The Patient Heart Has Stopped. Now the Doctor 'helps' by starting to strangle the patient too (Stephen Elop incompetence)

So we now know more about Nokia. Its not just that we've seen that Nokia the 'patient' has had a heart attack, and its heart has stopped (sales has stalled) - when we look at Doctor-In-Chief, CEO Stephen Elop, we now see that this 'Doctor' is attempting to fix things by strangling the patient!

Note, it was Stephen Elop which caused the initial shock, the heart attack. It was Stephen Elop's February 11 announcement of the end of Symbian that effectively killed the sales of Symbian in the sales channel. What Nokia has since seen, is a sales channel revolt, in effect a boycott of all Nokia phones, not just smartphones. Check this out.

ALL NEWS IS BAD NEWS

The blood is now everywhere. This is what we read everywhere. Tero Kuittinen, a Nokia analyst writes that Nokia smartphone sales are “eroding rapidly” and the crash is happening even as the phones are now “steeply discounted” and the sales channel is simply “phasing out” Nokia sales with “no carrier support”. That is carnage. If it was just one source, maybe we could dismiss it. But read what we hear from The Street who write about Nokia smartphones now saying “carriers are yanking the support of Nokia smartphones” and the higher-priced flagship phone successor to the N8, the E7 is said that its “launch is a disaster”.

And then Mobile Today reports on Carphone Warehouse (Europe’s biggest handset retailer) saying that Nokia premium phones like N8 and E7 are disappointing “despite the N8 getting off to a strong start at the end of last year” (ouch! Talk about snatching defeat from the jaws of victory!) and then from neighboring Orange store, Mobile Today quotes sales saying “Nokias are currently the worst selling handsets in the store”.

Not the worst-selling ‘smartphone’ but Nokia is now the worst-selling phones of the UK. This in one of Nokia’s traditional stronghold markets, the UK, where often 5 and sometimes as many as 8 of the top 10 bestselling phones have had the Nokia brand. April was the first month ever, when the Top 10 was devoid of any Nokia handset, no smartphone, no dumbphone. That has never happened as long as records have been kept in the UK market for top-selling phone brands. CNBC reported on 1 June that several mobile operators/carriers worldwide are now refusing to sell any Nokia smartphones.

The retail chain has spoken. They are sending a message to Nokia HQ. No price discount, no new model, no marketing gimmick, no apology by the sales rep, the regional sales manager, the global VP of sales, not even a total retraction by the CEO is now enough. The retail channel is strangling Nokia in a death-grip choke-hold. They will not let go, until Nokia Board of Directors fires the CEO and reverses the stated strategic direction to Microsoft.

Understand what this means. Nokia cannot survive even to the end of this year, if its retail channel is in revolt. Nokia does not have any meaningful levels of its ‘own’ sales, it has even closed most Nokia flagship stores (which only sold a tiny fraction of Nokia products). Nokia needs its distributor network, in fact Nokia’s distributor channel is the biggest in the world, and thus Nokia is most dependent on it. They have now grabbed Nokia by the hair, and pulled Nokia’s head under the water. Nokia is drowning and alone, it cannot recover. Nokia needs its distributors to be willing to let go, let Nokia catch a breath of fresh air. To get some Symbian sales back during 2011.

PLATFORM DEATH IS A SPECIAL DEATH

We have seen enough of these platform deaths in technology, to know how it goes. Anyone remember the short battle between Blue Ray vs HD DVD? Once a platform dies, it dies fast. Or we can go back into history, look at Sony's Betamax. It was technically better than VHS in every single generation, better sound, better picture, better slow motion etc. And at one point it was the bigger platform. One could have forgiven VHS for throwing in the towel, but VHS did not need to become as good as Betamax. What VHS needed, was to become 'good enough' and it devastated Betamax. But when Sony finally announced it was shifting from Beta to VHS, that killed Sony Betamax VCR sales overnight.

We have seen this movie before! The difference is in the Japanese version of the story, the platform is given its chance to fight, and they do not surrender when they were the biggest. Sony abandoned Betamax when their market share ws down to about 5%. But now we see how Hollywood would remake that Movie, in Stephen Elop's directoral debut. The blockbuster featuring sexy WP7 will kill of evil villain Symbian not when it was finally dead at 5%, no, Elop kills Symbian was when was still the biggest OS, and making profits, and growing sales (and most astonishingly, even managed to grow Nokia Average Sales Prices of smartphones - by a MASSIVE 15% in just one quarter. That is amazingly strong performance) ...and then to replace it with the smallest and weakest OS out there.

So small in fact, that Microsoft WP7 is currently not just selling less than similarly new bada from Samsung (bada sells more than twice as well, even though bada only has one handset maker and Microsoft WP7 has a family of them, including Samsung by the way). Microsoft's WP7 is so weak, that even though Microsoft has tried to kill off the older sibling, Windows Mobile for almost a year, WinMo still outsells WP7. That is how bad it is. How does WP7 compare to that dinosaur they call Symbian? Well, Symbian even after Stephen Elop took a lesson from Dick Cheney and shot Symbian in the face, Nokia alone on Symbian still outsells all handset makers who make Microsoft WP7 phones in Q1, by what.. 15 to 1 that is what!

And most insultingly, even in this, the worst quarter of Symbian ever, those non-Nokia 'other' Symbian makers, mostly Japanese handset makers, who mostly do not even fit into the bottom of the Top 10 biggest phone makers, they manage to sell more Symbian based smartphones - yes - than all Microsoft WP7 based smartphones in the past quarter, combined. The Microsoft WP7 family includes Samsung and LG, both Top 3 sized giant handset makers. What is wrong with this picture?

NOW ELOP IS SPITTING IN THE FACE OF THE DISTRIBUTORS

And then we get to the painful part. So, maybe February 11 was a mistake. Why is the situation getting worse for Nokia, not better? What is the clever CEO now doing? He saw that his house was on fire, he went and bought gasoline. He saw his patient was choking, so he fed the patient poison. When he saw his friend was starting to drown while swimming, rather than go save him Stephen Elop released the sharks! Look what the sharp Nokia CEO is now doing, to win over the hearts and minds of hte carrier community, his primary sales channel.

Stephen Elop announced that Nokia will release dual SIM phones. Nice, you say. I’d like one of those please. Yes. This is perfectly in line with his ‘West Coast’ philosophy, by which the consumer preference will win. So guess what. Nokia announced dual SIM phones back in 2009. Why haven’t we seen them? Because the carriers/mobile operators said they don’t want them (carriers/operators fear dual SIM phones will promote promiscuous behavior by customers to switch between networks).

So, Nokia has had this ability for two years, and has not released those phones. Now, after Nokia’s phone sales have stalled, the CEO waves that red flag in front of the carriers/operators - that next Nokia will bring those very same upsetting dual SIM phones to the market (Nokia has already launched the first such phones in India).

And look what is happening with another West Coast thinking-company, Apple. Apple wanted to bring the ‘virtual’ SIM card to the iPhone 5. The carriers said, ‘no way.’ Apple had already designed the iPhone 5 to run with no SIM card, and now is delayed in launching the iPhone 5, to rapidly redesign the iPhone.

It is the carrier who decides. The carrier/operator (and independent phone retailers) are the channel that Nokia needs. If the channel rejects Nokia’s phone(s), the phones die.

Nokia knows this, because that was what killed the Nokia N-Gage. Microsoft learned that lesson because it was not good or bad software that killed the Microsoft’s Kin. It was killed by the carriers. The same is true of Google’s ‘iPhone killer’ the Nexus One, the phone so great Google called it the world’s first superphone. Killed by the carriers. And now, even Apple is not strong enough to push a virtual SIM. That is how severely carriers/operators take the SIM card issue.

And Nokia’s new smart boy CEO announces proudly that Nokia is bringing dual SIM phones to the market. Smart move, Sherlock! Would you like to promise us next, that we will be greeted as liberators, too?

WINNING WEST COAST DESIGNS

Then the bizarre news we had last week, that Stephen Elop has assigned Nokia’s first Microsoft phone project to the West Coast California designers. Note, Nokia’s ‘own’ designers from mostly Finland, have managed to produce world-beater phones, that are the most desirable phones on 5 of the 6 inhabited continents, and driven by which Nokia has always sold more smartphones than anyone else. Always! That is an unbeaten winning streak of the Superbowl champions.

Read my lips. Smartphones designed by the incompetent Finnish designers of Nokia have an unbeaten winning streak, every single quarter ever – including this latest Q1 of 2011, Nokia’s ‘Finnish-design’ smartphones have outsold all others on the planet. And if you take Elop’s favored ‘West Coast’ Design, in fact, you can take all brands of smartphones of the United States, all Apple iPhones, all Motorolas, all HP/Palms, and all Dells and add them together - Nokia outsells them all – combined! Yes, even in this latest quarter after the CEO tried to kill off Symbian, these ‘poorly designed’ Finnish Nokia designs still managed to outsell all US based smartphones added together. That’s how well Nokia designers know and understand their market, their end-users, and the needs of the carriers/operators. An unbeaten streak of 14 years, 56 quarters in a row. Who knows how to design smartphones?

Stephen Elop took the Superbowl MVP quarterback and team off the field, and brings in a third string quarterback who has never won anything - and gives that team the project to design Nokia’s most important phone ever - the first Microsoft Windows Phone 7 based smartphone. Now, in the past week or so, that team is even given more pressure, where Stephen Elop has cut their development and testing time where originally they were told to ship the phone in Q1 of 2012, now Mr ‘I know Nokia faults are in execution… not’ Elop is causing a certain flood of design flaws into that very same first, most important handset.

This is what is meant, when an organization does not learn from past mistakes. Anssi Vanjoki would not have committed this error.

The carriers/operators of the world know what kind of designs tend to come from the West Coast, with the California thinking. Its duds like the Palm, the Kin, the Nexus, and for example the Motorola Rokr. Meanwhile yes, the iPhone? Yes, the original iPhone 2G jesusphone was indeed a big hit - in America, where 7% of all mobile phone subscribers live. The original 2007 design of the iPhone 2G was so much a failure in the rest of the world, that it was not a hit phone on even one other continent except North America. The original ‘West Coast’ design iPhone 2G was literally obsolete for the most advanced mobile phone markets like Japan (Where Symbian is considered fully competitive.. bizarre). This is the design ‘tradition’ that California-Dreaming Stephen Elop wants for Nokia and its global carriers/operators.

The operators/carriers on those other 5 continents where 93% of all mobile phone subscribers live, know very well, that Nokia’s normal designers know how to make highly desirable phones that their domestic customers want. And that American designs do not cut it. But ‘I know better’ Stephen Elop now flaunts new California-design smartphones for them.

ULTIMATE DEATH-NAIL: SKYPE

And if there is something carriers hate more than Apple’s iPhone App Store or virtual SIM cards or dual SIM cards, or ‘American’ designs for phones, the thing carriers/operators hate the most, is Skype. They hate Skype with a vengeance. Why? Because the carriers witnessed how easily Skype destroyed their fixed-landline telecoms cousins, and where Skype might not take all traffic, it devastated the revenues and profits of that robust industry. All existing Nokia senior managers know, that to offer Skype for carriers is tantamount to offering them a drink labeled as poison.

And what is our clever little darling Stephen Elop now promising the world? That Microsoft’s new WP7 smartphones will include Skype. His Muppet Master, Steve Ballmer is proudly crowing about how Microsoft will use Skype to build its eco-system.

Again, please don't misunderstand me. You and I may want to have Skype on our phones. It may come some day. But trust me, the carriers will not be letting the biggest phone maker flood their market with Skype phones replacing the carriers' cash cow - voice calls. Won't happen. The players who will eventually bring Skype in, will be the smallest of the disruptors, not unlike how Blackberry sneaked beneath the radar to bring Blackberry instant messenger to challenge SMS today. The carrier will not allow Nokia and Microsoft to do this. Not with the brand they hate the most, Skype.

Its like building an eco-system for plants, and bringing it out to space, and setting it out of the spaceship. Into the vacuum where there is no life. Steve Ballmer has killed Microsoft WP7’s chances as a smartphone OS, with this Skype malarkey.

If you want the ultimate proof that your phone will not ever be supported by carriers, put on unrestricted Skype on it. The Grand Genius Stephen Elop is jumping from one CEO failure to yet another, and compounding the problem every time. So first he shoots himself in the foot. Did that hurt? Yes? Sorry. Let me get a bigger gun and shoot again. Pain? Sure. Thats good. Now let me get a bazooka to really shoot myself in the foot.

POISONED HIS OWN WELL

Stephen Elop may have been the best candidate Nokia’s Board saw when they were interviewing for a new CEO in the summer of 2010. We will never know. He may have had brilliant ideas and views for Nokia. He may be a fantastic manager and brilliant motivator (although all sources seem to suggest the corporate morale at Nokia has never been as demoralized as it is now). He may have wonderful secret plans to launch Nokia into the next century. Maybe he knows how to do teleportation and time-travel with a mobile phone (using Microsoft software no doubt). He may be the sharpest knife in the drawer. But he has by his own actions killed the distributor channel support for Nokia. Stephen Elop has caused the cardiac arrest which now grips Nokia. The distributors have put Nokia smartphones on a boycott.

Stephen Elop has not learned from that. He has not reacted with haste, attempting to save Nokia. He is now thinking like a Microsoft Muppet, what is best for Microsoft. In that process, Stephen Elop has seen a patient whose heart has stopped, and rather than try to revive it, he has now started to strangle that dying patient. Stephen Elop is killing Nokia. He is angering his distributor chain with every move he makes.

He is incompetent to run a company in a period of change, if he is unable to change to changing conditions. He is unfit to run Nokia whose business depends totally on carrier support. His strategy has seen wholesale rejection by the channel, they now have Nokia in boycott. Not just Nokia smartphones, Nokia dumbphones are struggling. What little Nokia can sell, is sold with massive discounts. I know a dead parrot when I see one, and I am looking at one right now. That parrot is definitely deceased. It has passed on. This parrot is no more. He has ceased to be. Its gone to meet its maker. He's a stiff! Bereft of life, it rests in peace. .. this is an ex-parrot. (substitute 'career as CEO' for Parrot if you consider Elop's chances now).

That was a bit of an update from happy Nokia news. Next will be the episode about why the catastrophy is life threatening now, not next week, now. More on that as soon as I get a moment to blog again, hopefully within the next day or so.

Comments

[cibyr]

I know it's a bit of a side-note to this blog post, but it's a bit unfair to pick on the original iPhone for not being a hit outside the US when it was only offered in a handful of countries (because Apple was trying for a repeat of their AT&T exclusivity deal).

[Roo44]

I just hope the billions in "concessions" this clever CEO was able to negotiate out of Ballmer for this agreement is enough to buy some very nice flower arrangements for Nokia's funeral.

[PhoneBoy]

Wow, Tomi. If the channel has truly revolted against Nokia, incompetent is not nearly a strong enough word to describe what Stephen Elop is doing. Hopefully the Nokia Board takes swift action.

[virgil]

You know... you might be right.
Which means Nokia is already dead: the fist Nokia-WP7 phone will not be a success (*) because the carriers won't let it be a success.
Ouch.

(*) Unless it is truly a world-changing device. I find this highly unlikely - if Nokia could do such a device, the OS on it wouldn't really matter that much (and anyway, it wouldn't be important that the OS is WP7)

[Jonathan MacDonald]

In my opinion, this post is 100% spot on.

I totally agree with every single point and it would only be half as tragic if it weren't for the fact that so many of us in the industry saw it coming AND WARNED THEM.

But no...the arrogance is incredible...the Nokians let by the Dark Lord Elop and the Grand Master Ballmer (one of the least successful CEOs every to walk on planet Earth - check the share prices over his term) are determined to 'do things their way' - which is the polar-negative way our technological, sociological and commercial marketplace is moving.

I tried to tell them, you tried to tell them, we all tried to show them.

As the ancient Chinese proverb says - "when the winds of change are blowing - you can either build a shelter or a windmill"

Nokia are in the shelter game now.

But the wind is strong my friend. The wind is very strong

[agoedde]

Much as I disagree wit your views on where the current leadership in smartphones lies (it's certainly not Japan!), and in your assessment of the performance of Nokia's smartphone business pre-Q1-2011 (remember that blog post you wrote about artificially propping up market share in Q1-Q3 2010?): Your are spot on about Nokia's current situation with the operator distribution channel. I don't see Nokia phones in the operator shops anymore - unless I really search for them. Even then, very few models are carried, and at unattractive prices. As for adoption by customers: I have, so far, seen two N8s, one E7, one C6-01, and not a single C7 in the wild. I fear for Nokia's survival, not in 2012 and beyond, but this year.

[RobDK]

Let's face it Nokia's Symbian smartphones were not used as smartphones. They had appalling GUI's. They were difficult to use, and very few functions were used. They were slow with underpowered processors, stuttering transitions and slow response. Second grade internet and web experience. I have tried the N8 so-called iPhone killer. It was an appalling experience. Symbian is dead and we should be glad for it!

The questions for Nokians is why they were not able to bring a coherent narrative response to the iPhone, why the software was not good enough, and why it took 4 years to respond... Nokias collapse will be a text book case for business schools the world over for many years to come!

[Øyvind Mo]

Nokias demise is terrible for its staff and shareholders, of course. But it will accelerate the disruption of the mobile business, most notably the carrier's unsustainable dominating role. Consumers want advanced phones and simple network services, not the other way around. The carriers have been dominating many of the world's markets for far too long. Especially Android's march to victory will hopefully commoditize all network services, since Android phones are routinely rooted and modified outside of any operator control. It's about time. And it will be much easier without Nokia in the game. Ironically the carriers are bringing this upon themselves by outing Nokia, leaving all the room of the low/mid segment for Android.

[Nelson]

If this is happening, Nokia's Board has to act fast. In this industry a competitive portfolio of products is a critical factor of success of any company, without it fierce competition will drive it out of the industry. Nokia doesn’t possess a competitive portfolio of products anymore thanks to Elop. Now I believe that Nokia has the financial resources to pass through the year even if their revenue decreases significantly, but the board must decide what to do next, and honestly I don’t they now what to do anymore. I guess they’ll hang to the WP7 hope, and that won’t be enough. If this road is taken, then we will have a finish Motorolla. On the other side if Nokia Board acts quickly and brings Anssi, or has Tomi suggested Jorma, I don’t now if there is still time to save Symbian, or even make an All-in on MeeGo. Symbian is death right now, it was chop to pieces and sold by its residual value to Accenture, the developer already fled, and MeeGo might take too long to implement successfully.

[Sander van der Wal]

Tomi, are these people talking about European sales or worldwide sales?

Carphone Warehouse is definetively talking about European sales, and what you are seeing in Europe is that demand for Nokia smartphones has disappeared, because people now either want an iPhone or an Android. You cannot extrapolate that without confirmation to other markets.

[GJW]

So, how long is it going to take before Elop the Dead (parrot) gets the boot, and should Vanjokki replace him? (Note that Olilla is leaving already.)

[A Reader]

Great blog - very thought provoking as always ....... but it is very easy to be wise after the event.

If we had a time machine what would we do differently, not only in 2011 or 2010 but even in 2009?

As with hindsight Nokia seem to have been making a number of "big bets" for a number of years - none of which have played out as intended. Perhaps this was one of Nokia's biggest failures R&D and their ability to capitalise on it

The Apple and google story has had a huge disruptive effect on the market with their views of what the future looks like - it would have been interesting to know what Nokia's vision was. Perhaps this is what went wrong lack of clear vision...........

Keep on with the thought provoking blog

[Nicolaas]

The most frightening thought in this excellent article is the notion of Elop using Microsoft software to do teleportation and time-travel with a mobile phone. Your body would end up in one Tokyo, your head in New York, your arms somewhere in the Pacific Ocean, your legs would never be found back again and in the case of time-travel you would end up in a big blue void ;).

[Steve Barker / @stevebarker]

Hi Tomi

As good a read from you as ever, but I wonder what you make of Apple's iMessage service announced yesterday? This is designed to compete directly with your favourite medium - the good old SMS (no dancing, now!) Do you think the carriers will punish Apple the same way you maintain they are now punished Nokia for buying Skype?

Will this be the first 'death nail' in the Apple coffin?

[German]

Hi Tomi,

Your Skype fear is overblown. In the US they have really expensive data overages (or only sell you data if you buy unlimited minutes) and in Germany I burned through EUR 10 prepaid with just having the phone check e-mail every 15 minutes...

Otherwise you are spot on and the only hope for Nokia is to fire Elop and switch to Android with a custom Nokia skin. It's interesting what HTC is putting out recently with getting people to make apps for their Sense UI. I even can see a Nokia skin supporting QT -- why not?

Also the convergence of tablet, phone, and computer - see Windows 8 and Apple's Lion & iOS would favor Microsoft and I can see why Elop would push there. But I just feel that Google is further along with it's cloud offerings which will be at he heart of this converged world -- also they don't seem to be too restrictive otherwise Amazon wouldn't be able to muscle in. I am just more confident that Nokia could carve out a very profitable space in the Android eco system.

Regarding Symbian, Mego, Windows Mobile 7 -- the train has left the station. I feel there is no room for a third big ecosystem and even Blackberry aknowledges hat by making it's Playbook run Android apps.

[Tomi T Ahonen]

Hi all

Excellent comments, thank you everybody. I am on heavy business travel this week but hope to have time for a few replies now, will definitely be back later and respond to each of you. Please keep the comments coming.

Many asked how to fix it, I think Jorma Ollila needs to step in for interim - that would calm the investors. Anssi Vanjoki would have been excellent choice as CEO, I doubt he'd take the job now, and furthermore, with the poisoned relationship with carriers/operators, that is not the best case. I think the best choice is to fire Elop now and cancel the MS migration. Then commit to Symbian to the end of the decade (I have some ideas how) and that Symbian would power low-cost Nokia phones essentially forever, and go to MeeGo, the only new OS on which Nokia can release at least some phones this year. The new CEO? Ideally hired from a carrier/operator.. and ideally from Asia. I'll have much more on this in next blogs on this topic, but I have to blog about the big tsunami-wave disaster heading to Nokia HQ right now. It is not this blog. There is honestly worse still to come..

Keep the comments coming, I have read all and am learning a lot from them and our readers will enjoy them I am sure, as much as I do.

Tomi Ahonen :-)

[Borik]

I think analysis of WP7 + Skype being bad combo is inaccurate.

Look As Sprint and Deep Google Voice integration.

Its coming and maybe Nokia wants to be a head of curve for a change, or maybe they are already too late....

[Vulcan]

There is something Microsoft can do to please the operators: Kill Skype. That would make it. The end users would be dissatisfied, but that would not be Nokia.

But how to explain that this was needed to the shareholders of MSFT?

[piscao]

it amazes me ho the rest of the board see the direction that events are taking and do nothing! are some of micrsoft millions reserved to them too?

[John H]

Didn't you mention in a previous post that Nokia spent gobs of money to keep their phones on retail shelves and for retailers to push them? Nokia is in cost cutting mode now. If the new strategy is not to pay retailers for competitive space for current S^3 phones of course they won't be selling well now. Nokia/MS may decide to spend money to have their WP7 phones on the shelf; which will be their focus OS moving forward.

Android didn't sell well its first year on the market. I wouldn't call WP7 a dead platform especially with the Mango update coming along with Nokia's lineup. MS has the $$$ to make a platform succeed when it wants to; just look at the XBOX.

Why not give the West Coast design team a fair chance? If Finnish designs are so desirable they should be selling themselves, but as you state they're the worst selling phone in the UK; their typical stronghold.

You're judging Elop on devices that were in the pipeline before his arrival. He is actually taking actions on Nokia's past mistakes, where previous management stayed the course with slow and poor updates to existing platforms.