The Nokia CEO 'Burning Platform' memo at Engadget, doesn't ring true to my ears..

Engadget has published the full text of what it claims is a memo by Nokia's new CEO Stephen Elop. The memo is entitled the 'burning platform' memo. It seems to foreshadow a shift in Nokia smartphone strategy but is not clearly identifying what that shift would be. It is a good read, and well written, with lots of good facts in it. Its general sentiment, to rally troops, seems about right. I think, that to most industry-watchers, it seems very credible, as it could have been written by Nokia's new CEO.

UPDATE 11 February - Stephen Elop has confirmed today that the memo was real. This whole blog posting is now pointless, I was wrong. I will of course leave it here if anyone would like to come read it (and its comments). But please recognise - I am admitting I was totally wrong about it. For those who want to see what my view is of the new Nokia Microsoft alliance, please read: Wow this is good for Microsoft.

I don't think so. I think it is a hoax, but honestly, I do not know Stephen Elop, I have never met him, and I certainly have not heard one way or another, from my Nokia friends and colleagues, whether that memo is actually true. (please read the memo first, at Engadget)

Here is why it doesn't ring true to me. There are several astonishing errors and also 'obvious' missing pieces, that I cannot imagine Nokia's new CEO 'not having heard' from most of his meetings with most of his staff. I think, it reads more like a US analyst, who is trying to influence the discussion, who knows much of the Nokia story, but not the whole story. Here is where I think there are very glaring omissions or faults.

First the statement about Apple owning 61% of the 'over 300 dollar phone' segment is patently wrong, and Nokia is nothing if not meticulous about market shares and they buy every report and their competitor analysis department could not have suggested this kind of number. This to me, is an Apple-friendly analysis, based on US market share, not globally. Let me explain why. Apple sold about 47 million smartphones in 2010. RIM ie Blackberry has an average sales price of over 300 dollars, about half of its smartphones sell in that price range (over 300 dollar phones). Lets call it 23 million. Then we have HTC and Samsung, both sold about 25 million smartphones - the whole Samsung Galaxy series is in that price range (Samsung also sold 5 million cheap bada smartphones in 2010) and I'd say most HTC phones are in the price range. Lets call it 35 million combined from Samsung and HTC to play safe. Then what of Nokia? It sold 5 million S^3 phones in just one quarter, those were all 300 dollar or more phones (plus many more N97s and premium E-Series phones as well in the quarter). Again, if we play it safe and say of Nokia's 100 million smartphones, only 20 million were in this price point, we already have a combined global market of 125 million phones that cost over 300 dollars. And Apple's 47 million would be 38% of that. It will be even less, after we add premium cost Motorolas, SonyEricssons, and various other premium phones like the new ones from Sharp etc. No, this number does not ring right. I can believe, that an American analyst would be inclined to believe that as a 'fact' that Apple has 61% of the premium phone market, but Nokia knows this far better, and Nokia internal staff know the numbers better, they would not believe their new CEO if he suddenly says Apple is that big. And they have the corporate licenses to big handset analysis reports by Gartner, IDC, etc that all echo the same story. That Stephen Elop would start his email with such a number, that his own competitor analysis department would scream and kick and yell that it is totally off, does not seem right to me. But maybe its an isolated error. Lets read on.

On the low price phones, the memo mentions MediaTek but it does not mention any of the low-cost handset makers by name? The memo dares to mention Apple and Google, but now the CEO seemingly doesn't dare to mention Chinese brands like ZTE, Huawei, G'Five etc? That doesn't seem right.

While we are on competitors, Nokia's real competitor is Samsung (not Apple) and all at Nokia HQ know this. Samsung has recently launched its own OS bada (the most successful new OS launch in history, better than Google's Android or Apple's iPhone in its first 6 months) and Samsung is very successful in the high end with Galaxy smartphones and - most relevantly - Samsung has passed Nokia in the dumbphones market of Europe and now gaining in Asia, including China. He mentions Apple and Google but ignores the real (and currently only) threat to Nokia's hegemony, Samsung. This to me doesn't sound like the CEO has understood his primary competitor or the main market or how his primary competitor is moving into the smartphones space. I cannot imagine that the real Stephen Elop was blind to Samsung, and I cannot imagine if he talks of competition, that he would not point out how hungrily Samsung is eating into Nokia's markets globally. This doesn't ring right to me.

Then he supposedly writes "While competitors poured flames on our market share, what happened at Nokia? We fell behind, we missed big trends, and we lost time." This again smacks of ill-informed US based views of Nokia. "..we missed big trends" (?) WHAT? Excuse me? I can accept, definitely, that Nokia has recently been executing poorly, and its early steps in new areas have been clumsy. But 'missed' big trends? Which trend has Nokia missed. Name even ONE! Touch screens? Before iPhone! Internet phones? Nokia did the world's first. Consumer smartphones? Nokia invented that. Gaming phones? Nokia had years before the iPhone ever heard of Angry Birds. An app store? Nokia followed this trend from Japan five years before Apple launched its first app store. A developer community? Nokia has had it for more than a decade. Apps? Nokia has a whole unit that sells apps and services. Maps? Nokia bundles those on the phones. Money? Nokia launched Nokia Money long ago. Dual SIM phones, Nokia did that years ago. What trend is it that Nokia has supposedly missed. MISSED?

I can accept that Nokia's touch screen interface is not the most elegant and its user interface is currently not as good as rivals. That is not 'missing big trends'. The are perhaps slow in capitalizing on the big trands. That is fair. I really can't see him saying this. This is a typical US analyst view who don't know about Nokia's global products and its years of innovations. Stephen Elop could easily say, "we were not capitalizing on our innovations" or something like that, but seriously, he has been on a deep fast fact-finding mission to understand the company he is running. There is no way, Stephen Elop could be under any misconception about where the big trends are, and when Nokia first moved to enter those trends. I cannot believe he would say this in a memo to staff. This to me, sounds like a US analyst writing what he wishes Nokia would say, from a US viewpoint.

The supposed CEO memo continues "At that time, we thought we were making the right decisions; but, with the benefit of hindsight, we now find ourselves years behind." Again, 'years behind'. Years? On what? I could see, that last summer, when the N8 was again delayed, and Symbian S^3 had not shipped, that perhaps, perhaps a Nokia CEO could say, they were 'years' behind. But not today. Ovi store is the second best-performing handset maker app store behind only Apple's App Store. Nokia is years AHEAD of most of its rivals from RIM's app store to Microsoft's. Symbian S^3 sold on 5 million handsets, on only 3 Nokia models, vs Microsoft's brand new and fresh 'from the ground up' OS, Phone 7, which on about a dozen phone models from several manufacturers, shipped 1.5 million units in the same period.

Meanwhile Google talks of Google Money (Nokia Money years ahead). Apple is rumored to introduce Near Field ability to hits handsets (Nokia years ahead). I can see that the CEO would want to motivate his staff to work harder, and I totally agree that Nokia is currently under-performing. It is executing poorly. But this is totally the wrong message from the CEO, the facts he sees and hears, cannot support this type of claim. If anything, after Nokia bought full control of Symbian, Symbian has been climbing back into the game. It is not as user-friendly as Android or iPhone OS, but it doesn't need to be either - for that Nokia is bringing MeeGo and has very good 'prototype' experience from the N900 that ran Maemo. Nokia can definitely create a very competitive and utterly modern OS. Symbian is clearly stated to be the legacy OS, to power increasingly lower cost smartphones, and is designed to operate on modest power phones (CPUs and memory). Nokia is far ahead of Android or Microsoft Phone 7 or Apple iOS, in specifically having Symbian prepared for low-cost phones, something bada at Samsung is also designed for. To my mind, Nokia's CEO would be mentioning this, not saying they are years behind.

What is more, Nokia invested heavily in designing a migration path for its two operating systems, to help developers manage that transition. That is built around Qt and it is a centerpiece to Nokia's smartphone strategy. Qt is not mentioned in the whole memo? Why? He mentions Apple or iPhone four times and Google or Android four times but no mention at all of Qt? This again, seems to me like it was written by someone who studies Nokia but isn't fully aware of it. I cannot imagine, after all the effort Nokia does in all its communications to promote Qt as critical to the two OS platforms it controls, that it would not even be mentioned here. And it is definitely leadership - Microsoft decided it was too complex and costly to help its developers migrate from Windows Mobile to Phone 7 and just left the developers adrift. They now are witnessing the effects of that. And I cannot - cannot imagine - that Nokia's CEO could think, that this Qt strategy was somehow wrong, now? When we are mere months from the first MeeGo devices? This is the ultimate care of an existing eco-system. To go through the extra effort, time and money, to build a migration path - for Nokia's developer community! If the CEO talks of competitors, and 'falling behind' and ecosystems, why the stunning silence about Qt? What would be seen as the ultimate betrayal of Nokia's loyal developers would be for Nokia to abandon Qt and MeeGo now, mere months before the first phones? I cannot see Nokia CEO making this strange memo, without acknowledging Qt. It doesn't ring right to my ears.

Now what really hit me the first time I read this memo, that made me 'decide' it cannot be right, is the line in it that reads "Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes." This sentence refers to the widely-reported Canalys numbers about Android OS overtaking Symbian in Q4 of 2010. But right after it was released, many analysts have said the numbers don't add up! It is a math error! You don't build corporate strategy on someone's math error haha. Canalys have jumped the gun, it has not happened that Android would be bigger than Symbian (that is likely to happen, now in 2011, and this is something Elop would be very wise to warn his staff, but not claim it had happened). Right now, IDC for example very explicitly on Monday said that Nokia is still ahead of Android. The official numbers from Google itself on Android, do not support Canalys's claim! I cannot believe, that Nokia's CEO would take a number which is ridiculed by the industry (and must be against every other measure Nokia tracks internally) and puts it in the memo! I can see it from a US based tech analyst, who is not that familiar with the issue. Since the Canalys number had more than 400 press mentions all the way from CNN and CNBC and Bloomberg on down - it must be right. But Nokia CEO would know fully well that there are four analyst houses and that this one number is utterly at odds with what all others report on the industry. He would not take it as the truth, where all other evidence suggests the opposite. It would not be believed by anyone in the organization (but would be easily believed by those who are not very familiar with the industry, especially US analysts, who have heard earlier - correctly - that Android had overtaken Apple and RIM). This is the biggest glaring error in the memo to my mind, I cannot see that Nokia's CEO would give any credence to that reported market share. Especially not, when its already been discredited by other sources Nokia prefers to use, like IDC.

Then a weird statement. The supposed memo states "We thought MeeGo would be a platform for winning high-end smartphones. However, at this rate, by the end of 2011, we might have only one MeeGo product in the market." Its early February. If the CEO wanted, he could easily accelerate MeeGo development and give it resources and bring more devices to the market, if that is what he needs. I think this is now an analyst 'speaking' who projects from recent delays in N8 and E7, and expresses a warning about possible MeeGo delays. It really doesn't seem like the CEO would make this kind of 'forecast'? I could see him 'committing' to some number or asking his team to help ensure they have x models this year, but for the memo to have this kind of 'forecast' seems totally at odds with what I would imagine any CEO saying about his company?

The truth is, that MeeGo is new. It is the amalgamation of Nokia's Linux based open source new smarthone OS project, Maemo (that powered N900) and Intel's similar project. The strategic decision to join with Intel is a masterstroke by Nokia, it brought new partners into the new Maemo/MeeGo ecosystem and of course, because of this there would be no more Maemo devices, and MeeGo would need to be managed together with Intel. What is far more important is a good OS, than having tons of devices on the OS (remembering that the 'old' Symbian in its newest edition S^3 outsells the brand new Microsoft Phone 7 by more than 3 to 1). Again, I cannot imagine that the new CEO of Nokia would not have studied MeeGo carefully and know this. Most Nokia staff know this. Therefore there is no point at all in saying it is now somehow 'in jeopardy' or 'endangered' or 'severely delayed'. I can believe that Nokia's new CEO would want MeeGo devices this year, but for him to suddenly say he projects only one device - when we are in February, this doesn't seem right to me.

And on that point - why no mention at all of Intel, Nokia's partner in MeeGo? Or no mention at all of NTT DoCoMo, Nokia's biggest remaining partner in Symbian. How can it be, that Symbian can power phones for the world's most advanced mobile phone market, Japan, years ahead of every other market - and is the OS of preference by NTT DoCoMo the worlds' most innovative and inventive mobile industry company, and at the same time that same Symbian is obsolete and somehow 'years behind' the competition. I again don't see Nokia's new CEO being somehow so ill-informed about key strategic assets - and key strategic allies - especially in a memo where he talks about ecosystems and partners.

Then the funniest error in the supposed memo, is something only a US based writer would dare to write with a straight face, and no Nokia exec would accept - "(Symbian) ...has proven to be non-competitive in leading markets like North America." Haha. Yes, Symbian is failing in North America. But Nokia do global analysis of all of their markets. They know fully well, fully well, that the world's most advanced market for phones is Japan. Then comes South Korea. Then come the other leading Asian 'Tiger' economies like Singapore, Hong Kong, Taiwan etc - here we have far more than 50% smartphone penetration rates etc. After that comes Western Europe, ahead of the North American market. There is no way, a Nokia exec will say with a straight face that North America is a 'leading market' in phones - knowing how well they do, how backwards the US carriers (mobile operators) are in stiffling that market.

To me the memo is a well-written hoax, which has a few critical 'obvious' errors. Here for example, if the memo had read something like 'proven non-competitive in significant markets like North America' or in 'important' markets like North America or 'growing' markets or something like that. But for anyone to suggest North America is a leading market in mobile phones, this is something laughed at by all major analysts. It is a mid-range market, slightly behind Western Europe, on par with the Middle East and slightly ahead of Easter Europe..

On the Symbian paragraph the memo says "if we continue like before, we will get further and further behind" and again, this is something that the US based myths do perpetuate, but the facts are strictly the opposite. Symbian based Nokia phones outsold its two biggest rivals, all Apple iPhones and all RIM Blackberries, combined. Yes, the CEO could have written that rivals are starting to catch up to Nokia, but just in smartphones, Nokia is more than twice as big as its nearest rival. (and is still profitable!) You want to give this 'problem' to Toyota? To Coca Cola? To Boeing? Anyone in almost any other major industry would desperately love to have this 'problem' of being that huge, that you are twice as big as your nearest rival. I cannot imagine the Nokia CEO would make such a blatant error in his memo, suggesting Nokia is not far ahead. Yes, the rivals are catching up, but Nokia is not behind! Not falling 'further' behind. And definitely not falling 'further and further' behind. This could only have been written by a US based analyst who mistakes US market share for global market share. Nokia HQ staff know fully well that the world outside of USA is 3 times bigger in smartphones (and 8 times bigger in dumbphones).

Lastly, the direct oppostite finding. When the CEO says Symbian has proven non-competitive in 'leading markets like North America' - when we go to the world's leading market, Japan - Symbian is supremely competitive there! The exact opposite is the truth, but few analysts know the Japanese market. Nokia knows, and Nokia's Symbian team knows very intimately, because NTT DoCoMo, Japan's biggest mobile operator/carrier with half the market there, is a Symbian partner. I can see how a US based analyst would think Symbian is failing in 'leading markets' but I know that the Symbian team inside Nokia know the facts, that Symbian is succeeding in the market with by far the most advanced phones and by far the most demanding customers, used by the operator/carrier that is by far the most demanding. The Nokia CEO could not have missed this fact, when talking to any Symbian people at Nokia.

Lets move on, the memo mentions how fast the "Chinese OEM's" are - where all Chinese makers combined produce less phones than Nokia alone - but doesn't mention Samsung - which is by most industry analysts who specialize in Asian phones - far faster than the Chinese - and who are closing in on Nokia's market share (leading it in some markets already). This again, doesn't sound like it was written by a real Nokia CEO. There is speed in innovation, and then there is South Korean speed, which is legendary. He does mention the speed, yet he somehow ignores the chance to motivate his staff, that Samsung is using its world-record speed to catch up on Nokia (and has now in public even stated that its goal now is to become number 1. This memo really doesn't sound right. The theme - lets compete harder - makes sense but the example, Chinese OEMs without names, and ignoring Samsung, this doesn't seem right to me).

Then the memo has a paragraph on ecosystems. I much agree with that paragraph. But, if this was Nokia's CEO, I cannot see that he'd be able to include this glaring contradiction with what he wrote just a little bit earlier. The ecosystem includes not just hardware and software but "developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things." Yes. What was that? Developers? And previously in the memo Nokia was supposedly not innovating and years behind. Nokia's developers were recruited way back in the previous century! Applications? Nokia has a software unit that reports quarterly. Ecommerce, fine. Advertising? Nokia has bought two advertising companies to build its ad platform years before Apple or Google bought their first mobile ad platforms. Search, fine. Social applications, fine. Location-based services? What is Ovi maps for goodness sakes, Nokia was the first to offer maps totally free. And so forth. Either Nokia "thought it was making the right choices but has fallen years behind" or else this chapter about the ecosystems is not true, but both cannot be true. They are at a contradition! And again, a brand new CEO, in a memo to energize his company, cannot possibly make this basic level of error? This does not sound right to me.

While on ecosystems.. where is Ovi? Again if the new CEO emphasizes the need for an ecosystem, surely Ovi should at least be acknowledged in the memo? The world's second-biggest app store by a handset maker? Far ahead of most rivals? And all the steps Nokia has done to expand this ecosystem, not just apps but also services and content and maps and communities etc.

And then on customer preference, again I agree with the sentiment, and have written on this blog that Nokia loyalty and customer preferences are in decline, and that is very bad for Nokia. But this paragraph? "(Nokia loyalty is) ...also down in the other markets, which are traditionally our strongholds: Russia, Germany, Indonesia, UAE..." 

????

Russia. Yes. Germany. Yes. Indonesia. Yes. UAE? WHAT? Yes, I love Abu Dhabi and Dubai, but come on? Where is Nokia's single most important market? CHINA? China alone adds a whole new UAE every single month in new mobile phone subscribers. Where is India, Nokia's second most important market? India now adds not one, but TWO whole new UAE's every month! There is no way, no effing way, that Nokia CEO would write a sentence about Nokia's 'traditional stronghold' markets and ignore China and India, while including the United Arab Emirates. Wrong, Mr Fake Elop. This is not a Nokia CEO writing.

Note that the facts actually support the thesis - Nokia has been bleeding markets share in China and in India! So if that is Elop's message, he would most definitely include China and India in the memo! China houses the world's biggest phone factory for goodness sakes (a Nokia facility). There is no way, no no way, that Elop mentions the Arab Emirates, but forgets both China and India, the two biggest markets in the world of mobile telecoms.

Now, as to the sentiment, that Nokia is in trouble - yes, that Nokia faces huge changes, yes, that Nokia needs to embrace change, yes. Yes, the sentiment is right. But the statements in that memo do not ring true to my ears.

I think we'll know for sure on February 11th. If Stephen Elop's strategy presentation echoes many of the themes in this memo, then I will be clearly wrong. I doubt it. I do believe that his strategy view will be in many ways at odds with this memo. I do think that Nokia is very committed to Symbian, MeeGo and through Qt and Ovi is well along in achieving a long-term sustainable ecosystem leadership advantage, using its partners like Intel and NTT DoCoMo. I believe these will be clearly stated in Elop's strategy. There are lots of areas where Nokia is struggling (as I wrote in my blog last week giving my recommendations) but the platform for Nokia is not burning and definitely, now is not the time to jump off Symbian and MeeGo to Android or Phone 7. Yes, the CEO needs to motivate his team and company, but I do not believe this was a real memo from Stephen Elop. One or two of the above mistakes I could see in it, not this list of errors. No way would Nokia's CEO be so deluded from the facts.

(But obviously, lets see. Worst case, it is proven to be real, he really believes all that, and Nokia is led by a delusional psycopath who willingly suspends reality. Imagine if Microsoft had thrown in the towel when it had the world's biggest PC operating system! Imagine if Blueray had stopped fighting for the market when it was leading. This is silly)

Lets see if we get any official confirmation or denial of this memo. I do honestly believe, it cannot be true, that it would seem like the CEO didn't understand his own company, its markets, its products, and would not be believed by his own staff if he circulated this memo with this wording. But hey, I'm an outsider looking in, wouldn't be the first time a CEO had misunderstood his company haha..

ADDENDUM -  We have over 50 comments on the blog. I am writing now to clarify. I thought I was perfectly clear in the above - but let me be as clear as I can - I TOTALLY - TOTALLY agree - AGREE with the SENTIMENT of this supposed memo. Do not write comments saying 'Tomi you are delusional' etc. I TOTALLY AGREE with the main themes that this memo expresses. All of those - ALL OF THEM are valid concerns for the new CEO - and I HAVE MYSELF EXPRESSED MOST OF THEM ON THIS BLOG BEFORE. I am NOT SAYING that Nokia is 'not in trouble'. I am ONLY saying, that when I read that article on Engadget, and many of my Twitter followers asked me for my opinion, I said I don't think that is genuine, that I honestly think it is a hoax - because of some detail errors in it. It is possible that this is an inaccurate representation of Stephen Elop's statements, speeches, blogs, memos whatever. If so - if it is not 100% verbatim exactly from beginning to end exactly as Elop wrote it (or spoke it) - then I am right. That is my only point. I feel like there is some fraudulent person who has manufactured a well-written story, that seems credible to be from Stephen Elop to his staff. It apparently has borrowed several direct phrases from other items he's said or written.

The point is that I - Tomi Ahonen - TOTALLY AGREE with all major sentiments in this supposed memo. I am not in denial about any of the issues reported in it, as being problems with Nokia. I am finding astounding faults in how it is written - on specific items that to me, are not professional, and to me, could not have been expressed as they are written. That is why I feel this is a hoax. I have never said in this blog that the main points of that supposed memo are not true. I AGREE with the memo, ok? I just believe, that a Nokia CEO would not be making these basic errors in basic facts. Are we clear now? Tomi fully agrees with the 'sentiment' of that memo. Not partly agrees, fully agrees! Ok?

UPDATE - I just read a brilliant comment by Terence Eden @edent on Twitter who said that this might be taken out of context. If this was part of a longer memo, where Stephen Elop said first "Others are saying this about us" - then yes, very clearly, this could be in a memo, but then Stephen Elop would know - and his employees would also know, that those statements are not reality. That would be fine, and then, Engadget would have been publishing deliberately or accidentially a partial excerpt that expressly communicates the opposite of what was intended.

MORE - I have written a companion volume to this blog, explaining to those who might not immediately 'get it' why Nokia's current smartphone OS strategy (Symbian and MeeGo with Ovi and Qt) is the best for Nokia and any change to the OS now in 2011 would be tantamout to corporate suicide. The blog article is here Why Nokia OS Strategy is Right for Nokia.

EVEN MORE - and for those visitors who are interested in the overall market shares and the major players in the smartphone industry, as the final numbers were reported earlier today, I have just done my final analysis of all the numbers, market shares, major manufacturers, operating systems, by Q4 and for full year 2010, at this analysis: Smartphone Bloodbath 2010: Now Final Numbers.

Comments

[kibbles]

i had posted a comment on this, and in it i mentioned denial. i also touched upon, in particular, Nokia has missed the boat on.

it seems my comment has been removed. interesting.

[kibbles]

btw, i did of course read this blog post in its entirety. i just disagree with the message coming from the words you wrote.

guess that makes me deletion fodder. delete away! but know that you cant delete *ideas*, and thats those ideas are what people come here to discuss.

(and yet, you keep the "you're an idiot" comments. interesting.

[Hamranhansenhansen]

Elop is from Microsoft … it makes sense that he would have a tenuous grasp on reality. Microsoft is not a Silicon Valley company, they are an entire Europe away in Washington state, where they spend all day talking to themselves in their own language. They are divorced from market forces by illegally-obtained monopolies. They have one successful 1980's product in Microsoft Office and one successful 1990's product in Microsoft Windows. In mobiles, their platform burnt up so long ago it is cold now. Why Nokia hired Elop is beyond me. I live in Silicon Valley, but I'm from Europe, and it always gets me down when I hear "Microsoft-Microsoft-Microsoft" from Europeans. It's Wal-Mart, OK? Nobody in Silicon Valley even uses their products.

As to the meat of the memo: the trend Nokia missed is software. Software above all else. Hardware is a picture frame today, and software is the picture. Hardware is as important today as a floppy disk in the 1980's, it is just a medium for software. Apple took away Nokia's high-end phone business and half their profits with one device that had a billion times more software on it than all Nokia devices combined. 300,000 apps beats 500 phone models. Apple did this to Sony earlier in the century with iPod, then did it to high-end PC's with the Intel Mac, then to Nokia with iPhone, and is doing it to the low-end PC market right now with iPad. They ship staggering amounts of sophisticated, high-end software. The best software of today and the last 40 years, going back to the original Unix. All of those times Nokia was opening software and giving away software, they should have been making software very aggressively. They should have been hiring software engineers, buying software companies, focusing on one Nokia OS platform, transforming into a software company that ships their software on 2-3 phones, same as a 20th century software company shipped on 3.5 inch floppy, CD, and DVD.

And your check list of feature firsts is meaningless, because if we grab 100 random Nokia phone users and 100 random Apple phone users right now, we will find maybe 3 Nokia users have all those features, while 97 Apple users will have them all, and the other 3 will see them and go out immediately and buy a new iPhone and get them. Therefore, when people want those features, they think "Apple!" Apple makes new features usable, and they make existing features usable. They didn't just make a music download service, they signed up all of the music publishers, so the user could drop the CD entirely. They get past the novelty stage. They make a feature practical and then improve it to essential.

I really believe in integrated software/hardware, and that does account for over 90% of the profits in mobiles, so I really hope to see Nokia become a software company, not a disk maker for Microsoft. Whether the memo is real or not, I do think Nokia has to jump into one or the other: become a software company, or become enslaved to one. We will see what Nokia chooses.

[Gareth]

This article summaries everything that is wrong with Nokia / at Nokia. They just don't get it / they are in denial.

Elop sounds like the medicine they need. I just hope they are not pinning themselves on Windows Phone 7. They should do that and Android. It's their only hope.

I used to work in marketing for Apple. I helped launch the iPhone 3GS, and the iPad. We had regular review and strategy meetings.

Here's the thing, Nokia. Apple don't consider you to be a competitor.

[Tomi T Ahonen]

More comments

Hi gap, JC, E, Nemus, ht, Steve, keizka and Arun

gap - that sounds VERY compelling (MS Phone 7 to get US market). If the phone market was like the PC market, that would be perfect. But its not. The phone market - especially in the US market - is utterly controlled by the carriers/operators. Specifically a premium price phone will thrive or die based on whether the carriers are willing to subsidise the phone. Look at Google's Nexus One. This was not just a smartphone, a 'superphone' and had the hottest OS of the year, Android, when the Android market was not flooded by touch screen devices yet. If the carriers had subsidised Nexus One to 99 dollars or 199 dollars, it would be a top-selling phone in America now. They said no. Google tried to sell it bypassing the carriers. Two months later they shut the store down as a failure. This was the hottest new phone brand, with the hottest phone, on the hottest OS, by one of the biggest tech brands, who is an advertising juggernaut and in its home market. And it failed totally.

Not because of a bad OS or bad app store or bad user interface or bad design. Because the carriers boycotted Google's Nexus One (while subsidising rival phones). Nokia was once subsidised by the US carriers. That stopped in the middle of the past decade for a long list of reasons. Today all carriers in the USA boycott Nokia. Not because of a bad phone or OS or app store etc, because it is 'Nokia' - they are taking revenge for many battles that Nokia has had with the US carriers and they decided they'll give the business to the Koreans rather than Nokia..

With that, if Nokia now goes in with Phone 7, it offers nothing that the carriers want - they want Nokia to grovel and beg and plead and apologize until it hurts. Bringing in Steve Ballmer to 'convince' US carriers to play with Nokia will only infuriate them further. The only way Nokia gets back, is by not acting arrogantly, but apologizing and grovelling and begging, until they relent some day. At that point, it will matter not one iota what OS is on the phone, it will be the subsidy that determines is Nokia going to sell about as well as they do in Australia, UK, Canada, Mexico, New Zealand, Singapore, Ireland, Hong Kong, Philippines etc - countries that are very similar to the US in being English-speaking or else being neighbors of the USA (Mexico).. There is nothing unique about US consumers that would make them hate Nokia phones when the rest of the planet loves Nokia (in general, obviously recenlty Nokia love has not been that strong as in past years haha, I have written extensively what is wrong with Nokia on this blog)

JC - thanks. Actually the more I think about it, I believe it is 'mis-quoted' from what he originally said or wrote, an 'inaccurate' or incomplete record of what he said. Like the Apple market share, if someone 'omitted' accidentially or on purpose, the phrase 'in the US market' - the meaning totally changes. Yes, Apple has about 61% of the premium phone market in the US market! That would be totally true. Someone else, perhaps accidentially writing in a hurry or perhaps deliberately to make some point, removes that phrase and my alarm bells ring, wait a moment, no Nokia CEO would say this haha..

E - ok. Lets go to your points. your point a - LONG before there were ebooks, the first successful paid app on any mobile ecosystem was what? Games! Like on iPhones, like on Android, like on the world's first app store - NTT DoCoMo, and like on Nokia's own predecessor to Ovi, N-Gage's app store launched four years before the Apple iPhone App store. Nokia DID see this trend and was years ahead of it. They didn't make a good handset haha, but they had this trend and made all the right moves, including recruiting a big game developer community for N-Gage too.

b - ecosystem for payments? Did you know Nokia Money is in use in India for example? It is LIVE, has been for years now. There is your ecosystem and its again, years AHEAD of the others.

c - N-gage wrong again. After Nokia ended N-Gage it shifted their games to the Symbian app environment (that became Ovi later). I downloaded many games onto my N82 for example that were n-Gage games. They did this, exactly what you wanted, in their ecosystem and they did it years ago.

d - Ovi is a rebranding of Nokia's previous app environments. Nokia had tens of thousands of developers in October 2000 when I was quoted about it when I was still employed by Nokia. They were YEARS (almost a decade haha) ahead of this.

2 - it does sound very much like what a CEO would say, especially in a crisis and Nokia is indeed in a crisis, a huge one, and his points are all valid. Its the details which are so BLATANTLY false, that I cannot see him actually using those phrases. I think its either an accidential or deliberate alteration of what he said, maybe something has been edited out, or something changed later 'for emphasis' haha. Like the Canalys silly stat. No Nokia CEO would say that knowing from internal numbers that the other 3 analysts will not confirm it, and Nokia would look utterly silly spreading a false market share - that shows they've 'LOST' their lead haha, when it hasn't happened. But someone else, who saw the memo, and perhaps wanted to 'juice it up' when sending it to a journalist, may have added it, who is not seeing the internal numbers, and as this Canalys story got over 400 press mentions, it seemed very real and accurate. As it happens, I know these numbers by heart, I see immediately that it was a huge error...

haha then on your second list of actions - ouch, yes, that sounds very much like a new CEO on a mission to prove to the world in his first big position, that he can turn an ailing giant into a lean mean fighing machine haha, by painful cuts yes. Very likely we'll see lots of those things you list.

Nemus - yes, that also squares with the strange 'silence' from all sources at Nokia. Nobody anywhere has a scan or image of the original memo, nobody anywhere who has seen it has come forward under his/her own name. But there are several unconfirmed 'verifications' by the press.. Could be a clever PR ploy by the new kid on the block, eager to prove he is a master of the PR game (something Nokia has struggled with massively)

ht - good points and we mostly agree. On the US market option, please read what I wrote in the above..

Steve - and how exactly? Its a day already and over 450 press stories, and all major 24 hour news have covered it and nobody has one named Nokia exec who admits to it. Only unnamed sources. So its likely that is not true. Now, my calling around? Could I possibly confirm a non-story. No. Nobody (except Elop himself haha) could possibly say definitely that there is none, they could at best say, they haven't seen one, meaning I shoudl chase every name I have haha..

keizka - haha thanks

Arun - yeah, but no named contacts there either. Seen same at BBC, at FT, at SF Chronicle etc etc etc. Nobody has a name. It therefore is still not confirmed either way. Would not be the first time that the media has been duped - in particular where this originated all from ONE blog site. VERY suspicious.

Thank you all

Tomi Ahonen :-)

[foljs]

"""What trend is it that Nokia has supposedly missed. MISSED?"""

Em, all of the above "trends" can be regarded as missed by Nokia.

In none of those had Nokia any success.

Merely "doing it" doesn't count.

[mark]

*wipes tear* my god. it's been so long since I have seen someone actually analyze something on a blog.

reminds me of what the internet used to be, before everyone decided pageviews were more important than the truth.

[Reuben]

Excellent analysis Tomi, regardless of whether the memo is genuine or not.

Will you be attending MWC this year?

[Sami]

I read and re-read your blog entry.

Judging from your detailed analysis of Elop's alleged statements, I think Elop hit the nail on the head.

The bullet-by-bullet focused over-analysis by solid, experienced managers like you is exactly what got Nokia into the mess it is in. Perception matters, a lot. The same hubris that got it in the carrier-hell it is here in US, the same exasparated tone that doesn't match the words where you say to agree with the message. That is exactly why he is right. What has been clear from the outside - the fiefdoms, bureaucracy, indifference, lack of cohesive vision - must now be struck down from the top, with heavy price to the society in my home country.

I knew a few people at Nokia in my day, and there was no shortage of ego and arrogance among them. I remained a big fan of the product though starting from Cityman 900 and ending with the 8890, last one I was truly proud to own. After that I had one or two but slowly got sick of the lack of polish and care. Some beautiful pieces of hardware but lost in a sea of intentional mediocrity, all lacking clean cohesive user experience. I'm now posting this from an iPhone 4, a fully realized integrated product experience feature-counting Nokia still doesn't seem to get.

The one trend Nokia totally, utterly missed is that people care about the total experience. And dabbling with something with one product or another doesn't mean catching, riding or defining a trend.

Horace Dediu has written a lot of salient analysis on this. Everyone would be well served to read him on Asymco.

Friday is certainly going to be interesting and there will be a lot of resumes being updated in the coming weeks. I wish Nokia can pull it off, for my country. Even if the headquarters ends up here in Silicon Valley like some of the crazier rumors suggest.

[KVA]

Elop has provided a Microsoft-centric view of the competition. MS has, at least for the past 2 years or so, focussed only on beating iPhone. It is only lately that they have started focussing on beating Android as well. But MS has traditionally ignored the existence of Nokia, Samsung, Motorola, and Elop is just carrying this view forward. Hence this cannot be used to classify this memo as a fake.

[that guy]

I think Europeans are what's wrong with Nokia. Too much pride and arrogance in a market where perception is everything. I, for one, don't care whether the memo is real or not. I think it's spot on, from a consumer perspective point of view.

If Nokia is satisfied selling $50USD phones in third world countries (emerging markets, lol?) then they have the right strategy, but if they're aiming to build a brand that is representative of their respect egos then they have a long way to go.

It doesn't matter how innovative Nokia is/was in the past, and how they were market makers or ahead of the curve. It's been stated multiple times in the comments already, but quite simply put; arriving before a trend is actually worse than missing it entirely. They could have been the first to capitalize on the trend if only they had better execution or strategy.

MeeGo. Abandon it. Unless you really think Nokia dev teams are going to deliver higher quality software than real dev teams (at Microsoft/Google) you need to cut your losses. Leverage and partner with a real production house, know your role and make the hardware, it's not a bad life.

Hamranhansenhansen has nailed it. Completely and utterly understands the market and the direction things are going. Given that all hardware right now is built more or less equal, the community/software/culture are the ONLY variables in the mix. Nokia doesn't have the culture, community or software because they're a manufacturer, not a software house.

Ultimately, in my opinion, unless Nokia makes a strong move partnering with a software firm, they're finished.

[Tomi T Ahonen]

More replies

Hi Jay, Murat, Ajit, keizka, cooli, Andrew, Bob

Jay - re BBC memo, see my previous comments. We still don't have a named person, only unnamed sources. That sounds fishy to me. It could be true, it is certainly not proven to be true.

Murat - see above

Ajit - see above

keizka - thanks, exactly!

cooli - haha! I missed that :-)

Andrew - and I missed that too. Yeah, they talk Euro at Nokia HQ, religiously. The 300 dollar comment seems very much like a different person talking, to the real Elop which no doubt is much of the memo, very similar to several other of his statements. But the 300 dollar Apple iPhone comment is a glaringly disconnected piece, like another person inserted something haha..

Bob - good points. And bear in mind, only one third of Nokia's income is from smartphones, another third is dumbphones and the final third is networking equipment. Google and Apple do not factor in any way in two thirds of Nokia's business. But yes, for all who may think I'm now delusional - remember I have said for years now, that ALL phones will become smartphones before this decade is done. So the trend is to smartphones haha..

Thank you all,

Tomi Ahonen :-)

[Tomi T Ahonen]

More replies

Hi Jay, Murat, Ajit, keizka, cooli, Andrew, Bob

Jay - re BBC memo, see my previous comments. We still don't have a named person, only unnamed sources. That sounds fishy to me. It could be true, it is certainly not proven to be true.

Murat - see above

Ajit - see above

keizka - thanks, exactly!

cooli - haha! I missed that :-)

Andrew - and I missed that too. Yeah, they talk Euro at Nokia HQ, religiously. The 300 dollar comment seems very much like a different person talking, to the real Elop which no doubt is much of the memo, very similar to several other of his statements. But the 300 dollar Apple iPhone comment is a glaringly disconnected piece, like another person inserted something haha..

Bob - good points. And bear in mind, only one third of Nokia's income is from smartphones, another third is dumbphones and the final third is networking equipment. Google and Apple do not factor in any way in two thirds of Nokia's business. But yes, for all who may think I'm now delusional - remember I have said for years now, that ALL phones will become smartphones before this decade is done. So the trend is to smartphones haha..

Thank you all,

Tomi Ahonen :-)

[Matti V.]

Tomi, read the comment posted by: E.Casais | February 09, 2011 at 11:21 AM. I sincerely hope that you, a number of our country fellows, and Nokia religion fanatics out there will awake up for the reality and understand what is going on at Nokia. This memo is 100% genuine and Elop is absolutely right. He is no entrepreneur, he does not love Nokia but he loves to make its shareholders happy. Simple: if you want to make your shareholders happy, make them lots of money. AND go ahead and do whatever you can to increase the bottom line. Yes, bottom line means Profits. The last results were worrying. I am sure you reviewed and compared these results with, for example, Apple. Good that you did, so I don't have to brief you on that. At this stage, Nokia has no option but to reduce dramatically costs. I bet with you that this action will affect employees and business divisions which don't have a place in the company' strategy. After the company is shaped up (by removing the rust and burning oil engines), you will see the troops coming together again and focusing on a single mission: Connecting People! You are a smart guy and you will understand what I mean by stating this. It is not the end of Nokia, it is a new beginning for Nokia.

[Simo]

"BBC memo, see my previous comments. We still don't have a named person, only unnamed sources."

I assume you know how reliable media, like BBC works. They teach this in every Finnish primary school, so you should know it.

Media confirms their news from at least two sources before publishing it. The protection of sources is accorded to journalists under the laws of UK (and Finland, too).

Be a man and admit it: You were wrong!

[Billy]

Subtle xenophobia in your post.... Haters gotta hate!

[Leejjon]

I tried to find out on how to make JavaMe applications on Symbian but the more I look into it the more I see people saying Symbian is dead/dying.

This hoax doesn't really helps to motivate people to develop for Symbian either. It's like a huge group of people is trying to make it look dead. And Nokia isn't doing much effort on denying that this is true.

[Don McLean]

I find it interesting that lots of commenters see Nokia' problem is in the (wrong) platform strategy. While some others (whom I'd rather agree with) pointing out that it's poor execution and bureaucracy / corporate games.

Another point is that surrendering to (lets say) WP7 for North American market is not enough for Nokia. Because huge part of Nokia problem at this market is operators, and operators won't suddenly "forget" Nokia just because they (lets say) jumped on another bandwagon.

[Ajit Jaokar]

Hi Tomi
Here are my thoughts (cross posted from OpenGardens) original source including links at http://www.opengardensblog.futuretext.com/archives/2011/02/nokias-problems-and-inq-facebook-phone-on-android.html

In response to the Nokia memo, I am glad that finally reality seems to have dawned at Nokia .

While Tomi Ahonen and others have launched a passionate denial/ contradiction of the ideas in the memo, the reality is very simple ..

I do not mind if the memo is genuine, a blog, a rumour or a combination thereof.

The point is: The memo (if you can call it that ..) does encapsulate the problem .. which is

a) Lack of ecosystem management and dominance.

Google orchestrates the Android ecosystem.

Apple owns the iPhone ecosystem.

Nokia sells very large number of devices but it is no longer enough to JUST sell a large number of devices

What ecosystem does Nokia manage/dominate?

If not, can it be called a market leader?

b) The rate of change

c) Taking emerging markets for granted

So, related to above, the questions then become:

a) Can Nokia develop and dominate an ecosystem? and / or leverage existing ecosystems

b) Forget iPhone, consider Samsung which has (so far) managed the rate of change much better. Someone called it a ‘fast follower’. No matter what we call Samsung, they are managing to leverage mindshare

c) Refusal to acknowlegde the new manufacturers in India and China and hoping that these markets will be loyal for ever i.e. ignoring spice mobilility micromax, Olive telecom and others.

Now consider that today INQ announced the facebook phone .. on ADROID

lets read the back story behind this ..and the irony of a facebook phone on Google’s Android .. then think of the rate of change ..

I remember going to a Nokia booth at MWC last year and a woman showing me an idea of new Nokia services.

It was a ‘green’ service for travellers(reducing carbon footprint). As someone who travels extensively and a heavy user of mobile devices, in theory, I am an ideal target user of the service

But to get it, I had to get a Nokia id and a nokia phone.

I told her that there are OTHER ways to get that service and I added that as a traveller the most imp site for me is time and date but she rattled on on a pre scripted manner about how great this new green service was if ONLY I switched to Nokia ..

That’s basically completely missing the point(that I, as a customer have an option and that the reducing carbon footprint service can be obtained from many different ways)

And in my view, apps are a long tail service .. and most customers are now defining what they want in a much more granular way

Now this bring us to facebook phone ..

when I talked of mobile web 2.0 I often said that it should be called ‘web mobile 2.0′ i.e. web drives the agenda

Thats why facebook phone is more important.

Its the service which customers want ..

So, finally glad that someone(at the top) in Nokia has woken up to a new reality that the dynamics of the market itself have changed completely! and old style strategies and approaches will not work

In April 2008, I posted a blog based on a talk called The ASUS effect : Mobile innovation triggered by open source, long tail devices and a shift in the device value chain

That has been highly prophetic .. although I framed it in context of Linux and not android .. the principles are the same ..

Open source introduces a MUCH higher rate of change .. that explains Android success and Facebook phone on Android .. and on the other hand we have the iPhone

Think about it: A young person(a traditional Nokia demographic) goes to a phone shop

They have two choices – a Nokia phone OR a Facebook Android phone

Which will they choose?

Will it matter that its an Android phone? Its the same analogy with me at the MWC Nokia booth ..

In any case, lets wait and see what happens now ..

[flex]

bright brillant post. well done.