolution is typical Apple. But Nokia did not abandon the new world like Sony abandoned the musicplayer market to Apple's iPod. Nokia adjusted, and it now has not just one touch screen phone like Apple, Nokia has of coursee a series of touch screen phones. They are not as good as (when considering the touch screen only) as the iPhone is - but who is, honestly, this is comparing a Ferrari to a Toyota for goodness sake - but Nokia's touch screen phones are getting better every generation.

But while tech analysts marvel at the iPhone (and Androids now), the touch screen is not the only 'preferred' form factor, nor the 'decisive' purchase criterion. Apple is the master at its user interface, but Nokia has for example consistenly made far better cameras on its smartphones than Apple. For some buyers a camera is more important. Or others insist on such a bizarre concept as a QWERTY keyboard haha. Or having a phone that is compatible with industry standards (the original iPhone didn't even support MMS and even the current iPhone 4 doesn't support the industry standard 3G video calling, etc). For those pundits who obsess about the touch screen UI leadership - which Apple clearly holds over any rivals in handsets - there are dozens of other issues of phone feature (and price) factors where Nokia has mastered most, and is getting ever better at the touch screen too.

The critical point is, that Nokia can sell touch screen smartphones for a quarter of the price that Apple can - while still doing it profitably. (Most of the smartphone rivals are complaining bitterly of how expensive the smartphone market is, and how difficult it is to generate any profits there - note just this year Palm died and two very high profile smartphone/superphones were terminated totally, the Google Nexus One and Microsoft's short-lived Kin series of phones, and Lenovo has been very public in complaining about how much more expensive its entry into smartphones was, than what it expected).

The original Symbian OS which powers Nokia's smartphones was not designed for touch screen inputs. So it had to be changed - quite a lot actually - and that has been a painful and costly journey. It is well along, and the latest iteration of the Symbian OS is said to be far better at the touch screen parts. It says a lot about Nokia that Symbian survived this transition where Palm died and Microsoft found the transition so difficult it killed off the Windows Mobile platform to launch a totally new one, called Phone 7 - while its market share crashed from near 20% to 2% in just four years. Note that while Apple's iPhone is a one-trick pony, and only sells a touch screen super smartphone - Nokia keeps selling in similar quantities of touch screen smartphones across all its product lines. Its like Toyota making a supercar that matches a Ferrari..

There is a parallel trend from basic phone pad (12 key) ie T9 inputs to QWERTY inputs, especially for enterprise/business users (email) and youth (SMS and instant messaging). This was not invented by Blackberry. The world's first full QWERTY smartphone was also invented by Nokia and it continues to hold a similar 'Blackberry-matching' market share in all QWERTY phones with its E-Series and other QWERTY phones. This is totally different input paradigm from the touch screen, and its amazing for Nokia to have been competitive in both (Touch and QWERTY) at the same time. Motorola told us earlier this summer that a third of all smartphone buyers will not consider a smartphone that doesn't have a QWERTY input. We heard earlier this year that the UK youth's number one desired phone is not the iPhone, its the Blackberry. I was just in Toronto at the Mobile Think Tank this week and learned from Professor Matrix of Queens University, that 70% of Canadian college students use a Blackberry. To me, always in mobile, a safe bet about the future has been to study the youth of today. That makes you wonder about Apple's silly strategy of not giving us a QWERTY variant to the iPhone. RIM offers touch input versions of the Blackberry, why can't Apple give us a QWERTY iPhone? Nokia offers both of course as makes sense in this market.

There is a third parallel trend in smartphones, from business phones to consumer phones. This trend was captured by the iPhone but not invented by Apple. Who invented the consumer-only smartphone? Nokia. And it utterly dominates this space worldwide. Some classic smartphone vendors and systems (Palm, Microsoft) have suffered in trying to cope with this shift. Blackberry's big global rise has been driven by this shift (as the youth - ie consumer not enterprise customers - have fallen in love with the Blackberry). And Nokia invented the consumer smartphone, utterly crushingly devastatingly dominates it, and leads it. And this shift is far more price-sensitive than the enterprise/corporate phones market, so super-premium prices 'superphones' like the iPhone 4 or Samsung Galaxy or Blackberry Torch will be mostly out of reach to the true mass market consumer segment. But Nokia's sub 200 dollar 'basic' smartphones play perfectly there. If you always wanted a Ferrari but couldn't afford it, perhaps you bought yourself a Toyota MR 2 sportscar or a Ford Mustang. That is the Nokia mid-price smartphone. Nowhere near as great as the iPhone but nowhere near as expensive, and being of Nokia quality and brand and sales channel - it will dominate the market.

The fourth shift in smartphones is the price trend to the sub-100 dollar smartphone for the mass market. Again a shift that Nokia initiated and is mastering today with few real rivals (Samsung the strongest to try this tactic too, with its Bada based smartphones that were only launched earlier this year).

So in sum about Nokia today, it is the biggest, most dominant dumbphone maker. Nokia is offering ever cheaper 'Africa phones' and keeps providing features and abilites that many rivals ignore, specific to the less wealthy customers - replacable batteries, critical in countries of poor electricity supply - in-built FM radios - surprisingly for many in the poorest countries the first ever FM radio they have owned, is the one that comes with the new Nokia phone. Etc. In the emerging world market, where all the growth is now in dumbphones - Nokia's market share is above 50%. And they manage this profitably. Tell me this is not good execution?

And Nokia is also a network equipment maker. It bought Siemens's giant but loss-making networking unit, and turned it around and now NokiaSiemens Networks makes some profits, in a sector of the industry where profits are very rare to see. That to me speaks excellent management in very difficult conditions.

And Nokia is also a smartphone maker - the biggest in the industry, with the best-selling smartphone OS as well. Nokia invented the smartphone and has launched or pioneered all of the four major trends in smartphones. And even its OS, the most advanced smartphone OS in the world in 2007 when the iPhone launched - almost all upgrades to the iPhone were actually 'bug fixes' to try to make the iOS as good as Symbian - is now having a migration plan to a totally new smartphone OS, based on MeeGo. Both Symbian and MeeGo are open source OS's that conform to indsutry standards, and are supported by many manufacturers. That is the right strategy for Nokia (while it would not necessarily be the optimal strategy for a specialist niche maker like Apple or RIM).

MISSED THE APP STORE

And I should mention the App Stores. While all the silly hype globally in mobile is about apps - I have been repeating and repeating and repeating, that it is a trivial - trivial - sized non-business (today). It may - it may - become meaningful somewhere years down the line. We heard from Apple - the leader in app stores - earlier this year, that the total earned by the Apple iPhone App Store last year was under a billion dollars. A billion out of what, over 200,000 actual apps that exist in the App Store?

A billion may seem like a "big number" to those who don't understand mobile, but hey, Crazy Frog the ringing tone - yes just one - one - ringing tone - sold half a billion dollars - in paid downloads to mobile phone users - in one year - three years before Apple even opened up its app store. Put that into your iPhone app and think again. What is the bestselling category on the iPhone  - games. What is the bestselling game? Angry Birds. Sold what, 4 million copies. This is the best game on the 'amazing' App Store. But we mentioned on this blog years ago, that Artificial Life's side-line product (their main business is TV-mobile interactive services like SMS TV games etc) - a mobile Java game called 'V-Girl' the Virtual Girlfriend on your phone - sold 4 million copies. Paid downloads and paid customers to mobile phones, not smartphones, globally, years before Angry Birds. 4 million is nothing amazing to the mobile industry. Its a nice number yes, but what is the record-breaking achievement in the tiny sandbox called iPhone, is trivial to the big world of mobile. You want paid downloads to mobile? Try Tetris. Sold 100 million copies to mobile phones and counting.

The total global mobile phone app market last year was worth 5 billion dollars (said Chetan Sharma Consulting). Most of that was not consumer-oriented app store applications. No, most of that was enterprise/corporate solutions to integrate IT apps like SAP and Oracle to mobile. Then the comparison - SMS text messaging alone is worth 100 Billion dollars. Mobile data is worth 250 Billion dollars. App Stores are less than meaningful (today). Yes, from small things, big things can grow. But the hysteria about app stores is totally ridiculous today. I did a meticulous calculation of the futility of investing in apps today, and showed with rigorous analysis and facts that half of developers of paid apps will not make a profit in less than 11 years, and for the free apps (ie used in advertising and marketing) the prospects are far worse than that even.

One should not even bother to mention the word 'apps' not even when discussing the business of Apple or Google today. Its that tiny. And for Nokia, who cares. Yet... Yet... Yet... years before there was an iPhone App Store, there was a Nokia app store. The first generation of iPhones would not even let users install apps to it! All Nokia smartphones have allowed users to install apps for all of the past decade. If you seriously think that there is a trend to apps in the phone business, then yes, Nokia saw it long before the current hysteria, and had built its app offering and business systematically. We know the latest iteration of Nokia's app store as Ovi - incidentially the world's third best-selling app store for those who care about the lives of ants in the world of elephants.

PERCEPTION PROBLEM

Against this light, Nokia is 'accused' of 'failing' because of three major faults. Its flagship phone is not seen as good enough to go against the iPhone. Its profits have been declining (some might say perilously). And Nokia has lost most of its market share in the US market where Blackberry, the iPhone and various Android phones now are popular. So by faulty leap of logic, many see that Nokia is somehow 'losing to iPhone' (or Android or Blackberry). In reality that is a market anomaly that applies to North America only, where only 8% of the planet's mobile phones are sold..  Nokia utterly dominates the rest of the world (with the exception of those countries where strong domestic rivals control that country, South Korea, Japan and yes, the USA).

The reality is that recently the iPhone market share has been declining (four quarters in a row) where Nokia's market share held steady or actually grew. The reality is that in the past 12 months, Nokia smartphones have been winning against the iPhone, not losing to it. The numbers are irrefutable, but the myth prevails that Nokia is somehow 'losing' and specifically 'losing to the iPhone'. This is a perception problem! This is a communication problem. Not a strategy problem and not an execution problem. All the new CEO needs to do, is to communicate Nokia's true performance more clearly than previous Nokia managers have done in the past. The numbers are very clear. How awesome is that for Mr Elop, he gets the media attention for being the new guy, and he has a wonderful story to tell, where he does not need to 'fix Nokia' but rather just elaborate clearly what Nokia is doing. Awesome?

Nokia profits have been declining - as one might expect in a global economic downturn where many 'gold standard' corporations of impeccable credit ratings went bankrupt. Yes, Nokia should be able to do better than it is doing, but every other big 5 handset maker has seen either quarterly losses, or severely declining profits in the past few years, including Nokia's nearest true rival - Samsung. As this is a 'partly true' issue, the new CEO needs to tackle it on two sides - address the actual profitability rigorously, but also communicate it far more clearly - that Nokia as a mass market consumer phone maker - should be compared to Samsung, LG, SonyEricsson and Motorola (and ZTE) - and compared to any of those, Nokia profits are very good. And then just make sure as CEO, that those profits will now turn into growth again, as the economy improves - and probably with some strategic decisions about focus areas.

The North American market situation is the trickiest communication problem. If there are 5.1 Billion mobile phone subscribers on the planet - and the option is to be the best-selling phone for that part which is 285 million of those - or the remaining part which is 4.815 Billion mobile phone users - Nokia has focused correctly. Yes, it should do better in the US market, and Stephen Elop gets a fresh chance to turn Nokia around in the USA, but the shareholders need to be told much more about how enormous the market is globally, compared to the pretty trivial-sized US market in phones. That is not the same in television or personal computers or cars or airplanes etc - most other industries the role of the US market is very big. In mobile, it is very small (as a percentage of the world).

SANTA CLAUS CAME FOR MR ELOP WITH FREEBIE GIFTS

There are few things that were long in the pipeline, that will now come as gifts to the new CEO. Most of all, is the migration of Symbian OS to touch screens. That was a time-consuming long journey, it is not over, but it is now far along. Soon Symbian will be 'just as good' as most in the multi-touch experiences. That will bode very well for Nokia smartphones. Nokia's touch screen interface will not need to be 'better' than the iPhone - nor even 'as good as' the iPhone, as long as Nokia's touch screen interface is 'good enough'. That was the lesson we learned in the PC industry with Windows vs Macintosh. The Mac was always better. Always! The early Windows versions were horrible up to Windows 3.0 in 1990, when finally Microsoft released an 'Macintosh clone' that was good enough. Not as good, but good enough. And the rest is history. Microsoft used its scale to crush Apple, even where Mac was always better. That is where we are with Symbian today. It need not be better or even as good as the iPhone. All Symbian needs, is to be good enough. It is very likely that the current new about-to-be released version is good enough (that powers the N8) but even if its not quite there yet, Nokia will keep evolving and improving the touch screen parts of the OS, and will become good enough, soon enough. This is a freebie gift to Mr Elop. He will be seen to have saved Symbian and Nokia in the process..

There is the new N8. It seems by early opinions to be a long-overdue hit flagship for Nokia. Remember that Nokia's last succesful flagship - the N95 - handily outsold the iPhone globally. Nokia has the carrier relationships to turn a good phone into a big hit and the N8 seems to be very well poised to do well. It comes to a crowded market with the Samsung Galaxy now the big dog of the yard, with the iPhone 4 a very strong contender, and various other superphone wannabes, from Motorola Droids to Blackberry Torches to Lenovo LePhones out there. But Nokia has the world's best carrier partner network - if the carriers like the N8, it will become the planet's best-selling superphone, almost by default. This is all someting Stephen Elop was not in any way involved with, yet he stands to reep the rewards of the work that was done before him.

Apple's sudden decline comes also at optimal timing for the new CEO of Nokia. The actual peak of the iPhone market share has already happened (the iPhone had 17% of smartphone market share this time last year, they are now down to either 14% or 13% depending on which analyst numbers you look - every analyst now acknowledges that the iPhone has peaked and is losing market share globally). But the timing is close enough, that any 'revival' by Nokia can be seen mirroring a decline by Apple - and from now forward, it will be credited to the new CEO, even though he actually had nothing to do with that. But it will help create some image of Stephen Elop as a miracle maker if analysts a few years later start believing a legend that Elop came to save Nokia and in doing that, he defeated Apple's unstoppable gains in smartphones. (as I have written in my iPhone strategy blog - Apple now needs to diversify its iPhone portfolio and until it does that, it will see erosion of its market share, most of all to Android phones like the Samsung Galaxy)

ALL IS NOT PEACHY

So far its been a love-fest here with the Communities Dominate blog admiring Nokia.. Well, all is not well. There are indeed real problems too. But please lets be very clear, the problem at Nokia is not anything to do with its 'smartphones strategy' and mostly not even with its smartphones execution, nor with the Symbian OS and the future strategy of the smartphone OS into MeeGo. So please understand, Nokia's smartphone strategy is the best in the business, and any shift to Android for example would be stupid, abandoning a huge market lead and total control of its future, to the whims of Google's 'do no evil' strategies..

Most of all any business is about profits. The Nokia of old was a profit factory. Massive profits in this fast-moving and dynamic industry. Not so often the actual inventor (Japan's NTT DoCoMo has most true inventions in the mobile space), but being the fast follower, Nokia was well picking winning concepts (cameraphones, consumer smartphones) but made its stumbles too (N-Gage). Nokia was very good also at keeping to its vision - not for example taking the populist view from 2006 that flip phones would take over the world (anyone remember the Razr). And Nokia would often time its mass market launches with particular precision - consider its 3G phones for example.

Now Nokia's profits have shrunk to razor-thin. Some of that was due to the global economic downturn (remember, 3 of its rivals in the big 5 handset makers reported losses in their handset business during this economic crisis - Nokia never did. Its only loss of the past decade was one quarter during this economic crisis, when the NokiaSiemens unit's losses were bigger than the profits made in the handsets unit. One quarter, this after Nokia absorbed Siemens's loss-making networking unit and was fighting during the economic crisis, to turn it around).

But some of it is no doubt historical cost reasons. Nokia is a complex organization with much design and R&D overlap - quite costly. Its R&D processes are slow, painfully slow compared to 'internet speed' rivals like say Google. Here a successful 'West Coast' manager from Microsoft no doubt can help a lot in forcing much-needed changes to streamline Nokia's design and development work.

There is the question about synergies between the Networking unit, NokiaSiemens Networks and the rest of Nokia. When I joined Nokia in the 1990s, the networking side was the bigger side with most of the staff and most of the revenues. Now it has become the little brother in the big picture. Is there a synergy? That is hard to find, and most rivals who tried to do the synergy route, have abandoned it - Ericsson, Motorola, Siemens (used to be a Top 5 handset maker, it abandoned its handsets unit first to focus just on networks, in the past decade). And the NSN unit is a drain on profitability, even if they manage miniscule profits in the unit. By divesting NSN, Nokia could focus more on its core business - related to handsets - and instantly get a jump on the profitability of the company.

This would be a painful change, but Nokia has done that many many times before - it once made paper. Nokia was once for its main business being rubber. Nokia once had the majority of its business out of home electronics like TV sets. IT once made personal computers (primarily for the domestic Finnish market, Nokia's MicroMikko was an IBM-compatible PC running Microsoft operating systems). Nokia once made WiFi equipment, Broadband equipment, etc etc. They have not been afraid to abandon businesses that did not show promise for the future. It may be time for Nokia to get rid of NSN, and if so, a new CEO, in these times of poor profits, especially as an outsider and non-Finn, with no internal loyalties to worry about - this is something Stephen Elop will no doubt be considering. Coming from Microsoft's unit looking at the future of the PC side, cloud computing etc - will give particular insights into what kind of synergies may be useful in the near future - in evaluating the value of NSN to Nokia as a strategic asset, or whether they try to get rid of it now while it is marginally profitable.

There is the issue of becoming a box-mover. The basic phone is becoming a commodity product, and if we plot the price of basic phones with Moore's Law, by the end of this decade, a cheap cameraphone for Africa will cost 1 dollar. How long is it worthwhile to try to fight for that ultra-cheap market and what strategic moves if any, Nokia may want to make in that space.

Simultaneously we see shifts from hardware to software, from phones to apps. Is it the services model (cloud computing etc) or the app store. What are the profitable opportunities in mobile for a phone maker. What of Navteq, of Nokia Money, or mobile avertising, the Ovi store, etc etc etc. There are lots of opportunities, but also lots of endless pits of wasted effort in mobile, where the profits will never come.

There is management overhead. The world is going ever more lean. I have not seen any recent Nokia organizational charts, but probably there is room to cut some areas that drain managment resources but deliver little value to the bottom line. And where once Nokia Mobile Phones was a young person's job, today those former young graduates are middle-aged, and have seen the salaries grow and perhaps the hunger of wanting to become the biggest phone maker in the world has dimmed in their eyes. I honestly do not know, but I would not be surprised, if there weren't many middle to senior managers who really should be moved on. The Finnish employment culture - and that at Nokia - rewards loyalty and makes it difficult to lay off people. But the opportunity is good when a new CEO comes in; the opportunity is greater still, if the company has been seeing a dangerous decline in profits. This is a time to consider staff cuts (and not just in management, obviously)

SO WELCOME STEPHEN ELOP

There is so much to an Fortune Global 500 sized company CEO job description that I cannot even start to imagine. Most of the work Mr Elop will be doing is stuff we'd never even bother to write about on this blog. But Nokia is the gorilla in the room, when it comes to the mobile industry. So very many of the stories we discuss here, will invariably touch upon Nokia, or feature Nokia.

I do feel that Olli-Pekka Kallasvuo got a 'raw deal' in how he was kicked out. But also, that there were some good reasons as well, and that I could well see why the shareholders felt that was needed. The Chief Executive Officer of Nokia had lost the trust of the owners of the company, and therefore, could not really sustain the trust of the Board either. It was a hard choice for Chairman Jorma Ollila and his Board, but once that decision was made, they did need a new CEO.

I do think that the very superficial view to Stephen Elop's past suggest he could be a great CEO for Nokia. He is a North American, he knows the way to talk to North American press and analysts and investors - that is where most of Nokia shares are held. He comes from the PC and software side of the tech industry, a welcome infusion of new thinking to top management at Nokia. He is a Canadian - a nationality that seems to gell particularly well with Finns (maybe its all that ice hockey - the greatest ever ice hockey player, the one they called 'the Greatest' ie Wayne Gretzky, a Canadian, did after all get most of his points scored, by setting up passes to a Finn - Jari Kurri his long-time scorer-sniper, who in turn is of course the greatest-ever Finn to play ice hockey. Both are obviously inducted in the Hockey Hall of Fame..).

I made the joke speaking in Toronto this week, that Finland has just appointed its first-ever Canadian Vice Prime Minster - arguably the CEO of Nokia is perhaps the second most powerful man in the domestic Finnish economy haha..  Or maybe its the long dark winters, the snow, who knows. A lot of Finns have migrated to Canada, so there is a kinship too, probably most Canadians know at least someone who has Finnish heritage. And we are both large countries geographically, with small populations, in the shadow of superpowers. You learn perhaps a certain level of humility and willingness to compromise, if you are bordering on the USA or Russia/Soviet Union..

So, all you you out there who are screaming for Nokia to shift now to Android. Get over it. It will never happen. Nokia has a robust and good mobile phones-optimized smartphone OS called Symbian, a fully open source OS supported by dozens of handset manufacturers. It also has a new OS coming up, called MeeGo, also open source, also supported by many manufacturers, but is now fresh and new, and Linux based. What more could you want? If Nokia abandoned all that leadership, and surrendered to the whims of Google, that would be a colossal mistake. And Nokia does not do colossal mistakes. It does stumble as any handset maker will stumble (iPhone Death Grip, anyone?) The N97 was a rare Nokia stumble, but that pain is just about over. I would be very confident in believing that at least the N8 will not be seen as a failure in its early reviews the way the N97 was received.

There is a new man now at the helm of Nokia. The shareholders have been satisfied, it is not another Finn, and not someone from the inside, who might have been 'poisoned' with too much 'Finnishness' or 'Nokia-think' so the shareholders should now be happy for the short run. But the really weird part is, that Nokia is pretty well poised to outperform its other big 5 handset maker rivals into the foreseeable future. Nokia will never generate as huge profit margins as Apple, but if Nokia's profits turn now from decline into growth - then Stephen Elop will be seen as the savior, the miracle-maker, the man who defeated the Apple iPhone challenge and saved Nokia. While that may not technically be true, it will be a far better story for the Nokia PR people to spin, than the past year of explaining why the N8 was again delayed...

Good luck Stephen Elop. You are landing in the coolest job on the planet and may your reign be long and prosperous.

Comments

[don_afrim]

Great article Tomi! I agree with you, Nokia is the Toyota of the mobile industry. They offer the best and most reliable products in the industry in every segment, soon also the high-end segment with the N8, E7, X7 and the upcoming MeeGo based N9 (possibly in different form factors too) will set the bar in mobile computing. I do think it is the correct decision to not go the Android route because that will lead into a dead end. Google wants to corner the mobile market just like Microsoft cornered it with Windows, but the mobile market is not the PC market, Microsoft was able to corner the PC market with Microsoft Office, and highly complex business solutions (where Apple failed) and captured the consumer market from there. The phone industry is a whole different animal, that's why Microsoft failed twice already (windows mobile and KIN) and i don't see Android become the 'Windows' of the phone industry, because there is no need for a 'Windows' solution in the mobile space. People will never do work on a phone, no matter how advanced the technology will get. The most work people will do on a phone is read some emails, reply a few sentences back, maybe check the stock market on the go and sync the calendar with your PC. All Nokia phones are great at that already. But the phone is and will always be all about communication. So there will never be a need for the expensive business solutions that were needed in the computer industry. Phones need to be portable, that's why you can't work on them because they're small. Nokia knows this and they would be incredibly retarded trusting their future on Google, a newbie in the mobile space. All companies that are on Android now have failed in the smartphone business before and are making a second run (Motorola, SonyEricsson, HTC, Samsung, LG, Palm+). All of them lost to Nokia by the way. All developers supporting Apple will also write the same applications for Nokia phones sooner or later, they would be stupid not to, that's where they can sell more apps and the most useful apps are already on the symbian platform, who cares about all the iFart apps out there. Seriously, those 200'000 apps on the iphone are useless, i tried my hardest to find more than 20 apps out of the 200'000 that i would actually use and half of them are apps that most Nokias can already do right out of the package, like navigation, IM, twitter, facebook, skype. If Nokia hasn't caught up to Apple UI wise with this current line up, they will most likely surpass them by the time Symbian 4 comes out.

Tomi, since you have ties to Nokia, I have one request you could make to them.. please ask them to just give the user the option to select portrait qwerty on their new touch screen phone. I think its a really useful and important feature and they need to have that.

[Andy Hussong JV Attraction Formula]

Indeed! Nokia is the dominating brand among other mobile phones. The company has never failed to give latest and freshest phone models to the market for the satisfaction of the mobile phone consumers.

[DipuK]

I dont think Nokia has to disinvest from NSN, rather taking it as a wholely owned unit from Siemens would be a better option. As NSN CEO Mr Surie highlights, NSN is winning where it matters, currently number one in both 4G networks and managed services. It hasnt somehow realized the synergies with Siemens, mainly due to the culture-rift between "Germans and Finns". Once Nokia takes over and Siemens is out, this problem can be sorted and internal efficiency alone can lead to profitability. Abandoning the NSN ship at this stage would be sending wrong signals to the market as it would underline the myth that Nokia is in real trouble and an American is hired to sell it off.

[Tomi Ahonen]

Thanks guys!

I love the comments, deep, insightful. I am in Greece today with a client (just got back to hotel after the dinner and party) so I am dead tired and can't comment now - but I will be back to comment to all of you, please keep comments coming.

Tomi Ahonen :-)

[Frank Daley]

You have highlighted some of the flaws in the arguments around Nokia adopting Google Android, however I believe the greater danger is that Nokia's new CEO adopts a range of Microsoft technologies and suffers the Microsoft kiss-of-death.

Microsoft cannot tolerate competition and despite numerous anti-competitive legal cases, continues to pursue a strategy based on embrace - extend - destroy.

For more than a decade it has tried to insert its products into Nokia. The big question remains as to whether or not Stephen Elop will now act in the best long-term interests of Nokia, or allow his personal relationships with Microsoft lead to a Microsoft embrace of Nokia to plant the kiss-of-death.

[KDT]

I still don't get it. How can anyone possibly say Nokia is successful *as a business*.

Nokia's profit was a mere $315 million in 2009, down from $9 Billion in 2007 and you wonder why the stock price went down?
http://gizmodo.com/5638995/nokia-is-the-mcdonalds-of-phones

On the other hand. Apple is making more of a profit off of the iPhone than the rest of the industry combined with only 3% of the world market share in phones:
http://www.businessinsider.com/you-cant-appreciate-how-completely-apple-has-humiliated-rim-nokia-and-the-rest-of-the-gadget-industry-until-you-see-these-charts-2010-7

So why should Apple take the pundits advice?

[Mark]

@KDT

So what's the overall profit been in 2010 so far? Why talk about 2009?

Apple are very successful, Nokia are successful. It's pretty easy to figure out.

Mind you, since all Apple sell in handsets are premium products at a massive mark up it's not surprising they have the lion's share of the profits. Whether that position is sustainable given the increasing competition and what do they have to fall back on if it isn't are questions that need to be answered though.

[KDT]

@Mark

Apple sold 20,731,000 iPhones FY 2009. They have already sold 25,877,000 in FY 2010 and there is still one quarter left. There is no reason to believe they won't sell at least 35 million this year. So it looks like they will sell at least 35% more this year with the same profit margins. That's not even counting the estimated 25 million iPod Touches and probably 8 million iPads all running the same OS and same apps. Meaning an iPhone owning parent will buy their kids a compatible iPod Touch and may buy an iPad. So which phone do you think these kids are going to want when they get ready to get one? There is no real profit at the bottom end and just like with computers, Apple can afford to ignore the low end and still be more successful.

Apple is doing the same to the phone industry as it has done to the computer industry. It's not hurting the competition by taking away volume, it's hurting the competition by taking away the most profitable customers. The rest of the market is fighting over leftovers as far as profit is concerned.

Tomi, blamed the economy for Nokia's woes but Apple has been part of the same economy and has seen greater profits and sales from the iPhone each year. Just like Dell learned in the computer industry, the way to success is not by selling profitless commodity items with no value add.

While Nokia is bottom feeding, Apple introduced a more expensive mobile product -- the iPad -- and created another $10 - $15 billion annual revenue stream out of thin air.

[KCB]

Mr. Elop shall address one issue only: execution. Nokia has the right vision and strategy. When Mr. Vanjoki at a conference in 1999 told the audience that people would have used cellphones with eyes and not just with ears, everybody was laughing at him... he was actually right!
In the last years Nokia lost some focus but mainly missed execution. List of Nokia's bad examples is much longer than Apple's and RIM's lists, here lies the difference.
As soon as Nokia will be back with better design devices (nothing really impressive came after N95), with a good set of easy-to-use integrated features&services and with a good apps store developers support, they will be shining again! Piecesa are there they just need to execute!

[KDT]

@KCB

What s strategy could Nokia possibly have against it's competitors, Apple is the integration, UI, and marketing expert, and Android manufacturers can match any hardware design that Nokia can come up with and are not saddled with developing their own OS or ecosystem (as poor as the ecosystem is compared to Apple). RIM has the corporate sector and MS will take the leftovers. Yes, I know the standard retort is that I'm being "U.S. centric" and ignoring the developing world. But if Nokia cares about profit, these are the companies that Nokia has to beat.

Notice, I'm not concerned about the dumb lowend no-profit phones. Nokia's problem is not competing for market share. Nokia needs to be compete for "profit share". So what if they sell a billion phones and can't make any money doing it?

[nutiblogi]

Tomi, what you think about Nokia's 2010 smartphone models (keyboards) mess? some... only SOME logic, if 123 C5 were C3 and C3 C5, there were nice: 3-serie is 123 and 5-serie is small-QWERTY. the same mess with 6 and 7-series, like nokia can't decide, which one could be full-touchscreen and other big-QWERTY. earlier times was more clear, what is e6x, e7x, e8x or e9x

[Alexander]

Agree on the overall strategy, but the bad choices made in execution continue to astound me. Autofocus cameras are standard in for smartphones nowadays, and then Nokia releases all Symbian^3 phones but the N8 with EDoF cameras. Especially for the E7, not being able to photograph documents is going to be a deal breaker for a lot of people. For me the only model worth considering now is the N8, which has the huge drawback that I can't replace the battery.
But in the end, after some testing of one of the current top-of-the-line Android smartphones, I still would like to use a Symbian phone, since Android is not really mature regarding a lot of aspects of everyday use, and all the other OSes are not really an option anyway for various reasons. Still hoping the N8 will turn out to be a great phone!
(various reasons against other OSes:
iphone - itunes mandatory, control-fascism of Apple
RIM - different focus from what I need
WinMO - dead
WinPhone7 - no multitasking, no customization
MeeGo - not out yet
Maemo - dead
Bada - get serious!)

[KCB]

@kdt
Nokia strategy in the high end devices space (profit share space to use yr words) is almost the same as Apple one (few differences of course such as Operators approach) They actually started few years before iPhone came to market and they have all the pieces they need to make it happen
They just have to execute better than what they did recently, few examples: less devices but more iconic ones, clearer marketing and communication messages, better user experience and less fragmented services offer. In one word better execution!
KCB

ps having its own OS should be a plus, once it works fine. let's se with Symbian3 and 4 before meego comes

[Claus212]

Nokia's problem is two-fold: Software strategy execution is way too slow, and US-mindshare spearheaded by (amateurish) tech-blog sites is poor. The latter is also a big Marketing challenge.

As you write in your blog, with S^3 and soon S^4 the worst of the SW problems could be over. And if Meego / N9 turns out to be a winner, US tech blogs might change their tune and make Nokia more "cool" than they are today.

Additionally, Nokia could do a lot in the U.S. The next flagship smart phone should be over-spec'd, i.e. a dual core CPU or one that runs at 2 or 3 Ghz (overclock it and replace if it really burns through), a display with markedly higher resolution than what is necessary (and reasonable) on a smart phone (1920x1080 anyone?), the N8 camera and what have you. Packaged in a great design (hire Porsche Design or Ferrari to style it if necessary). Two or three killer specs, the rest solid upper class. This would be a very high priced device to show off. Manufacture in relatively small numbers, provide some kind of specialized customer service around it, and state that this device is so special and great that only a few will be willing to afford it, and only real tech lovers will be able to appreciate its virtues (price point above $1,000, so more than 50% more expensive than the iPhone). Then follow with some reasonable spec'd devices, actually usable, solidly manufactured and sell them at the iPhone / Droid / Galaxy level. If Nokia can get one, two or three of the US carriers to sell their line of phones, then they can give everyone else a run for the money.

Do this for the U.S. and non-U.S. high end markets, and continue to sell loads of affordable good quality phones to the masses.

[Murat]

I've got to say this doesn't really sound very unbiased. You put Nokia on a pedestal too often.

The overall message I get from this is that Nokia was first to a whole bunch of stuff - that sadly no one cares about or gives them credit for because Apple and others now do it better. Do we have to play a violin for Nokia because everyone has forgot that they made touch screen phones/app stores first? Consumers don't care who did it first, they care who does it best.

And I think that was one of the things fundamentally wrong with Nokia, this idea that because you were first so you can sit back and rest of past achievements. I worked at Nokia just like you, I know the company intimately, the only difference is that I was there more recently, it was amazing at how many people scoffed at the iPhone, saying it didn't have this or that feature. Then a year later panic set in as departments were rushing to combat/copy Apple.

"Nokia's touch screen interface will not need to be 'better' than the iPhone - nor even 'as good as' the iPhone, as long as Nokia's touch screen interface is 'good enough'."

Oh dear. This is not how you do this. Good enough is never enough.

"Nokia was the first company to say a smartphone was a computer (something ridiculed by the 'real' PC makers at the time, and only very recently the PC makers - all 6 of the 6 biggest PC makers in fact - have all found it to be true, that a modern smartphone is indeed a 'real' computer, only a tiny and pocket-sized one)."

I use to work for a agency that worked for Nokia and we got sent a memo stating from now on we were no longer allowed to call Nokia phones phones 'mobiles or smartphones' but 'multimedia computers', the trouble is with that strategy was the phones on the market at the time (2004) were god awful at being anything more than a mobile phone, with complaints over slowdowns,crashes and usability.

"Apple does it thumbing its nose at industry standards and quarrels with major players like its long-standing feud with Adobe Flash. That is a way to produce exceptional devices and services - for the luxury crowd, ie for a tight niche market - but it is not the way to win the world. You cannot win the world that way."

Personally I think Flash is becoming less and less relevant in mobile, especially when Flash video is now quickly moving to HTML5. Think about how many mobile optimised sites use Flash anyway? If they do then you can serve the correct site based on the capabilities of the phone. Of course the iPhone can't view full Flash sites but I really don't think it matters and part of a purchase decision for the mass market.

"Who invented the cheap consumer smartphone? Not Apple. It was Nokia again. Nokia already sells basic non-touch screen smartphones at 100 dollars (price without subsidy, ie without contract, where the iPhone without contract costs 600 dollars) and is pushing the price point of cheapest touch screen smartphones to that level too - already offering its cheapest touch screen smartphone at nearly 100 Euros. No matter what the Apple loyalists think of the iPhone, it will never be a mass market phone. Apple is a classic premium luxury niche maker, who can hope to have 3% of the market - like it has with the Macintosh PC, after 26 years of fighting those battles with its 'revolutionary' PC."

Strange statement you're making here.

Just because Apple doesn't sell cheap handsets does that somehow make them inferior? What company would you rather be the CEO of the company making one of the most desirable handsets ever made ... or the CEO of the company making everyone spare handset when they lose the one they actually like the most?

And I'm going to mention it again cos I know you love it, that 3% of the market is making Apple more money than the massive percentage Nokia has so what really is the message/learnings here?

"They are not as good as (when considering the touch screen only) as the iPhone is - but who is, honestly, this is comparing a Ferrari to a Toyota for goodness sake "

When you buy a top-end Nokia I think it's fair to compare it to a iPhone don't you?

"The touch screen phone was not invented by Apple, Nokia had its first touch screen phone out years before the iPhone."
"Or having a phone that is compatible with industry standards (the original iPhone didn't even support MMS and even the current iPhone 4 doesn't support the industry standard 3G video calling, etc)"

The iPhone still sold millions and millions regardless. Again, learnings here.

"We heard earlier this year that the UK youth's number one desired phone is not the iPhone, its the Blackberry. "

This is more to do with Blackberry Messenger. But yeah it's a no brainer that a QWERTY iPhone would be great, but then everyone knows that.

"almost all upgrades to the iPhone were actually 'bug fixes' to try to make the iOS as good as Symbian"

Woah woah woah, are you honestly suggesting that the iOS Symbian was/is better than the iOS? Even in 2007 it wasn't. Jesus. By the time the 3G came out evven the people in Nokia didn't believe that. What does that tell you?

"And I should mention the App Stores. While all the silly hype globally in mobile is about apps - I have been repeating and repeating and repeating, that it is a trivial "

Apps are now becoming part of peoples purchase decision. Not trivial if it is selling phones. You only need to take a look at Nokias marketing material to see how important this is for them too.

"You want paid downloads to mobile? Try Tetris. Sold 100 million copies to mobile phones and counting."

Yeah could that maybe be because it was available to hundreds of handsets?? Come on it's not a fair comparison to angry birds!!!!

[JB]

Can we stop comparing phones to cars?! There's a vast difference in the way consumers approach buying devices that cost $200 vs $600 and one's that cost $20,000 vs $60,000. Cost as a percentage of income is a HUGE factor. Bad metaphors create bad ideas, don't use them.

[Matthew Artero]

Thanks Tomi for all your hard work of analyzing and writing this up. It seems some of the comments of this latest post have forgotten your explanation of the importance of winning the platform war and how to win a platform war.

When the developers migrate to the platforms with the larger market share, all of a sudden those devices using platforms with smaller market shares will be forced to do their own app development which will cut into their profits.

One thing I know happens when people/we work with intense focus, and analysis work requires focusing on some small details, is that it can become easy to not see the forest from the tree.

I see that Nokia’s problem is definitely more than a communication problem. I see that shareholders are absolutely right to say that Nokia missed the boat and demand higher profits, but of course not at the expense of losing the platform war.

Nokia has failed to do what we see other global brands doing in other industries. Food giants have their cheep food brands as well as their expensive food brands. Car makers like Honda and Toyota have launched their more expensive Acura and Lexus brands.

Toyota has also launched its inexpensive Scion brand which protects the name of Toyota from being associated with the word “cheap”.

So the way I see it, share holders are upset with Nokia for not doing what is already considered to be standard practice when faced with the situation that Nokia is faced with.

The bottom line for shareholders is that Androids and iPhones are selling in enough numbers that they want Nokia to be taking a piece of that action. As long as those numbers are there they will always complain and Nokia cannot communicate those complaints away.

Surely there were people at Nokia that believed in this approach, evidenced by the enormous amounts of money Nokia used to spend on research, including grants to other organizations. But now that money is tight, the amount spent on research is not as much as it used to be. With less money into research the reliance on winning through market share has become heavier than it use to be. More of Nokia’s eggs are going into one basket.

In other posts you have told us about the different products and services that mobile has cannibalized. Cameras, email, landlines, PDAs, and so on. By that logic, there is no reason for phones to not also cannibalize the keyboard. In fact I say it must cannibalize the keyboard. I say it is inevitable. Therefore getting together with me and my invention would be a great advancement for Nokia and would help silence Nokia’s critics. Or if another manufacturer does it first, critics will say “another boat that Nokia has missed”.

What’s to stop Android and the iPhone from eventually selling cheaper phones? I think it is a legitimate concern of shareholders. It seems that Nokia's success in the platform war hinges on others not entering the lower markets. This is not something Nokia can control. We learn from Sun Tzu to never rely on predicting or trying to control the enemy.

[Matthew Artero]

In his first public address as incoming CEO of Nokia, Elop sounded a lot like this blog as he pointed out Nokia’s strengths saying that Nokia has the ability to take advantage of today’s opportunities.

I’m sure outgoing CEO Kallasvuo holds the same view. But of course the problem is shareholders don’t just want a company to be in position to take advantage of the new opportunities, they want it to succeed at taking advantage of the new opportunities.

An interesting thing about Elop’s speech and the reports from analysts and news agencies is that they are all saying the same thing, Nokia has the resources, talent, and skill to do it, but nobody is saying what “it” is.

Elop says he will be listening and learning. Therefore he must believe the answer already exists in the minds of others who are going to tell him what they think Nokia should do.

That leaves me wondering. What are the various products the other voices are saying Nokia should come out with, and what are their reasons for suggesting it?

[Steve Woodgate]

Hi Tomi

Toyota do make a supercar http://www.autoweek.com/article/20100602/CARNEWS/100609975
Let's hope this augurs well for Nokia smartphone efforts.

Steve

[Henry Sinn]

“All Symbian needs, is to be good enough”…

“Microsoft released a 'Macintosh clone' that was good enough”

MS office on Windows was “Good enough”…
MS office on Apple was more than “Good enough” – saved Apple

Phones are replacing [soon will] our PC’s
The Nokia offerings are [arguably] the closest to what a PC “is” with such aspects as the ability to store files, attached peripherals and truly do more than one thing at once..

MS office on Nokia will add to that mix and it will be more than “Good enough”….

The rest will be history.